For those adding Crypto as an asset class to their AA

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occambogle
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Re: For those adding Crypto as an asset class to their AA

Post by occambogle »

Crypto held directly using hardware wallet: BTC/ETH in roughly 70/30 ratio.
BLOK ETF in taxable account
GBTC, COIN, SI etc held indirectly through ARK ETFs in taxable accounts.
GBTC in Roth IRA, though I may switch new money there to one of the Canadian Bitcoin ETFs such as BTCC, am undecided on that
(Note: The Canadian ETFs are only suitable for IRAs due to PFIC taxation for taxable)
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ccf
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Re: For those adding Crypto as an asset class to their AA

Post by ccf »

Prahasaurus wrote: Fri Apr 16, 2021 11:22 pm Let me give you a few examples of what I'm doing:...
Thanks for sharing!

I use Metamask and a password manager for my private key. What will a hardware wallet do for me?
feh
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Re: For those adding Crypto as an asset class to their AA

Post by feh »

ccf wrote: Sat Apr 17, 2021 6:22 am
Prahasaurus wrote: Fri Apr 16, 2021 11:22 pm Let me give you a few examples of what I'm doing:...
Thanks for sharing!

I use Metamask and a password manager for my private key. What will a hardware wallet do for me?
Just google "why use hardware wallet crypto"
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ccf
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Re: For those adding Crypto as an asset class to their AA

Post by ccf »

k i retract my question, I don't want to take this off topic, I like the topic. I do have an unused hardware wallet in a box as my private keys are already stored in something that I already have and use and trust and maintain for sensitive information and that is already set up for the event of my death, etc. I don't see the benefit of using a hardware wallet instead of metamask+fingerprint on a mobile device but if I'm using a computer with a hardware wallet, I wouldn't have to trust that my computer isn't compromised when it comes to typing in or pasting in the password.
Last edited by ccf on Sat Apr 17, 2021 7:49 am, edited 4 times in total.
Rifampin
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Re: For those adding Crypto as an asset class to their AA

Post by Rifampin »

Maybe I have FOMO or maybe I just want to have some exposure in crypto but I decided to allocate 3% of my portfolio to crypto. Does the following breakdown seem reasonable?:
67% Bitcoin
22% Etherum
11% Cardano ADA

I haven't purchased BTC yet but I plan to hold all of these for at least 1 year and if profitable, I plan on taking out my original investment and letting the rest ride. Anyone else hesitating on buying BTC at the 60k mark?
Xrayman69
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Re: For those adding Crypto as an asset class to their AA

Post by Xrayman69 »

Bought COIN stock as a play on crypto earlier this week at $322/share. Less than 1% of NW, not large but a tangible amount of money (enough to by a midsized domestic sedan)

Already owned SQ and PYPL as plays on currency exchange models and gave over the years taken out my basis +10% and will let the rest ride. These two also have an angle and tangent on crypto.

I’m not familiar enough with how to buy, store, transfer, liquidate or use crypto as a tool to buy hard assets (nor am I interested at this time). However I accept that crypto has some technological innovative characteristics (blockchain records, potential ease of use for communities without reliable banking access and thus TAM is large) and has the potential to be integrated into everyday life and thus has value as a technology.
ohboy!
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Re: For those adding Crypto as an asset class to their AA

Post by ohboy! »

Xrayman69 wrote: Sat Apr 17, 2021 9:24 am Bought COIN stock as a play on crypto earlier this week at $322/share. Less than 1% of NW, not large but a tangible amount of money (enough to by a midsized domestic sedan)

Already owned SQ and PYPL as plays on currency exchange models and gave over the years taken out my basis +10% and will let the rest ride. These two also have an angle and tangent on crypto.

I’m not familiar enough with how to buy, store, transfer, liquidate or use crypto as a tool to buy hard assets (nor am I interested at this time). However I accept that crypto has some technological innovative characteristics (blockchain records, potential ease of use for communities without reliable banking access and thus TAM is large) and has the potential to be integrated into everyday life and thus has value as a technology.
I am in around $320 too. Just for some lunch money. I think this thing will hit $100B valuation easy assuming the macroenvironment doesn’t suddenly tank.
ohboy!
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Re: For those adding Crypto as an asset class to their AA

Post by ohboy! »

Rifampin wrote: Sat Apr 17, 2021 6:57 am Maybe I have FOMO or maybe I just want to have some exposure in crypto but I decided to allocate 3% of my portfolio to crypto. Does the following breakdown seem reasonable?:
67% Bitcoin
22% Etherum
11% Cardano ADA

I haven't purchased BTC yet but I plan to hold all of these for at least 1 year and if profitable, I plan on taking out my original investment and letting the rest ride. Anyone else hesitating on buying BTC at the 60k mark?
If you are trying to hedge Ethereum with Cardano I would split it into DOT and ADA. ADA is a hype machine. Also Im personally weary of Bitcoin past this bull-run. Proof of work is going to be hard to sell when proof of stake is shown to work well at 99% less energy use. Bitcoin is much more a narrative and meme than Ethereum. I own equal amounts of both at this point but think in 5 years Ethereum has a ton more potential. There isn’t much you can do with Bitcoin and the building/development is minute compared to Ethereum. Before investing in ADA you may also want to watch some videos from it’s ship captain, I don’t like him at all.
EnjoyIt
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Re: For those adding Crypto as an asset class to their AA

Post by EnjoyIt »

Bogleheads generally don't buy assets that do not provide a return. Gold and silver being an example. Sure, some do, but I'm speaking in generalities. I am now seeing more and more bogleheads, long timers, buying into cryptos. Does that mean we are starting to reach our peak because the last of the skeptics are getting involved or does it mean that cryptos are getting adopted by the more serious investors and there is more room to grow? Time will tell.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
txhill
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Re: For those adding Crypto as an asset class to their AA

Post by txhill »

EnjoyIt wrote: Sat Apr 17, 2021 9:38 am Bogleheads generally don't buy assets that do not provide a return. Gold and silver being an example. Sure, some do, but I'm speaking in generalities. I am now seeing more and more bogleheads, long timers, buying into cryptos. Does that mean we are starting to reach our peak because the last of the skeptics are getting involved or does it mean that cryptos are getting adopted by the more serious investors and there is more room to grow? Time will tell.
I am mostly buying and holding BTC and ETH (in approximate proportion to their market cap), but I am just now starting to dabble in DeFi and generating yield on BlockFi. There is some risk with these methods given the newness of the space. But there’s a real possibility that this is the future of fixed income, or at least will be a complement to bonds. Bonds are currently complete garbage right now though, so investors are really hungry for yield elsewhere...
manlymatt83
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Re: For those adding Crypto as an asset class to their AA

Post by manlymatt83 »

I dabble a little bit in the various ETFs as well as BTC. I use a completely separate brokerage for this, almost where I forget about it. My main brokerage, where most of my funds are, is all index funds.
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watchnerd
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Re: For those adding Crypto as an asset class to their AA

Post by watchnerd »

EnjoyIt wrote: Sat Apr 17, 2021 9:38 am Bogleheads generally don't buy assets that do not provide a return. Gold and silver being an example. Sure, some do, but I'm speaking in generalities. I am now seeing more and more bogleheads, long timers, buying into cryptos. Does that mean we are starting to reach our peak because the last of the skeptics are getting involved or does it mean that cryptos are getting adopted by the more serious investors and there is more room to grow? Time will tell.
I haven't seen any of the long timers frame their crypto positions in a manner that seems to meet the Benjamin Graham definition for investment vs speculation:
"An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative."

They may be old timers, but they're making a speculative bet just like anyone else.

Bankers / Fidelity/ Coinbase, on the other hand, who are building financial services models on top of crypto that charge for fees, and thus businesses with IRR, are in a different camp than those who are investing in crypto as an asset class for speculative appreciation.

