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 have been captured once a speculative asset has been swapped to a stablecoin. Stablecoins experience 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. By this time, it’s too painful to sell, they hold 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 take a quick 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, only it’s a lot more powerful! Investors can sell their monthly yield, which in certain instances can exceed 10%. It doesn’t take long before much of the value of the portfolio is extracted but with the portfolio still 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 comes to an abrupt end, the investor who has been harvesting yield is better off than those still completely 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.
Final Thoughts
There are so many benefits to acquiring and holding yield-bearing assets. I am a huge 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 larger role in my strategic approaches in 2025. It’s going to be an exciting year! All the best! See you next time!
Disclaimer
First of all, I am not a financial advisor. All information provided on this website is strictly my own opinion and not financial advice. I do make use of affiliate links. Purchasing or interacting with any third-party company could result in me receiving a commission. In some instances, utilizing an affiliate link can also result in a bonus or discount.
This article was first published on Sapphire Crypto.
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