Wednesday, October 28, 2020

(Future) DBS Digital (Cryptocurrency) Exchange?

It is 2020.

If you *still* think Bitcoin is a scam / pyramid scheme, you might actually be extremely low IQ. Functionally retarded, perhaps.

It is one thing to admit that you do not understand it.
To say that you are not comfortable with it.
To say that you do not believe that it will accrue value for XYZ reasons.

It is another thing to say it is a scam.

That said, that does not mean that it can only go up. 

I actually find this narrative shift since the last cycle to be very interesting. 

Semi-intelligent people no longer ask if Bitcoin is a scam anymore.

Instead they ask, is it over? How much higher can it go?

The DBS news yesterday was very surprising to me.


Not because I did not think that this would happen, but I was not expecting it to be moving so quickly.

Hilarious that they had to pull the news because they don't have the proper final approvals yet, haha.

Anyway, imagine being late and missing the opportunity countless of times over the past few years to invest into a paradigm changing technology that has minted countless of millionaires just because you listened to some old non-tech savvy investor called Warden Bufflet.

I can't imagine that, because that does not apply to me.

Now imagine being a financial institution or observer and watching Bitcoin and cryptocurrencies have all the necessary infrastructure being put into place for mass adoption and you still think it is a scam.

Have fun staying _____. 

Monday, October 19, 2020

The Death of Defi Yield Farming

Quick post:

TLDR; DeFi yields are approaching pre-farming levels, of around 1-4% long term rates

YFI is dying - just that most of its supporters don't know it yet. I have talked to several YFI holders who are bullish on it for purely narrative reasons. They have absolutely zero data and no math or numbers to back their thesis.

YFI vaults AUM (TVL) is cratering.

-30% in AUM in the past 12 days.

Yields across all its vaults are cratering.

-50% in yields across all CRV related strategies.

Perhaps the only saving grace for YFI for now is the lag between governance earnings distro and the actual performance on the ground. Things might change very quickly next month when they low ass bitch numbers get reported and realized during the governance payout.

Perhaps the other saving grace is the 0.5% withdrawal fee they exit tax of vault users abandoning the system. That would be their main source of profit, lol.

Now, how can they turn things around? Build out products that people want to use and capture value in it and direct it to tokenholders. But, that is much easier said than done. I am not holding my breath for a YFI turnaround story. Things will likely turn terrible and plenty of "YFI is a blue chip / long innovation and builders" fan bois are going to sink with this Titanic.

Yields are collapsing system-wide.

mUSD-USDC yields is 6.5% in MTA and 5.4% in BAL. That's only 12% while taking on DeFi risks.

Dodo was hovering 20-40% for the past weeks. Now there is a new change that will slash yields 50-80% for liquidity providers. Yields should be collapsing to sub 15%.

We can go back to YFI vaults of all the various USD variants. 3-5%. 

And those are the incentivized yields.

What about "real" yields from lending / borrowing platforms? 

Aave posts about 2.5% to 4%.

Compound is 1.5% to 3.2%.

Defi yield farming is currently a meme. It doesn't exist anymore.

The golden age of farming is over.

------------------------------

If you can't already tell, I am very bearish on YFI unless they can churn out a product / service that can meaningfully replace vaults as their main profit contributor. I am extremely doubtful that they can.

As much as I hate CRV, the collapsing TVL of YFI vaults actually means less and less capital is being used to farm and dump CRV. It is now in the range of "normal", I guess? An investment thesis can be made that if cash flow growth % is higher than inflation %, CRV could make sense.

However, like I have said, the AMM space in Ethereum is hyper-competitive. There is no need to make a bet on any AMM now. I have zero intentions to ever acquire any CRV as a fundamental investment.

This line of thought also carries on to Dodo. I pre-farmed it. And I am also farming it now. But I will likely pull out my funds with the liquidity provision incentivization rate change. Just like with my preCRV, I will routinely dump my preDODO.

Barn is the new farm on the block. It will be farmed hard. It will dump hard. I wouldn't really bet it on. I don't even think I am going to farm it particularly hard as well.

------------------------------

The golden age of farming is truly over.