Personally, I'm more inclined to use leverage, as I can model it and estimate my risk vs return better.
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rhoms33
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Re: For those adding Crypto as an asset class to their AA

Post by rhoms33 »

Rifampin wrote: Sat Apr 17, 2021 6:57 am Anyone else hesitating on buying BTC at the 60k mark?
No. I DCA biweekly regardless of price.

If you are hesitant at $60k, you should probably rethink the investment. You could easily watch it go to $40k tomorrow. Or $80k.

I think we are still early and $60k is a bargain.
bluechip2
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Re: For those adding Crypto as an asset class to their AA

Post by bluechip2 »

I have recently started using both Gemini and coinbase, and both have excellent interfaces.

My current holdings, roughly evenly are:

Bitcoin (Gemini ‘earn’ account- 2% interest)
Ethereum (Gemini ‘earn’ account- 3% interest)
Algorand (coinbase- 6-7% interest)

Will plan to get to 5-10% of portfolio.

I think of these as my “three fund portfolio” (more like a three stock portfolio…) with BTC and ETH representing large cap and Algo representing smal/microcap.

In the current environment, the interest % is a big draw. The Gemini earn accounts lend out to institutions for the interest, but there’s theoretical risk of loss. Algo currently earns 6-7% natively at this point in the project.
Valuethinker
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Re: For those adding Crypto as an asset class to their AA

Post by Valuethinker »

watchnerd wrote: Sat Apr 17, 2021 9:53 am
EnjoyIt wrote: Sat Apr 17, 2021 9:38 am Bogleheads generally don't buy assets that do not provide a return. Gold and silver being an example. Sure, some do, but I'm speaking in generalities. I am now seeing more and more bogleheads, long timers, buying into cryptos. Does that mean we are starting to reach our peak because the last of the skeptics are getting involved or does it mean that cryptos are getting adopted by the more serious investors and there is more room to grow? Time will tell.
I haven't seen any of the long timers frame their crypto positions in a manner that seems to meet the Benjamin Graham definition for investment vs speculation:
"An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative."

They may be old timers, but they're making a speculative bet just like anyone else.

Bankers / Fidelity/ Coinbase, on the other hand, who are building financial services models on top of crypto that charge for fees, and thus businesses with IRR, are in a different camp than those who are investing in crypto as an asset class for speculative appreciation.

Personally, I'm more inclined to use leverage, as I can model it and estimate my risk vs return better.
More people have gone broke through leverage than any other way in financial history. Make sure you have enough time in the market to recoup your losses. And remember Long Term Capital Management.

As to "crypto". Yes, there's no Benjamin Graham definition of investment in this. People like it - because it has gone up a lot. When you push back on what is the business model, one doesn't tend to get a coherent answer (perhaps I am just not intelligent enough to understand it). When you ask how they make an 8% return (one argument) there's not a clear explanation - they lend crypto to other people, who pay them a high interest rate?**

If someone has built a business model using blockchain technology, that works at scale and is useful, then great. However the big challenge there is always "defensible moat". It's not enough to be first, you have to be able to stop someone else duplicating what you did (with the 2nd mover advantages of not having to go down all the blind alleys) or be able to innovate so fast that it doesn't matter - you could argue Amazon the latter, although they did patent things like "one click". And Amazon's endless long-suffering shareholders, who tolerate the constant reinvestment of their capital, are not universal in capital markets.

Google is a natural monopoly (ie increasing returns to scale across any volume of output) but even they weren't the first search engine - nor are they the market leader everywhere.

Facebook has huge network effects. Maybe that's the key to success in "blockchain business models"?

** there's a reasonable case that bitcoin, say, works well for an Iranian. I am not sure how large a market that really is - people with surplus assets in countries that have currency controls, but, unlike China say (which has banned crypto mining?), don't have the state power and nous to make that seriously risky (btw Iran is a very sophisticated state wrt the Internet and of course Chinese technology will be available to them).
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vanbogle59
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Re: For those adding Crypto as an asset class to their AA

Post by vanbogle59 »

rhoms33 wrote: Sat Apr 17, 2021 10:12 am
Rifampin wrote: Sat Apr 17, 2021 6:57 am Anyone else hesitating on buying BTC at the 60k mark?
No. I DCA biweekly regardless of price.

If you are hesitant at $60k, you should probably rethink the investment. You could easily watch it go to $40k tomorrow. Or $80k.

I think we are still early and $60k is a bargain.
"Anyone else hesitating" - I was hesitant at $675 several years ago.
"You could easily watch it go to $40k tomorrow. Or $80k." - or $400K or $0. There are no fundamentals or comps to make this analysis.

Either it gets accepted as a store of value by a lot of people, or it doesn't.
Valuethinker
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Re: For those adding Crypto as an asset class to their AA

Post by Valuethinker »

bluechip2 wrote: Sat Apr 17, 2021 11:06 am I have recently started using both Gemini and coinbase, and both have excellent interfaces.

My current holdings, roughly evenly are:

Bitcoin (Gemini ‘earn’ account- 2% interest)
Ethereum (Gemini ‘earn’ account- 3% interest)
Algorand (coinbase- 6-7% interest)

Will plan to get to 5-10% of portfolio.

I think of these as my “three fund portfolio” (more like a three stock portfolio…) with BTC and ETH representing large cap and Algo representing smal/microcap.

In the current environment, the interest % is a big draw. The Gemini earn accounts lend out to institutions for the interest, but there’s theoretical risk of loss. Algo currently earns 6-7% natively at this point in the project.
How exactly do these accounts "earn" interest? Why would someone pay interest to them, for the privilege of holding the currency?
MoeMoney
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Re: For those adding Crypto as an asset class to their AA

Post by MoeMoney »

Valuethinker wrote: Sat Apr 17, 2021 11:26 am
How exactly do these accounts "earn" interest? Why would someone pay interest to them, for the privilege of holding the currency?
Loaned out as leverage, just like a traditional bank
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vanbogle59
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Re: For those adding Crypto as an asset class to their AA

Post by vanbogle59 »

Valuethinker wrote: Sat Apr 17, 2021 11:26 am
How exactly do these accounts "earn" interest?
One VERY SMALL detail to note: the interest will be paid in the native currency.
Earn 5% on ALGO and the price of ALGO rises? Party.
But if ALGO tanks (which is the elephant in the living room, right?), your 5% ain't worth squat.

So, don't equate earning 5% on ALGO to earning 5% in an ALLY CD on USD.
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Corsair
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Re: For those adding Crypto as an asset class to their AA

Post by Corsair »

Do people count this towards their equity allocation or in their alternative allocation? So if you're 70% equities and 5% BTC do you consider yourself being a 75/25 or a 70/25/5?
Last edited by Corsair on Sat Apr 17, 2021 11:44 am, edited 1 time in total.
All posts are my own opinions and are not financial advice.
Valuethinker
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Re: For those adding Crypto as an asset class to their AA

Post by Valuethinker »

MoeMoney wrote: Sat Apr 17, 2021 11:32 am
Valuethinker wrote: Sat Apr 17, 2021 11:26 am
How exactly do these accounts "earn" interest? Why would someone pay interest to them, for the privilege of holding the currency?
Loaned out as leverage, just like a traditional bank
But who needs to borrow the cryptocurrency?

To what purpose are they putting it?
SEAworld9
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Re: For those adding Crypto as an asset class to their AA

Post by SEAworld9 »

vanbogle59 wrote: Sat Apr 17, 2021 11:40 am
Valuethinker wrote: Sat Apr 17, 2021 11:26 am
How exactly do these accounts "earn" interest?
One VERY SMALL detail to note: the interest will be paid in the native currency.
Earn 5% on ALGO and the price of ALGO rises? Party.
But if ALGO tanks (which is the elephant in the living room, right?), your 5% ain't worth squat.

