The Stablecoin Shift
In recent articles, I have addressed the process of exiting the market and the planning required to accomplish this endeavor. Ideally, an investor wants to exit the market near the cycle peak. However, for many, this can be a daunting and impossible task. One of the safest ways is to begin averaging out of the market, similar to how investors’ dollar-cost averages into the market.
This gradual shift commences once an investor has experienced significant gains in their portfolio and decides it is time to begin realizing that value. This is usually achieved by shifting altcoin allocations into stablecoin holdings. The gains are captured once a speculative asset is swapped to a stablecoin, which experiences minuscule levels of volatility.
In the case of industry leaders such as Tether and USDC, it is usually a fraction of a percent. This ensures gains are captured and preserved until the next investment or financial transaction. The leading problem regarding this strategy is knowing when to sell. Slowly averaging out of a position helps to create a structured process to follow, ensuring that action is taken and the decision is not avoided.
Why I Prefer Yield-Bearing Assets
You will be surprised how many investors put off this decision until it’s too late. In other words, they only realize the gravity of the situation once the market has already corrected by double-digit figures. It’s too painful to sell by this time, and they have held the assets for years, anticipating the next bull market. I like to own assets that have income-generating capabilities.
This approach goes beyond simply earning yield. An investor can exit the market without selling by holding income-bearing assets. Before I address DeFi, let’s look at a staking project like GRASS, which has an aggregate APR of 40% over the past few months. This is a return of almost 4% per month. Instead of averaging out of such a position, an investor can choose to sell their monthly yield.
This means that within 6 months, they can extract approximately 25% of their holdings without actually selling any of their holdings. The same applies to DeFi; it’s a lot more powerful! Investors can sell their monthly yield, which can sometimes exceed 10%. It doesn’t take long before much of the portfolio’s value is extracted but remains intact.
Once the market becomes aggressively bullish, investors can begin extracting the principal investment. Because much of the portfolio has already been extracted, much of the risk has been mitigated. By utilizing such a strategy, timing is no longer as crucial a challenge as before. If the bull market ends abruptly, the investor harvesting yield is better off than those still wholly exposed to the market.
Strategies like this require methodical execution, void of emotion and FOMO. Emotional investors will always find a reason to keep compounding and not extract their monthly earnings. There can be no compromise. Find an excuse once, and you will keep finding excuses not to follow through.
The most effective strategies are often methodical and void of adjustments. If adjustments are to be considered, they must be pre-ordained scenarios factored in as part of the strategy. Once a plan has been executed, it must remain on course. Deviation from a strategic approach renders it no longer a strategy.
Final Thoughts
There are so many benefits to acquiring and holding yield-bearing assets. I am a massive fan of this school of thought. There are so many creative ways they can be utilized and put to work, not to mention the passive income dynamic. DeFi will play a more significant role in my strategic approaches in 2025. It’s going to be an exciting year! All the best! See you next time!
Sapphire Crypto 