I am not increasing positions in any crypto assets yet, especially not DeFi assets. 

I have zero intentions of buying any tokens at these prices.

I am planning to repatriate the majority of my on-chain assets back into my CeDeFi platforms and wait out the winter.

If the broad market goes back to risk-on mode, my risk-on strategy is just trading ETHUSD. This could happen either as a stonks pump correlation move, or the "crypto is a hedge against inflation" money printer go brrr meme.

My strategy from here on out is very simple.

Farm CeDeFi.

Work my work tokens as intended (SNX, AAVE, RUNE).

Don't do much on-chain stuff except dumping shit tokens.

Trade ETHUSD if we go back to risk-on.

Chill out for the next few months, if not, years.

Good luck everyone.

Tuesday, October 13, 2020

Oct 2020 Crypto Ramblings

All that said and done earlier about the DeFi markets overheating and "crashing", my public ENS portfolio is still sitting very healthy and stronk.

Publicly verifiable on the blockchain by anyone literate enough to do so.

Just wanted to blurt out some more additional thoughts.

1) YFI is not going to make it.

As CRV price continues to tank on the realization that it's inflation schedule is retarded and everyone is just farming CRV to dump it, its price has unsurprisingly dropped from over $50 pre-exchange listings to around ~$0.60 now. Almost -99% in a few short months. Amazing.

But as a side effect of this dumping, the yCRV vault farming and dumping CRV and recycling profits back into yCRV has seen its yields crater as well. The current projected annual yields are in the ballpark of 4%. Absolutely disgusting.

And obviously, people are noticing it and most importantly, reacting to it. YFI yVault AUM has been winding down since the yields started cratering. 

YFI profit model is very simple, (unless new stuff gets added), which is simply = AUM * yields * fees

So AUM down, yields down massively, while fees are constant.

How is that "cash flow" valuation of YFI looking like now?

The market is being irrationally hopeful and optimistic about YFI. They will be punished.

2) Privacy coins on the rise

As with last cycle, I noted that I consider privacy coins to be a mid-late bull cycle play.

The narrative isn't very complicated - winners take profit from the high performing sector and wash them through privacy coins.

I believe that this happened during the ICO era, and I believe that this narrative is playing out now with DeFi / food ponzis on the decline. People are rotating out of DeFi and into privacy coins and will be washing their tracks and coming out of the end other with nice clean money with no traces to their perhaps dirty DeFi past.

If this is indeed happening, then this should be a sign that it is the mid-late period of this cycle.

How much longer can this "bull run" narrative last?

Believe me, I rather we be in a bull market too. But I don't get to decide what market we are in. I just try to figure it out myself, and re-adjust positions accordingly.

3) BTC pump + alts dump = max pain?

A current path forward popularized by the 3AC chads (su + kyle) is that we go into a max pain scenario where BTC pumps based on macro + being the only legit crypto asset that can attract and absorb the inflows of capital.

This makes sense for some reasons. If it is a macro pump, then of course everything will pump. The decline of the USD will make all assets priced in USD pump, not because they are more valuable, but because the USD is becoming less valuable.

Cue the money printing / USD devaluation memes.

But that almost sounds too easy, though I don't doubt that the long term trajectory of this thesis.

The second part about the bandwidth capacity is largely true, but discounts that (1) stablecoins of USD also exist and (2) ETH has bandwidth as well, though definitely not as large. Perhaps scaled down by a factor of 2-5x, but still significant enough.

So as their theory goes, the market like to search for max pain to transfer profits from the greedy (alts) to the conservative and patient (BTC hodlers).

But I disagree actually.

I believe the max pain scenario is that everything shits itself, lel.

Which means, BTC, ETH and all alts will shit the bed.

Of course, ETH is basically leveraged BTC, so if that happens, ETH is going down harder than BTC.

I think "alts" is a confusing terms these days. When I mean alts, I mean only DeFi alts, because in my opinion, all other alts are trash backed by nothing. At least DeFi is somewhat useful to an extent, if you look away from some of their absurd valuations.


My outlook

I am no guru, but here's what I think.