So, don't equate earning 5% on ALGO to earning 5% in an ALLY CD on USD.
This is platform dependent. For instance, BlockFi allows you to take interest in the native currency, or all of it in a currency of your choosing that is on their platform. So if you wanted the interest from your BTC, ETH, LINK, etc all in USDC, that is an option.
Valuethinker
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Re: For those adding Crypto as an asset class to their AA

Post by Valuethinker »

vanbogle59 wrote: Sat Apr 17, 2021 11:40 am
Valuethinker wrote: Sat Apr 17, 2021 11:26 am
How exactly do these accounts "earn" interest?
One VERY SMALL detail to note: the interest will be paid in the native currency.
Earn 5% on ALGO and the price of ALGO rises? Party.
But if ALGO tanks (which is the elephant in the living room, right?), your 5% ain't worth squat.

So, don't equate earning 5% on ALGO to earning 5% in an ALLY CD on USD.
So you have "money" that has no official purpose (you can't pay your taxes with it) and you get paid "interest" in more of this "money".

There's quite a lot of work about giant stone coins that they use in Pacific Islands, which are too heavy to actually move. A lot of anthropological work on this.

There's also quite a bit of microeconomic research about how cigarettes (and presumably, drugs) are used as currency in prisons.

This is very interesting from an anthropological perspective. The notion of a shared cultural reality which gives a symbol, substance.

It seems to me turning this, in turn, to an "investment" is another step up in quantum level on the concept.
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vanbogle59
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Re: For those adding Crypto as an asset class to their AA

Post by vanbogle59 »

Corsair wrote: Sat Apr 17, 2021 11:43 am Do people count this towards their equity allocation or in their alternative allocation? So if you're 70% equities and 5% BTC do you consider yourself being a 75/25 or a 70/25/5?
There may be some who count it as equity. It ain't.
Valuethinker
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Re: For those adding Crypto as an asset class to their AA

Post by Valuethinker »

SEAworld9 wrote: Sat Apr 17, 2021 11:45 am
vanbogle59 wrote: Sat Apr 17, 2021 11:40 am
Valuethinker wrote: Sat Apr 17, 2021 11:26 am
How exactly do these accounts "earn" interest?
One VERY SMALL detail to note: the interest will be paid in the native currency.
Earn 5% on ALGO and the price of ALGO rises? Party.
But if ALGO tanks (which is the elephant in the living room, right?), your 5% ain't worth squat.

So, don't equate earning 5% on ALGO to earning 5% in an ALLY CD on USD.
This is platform dependent. For instance, BlockFi allows you to take interest in the native currency, or all of it in a currency of your choosing that is on their platform. So if you wanted the interest from your BTC, ETH, LINK, etc all in USDC, that is an option.
And "USDC" is -- US dollars, but as a digital currency? And who backstops that? Surely not another lender?

The recipe for a bank run is looking ohh so well prepared... good thing the FDIC backstops your crypto deposits, I presume?
Last edited by Valuethinker on Sat Apr 17, 2021 11:55 am, edited 2 times in total.
Valuethinker
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Re: For those adding Crypto as an asset class to their AA

Post by Valuethinker »

vanbogle59 wrote: Sat Apr 17, 2021 11:47 am
Corsair wrote: Sat Apr 17, 2021 11:43 am Do people count this towards their equity allocation or in their alternative allocation? So if you're 70% equities and 5% BTC do you consider yourself being a 75/25 or a 70/25/5?
There may be some who count it as equity. It ain't.
It's 5% on the outsider in the 2.30 at Cheltenham, to my mind.
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vanbogle59
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Re: For those adding Crypto as an asset class to their AA

Post by vanbogle59 »

SEAworld9 wrote: Sat Apr 17, 2021 11:45 am
vanbogle59 wrote: Sat Apr 17, 2021 11:40 am
Valuethinker wrote: Sat Apr 17, 2021 11:26 am
How exactly do these accounts "earn" interest?
One VERY SMALL detail to note: the interest will be paid in the native currency.
Earn 5% on ALGO and the price of ALGO rises? Party.
But if ALGO tanks (which is the elephant in the living room, right?), your 5% ain't worth squat.

So, don't equate earning 5% on ALGO to earning 5% in an ALLY CD on USD.
This is platform dependent. For instance, BlockFi allows you to take interest in the native currency, or all of it in a currency of your choosing that is on their platform. So if you wanted the interest from your BTC, ETH, LINK, etc all in USDC, that is an option.
That may seem different, but it really isn't.
Leaving aside the risks of USDC, and I don't question that these currencies can be easily converted whenever you choose...

Earning 5% interest on your BTC at Coinbase is NOT the same as earning 5% on USD at ALLY.
There is a much higher chance that the change in value of the BTC will make the interest payments irrelevant. For good or ill.
DiploInvestor
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Re: For those adding Crypto as an asset class to their AA

Post by DiploInvestor »

TheTimeLord wrote: Thu Apr 15, 2021 7:42 am For those adding crypto as an asset class to their AA:

How are you adding it?
--Buying crypto,
--Buying Trust instruments,
--Buying companies participating in crypto

What type of account are you using?
-- Taxable, Tax Deferred or Roth
-- Brokerage, Coinbase, PayPal, etc.

What size allocation are you targeting?
I started looking into crypto in 2017 - already late IMHO. I even built an etherium mining rig out of curiosity, which was a bit annoying to operate, and am considering staking ETH in the near future.

My allocation is about 5% to crypto (taxable): 90% ETH, since I’m a big believer in its usefulness. The rest is split between LTC, UNI, and XRP (which I can’t trade right now, but which has quadrupled in the past few weeks from my 2017/18 cost basis and will hopefully be tradable once that SEC business is over). I use Coinbase Pro and appreciate the excellent product, its ease of use, and the fact it’s a money maker turning actual profits. Also have a bunch of COIN I bought (in ROTH) just before the close on opening day.

As much as I am a long-term investor with a relatively normal portfolio, I also need to satisfy the urge to gamble a bit, and right now crypto is doing just that. I may look into the methods Prahasaurus talked about above as well to earn a bit extra.
"History doesn’t repeat itself, but it often rhymes." -- Mark Twain // "If you have a garden and a library, you have everything you need." — Cicero
EnjoyIt
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Re: For those adding Crypto as an asset class to their AA

Post by EnjoyIt »

MoeMoney wrote: Sat Apr 17, 2021 11:32 am
Valuethinker wrote: Sat Apr 17, 2021 11:26 am
How exactly do these accounts "earn" interest? Why would someone pay interest to them, for the privilege of holding the currency?
Loaned out as leverage, just like a traditional bank
With debt being so cheap today, who and why is someone borrowing to give you 6-8% interest. What happens to the debt if the value of their collateral (other crypto) goes down in value? What if it goes down fast as it has done in the past during corrections?
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
SEAworld9
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Re: For those adding Crypto as an asset class to their AA

Post by SEAworld9 »

vanbogle59 wrote: Sat Apr 17, 2021 11:57 am
SEAworld9 wrote: Sat Apr 17, 2021 11:45 am
vanbogle59 wrote: Sat Apr 17, 2021 11:40 am
Valuethinker wrote: Sat Apr 17, 2021 11:26 am
How exactly do these accounts "earn" interest?
One VERY SMALL detail to note: the interest will be paid in the native currency.
Earn 5% on ALGO and the price of ALGO rises? Party.
But if ALGO tanks (which is the elephant in the living room, right?), your 5% ain't worth squat.

So, don't equate earning 5% on ALGO to earning 5% in an ALLY CD on USD.
This is platform dependent. For instance, BlockFi allows you to take interest in the native currency, or all of it in a currency of your choosing that is on their platform. So if you wanted the interest from your BTC, ETH, LINK, etc all in USDC, that is an option.
That may seem different, but it really isn't.
Leaving aside the risks of USDC, and I don't question that these currencies can be easily converted whenever you choose...

