I've made plenty of posts over the years describing my strategy for Bitcoin stacking in bear cycles and profit taking in bull cycles. This is now my 3rd cycle of executing this strategy.
In some previous posts, I've described the strategy and also walked through the numbers as the volatile crypto market fluctuated in value. We saw BTC drop to $18k and we also saw it rise to $30k, then slap back down.
Well, today BTC is sitting at $41k. Our last update on the vault strategy was when BTC was $28k, so let's talk about how things are going.
The Strategy
In each of my prior posts, I've talked about the strategy itself. I won't go into the details again here but I will give a quick synopsis. If you'd like to re-read those posts to catch up, I'll link them here.
- How My Lending Strategy for Bitcoin Collateralized Vaults is Making $$ Right Now
- Bitcoin Collateralized Lending Vaults | How to Pay Your Bills Without Selling Your Crypto
- How to Get Rich Selling Your BTC Without Actually Selling Your BTC
- Collateralized Bitcoin Loans: How My Strategy is +40% in the Current Crypto Market
The strategy itself is very simple:
- Stack sats
- Collateralizing sats for a loan
- Using loan to pay for immediate expenses
- Waiting for bull market to pay back the loan using less BTC than you bought (since BTC is more valuable than the debt)
The Current Status
This strategy has performed stupendously well for me in the past 2 cycles where I've done it. This 3rd cycle is already shaping up nicely and showing me that I'm on the right path once again.
Buy Bitcoin, collateralize it, use DAI to pay for expenses.
Then you wait for the bull market. It's that simple.
Of course, there are many emotions and ups and downs. Depending on your risk tolerance, you need to be mindful of your liquidation price and have strategies + extra capital in place to support your position if the market drops suddenly.
.... and in crypto, the market can ALWAYS drop suddenly. One must be vigilant, especially if you play at high stakes.
Bitcoin is currently trading for $41k. I have a model vault that I use to talk about this strategy in these posts. The model vault is a bit more risky than my main vault.
The main vault carries a much lower liquidation price. Essentially, I look at that as being "Safe". If the market tanks, I doubt we'd get anywhere even remotely near that price to get liquidated.
The model vault is different. I usually keep it's liq price around -15% from the current BTC price. This is quite risky and I wouldn't recommend this type of strategy for most people.
Now, I'm at my computer all day. I'm able to quickly deploy capital into this vault as needed and I am not worried about a liquidation event. I do need to stay on top of it and manage the collateral frequently, but this is like a "Hot Vault" where I am constantly moving collateral in and paying down debt, etc.
In a prior post, the vault had 4.6 BTC and was valued at $77k.
Today, the vault has 8.3 BTC and is valued at $345k.
The same 4.6 BTC is worth $190k right now. A $120k profit from the last vault update (doesn't include the new ~4 BTC that has been added since).
The new BTC is DCA'd from ~$20k - $40k. I still buy Bitcoin to this day, even though we are over 40k. The new BTC is bought slowly and methodically. I guess it's a tell tale sign of how bullish I am on BTC in 2024.
When Do We Start Selling?
This is a big question. It's good to have rules in place and be prepared for anything. We need to stay vigilant during both the bear and bull market.
In the bear, we are stacking as much as we can and preventing ourselves from getting liquidated.
In the bull, we feel rich and greedy. We don't want to sell too low before the real run happens but we also don't want to let the real run happen and not have sold anything, then get liquidated later.
It's important to have rules. In my opinion, one of the best rules is DCA.
Dollar-cost average in and dollar-cost average out.
I have not yet hit my price target to start DCA'ing out. Right now, that target is $65k (the previous high from the last cycle).
How it Works
So when we cross $65k, I will begin DCA'ing out of the BTC position. Not all of it and surely not all at once.
The DCA will start very very small and will increase as the price of BTC increases. I fully believe BTC will cross $100k in the coming cycle, but greed will not let me hold on to all this Bitcoin and wait for some arbitrary price.
Instead, I will DCA small %s of the BTC at a time.
What happens with the DCA's? I sell BTC to DAI and then I pay down the DAI debt that was accumulated over the past 3 years.
In a previous post, I showed you some scenarios:
15% of Vault Value
When BTC hits $100k, only 15% of the vault value is needed to repay the DAI debt that was accumulated.
That means I get to keep the other 85% of the vault value as BTC or sell it for stablecoins, fiat, whatever.
I obviously am a long-term believer in BTC so I'll never sell 100% of my position, but I am willing (and have in the past) to sell a large percentage of it to stablecoins/fiat, then wait to re-buy.
Verdict
The overall vault is up about 221% in value (using the average accumulation price of the BTC I bought).
Not bad for 3 years of dollar-cost averaging, eh?
This strategy has been my #1 money maker being in this industry for over 8 years now. It allows me to accumulate BTC every day while still paying expenses and being able to live.
Michael Saylor and others have talked about this idea. It's not new. It's been around for decades.
Buy, borrow, die.
My take on it is, buy, borrow, repay. I still like to repay the loans during cycle tops. BTC does not behave exactly like other assets. The cyclical nature of it requires some adaptation to the buy, borrow, die strategy.
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