In the previous crypto bull market, I was a genius. I had managed to save more money than I had ever been able to save in my life. I had figured out how things work. I often say that everybody is a genius during a bull market. I meant everybody else. But it apparently means me too.
Once the bear market took hold, I could not keep up with margin calls. I wound up getting liquidated within weeks. Although it's not great to get liquidated, I was actually still in the green. I was forced to take a profit by the margin calls. In other words, it could have been worse.
The general consensus in the crypto world is that we are gearing up for another bull market in 2024. We get a chance to start over, to try again. With this in mind, I am working my DeFi a little differently from last time around.
AI image by Bing Image Creator
Risk Off
As the price of HIVE and my DeFi holdings increase, I'll be selling small portions into stablecoins. I'll need to set some milestones to trigger the sells. But the point is to lock in gains as HIVE goes higher and higher.
As for DeFi, this time around, I'm going to do a better job of allocating my deposits. Last time around, I was too heavy in my favorite cryptos and very light on stablecoins. This time, I'm going to stabilize the portfolio volatility by having a large portion in stablecoin.
This new aproach also affects how much my bags will grow. This is a lump I'll have to take. My main concern is to use DeFi as a source of credit so that I can finance big purchases. For this reason, volatility is not my friend. Although it benefits me that my bags grow during a bull market as it also increases my credit limit. But at the same time, it introduces risk in that my credit can quickly drop with the market.
I'll have to do the calculator game to figure out what ratio of stablecoin to crypto best fits my risk tolerance. I'd like to be able to tolerate a 75% drop without having to worry about liquidation. I recognize that, mathematically, I'll need to be heavy on stablecoin deposits. However, too heavy into stablecoins would also stifle growth.