Earning 5% interest on your BTC at Coinbase is NOT the same as earning 5% on USD at ALLY.
There is a much higher chance that the change in value of the BTC will make the interest payments irrelevant. For good or ill.
I wasn’t debating your point, I was merely pointing out that you don’t have to take the interest in the native currency. You will always receive whatever the percentage is for the tier amount you have invested. How that is valued against a fiat dollar will be variable.

No one is saying they are the same (at least I am not).
Last edited by SEAworld9 on Sat Apr 17, 2021 12:15 pm, edited 2 times in total.
SEAworld9
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Re: For those adding Crypto as an asset class to their AA

Post by SEAworld9 »

Valuethinker wrote: Sat Apr 17, 2021 11:47 am
SEAworld9 wrote: Sat Apr 17, 2021 11:45 am
vanbogle59 wrote: Sat Apr 17, 2021 11:40 am
Valuethinker wrote: Sat Apr 17, 2021 11:26 am
How exactly do these accounts "earn" interest?
One VERY SMALL detail to note: the interest will be paid in the native currency.
Earn 5% on ALGO and the price of ALGO rises? Party.
But if ALGO tanks (which is the elephant in the living room, right?), your 5% ain't worth squat.

So, don't equate earning 5% on ALGO to earning 5% in an ALLY CD on USD.
This is platform dependent. For instance, BlockFi allows you to take interest in the native currency, or all of it in a currency of your choosing that is on their platform. So if you wanted the interest from your BTC, ETH, LINK, etc all in USDC, that is an option.
And "USDC" is -- US dollars, but as a digital currency? And who backstops that? Surely not another lender?

The recipe for a bank run is looking ohh so well prepared... good thing the FDIC backstops your crypto deposits, I presume?
I’m not sure why the snark. No one is saying this is the same as FDIC insured accounts. If you would like to know more about stablecoins, there are many places to research that.
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vanbogle59
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Re: For those adding Crypto as an asset class to their AA

Post by vanbogle59 »

SEAworld9 wrote: Sat Apr 17, 2021 12:10 pm I wasn’t debating your point, I was merely pointing out that you don’t have to take the interest in the native currency. You will always receive whatever the percentage is for the tier amount you have invested. How that is valued against a fiat dollar will be variable.

No one is saying they are the same (at least I am not).
Ah. Then we agree.
BTW, I am staking Tezos at Coinbase. It's fun to watch the Rewards ticker spin away :-)
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Re: For those adding Crypto as an asset class to their AA

Post by Prahasaurus »

EnjoyIt wrote: Sat Apr 17, 2021 9:38 am Bogleheads generally don't buy assets that do not provide a return. Gold and silver being an example. Sure, some do, but I'm speaking in generalities. I am now seeing more and more bogleheads, long timers, buying into cryptos. Does that mean we are starting to reach our peak because the last of the skeptics are getting involved or does it mean that cryptos are getting adopted by the more serious investors and there is more room to grow? Time will tell.
I gave specific examples of crypto projects that pay a return. Bitcoin does not pay a return. It's similar to gold and silver. But other projects DO pay a return, similar to a dividend. Or at least have a valuation based on real cash flow, similar to stock in a company that does not pay a dividend, but does have a valuation theoretically based on cash flow.

So to summarize:

Bitcoin - similar to gold/silver. No cash flow. No dividend.

Ethereum - currently similar to gold/silver. HOWEVER. This will change soon, as Ethereum moves to Proof of Stake, and pays an actual dividend to those that help secure the network. This is a major change, and you should understand its implications very well before investing in ETH. Actually now both networks exist in parallel (Proof of Stake and Proof of Work). But soon Proof of Work (mining) will end, and the entire network will be based on Proof of Stake.

Uniswap - Pays no dividend, but generates a ton of cash, which theoretically can be distributed to "shareholders" (e.g. token holders). Uniswap is similar to a stock that does not (currently) pay a dividend, but could chooser to do so in the future.

Ren - Pays the equivalent of a dividend, currently around 15% or so. Dividend based on real cash flow generated. Actually, all cash generated by Ren is paid out to node operators. You can almost consider this a bond, or a dividend stock in which 100% of real cash flow is distributed to node operators (a subset of token holders, as you need 100k REN to operate a node).

The Graph (GRT) - pays no dividend. GRT token is a governance token, similar to equity in a company. HOWEVER. If you participate in the network as an Indexer, a Curator, or Delegator (I'm a Delegator), you earn the equivalent of a dividend. More here: https://thegraph.com/docs/network#overview. Delegator rates are around 15%, plus minus. Paid in GRT tokens.

Aave - Cash flow generator, but currently no dividend paid (again, this can change). AAVE token is a governance token, similar to an equity share in a company that pays no dividend. However, you can earn more AAVE by staking your AAVE in their Safety Module, if you choose to do so. Or simply buy and hold, and you have voting rights in the protocol, similar to shares in a company.

Etc., etc. It really depends on the specific protocol (project). You should understand this very well before you invest. Otherwise, you are leaving money on the table. Saying that "Bogleheads generally don't buy assets that do not provide a return" is fine, provided you understand the differences between Bitcoin (where this statement is true) and Uniswap, Ren, Synthetix, Aave, etc. (where this statement is not true). Because many of these projects DO provide a return directly (dividend, staking options, etc.), or indirectly (governance token, similar to equity shares in a company). And sometimes a combination of the two. And you need to understand how they provide a return, and also understand how you can benefit.

To give one specific example, I'm earning around 700 USD per month in AAVE tokens through staking my existing tokens at their site. I could simply hold AAVE in my wallet and do nothing (just vote on key initiatives, using my "shares" in Aave). But by staking, I can increase my overall return. Over time, this can be quite significant. Especially when this return is paid in AAVE tokens, which have appreciated significantly.
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vanbogle59
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Re: For those adding Crypto as an asset class to their AA

Post by vanbogle59 »

SEAworld9 wrote: Sat Apr 17, 2021 12:13 pm
Valuethinker wrote: Sat Apr 17, 2021 11:47 am
And "USDC" is -- US dollars, but as a digital currency? And who backstops that? Surely not another lender?

The recipe for a bank run is looking ohh so well prepared... good thing the FDIC backstops your crypto deposits, I presume?
I’m not sure why the snark. No one is saying this is the same as FDIC insured accounts. If you would like to know more about stablecoins, there are many places to research that.
"I’m not sure why the snark" - because we are all anonymously posting LOL

"And "USDC" is -- US dollars, but as a digital currency? " - The concept of a pegged currency isn't new. Do you trust the pegger? That's always the question. I seem to remember Thailand and Venzuela (among others, I'm sure) didn't exactly excel in that role.
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Re: For those adding Crypto as an asset class to their AA

Post by EnjoyIt »

Prahasaurus wrote: Sat Apr 17, 2021 12:23 pm
EnjoyIt wrote: Sat Apr 17, 2021 9:38 am Bogleheads generally don't buy assets that do not provide a return. Gold and silver being an example. Sure, some do, but I'm speaking in generalities. I am now seeing more and more bogleheads, long timers, buying into cryptos. Does that mean we are starting to reach our peak because the last of the skeptics are getting involved or does it mean that cryptos are getting adopted by the more serious investors and there is more room to grow? Time will tell.
I gave specific examples of crypto projects that pay a return. Bitcoin does not pay a return. It's similar to gold and silver. But other projects DO pay a return, similar to a dividend. Or at least have a valuation based on real cash flow, similar to stock in a company that does not pay a dividend, but does have a valuation theoretically based on cash flow.

So to summarize:

Bitcoin - similar to gold/silver. No cash flow. No dividend.

Ethereum - currently similar to gold/silver. HOWEVER. This will change soon, as Ethereum moves to Proof of Stake, and pays an actual dividend to those that help secure the network. This is a major change, and you should understand its implications very well before investing in ETH. Actually now both networks exist in parallel (Proof of Stake and Proof of Work). But soon Proof of Work (mining) will end, and the entire network will be based on Proof of Stake.

