Playing The Cycles: A Game of Patience

Backed by Bitcoin

September 3, 2023

 

Greetings Everyone,

I wanted to drop in and give everybody a blog. I was expecting to be writing a lot more this year, but I’ve made some different moves in my own life as far as employment and hadn’t had as much time to address this community as I thought I would. Anyway, I’m back stable again and ready to continue to guide us through this bear market and into the upcoming Bitcoin halving. I’ve been doing a lot of thinking on my portfolio as a whole and decided that I needed to reallocate to be better prepared for the upcoming halving, presidential election, and subsequent bull market. 

I wanted to get myself into some stocks and larger altcoins to protect myself against any late bear market downside that may come. I also am looking at more of a guaranteed upside based on news from some of the bear market trends I’ve been seeing. We are in the late part of the longest bear market in crypto history. Investing amid the largest financial collapse in Chinese history and witnessing a growing national debt in America. China is going to have to print trillions of fiat currency, America is going to have to print trillions and Europe is going to have to print trillions. Crypto has historically been the best performing asset we have ever seen in an environment like this. Looking at how this affects our children on a 50 year time horizon, the options are to increase taxes on our children and grandchildren to pay for this or print ourselves into oblivion similar to many of the great empires that have come before us. 

People in our country are watching housing prices rise, food costs rise, and energy costs rise. However, we fail to fully grasp why this is happening and what we can do to counteract this. We are in a very interesting time in human history. Using computer code, we have created a concept called digital scarcity. A verifiable rules-based monetary system that is temporarily volatile but able to be traded 24/7, borrowed against like the true asset that it is and able to held more securely than any bank ever could. 

Consider yourself lucky to be able to front run the largest financial institutions in the world in obtaining the most valuable asset you will ever see in your lifetime. I write with such conviction because I’ve already seen what having a crypto portfolio has been able to do for me when I ran out of money myself. It was the reason I was able to eat some days. These are exciting times and the people who will emerge from this sector as the new wealthy will be the patient ones who played this in market cycles.

To Your Success,

Donny Diamond Hands

References

SEC delays verdict on BlackRock’s ETF application; Will Bitcoin ETFs see light of day? (yahoo.com)

https://www.bloomberg.com/news/articles/2023-08-18/china-s-hidden-financial-dangers-erupt-with-shadow-bank-crisis?utm_source=website&utm_medium=share&utm_campaign=copy

Regulator warns Europe's banks are still at risk | CNN Business

Does Bitcoin Beat Inflation? (forbes.com)

 

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Proper Risk Management Practices

March 15, 2023

Backed By Bitcoin: The Blog

 

PROPER RISK MANAGEMENT PRACTICES

This blog post will cover risk allocation. This is an extremely important concept in crypto because of the aspect of volatility. Because Bitcoin has a history of dropping 70% - 80% from the highs, it is imperative that we understand portfolio composition and risk allocation. Cryptos (and companies) with small market caps are normally the riskier plays and traditionally should be made a smaller portion of our portfolio. The best part about being a New World Banker is that you are responsible for allocation and risk management of your own portfolio. You are responsible for learning, strategizing and deploying capital (LSD). This is one of the largest concepts that keeps people from being sovereign with the money that they have and why people feel like they need to pay Wall Street to gamble their money off and not have to pay the bill for 40 years. Anyway, I digress! Let’s get into some good risk management practices and I’ll teach you some principles I’ve used to be successful throughout this bear cycle.

 

Many individuals will tell you do not invest what you cannot afford to lose. This is a good mantra, but a basic one. Some more powerful mantras are the following.

 

RISK MANAGEMENT MANTRAS

 

1.     If you don’t know where the yield is coming from, then you are the yield! Look for blockchain addresses and proof of any fees you are supposedly generating.

2.     Pick an overall strategy and dollar cost average your way into it. You’ll be surprised how large your bag can grow in one 4-year cycle.

3.     Part of “LSD” is continuing to follow the projects that you’re invested in to be able to spot a change in fundamentals. If the goals of the project don’t align with what you want, then you should exit as soon as possible.

