This is kind of a proverb, reminding us
that temporary downsides aren't an obstacle, but a
necessary stepping stone towards maximizing profit.
Buffett, of course, was talking about the stock market
and wouldn't touch crypto with a ten foot pole.
But the question remains, does it
ever make sense to sell?
What does the research actually say?
Hodling is more than just closing your eyes and
white knuckling it until coin market cap turns green.
There are two main reasons why
you'd never sell your crypto.
One, you believe in how the project will come to define
the future of the global economy, and two,
you want to make money as much of it as you possibly can.
And I don't judge either way you do you.
But hold on a second, because it's too easy to
yell "Hodl", "dollar-cost average" and "buy the dip".
It's never quite that easy in practice.
So instead, I want to arm you with
the knowledge of strategies that you can take
and how they compare profit wise.
This way, you can sleep a little bit
better at night knowing that the crypto in
your wallet deserves to be there.
It's pretty clear that crypto hasn't
managed to shake stock market moves.
Fears in the stock market almost
always translate to fears in crypto.
That is, in the last two years anyways, whether it
makes any sense or not, that's how things work.
It's also true that altcoins rise
and fall based on Bitcoin's performance.
I like to think of it like gravity.
So let's picture Bitcoin as the sun.
Small altcoins are then planets that are
affected by Bitcoin's mass and movement.
But if Bitcoin is the sun, that makes the
equities markets like the Milky Way, whose even
larger gravitational pull can sway even Bitcoin.
Sure, Hype, FOMO,
or the occasional tweet from a billionaire can allow
a project to break free from the gravity for
a while, but gravity is a big batch, and
it always wins in the long run.
The good news is that some projections put Bitcoin
reaching $200,000 in the second half of 2022.
They literally call it a powder keg that could explode
to 5X based on the fact that 75% of
Bitcoin's whole supply is being kept in storage.
Basically, the thought is that there's such a
limited supply of available Bitcoin, it would take
an institution just purchasing 200,000 Bitcoin to increase
the assets value by at least three times.
Now, predictions don't always work out, and that
one in particular is banking on someone
dropping nearly $10 billion on Bitcoin.
But if they do, you'll want to know this
and this isn't the theory
saying that you peaked in high school.
This theory says that you shouldn't
try to time the market. But why?
It turns out that if you miss out
on the ten best performing days in an
asset's history, your return is dramatically decreased.
In fact, this can actually take
your return from positive to negative.
Take a look at this chart.
In the 1980s, the S&P returned 227% over ten years.
By my math, there's more than 3000 days in a decade.
If you missed out on just ten of
the biggest gainer days, your return for the
entire decade is more than cut in half.
Short term traders in crypto will argue that day trading is
the only way to make real profit in this market.
Which don't get me wrong, that can
work, especially if you're really familiar with
one asset and its price movements.
But this underestimates the time it takes
to really watch and study market movements,
not to mention the stress.
For a trade to be worth you spending all
day staring at a screen, it has to be
a dollar amount that's significant to you, that's stressful.
I mean, my heart rate is already high
enough sitting here drinking coffee all day long.
But this works for some, but for most people, it's just
too much emotion to fit into your average Tuesday.
So it seems for a normal human, time, not
timing is what matters most over the long run.
Which is great, because that's actually less work.
I mean, who doesn't want to do less work?
But there are different levels of passively hodling.
A few studies have come out that challenged the idea
that hodling through thick and thin is the best.
The best day's theory works because we
have stock data all the way back
from before your grandparents were born.
Newer strategies have come out that may outperform the
white necklace fever dream that passive hodling can be.
So a study by Investopedia compares the buy and hold
approach to a more active strategy called Constant-Mix.
Here's how the study was set up.
Group one, the Hodlers, would buy an allocation of
stocks and bonds at a 60-40 split, just
a classic stock and bond allocation and hold them
no matter what happens in the market.
Group two, the Constant-Mix, would buy the same
60-40 split, but then they would constantly rebalance
to keep the portfolio right at 60-40.
If stocks go down, you'd move some bond money
over the stocks to get that back up to
60%, and vice versa, you get it.
What's important is the results.
They were peculiar.
It turns out that in a long, trending
market, whether up or down, the buy and
hold strategy has a better return.
But it gets more complex.
In an oscillating market, this just means
a market where things are more unpredictable.
Big reversals followed by big surges in price.
When things are crazy and unpredictable,
Constant-Mix actually beats out hodling.
The reason being is we're emotional.
This is also the reason why I've been trying out
one of those gimmicky beard roller things, because I'm getting
tired of being cyber bullied for my patchy beard, and
I'm just trying to do everything I can about it.
But either way, this strategy essentially systemizes buying,
dips and selling profits while completely taking out
those pesky emotions from your decision making.
The reason I bring this up is an oscillating market.
Sounds a whole lot like crypto in general, an uptrend over
time, but a whole lot of volatility along the way.
So if your goal is to maximize your
profit, it seems like committing to a portfolio
balance could be the right way to go.