Uniswap - Pays no dividend, but generates a ton of cash, which theoretically can be distributed to "shareholders" (e.g. token holders). Uniswap is similar to a stock that does not (currently) pay a dividend, but could chooser to do so in the future.

Ren - Pays the equivalent of a dividend, currently around 15% or so. Dividend based on real cash flow generated. Actually, all cash generated by Ren is paid out to node operators. You can almost consider this a bond, or a dividend stock in which 100% of real cash flow is distributed to node operators (a subset of token holders, as you need 100k REN to operate a node).

The Graph (GRT) - pays no dividend. GRT token is a governance token, similar to equity in a company. HOWEVER. If you participate in the network as an Indexer, a Curator, or Delegator (I'm a Delegator), you earn the equivalent of a dividend. More here: https://thegraph.com/docs/network#overview. Delegator rates are around 15%, plus minus. Paid in GRT tokens.

Aave - Cash flow generator, but currently no dividend paid (again, this can change). AAVE token is a governance token, similar to an equity share in a company that pays no dividend. However, you can earn more AAVE by staking your AAVE in their Safety Module, if you choose to do so. Or simply buy and hold, and you have voting rights in the protocol, similar to shares in a company.

Etc., etc. It really depends on the specific protocol (project). You should understand this very well before you invest. Otherwise, you are leaving money on the table. Saying that "Bogleheads generally don't buy assets that do not provide a return" is fine, provided you understand the differences between Bitcoin (where this statement is true) and Uniswap, Ren, Synthetix, Aave, etc. (where this statement is not true). Because many of these projects DO provide a return directly (dividend, staking options, etc.), or indirectly (governance token, similar to equity shares in a company). And sometimes a combination of the two. And you need to understand how they provide a return, and also understand how you can benefit.

To give one specific example, I'm earning around 700 USD per month in AAVE tokens through staking my existing tokens at their site. I could simply hold AAVE in my wallet and do nothing (just vote on key initiatives, using my "shares" in Aave). But by staking, I can increase my overall return. Over time, this can be quite significant. Especially when this return is paid in AAVE tokens, which have appreciated significantly.
Thanks for the detailed response. Can you please add:
How does Ren and AAVE generate income so that it shares its income with its investors (stake holders?)
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
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Re: For those adding Crypto as an asset class to their AA

Post by SEAworld9 »

I will post a small view into the crypto part of my portfolio. I have been dabbling in crypto for a while (opened original Coinbase account in 2013). I am not saying crypto is better or worse than any other investment vehicles (a majority of my investment portfolio is indexed in VTI) nor am I saying crypto is the great financial messiah. It is a newer financial system that is developing, and it has both many opportunities and many warts.

I current hold:
BTC: mainly in cold, some with BlockFi at 6% and 2%, some with nexo at 4%
ETH: mainly in cold, some with BlockFi at 5.25%, some staked at 24.34%.
USDC: mainly with BlockFi at 8.6%.
ZIL: staked, 14.4% APR plus gZIL rewards on top (1 for every 1000 ZILs earned)
CAKE: staked, 303.41% APY (pool is 118.4% CAKE + 185.01% BUNNY)
BUNNY: staked (these are the rewards from staking CAKE), 384.84% APY (158.74% APR) to earn WBNB
And various other tokens, some that i flip, some that are staked from 70%-120% APR.

I dont do any liquidity pools at the moment; in general the gains aren’t worth the risk of impermanent loss to me.

Re: crypto loans - people take these out (i do not) at what seem like high rates compared to fiat loans for two primary reasons:
- because some token pairs only trade against BTC/ETH/stables.
- because in defi platforms you can get 25-45% APRs on stablecoins and 200-500% APY or much higher in staking tokens and in LPs. I was in an EGG-BNB LP that was paying 65,212% APY at one point (it has since settled around 3,200% APY).

So the money acquired via these loans is never sitting still, it’s leverage for arbitrage (just like with many financial vehicles). People take out loans out at 6%-20% because there are a ton of opportunities right now earn 75%-500% APY or more. I am not saying that this will always be the case, it’s just what’s happening now.

Yes the names of tokens can be/are ridiculous. Yes it is a convoluted process get money in the right places. Yes there is risk in many forms, some of which can be mitigated, some of which can’t - but thats pretty much like with anything. No it’s not that same as FDIC insured accounts or interest earned on fiat fixed income. No I am not saying anyone should do this, nor am i trying to convince anyone they should. I am merely providing a window into what is happening and why because.
Last edited by SEAworld9 on Sat Apr 17, 2021 12:43 pm, edited 1 time in total.
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Re: For those adding Crypto as an asset class to their AA

Post by SEAworld9 »

vanbogle59 wrote: Sat Apr 17, 2021 12:27 pm
SEAworld9 wrote: Sat Apr 17, 2021 12:13 pm
Valuethinker wrote: Sat Apr 17, 2021 11:47 am
And "USDC" is -- US dollars, but as a digital currency? And who backstops that? Surely not another lender?

The recipe for a bank run is looking ohh so well prepared... good thing the FDIC backstops your crypto deposits, I presume?
I’m not sure why the snark. No one is saying this is the same as FDIC insured accounts. If you would like to know more about stablecoins, there are many places to research that.
"I’m not sure why the snark" - because we are all anonymously posting LOL

"And "USDC" is -- US dollars, but as a digital currency? " - The concept of a pegged currency isn't new. Do you trust the pegger? That's always the question. I seem to remember Thailand and Venzuela (among others, I'm sure) didn't exactly excel in that role.
Like i mentioned before, if you would like to understand stablecoins, such as USDC, there are many places to learn more.
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Re: For those adding Crypto as an asset class to their AA

Post by Prahasaurus »

EnjoyIt wrote: Sat Apr 17, 2021 12:07 pm
MoeMoney wrote: Sat Apr 17, 2021 11:32 am
Valuethinker wrote: Sat Apr 17, 2021 11:26 am
How exactly do these accounts "earn" interest? Why would someone pay interest to them, for the privilege of holding the currency?
Loaned out as leverage, just like a traditional bank
With debt being so cheap today, who and why is someone borrowing to give you 6-8% interest. What happens to the debt if the value of their collateral (other crypto) goes down in value? What if it goes down fast as it has done in the past during corrections?
How many times do we need to explain this?

1 - Debt is cheap to whom? For 99% of people on this planet, how is debt cheap? Why do you think credit card companies charge 18% if debt is so cheap?

2 - Aave provides credit to anyone in the world, with no KYC. You only need collateral. You can have access to thousands or millions of USD (actually USDC, DAI, etc, but it's a 1:1 conversion) right now, provided you have the collateral. You could be a bank president, a house wife with terrible credit, a 16 year old in Nigeria, whatever. Aave doesn't care. You only need the collateral. You can get your loan in seconds.

3 - You must maintain collateralization ratios, which vary a bit based on what you are using as collateral. More stable collateral such as USDC require less than less stable collateral (many crypto assets). In any case, you are automatically liquidated should your collateral ratio fall into the red zone. Doesn't matter if it "goes down fast," you have lost your principal long before this becomes an issue.

4 - It's revolutionary to be able to hold onto one asset (e.g. Ethereum) and use it as collateral to finance the purchase of other assets (perhaps in USDC), with no KYC, without having to know anything about your counterparts, etc. And the entire loan is done in seconds. I can borrow a million dollars right now should I want it, with no questions asked, etc., the entire process would take 1-2 minutes. That is really amazing!

5 - Let's say you are a mathematical genius, you are a 17 year old Russian, you have earned some money in crypto, and you want to invest more with leverage. You feel you have an edge over other investors, and you want to increase that edge with leverage. How do you do that? You certainly aren't going to get a loan from your local Russian bank. You certainly aren't going to get capital from foreign banks. But you can use your existing Ethereum or Bitcoin as collateral, and now, within minutes, you have digital dollars you can use to finance further crypto purchases. No questions asked.