 

I think it’s important to identify your top priority within crypto. People have different goals and objectives, and this space can be pretty much anything you want it to be. It’s up to you to decide what you want. My main objective is passive income. So, my portfolio is largely staking and node operation. In exchange for performing these services for the network I receive fees. My goal is to continue to dollar cost average into the things that continue to produce income and eventually build a sustainable revenue model for my business. Coming in with that understanding, I continue to search for things that meet those objectives. You’ll need to prepare an investment thesis for any project before you start your dollar cost averaging strategy into those assets. You’ll need to ensure that the yield is sustainable and not a result of unplanned inflationary pressures. This is where learning and strategizing comes in. We will need to learn a project to find out if it suits our overall crypto strategy and see if it will serve the overall vision for what you want. Some people want to be early to a coin and sell at the pump. Sort of like a venture capitalist type of situation. There’s nothing wrong with that, but it’s easy to get into a gambling mentality with that. I prefer to find fundamentally sound projects with sustainable tokenomics models that will allow me to get paid in perpetuity. In this space, you only must be right once and only after studying the greatest innovators and monopoly builders of American history will you find my reasoning for looking at some digital coins in this manner. There are a lot of things to get distracted by and you need to do everything you can to keep your main goal top of mind. 

 

Let’s get into some hard numbers on how my portfolio looks right now. These allocations will change as market conditions change. As of right now, in a bear market there’s no need to be heavy in stable coins in my opinion. Looking at the overall price of these assets over the last 4-5 years we are well below 52-week lows and price action is consolidating in a tight range overall. That’s a time to be deploying capital in a slow and controlled manner. We must learn to think like an institution, it doesn’t matter if our portfolio is $1,000 or $100,000,000. Money will always go to the pockets where it is treated best and cared for properly. Here are my current holdings (I know that’s what everyone is here for). I hope that you find success and that your strategy is well planned and thought out. 

 

The hardest part of this game is patience. If you can learn patience, then you will be successful at anything you set out to accomplish, no matter how big or small. It’s about consistently working, not having it all at once. During periods of draw down it’s going to be about following the market and patiently waiting in cash while deploying small amounts of your overall cash. This pie chart will change and ultimately these crypto holdings will grow to 25% of my total portfolio. The goal is to have 25% of your money at risk while bringing back more value to add to your overall bag. Eventually you will be able to live from the value that the 25% brings in and your long term holds never dwindle.

Connect with me at the following link

https://linktr.ee/donnydiamondhands

The Secret To Crypto Research

 Backed By Bitcoin Blog

February 1, 2023

Donny Diamond Hands

THE SECRET TO CRYPTO RESEARCH

In this edition of the Backed By Bitcoin Blog we will be going over how to research. This is a skill that basically separates the noise from what is actually true. New World Bankers base investment decisions on previous historical price data and fundamental analysis. We make decisions using price charts, news from “Crypto Twitter”, mainstream outlets and other online metrics to gauge sentiment. One important tool to gauge sentiment can be found at this link https://alternative.me/crypto/fear-and-greed-index/. This tool uses a lot of online metrics to spit out a number on where they believe the sentiment of the market is. You can use our other tools as confluence to agree or disagree with this tool. It is very easy to load up on blue chip cryptos during the bear market once you know a few sites to be able to perform research on some of these coins. I’ll outline a few things here and give you my thoughts on some of the better ways to research a cryptocurrency.

To ensure success, I always start with www.CoinMarketCap.com. This site will give you a quick synopsis on sentiment, provide details on tokenomics, give you current price and show you where to be able to acquire the token. After you’ve had an opportunity to familiarize yourself I start by reading the blogs of the team and looking over the website. I also always take time to read the whitepaper for any project that I plan to invest in. The website and whitepaper will give the foundation on how the project is supposed to run. It will be especially important to focus on tokenomics while researching. Some projects may be hard capped, similar to Bitcoin and some projects may be inflationary with plans to reduce inflation later such as a burn mechanism. 

It is vital to understand that 90% of these cryptos will fail and the big players in 10 years, may not be who has the most market cap at the moment. We need to research for infrastructure and fundamentals, therein will lie our opportunity to be wildly successful in the crypto space. I think it is important to know everything possible about the protocols you are trusting with your money. We need to know how it’s governed and who holds most of the power. In the end, all a smart contract is is a community of people who choose to follow certain rules within a transaction.

After you’ve spent some time familiarizing yourself about the project on a basic level, it will be time to start joining and following communities. These communities can normally be found on discord or other online forums. Links to these forums will appear on the homepage for the coin or on CoinMarketCap. Follow these communities to haulage sentiment, ask questions and in some cases be able to ask developers questions. This is one of the more powerful parts of crypto in my opinion. A good crypto will have an established and experienced team, a strong community and an online presence that can be traced back for many months or years. 