So I sat there and I thought on this for a while.
How could this strategy be applied to crypto?
See, it works well for stocks and bonds
because those assets typically move in opposite directions.
When one is doing well, the other
typically isn't because they're essentially fighting for
the same dollars from investors.
So I was trying to figure out what does well when
crypto is down because you want to be in crypto.
But again, Bitcoin's gravity means altcoins move
in the same direction, so it's not
quite the same as stocks and bonds.
And then it hit me - lending.
It's not the exact same,
but the principles are similar.
This rebalancing strategy could work extremely well with
lending and holding crypto of your choice.
You could, for example, lend out 40% of your portfolio
and stablecoins for 10% to 20% interest, and then
the remaining 60% be in cryptos of your choice.
Then every two weeks or once per full moon
or however you want to do things, you rebalance
it back to that 60-40 split.
But it doesn't end here because we have
another study by Shrimpy that goes even deeper.
And this time it's specifically a study on crypto.
So here's how it worked.
They took crypto from the bear market between
January 2018 and January 2019 and built portfolios
of cryptos ranging between 2 and 18
random assets in each of those five portfolios
were duplicated and rebalanced over different time intervals
ranging from 1 hour to monthly.
The goal was to then compare those
20 portfolios to the results of the
same cryptos with no rebalancing whatsoever.
So baseline performance versus rebalancing not
to sound like a BuzzFeed article,
but the results were shocking.
The clear winner by a
huge margin was daily rebalancing.
It did best for every single portfolio
size and significantly better than holding outright.
The percentage is shown here is the
performance over simply holding the same cryptos.
What they found is the more
often things are rebalanced, the better.
However, there is a speed limit because the more
you trade, the more trading fees you incur.
This is why hourly rebalancing
perform worse than daily.
And they also found out that the more
assets you hold is also generally better.
Now, it is important to note that
they chose random crypto, so your portfolio
may end up with completely different results.
But the question is, should
you regularly rebalance your portfolio?
And chances are it wouldn't hurt.
And thankfully, it's the 21st century and
you don't have to manually rebalance yourself
every day if you don't want to.
Pionex has a bot that auto rebalances your
portfolio with up to ten different coins.
Here you click Rebalance bot, .
Multi Coin mode
Customize
Choose your favorite crypto gems, choose how much
you'd like to invest, click Advanced Settings, turn
on rebalance because that's why we're here.
And then you can see that they only go
up to 4 hours, which isn't a big deal
because their fees are super low at only 0.5%.
But you can limit that even further
by changing the rebalance mode to threshold.
There, you can allow the bot to
only rebalance after set price changes.
So ponder what you'd like to do and click Create.
And then from there you can click Detail and
see everything you need to know about the portfolio.
It's pretty darn handy to use, and I'm going to
use this bot and just see how it does.
Pionex will also be linked in the description.
If you use that link, you'll
get even lower trading fees.
But all of this leaves us with one glaring question.
If it's best to just buy and hold
forever and perhaps rebalance, when should you sell?
I mean, at the end of the day, the point
of investing is to make money and then do the
things you want to do with that money.
I still got my eye on that 18th century Samurai armor.
But what if I told you that it's possible to
do both to hold and buy 18th century Samurai armor?
There's a story of Larry Ellison.
He owns 22% of this little corner shop
you may have heard of called Oracle.
His ownership here has made
his net worth absolutely massive. But he has a problem.
If he wants to use any of that money
to, I don't know, get in the billionaire space
race or whatever billionaires want to spend their money
on, he has to sell his shares.
What he did, instead of selling was use his shares
as collateral to take out a line of credit at
the bank, a line with $22 billion as the limit.
His strategy made him the most indebted person alive.
But this does something interesting.
It means he never has to sell his shares,
meaning he never has to pay capital gains tax
and he still gets to use that money.
The beauty is, anyone can take the same strategy.
It can be done pretty simply on most
crypto exchanges, locking up some crypto and then
borrowing against it or in DeFi,
you can take things one step further. Take this example,
on the Yearn protocol. You can take the stablecoin
USDC and deposit it for an average yield of
around 7%, earning you money on your cash.
When you deposit your USDC, it turns into yvUSDC.
This is called a yield bearing collateral,
basically a receipt of your deposit.
That in itself is worth money and is making money.
Now you take your YV tokens to
the Abracadabra protocol, pledge them as collateral
and borrow MIM tokens against it,
another stablecoin just stay with me here.
What's great about this is that the interest that
you'd have to pay on the borrowed MIM is
way lower than your return on that USDC deposit.
So theoretically your yield sits at 6.2% and you still have
those stablecoins that you can then use to buy more
crypto sell for cash or spend however you like.
Now of course this is an advanced strategy.
Please do your own due diligence and there is
added risk if you're using collateral that has some
volatility but the point is in DeFi you can
have your crypto and spend it too.
So if you learned anything new don't forget to hit the
subscribe button, it's free and you can always change your mind
later and I just like to thank you so much for
watching and I hope you have a profitable day!