Regardless of whatever situation, DeFi will perpetually be shit for a long time as people realize just how insanely much hot money was just temporarily around to milk the yields and book quick cap gainz, and these monies will be leaving and not coming back any time soon. I still have DeFi positions in things that I have a positive LOOOOOOONG TERM outlook on.

If the 3AC "max pain" thesis turns out to be the right play, I will not be chasing BTC, but I will instead be sitting in ETH as a higher beta play and I'll just be trying to time the larger cycle for my gradual exit as mainstream euphoria hits.

But I doubt that scenario happens.

I think the most likely scenario is that everything goes to shit.

DeFi is pinned because of cratering fundamentals (yields going to 0%, NFTs spastic narrative, "real users" being tiny shrimp without the financial firepower to support the system) and things goes into another winter / buidl mode for a while to work on L2.

ETH as the "base" currency will not be as brutalized that badly as DeFi alts, since many that decide to evac might choose to sit in ETH for the phase 0 / EIP1559 narratives (imo, weak bullshit pumpamentals) whether or not they are stupid memes or actual fundamental improvements to the protocol. 

BTC is basically now the yardstick to which I look at to decide how things play out.

If BTC pumps, its the 3AC scenario and I long ETH.
If BTC dumps, then it's G's REAL "max pain" scenario, and we all eat ramen for 3 years. 

I know listening to me spew out bearish thoughts might seem very depressing, but I do not see much fundamental events to increase the risk appetite in this space. We are either macro driven (stonks/USD) or BTC driven (the leading major). In fact, I see lethargy and people looking for final sprint opportunities and others wanting to take breaks and risk-off.

The miracle bull scenario is that if post US elections everything is bullish and all assets pumps, there's a chance that the "4 year crypto cycle" meme plays out and we do get a golden bull run and we all retire ridiculously rich AF end 2021.

But one of the things that I always find true is that the market doesn't work to enrich everybody. The market works to enrich the few by taking from the majority of existing participants.

So, unless retails indeed comes in (they become the many, enriching the current fewer players) and cause us to enter into a golden bull run with their fresh capital and meat to prey on, it's just us pwning each other in a survival of the fittest tournament for the last ones standing until the next cycle begins.

The truth is that I have no idea what is going to happen with the markets. I internal flip between bull and bear several times a week arguing with myself. As of now, I am largely unexcited unless we start seeing signs of external interest translating into money flowing into the space - and if that happens, I would be keen on targetting ETH as a good R/R play that has deep enough liquidity to take up a position, and to also eventually exit without any issues.

*note: I drafted this yesterday before the market turned bull on the China DCEP narrative, which I do think is a decent narrative. My bull scenario is still the same though, which is if things do end up looking bullish, I rather be in ETH than BTC.

Thursday, October 1, 2020

Sinkie Help Sinkie

Not advice, just certain thoughts I wanted to share. 

Not psyops, this is what I genuinely feel about the market.

Maybe it will help you, maybe it will not. I don't know.

COMP started this whole yield farming craze. Yes, SNX was doing it for a long time, but COMP mainstreamed it. People suddenly realized that they could earn yield from engaging in DeFi activities like lending / borrowing, and it was pretty ridiculous with virtually no supply / bandwidth restrictions, other than how much money you had in your wallet.

Til today, months after COMP kicked things off, many people still do not know or understand where this value is coming from. Who is paying for all these triple / double digit APY yields?

The long answer is a bit complicated. The short answer is the people who are betting on the tokens themselves to increase in value by buying them. Could be a good investment, could be a shit investment. Who knows? Not me. I don't know shit.

YFI is an interesting case study. I am still adamant that my decision back then to farm and dump YFI was the correct one. What revenue stream did the suite of Y products have back then? What promise was there that more products would be created, that have PMF? Under what reason is Andre obliged to release them under the YFI umbrella, rather than go off and build things under another flag?