Additional research can be carried out by reading books by independent authors and going to local meetups and lessons on cryptocurrency. Crypto requires a lot of reading to be able to be consistently successful. Educating yourself will be paramount to you success and research is all about learning the facts you need to know to predict success or failure. I’ve used these skills extensively in my own trading. Research made me a much more comfortable and consistent trader and crypto enthusiast. Research is the backbone to what we do, it is imperative that you embrace learning and transform yourself into the type of person who can synthesize complex information into digestible pieces. It is a pre-requisite to accumulating the correct coins and cashing out at the top of the market cycle.

Stable Coins: The Basics

 

The Blog: Backed By Bitcoin

January 15, 2022

 Stable Coins: The Basics

After Bitcoin, the most important coins in the space are stable coins. Some stables are risky because many are unregulated by the SEC and the dollars that back them have not been audited by any third parties. This makes it possible for money to be stolen from users using stable coins. However, in this article we will be going over many of the attributes of stable coins including the following list.

1.       What are stable coins?

2.       How can stable coins be used?

3.       How to evaluate a stable coin

4.       What are the top stable coins in today’s cryptocurrency market?

5.       What is the SEC’s plans for regulation?

6.       Where do I find information about each stable coin and the issuer

In essence, stable coins are cryptocurrencies that are pegged to the United States Dollar. These coins allow you to be within crypto and still have the price stability of the dollar. This allows citizens in developing countries to save dollars and have access to dollars. These stable coins can be used to save and spend United States dollars where the native currency is highly inflationary. All stable coins are not created equal and its important to understand the difference between algorithmic stable coins and cash backed stable coins. Professionally audited, compliant, cash backed stable coins are considered the safest stable coins in the industry. Algorithmic stable coins use complicated math to maintain price and often lose peg. They have proven to be unreliable during my years in crypto.

 Stable coins can be used to save on exchanges, personal hot wallets, in cold storage or can be loaded on a crypto convertible debit card and used to purchase goods and services anywhere a debit card is accepted. You can normally earn anywhere from 1% - 8% yield by yield farming or using some of the yield generating services on some of the major centralized exchanges. Stable coins can also be sent to individual wallets similarly to how dollars can be transferred.

The best way to evaluate a stable coin is to check to see how it has been audited and how the coin has performed in the past. Older stable coins are less risky and have seen more downturns and experienced more pressure to de-peg. My personal preference is stable coins that are backed by physical cash inside of a bank account that is audited by a third party. There are many options on which stable coin to choose. USDC is the leader regarding this type of stable coin. They are a fully audited and physically backed crypto. Another leader regarding stable coins is DAI. DAI is minted based on the amount of funds locked in the Compound Protocol, which is a decentralized lending and borrowing protocol. It is the most stable and reputable crypto backed stable coin. I’ll include references to more information on both stable coins below.

MakerDAO | An Unbiased Global Financial System

USD Coin (USDC) | Crypto that’s held to a higher standard | Circle

The situation that we currently have with regulation is one of uncertainty. The thing that we can be certain of though is that regulation is coming within the industry this year. We can expect that after the FTX fiasco and the Terra Luna collapse that the SEC (Securities Exchange Commission) will introduce laws regulating stable coins. Contrary to popular belief regulation is an extremely good thing for crypto. This regulation will allow more of the world’s sovereign wealth to enter the cryptocurrency space. Regulation is a major steppingstone to giving us a $100,000 Bitcoin. Also, as a side note, Bitcoin has already been officially labeled as a commodity by the SEC. This also adds to the credibility of this financial asset similarly to oil, wheat, corn, or coffee beans. The only information that the SEC has given on their plans for regulation in the crypto space is that they have plans for stable coins in 2023. Anything other than that is purely speculation. What you do know for sure is that representatives from the leading stable coins in the industry will be looking for the opportunity to influence that regulation to make it favorable for users and stable coin issuers.

 

The best place to find information on each stable coin is the official websites of each coin. Since each of these coins is a cryptocurrency, they all have whitepapers outlining how they are designed and how each coin will react in the event of a bank run. I think it’s important to understand what youre investing in before you place your capital. One of the biggest lessons that we learned from Terra Luna is to look at where the yield is coming from. A hard, set amount of yield it hard to sustain. Terra Luna was promising 20% paid out in a stable coin and the coin de-pegged. I also want to mention a few other decent stable coins that may not be industry leaders but have done well to make it through this bear market so far. A quiet stable coin is the best type of stable coin. Some crypto users have experienced personal issues with using a stable coin that issued by a company in comparison to one that is issued by a smart contract. I like to diversify my stable coin holdings as well. Hopefully I’ve given you enough information to make an educated decision on holding a cash equivalent.

 

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