Does this end badly for some? Absolutely! Just like in traditional finance, where hedge funds go under. But now, thanks to crypto, we can all have access to cash. It's not just for billionaires.
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Re: For those adding Crypto as an asset class to their AA

Post by EnjoyIt »

Prahasaurus wrote: Sat Apr 17, 2021 12:42 pm
EnjoyIt wrote: Sat Apr 17, 2021 12:07 pm
MoeMoney wrote: Sat Apr 17, 2021 11:32 am
Valuethinker wrote: Sat Apr 17, 2021 11:26 am
How exactly do these accounts "earn" interest? Why would someone pay interest to them, for the privilege of holding the currency?
Loaned out as leverage, just like a traditional bank
With debt being so cheap today, who and why is someone borrowing to give you 6-8% interest. What happens to the debt if the value of their collateral (other crypto) goes down in value? What if it goes down fast as it has done in the past during corrections?
How many times do we need to explain this?

1 - Debt is cheap to whom? For 99% of people on this planet, how is debt cheap? Why do you think credit card companies charge 18% if debt is so cheap?

2 - Aave provides credit to anyone in the world, with no KYC. You only need collateral. You can have access to thousands or millions of USD (actually USDC, DAI, etc, but it's a 1:1 conversion) right now, provided you have the collateral. You could be a bank president, a house wife with terrible credit, a 16 year old in Nigeria, whatever. Aave doesn't care. You only need the collateral. You can get your loan in seconds.

3 - You must maintain collateralization ratios, which vary a bit based on what you are using as collateral. More stable collateral such as USDC require less than less stable collateral (many crypto assets). In any case, you are automatically liquidated should your collateral ratio fall into the red zone. Doesn't matter if it "goes down fast," you have lost your principal long before this becomes an issue.

4 - It's revolutionary to be able to hold onto one asset (e.g. Ethereum) and use it as collateral to finance the purchase of other assets (perhaps in USDC), with no KYC, without having to know anything about your counterparts, etc. And the entire loan is done in seconds. I can borrow a million dollars right now should I want it, with no questions asked, etc., the entire process would take 1-2 minutes. That is really amazing!

5 - Let's say you are a mathematical genius, you are a 17 year old Russian, you have earned some money in crypto, and you want to invest more with leverage. You feel you have an edge over other investors, and you want to increase that edge with leverage. How do you do that? You certainly aren't going to get a loan from your local Russian bank. You certainly aren't going to get capital from foreign banks. But you can use your existing Ethereum or Bitcoin as collateral, and now, within minutes, you have digital dollars you can use to finance further crypto purchases. No questions asked.

Does this end badly for some? Absolutely! Just like in traditional finance, where hedge funds go under. But now, thanks to crypto, we can all have access to cash. It's not just for billionaires.
1) That is exactly it, these large must be to people with bad credit. People with credit card debt at 18% for example. These borrowers are not good stuarts of their finances and therefor can't have access to cheap debt like so many others.

2) I'm pretty sure a poor Nigerian does not own crypto to be able to borrow against, otherwise they would not be a poor Nigerian, they would be a rich Nigerian. Either way, if one has collateral, the smart thing to do is to sell your cryptos if you need money, not take out more debt. But that is not the point of this discussion.

3 + 4 +5) This is actually what concerns me about this process. I have no way of proving or disproving it, but I have a strong suspicion that a significant portion of the people borrowing on these platforms are using it to buy more crypto currency with the borrowed funds, in essence they are leveraging their position. I wonder how this will play out in the next correction?
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
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Re: For those adding Crypto as an asset class to their AA

Post by vanbogle59 »

SEAworld9 wrote: Sat Apr 17, 2021 12:40 pm

"And "USDC" is -- US dollars, but as a digital currency? " - The concept of a pegged currency isn't new. Do you trust the pegger? That's always the question. I seem to remember Thailand and Venzuela (among others, I'm sure) didn't exactly excel in that role.


Like i mentioned before, if you would like to understand stablecoins, such as USDC, there are many places to learn more.
Not sure I understand...
Are you suggesting that the pegger is irrelevant?
I think Goldman and the auditors would differ. That is precisely how they are promoting USDC: "Trust us, this is fully backed by $. 1:1"

I have no reason to doubt them. But I do think this function is critical.
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Re: For those adding Crypto as an asset class to their AA

Post by Prahasaurus »

EnjoyIt wrote: Sat Apr 17, 2021 12:33 pm
Prahasaurus wrote: Sat Apr 17, 2021 12:23 pm
EnjoyIt wrote: Sat Apr 17, 2021 9:38 am Bogleheads generally don't buy assets that do not provide a return. Gold and silver being an example. Sure, some do, but I'm speaking in generalities. I am now seeing more and more bogleheads, long timers, buying into cryptos. Does that mean we are starting to reach our peak because the last of the skeptics are getting involved or does it mean that cryptos are getting adopted by the more serious investors and there is more room to grow? Time will tell.
I gave specific examples of crypto projects that pay a return. Bitcoin does not pay a return. It's similar to gold and silver. But other projects DO pay a return, similar to a dividend. Or at least have a valuation based on real cash flow, similar to stock in a company that does not pay a dividend, but does have a valuation theoretically based on cash flow.

So to summarize:

Bitcoin - similar to gold/silver. No cash flow. No dividend.

Ethereum - currently similar to gold/silver. HOWEVER. This will change soon, as Ethereum moves to Proof of Stake, and pays an actual dividend to those that help secure the network. This is a major change, and you should understand its implications very well before investing in ETH. Actually now both networks exist in parallel (Proof of Stake and Proof of Work). But soon Proof of Work (mining) will end, and the entire network will be based on Proof of Stake.

Uniswap - Pays no dividend, but generates a ton of cash, which theoretically can be distributed to "shareholders" (e.g. token holders). Uniswap is similar to a stock that does not (currently) pay a dividend, but could chooser to do so in the future.

Ren - Pays the equivalent of a dividend, currently around 15% or so. Dividend based on real cash flow generated. Actually, all cash generated by Ren is paid out to node operators. You can almost consider this a bond, or a dividend stock in which 100% of real cash flow is distributed to node operators (a subset of token holders, as you need 100k REN to operate a node).

The Graph (GRT) - pays no dividend. GRT token is a governance token, similar to equity in a company. HOWEVER. If you participate in the network as an Indexer, a Curator, or Delegator (I'm a Delegator), you earn the equivalent of a dividend. More here: https://thegraph.com/docs/network#overview. Delegator rates are around 15%, plus minus. Paid in GRT tokens.

Aave - Cash flow generator, but currently no dividend paid (again, this can change). AAVE token is a governance token, similar to an equity share in a company that pays no dividend. However, you can earn more AAVE by staking your AAVE in their Safety Module, if you choose to do so. Or simply buy and hold, and you have voting rights in the protocol, similar to shares in a company.

Etc., etc. It really depends on the specific protocol (project). You should understand this very well before you invest. Otherwise, you are leaving money on the table. Saying that "Bogleheads generally don't buy assets that do not provide a return" is fine, provided you understand the differences between Bitcoin (where this statement is true) and Uniswap, Ren, Synthetix, Aave, etc. (where this statement is not true). Because many of these projects DO provide a return directly (dividend, staking options, etc.), or indirectly (governance token, similar to equity shares in a company). And sometimes a combination of the two. And you need to understand how they provide a return, and also understand how you can benefit.