But that was then. Water under the bridge. Now they have vaults and insurance and stablecredit and lots of other interesting stuff. If I had known Andre would be slave to the YFI ecosystem for life and churn out products for them, I wouldn't have sold. But of course, hindsight is 20/20. No one can get every single trade right and I am okay with that, though I believe that YFI investors fell more on the "luck" side than the "skill" side of this very profitable trade. Congrats to you and sucks to be me. It is okay, I can accept failure, learn from previous experiences, and now I try to be better for the future.

How about now? What is the value of YFI? Especially when ecosystem wide yields are dropping? yCRV farming used to be in excess of 100% APY. For a while it was holding steady around 80% APY. Today? Barely 10%, maybe 15% on a good week if people aren't dumping CRV.

But people are dumping CRV. It is not just CRV that people are dumping. People are dumping every single farmable asset that is being used primarily as rewards to bootstrap adoption through yield farming.

CRV. SWRV. MTA. SUSHI. UNI. BAL. BEL. WING. FARM. CREAM. 

What use is a yield farming vault when DeFi yields are getting absolutely brutalized, while CeFi as a laggard is offering higher yields? 

How much "cash flow" does YFI as a token generate, when yields go back to "normal", which is low single digits for crypto, and mid single digits for USD variants? At some point, the DeFi rates no longer makes sense, especially if you are considering smart contract risks, composability risks, transaction fees and cost of personal time for management and monitoring.

Will the 5% performance fee + 0.5% withdrawal fee of vaults cut it and be enough to justify the valuations of YFI? Will they be able to release new services that can capture value and rightfully siphon off some to accrue to YFI holders?

What would "normal" rates even be in the future, now that yield farming is no longer a niche activity and the mass market and hot money can flow into to eat any mispriced yields? You need not worry about your typical retail shuffling around 4-5 digits to farm yield. You need to worry about the larger players with 6-7 digits that will smash down yields just by them moving around.

Obviously, I think that this market is heading towards lower rates and those rates will stay low, which is why til today I own 0 YFI and I am not ashamed to say it. It simply does not fit my thesis of my expectation of how the future of crypto would look like. As with many things, I am more happy if this illusion continues and ecosystem wide yields are high and the ponzi can continue.

While I may be a shitty growth investor, I think I am pretty good with estimating the yield / risk tolerance of market participants. And obviously my feel is that these yields for the past few months are unsustainable, but will also regress back to a low number and likely stay there til the next round of exuberance begins.

So, unless people are straight up buying those farmed tokens because they genuinely believe that the long run intrinsic value of those tokens with unknown activation and amounts of future fee distribution is larger than the very known sell pressure of the massive amounts of mercenary hot money farmers that literally do not give a shit about these projects, I think that the sell pressure of those tokens will be relentless and brutal.

Now break. That bit is about yield farming.

Next, NFTs. The pineapple MEME coin is now down ~70% from its hype peak. Clones are popping up. Fake NFTs are also appearing. IMO, this current NFT narrative is a stupid one, considering that (1) it isn't a scalable strategy for most people and capital and (2) that segment is still very nascent.

I don't doubt that NFTs will be a huge thing, eventually. What I strongly doubt is that it becomes a thing now, in this cycle, amidst poor infrastructure for scaling and still terrible to weak UX for mass retail.

NFT bulls will soon learn what it means to be liquidity rekt.

Next, degeneracy.

The market has completely stopped looking at fundamentals anymore. Legitimate projects in the space making progress and increasing the intrinsic value of their network and token is put in the backseat, to play second fiddle to the ponzi farm / scam of the week that is delivering 1000% APY returns.

The EMN shitshow is the epitome of this. Unannounced, unaudited smart contracts, no whitepaper, not even a medium post, and $15M of funds aped into it within 12 hours. In case you were wondering, I did not participate, because I am not a retard. If you lost money on this, you are really pretty fucking stupid.

At this point of the market cycle, fundamentals do not matter anymore. It is all about short term price action expectations.

People felt the FOMO missing YFI, YAM and their early clones and are now throwing caution to the wind while they yolofomo into things that they do not understand, just because they want to make a quick buck.

When retail thinks they are the smart money, then who are the greater fools that will pump the retails' bags?

If not you,
not me,
then who?

Is this not peak mania?