To give one specific example, I'm earning around 700 USD per month in AAVE tokens through staking my existing tokens at their site. I could simply hold AAVE in my wallet and do nothing (just vote on key initiatives, using my "shares" in Aave). But by staking, I can increase my overall return. Over time, this can be quite significant. Especially when this return is paid in AAVE tokens, which have appreciated significantly.
Thanks for the detailed response. Can you please add:
How does Ren and AAVE generate income so that it shares its income with its investors (stake holders?)
Aave - Fees are generated by the spread between borrowing and lending, based on supply and demand. How those fees are distributed is determined by the AAVE governance token. https://finematics.com/lending-and-borr ... explained/

Ren - when you transfer an asset (e.g. Bitcoin) from one chain to another (e.g. moving Bitcoin from the bitcoin blockchain onto the Ethereum blockchain*), you pay a fee. Currently, it costs .25% to move Bitcoin onto Ethereum (in the form of renBTC, a representation of Bitcoin - so called "wrapped Bitcoin"- as Bitcoin can never leave the Bitcoin blockchain). It costs .1% to move that same renBTC back to BTC. We refer to these as "mint" and "burn" fees. All of those fees are distributed to node operators. However, we are about to change that so a small % is kept in the protocol to be used as a developer fund, to finance projects. All under control of REN token holders.

*You actually don't move Bitcoin literally onto Ethereum. Bitcoin can never leave the bitcoin blockchain. What happens is you lock the keys to your Bitcoin in a smart contract on Ethereum. These keys are now controlled by Ren node operators (not any single node, as that would be too risky, but a collection of nodes, hence decentralization). Once the nodes confirm your Bitcoin is locked, they issue ("mint") a new token, renBTC, that is Ethereum compliant, and available to you now on the Ethereum blockchain. Only you have access to this renBTC token. Now you can use your renBTC on Ethereum, and its value is the same as regular BTC. You cannot get the keys to your original BTC (which is locked away) until you relinquish keys to your renBTC ("burn" your renBTC). Both minting and burning carry a small fee. Why do this? Because you can put your capital in the form of BTC to work on Ethereum. The Bitcoin blockchain has zero options to make money off Bitcoin! This is why I'm so bullish on Ethereum. If you want to put your Bitcoin to work, you need to move it to another chain, and Ethereum is the primary chain for this. Bitcoin maximalists will tell you never fear, you will soon have many more options on the Bitcoin blockchain so you don't need to move your Bitcoin to other chains. I am highly skeptical this will happen. Why don't Ren node operators steal the Bitcoin? Because each node must post a bond of 100k REN tokens, currently valued at 110,000 USD. If any node tries to do something sinister, it will lose all or part of its bond. There are around 1800 nodes on the Ren network, facilitating these transactions (minting and burning Bitcoin).
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Re: For those adding Crypto as an asset class to their AA

Post by Valuethinker »

SEAworld9 wrote: Sat Apr 17, 2021 12:13 pm
Valuethinker wrote: Sat Apr 17, 2021 11:47 am
SEAworld9 wrote: Sat Apr 17, 2021 11:45 am
vanbogle59 wrote: Sat Apr 17, 2021 11:40 am
Valuethinker wrote: Sat Apr 17, 2021 11:26 am
How exactly do these accounts "earn" interest?
One VERY SMALL detail to note: the interest will be paid in the native currency.
Earn 5% on ALGO and the price of ALGO rises? Party.
But if ALGO tanks (which is the elephant in the living room, right?), your 5% ain't worth squat.

So, don't equate earning 5% on ALGO to earning 5% in an ALLY CD on USD.
This is platform dependent. For instance, BlockFi allows you to take interest in the native currency, or all of it in a currency of your choosing that is on their platform. So if you wanted the interest from your BTC, ETH, LINK, etc all in USDC, that is an option.
And "USDC" is -- US dollars, but as a digital currency? And who backstops that? Surely not another lender?

The recipe for a bank run is looking ohh so well prepared... good thing the FDIC backstops your crypto deposits, I presume?
I’m not sure why the snark. No one is saying this is the same as FDIC insured accounts. If you would like to know more about stablecoins, there are many places to research that.
My perspective is as someone who had a (very long time ago) degree in economic history. And more recently spent quite a bit of time reading around the history of finance and financial markets (always more to learn though) and explaining to others how banking and investment banking work.

And so the point is to push the assumptions of a belief system, and see if there's anything genuinely new here. And also to get people to stop using damned jargon "USDC" etc. I raise you MTNs to your USDC, etc... and CDS not CDs.

This is a way of thinking that would have served me well had I applied it better during the dot com boom and bust - but, you know, I was in the middle of it all and we were going to be rich ...

So it's the old set of questions:

- how can something pay 8% when nothing else in the market is paying 8%? Or does that have the sort of extreme level of risk of, say, Ecuadorian bonds?

- and is there a genuine "new new thing" here, rather than just a very clever bit of technology

- how does this new system (which is really a belief system, see my post about anthropology of big stones as money, just a bit earlier) deal with the challenges that all the old systems have faced and had to deal with?

The tone is not intended to be snarky, but it is certainly sceptical ... I hear a lot of how this is amazingly different and better than anything that existed before but ....

BTW if you are an Iranian, I can see the attractions. Any way that works to get around exchange controls, in countries with high inflation/ high devaluation currencies (Iran, Turkey etc).
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Re: For those adding Crypto as an asset class to their AA

Post by MoeMoney »

I contributed to the inevitable derailing of this thread so I'll contribute to the OPs question as well as I was enjoying a productive discussion on asset allocation including crypto.

- Buying crypto, no proxy assets. Mix of BTC, ETH, LTC, UNI, LINK, NEO, XMR, etc. Weighting is in order of list.

- Coinbase mostly but moving away to Metamask (decentralized)

- Allocation is a bit different. I am seeking to spend a specific $ amount, call it 5% of net worth, as my cost basis as quickly as possible. From there I will DCA in with zero plan to rebalance (I do not want to eat grasshoppers)
SEAworld9
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Re: For those adding Crypto as an asset class to their AA

Post by SEAworld9 »

vanbogle59 wrote: Sat Apr 17, 2021 1:00 pm
SEAworld9 wrote: Sat Apr 17, 2021 12:40 pm

"And "USDC" is -- US dollars, but as a digital currency? " - The concept of a pegged currency isn't new. Do you trust the pegger? That's always the question. I seem to remember Thailand and Venzuela (among others, I'm sure) didn't exactly excel in that role.


Like i mentioned before, if you would like to understand stablecoins, such as USDC, there are many places to learn more.
Not sure I understand...
Are you suggesting that the pegger is irrelevant?
I think Goldman and the auditors would differ. That is precisely how they are promoting USDC: "Trust us, this is fully backed by $. 1:1"

I have no reason to doubt them. But I do think this function is critical.
I dont believe I said anywhere that this is irrelevant.

You seem to have many questions on USDC. Like who audits it (Grant Thornton), how often (monthly), and if those audits are public (yes).

I just said there are many places to learn this and more if you would like to know.
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vanbogle59
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Re: For those adding Crypto as an asset class to their AA

Post by vanbogle59 »

EnjoyIt wrote: Sat Apr 17, 2021 12:55 pm
1) That is exactly it, these large must be to people with bad credit. People with credit card debt at 18% for example. These borrowers are not good stuarts of their finances and therefor can't have access to cheap debt like so many others.

2) I'm pretty sure a poor Nigerian does not own crypto to be able to borrow against, otherwise they would not be a poor Nigerian, they would be a rich Nigerian. Either way, if one has collateral, the smart thing to do is to sell your cryptos if you need money, not take out more debt. But that is not the point of this discussion.

3 + 4 +5) This is actually what concerns me about this process. I have no way of proving or disproving it, but I have a strong suspicion that a significant portion of the people borrowing on these platforms are using it to buy more crypto currency with the borrowed funds, in essence they are leveraging their position. I wonder how this will play out in the next correction?
"must be to people with bad credit" - no. they are likely people with no other ACCESS to credit. That MIGHT be because they have "bad" credit. It might be because of where they live or many other reasons.

"I'm pretty sure a poor Nigerian does not own crypto to be able to borrow against" - are you really? All you need is a smartphone. And why are you picking on Nigeria?

"the smart thing to do is to sell your cryptos" - you should always just lead with this. it saves time. if you are right, nothing else matters. if you are wrong, however....

"they are leveraging their position" - Well, of course. All loans are leverage, right?
Prahasaurus
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Re: For those adding Crypto as an asset class to their AA

Post by Prahasaurus »

EnjoyIt wrote: Sat Apr 17, 2021 12:55 pm
Prahasaurus wrote: Sat Apr 17, 2021 12:42 pm
EnjoyIt wrote: Sat Apr 17, 2021 12:07 pm
MoeMoney wrote: Sat Apr 17, 2021 11:32 am
Valuethinker wrote: Sat Apr 17, 2021 11:26 am
How exactly do these accounts "earn" interest? Why would someone pay interest to them, for the privilege of holding the currency?
Loaned out as leverage, just like a traditional bank
With debt being so cheap today, who and why is someone borrowing to give you 6-8% interest. What happens to the debt if the value of their collateral (other crypto) goes down in value? What if it goes down fast as it has done in the past during corrections?
How many times do we need to explain this?

1 - Debt is cheap to whom? For 99% of people on this planet, how is debt cheap? Why do you think credit card companies charge 18% if debt is so cheap?

2 - Aave provides credit to anyone in the world, with no KYC. You only need collateral. You can have access to thousands or millions of USD (actually USDC, DAI, etc, but it's a 1:1 conversion) right now, provided you have the collateral. You could be a bank president, a house wife with terrible credit, a 16 year old in Nigeria, whatever. Aave doesn't care. You only need the collateral. You can get your loan in seconds.

3 - You must maintain collateralization ratios, which vary a bit based on what you are using as collateral. More stable collateral such as USDC require less than less stable collateral (many crypto assets). In any case, you are automatically liquidated should your collateral ratio fall into the red zone. Doesn't matter if it "goes down fast," you have lost your principal long before this becomes an issue.

4 - It's revolutionary to be able to hold onto one asset (e.g. Ethereum) and use it as collateral to finance the purchase of other assets (perhaps in USDC), with no KYC, without having to know anything about your counterparts, etc. And the entire loan is done in seconds. I can borrow a million dollars right now should I want it, with no questions asked, etc., the entire process would take 1-2 minutes. That is really amazing!

5 - Let's say you are a mathematical genius, you are a 17 year old Russian, you have earned some money in crypto, and you want to invest more with leverage. You feel you have an edge over other investors, and you want to increase that edge with leverage. How do you do that? You certainly aren't going to get a loan from your local Russian bank. You certainly aren't going to get capital from foreign banks. But you can use your existing Ethereum or Bitcoin as collateral, and now, within minutes, you have digital dollars you can use to finance further crypto purchases. No questions asked.

Does this end badly for some? Absolutely! Just like in traditional finance, where hedge funds go under. But now, thanks to crypto, we can all have access to cash. It's not just for billionaires.
1) That is exactly it, these large must be to people with bad credit. People with credit card debt at 18% for example. These borrowers are not good stuarts of their finances and therefor can't have access to cheap debt like so many others.

2) I'm pretty sure a poor Nigerian does not own crypto to be able to borrow against, otherwise they would not be a poor Nigerian, they would be a rich Nigerian. Either way, if one has collateral, the smart thing to do is to sell your cryptos if you need money, not take out more debt. But that is not the point of this discussion.

3 + 4 +5) This is actually what concerns me about this process. I have no way of proving or disproving it, but I have a strong suspicion that a significant portion of the people borrowing on these platforms are using it to buy more crypto currency with the borrowed funds, in essence they are leveraging their position. I wonder how this will play out in the next correction?
1 - It's just not true that the only people who wish to access funds and pay a high fee have bad credit. I can have access to 7 figures within minutes if I choose to do so. How can I do that in traditional finance? Sure, I could do it, but it would take me months, require a lot of time, paperwork, etc. With Aave, I could have 1 million USD in minutes. Do you see how revolutionary that is? What if I want the money for weeks only? Or perhaps just hours to speculate? How does a normal person get access to that kind of money?

2 - A Nigerian who has made money off crypto would have crypto as collateral. That same intelligent Nigerian would understand the power of leverage, and use it to his advantage to supersize his gains. How do you think hedge funds make so much money? Now that 17 year old Nigerian can be his own hedge fund. Can he fail and lose it all? Absolutely. But he can also succeed and make so much more.

3 + 4 + 5) Of course they are using crypto to buy more crypto!!! LOL!!!!! Here is a news flash: I have a strong suspicion that many hedge funds are using massive leverage to supersize gains. Want to participate in a hedge fund? You need to have millions, pass KYC, etc. Or you can do it within crypto, at much smaller scale, with similar effect.

DeFi is about giving the little guy access to the same tools that hedge funds have. That Nigerian kid can now short Tesla or gold or go long on Bitcoin with massive leverage, or whatever. Will he or she succeed? The smart ones will, long term. But now it's open to everyone. This is the revolution so many here are missing. Anyone, anywhere in the word, can participate. You just need some capital (doesn't need to be millions, a few thousand is fine to start), an internet connection, Metamask, and intelligence.
Asset Allocation: VT
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vanbogle59
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Re: For those adding Crypto as an asset class to their AA

Post by vanbogle59 »

SEAworld9 wrote: Sat Apr 17, 2021 1:23 pm
I dont believe I said anywhere that this is irrelevant.
This is like the third time it appeared that we disagreed, but we actually agreed.

This much seems clear:
your risk profile is dramatically different than mine
your confidence in this space is dramatically higher than mine
But we both seem to be looking at the same set of facts.
How very, very old-fashioned.

Good luck.
qwerty123
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Re: For those adding Crypto as an asset class to their AA

Post by qwerty123 »

Prahasaurus wrote: Sat Apr 17, 2021 1:18 pm *You actually don't move Bitcoin literally onto Ethereum. Bitcoin can never leave the bitcoin blockchain. What happens is you lock the keys to your Bitcoin in a smart contract on Ethereum. These keys are now controlled by Ren node operators (not any single node, as that would be too risky, but a collection of nodes, hence decentralization). Once the nodes confirm your Bitcoin is locked, they issue ("mint") a new token, renBTC, that is Ethereum compliant, and available to you now on the Ethereum blockchain. Only you have access to this renBTC token. Now you can use your renBTC on Ethereum, and its value is the same as regular BTC. You cannot get the keys to your original BTC (which is locked away) until you relinquish keys to your renBTC ("burn" your renBTC). Both minting and burning carry a small fee. Why do this? Because you can put your capital in the form of BTC to work on Ethereum. The Bitcoin blockchain has zero options to make money off Bitcoin! This is why I'm so bullish on Ethereum. If you want to put your Bitcoin to work, you need to move it to another chain, and Ethereum is the primary chain for this. Bitcoin maximalists will tell you never fear, you will soon have many more options on the Bitcoin blockchain so you don't need to move your Bitcoin to other chains. I am highly skeptical this will happen. Why don't Ren node operators steal the Bitcoin? Because each node must post a bond of 100k REN tokens, currently valued at 110,000 USD. If any node tries to do something sinister, it will lose all or part of its bond. There are around 1800 nodes on the Ren network, facilitating these transactions (minting and burning Bitcoin).
Small correction - in the current version of Ren (phase "sub-zero"), the ren core developers run the nodes that actually hold custody of the Bitcoin deposited for renbtc.
flyfishers83
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Re: For those adding Crypto as an asset class to their AA

Post by flyfishers83 »

It’s not clear to me how having instant access to large sums of money to buy additional speculative assets without basics like KYC is a net positive. When things go bad, it’s going to go very bad.
dru808
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Re: For those adding Crypto as an asset class to their AA

Post by dru808 »

Gbtc and ethe in tax advantaged

Xbt & eth bought through exchange in taxable.

5% allocation starting now at 12%+, haven’t rebalanced, will rebalance to 10%.
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