Over night, the markets rallied *check notes* 3% and now everyone is back to being bullish.

I cannot help but observe the situation that the market is desperately grabbing at straws here trying to justify their positioning, rather than changing their positioning to reflect the market conditions.

Insane yield farming bringing in hundreds of millions to perhaps low bils of hot mercenary market to perpetually put a ceiling to rates in this market, to forcing a silly NFT narrative and now peak degeneracy to defend and cheer on every and any upwards price movement.

People are now pushing out fundamentals further and further into the future to justify valuations.

At the same time, people are also bringing forward their imaginations of how quickly mass adoption will come and take place.

Maybe until now I have been plain lucky. Maybe my brains and body have been hardwired to succeed in a bear market, where I buy the blood and hodl with stronk hands. And maybe that makes me a weak bull market investor. Yes, that could really be the case here. I am not god. I do not make perfect calls to the exact time and price and I certainly do not take every single trade or execute them perfectly.

I am just a person looking after my own money.

The flipside of this entire argument is that 

1) DeFi is a huge fundamental improvement over the crazy ICO boom in the past (I agree, but also not mutually exclusive with the idea that the market is also overheated and misallocating)
2) ponzi food farming + other silly games and fads do not negate the usecase of crypto / defi (I also agree)
3) new money has entered and will continue to enter the system (I disagree, many stats cited are completely gameable and not significantly useful. # of new address? lmao gfy, I have 100+ addresses)

At time of posting, ETH is sitting at $363.40.
The FTX DeFi perp is at 2223.

Can we go up higher? Of course, and I do think so too, especially in the long run.

I cannot predict the future, but this will be an interesting post to look back upon and reflect about.

Don't let my "FUD" affect you and your decisions.

This is just something that has been on my mind recently, so I wanted to share it.

I rather be wrong and we moon.
I do not have any short positions.
I still have long positions.
I want a reasonably sized house too.

I hope I am wrong and the market moons like shit and you all get rich AF, while I lag behind on the gainz because of my positioning and only get semi-richer.

But I did not make it this far being a sheep and swallowing whatever narratives people spin. 

I'm not being contrarian because I think it is cool. By now, you should have realized I pretty much dgaf about a lot of things that normal people care about. 

I'm being contrarian because I like my money I would like to keep most of it.

Good luck and stay safe.

Tuesday, September 29, 2020

Not that bullish on Crypto these days

The crypto markets are getting a bit silly these days.

Anyway, a lot of people disagree with me and are not happy I am not being bulltarded and for being uncooperative in pumping the ponzi. Oh well. I don't care. The only P&L I care about is mine, not others.

As you know, I took out my initial capital + half a mil of profits earlier.

I have since done some more portfolio management and increased my cash position. My best sell that I managed to execute was ETH at $480. Sold some before that, been selling after that as well. Impossible to time the exact (local?) top and do it with size. Now price of ETH is around $350. 

Outside of my ENS which I am sure some of you see, other secret addresses and CeFi accounts with crypto, I am also sitting on thiccccccccc stacks of USD stablecoins.

Stablecoin yields around the space is well in excess over 10% pa. I consider 15% to be my risk-free rate.

But let's say you're a big pussy and you just park it with Blockfi because humji max.
At $2M USD deposits @ 8.6% pa, that's still an "income" of $172,000 USD a year, or $19,000 SGD a month.

What if 15%+++ rates instead of the 8.6% rates?

Enough to retire on?

You tell me.

I think it is important to stress that my goals are probably very different from yours. I don't need to 10x or 100x "to make it".

I've already "made it".

So you don't have to worry if I "can make it", you just need to worry about yourself. A couple of clicks and boom, my stablecoins are back to being fully long. So worry about yourself, not me. Very kind of you, but really, not necessary.

I hate to be a downer, but people in the space are just too retardedly bullish. I am more than happy to be wrong though. 

Like I mentioned, I still have plenty of crypto positions. Financially, I have much more to gain if the crypto market goes up. I would prefer if the market goes up.

But don't confuse what you want to happen, with what will likely happen.

I am mentally and financially prepared for downside. I hope you are too.

Stay safe out there.