Sunday 20 March 2022

Why I have decided to allocate about 20% of my crypto portfolio to stable coins and earn interest

Going into 2022, I was expecting the market to not be as positive as 2021 because we knew what was coming our way (interest rate hike) but wow, what a volatile 2022 it has been. Even with my monthly DCA-ing, the value of portfolio has been downwards and I think there is a lot of uncertainty for the remaining months of 2022 (even though we are only at March but with all the events, it does feel like we went through half of 2022).

Even as we experience some recovery from the drop due to Russia attacking Ukraine, I feel that 2022 will be a interesting and maybe sideways market as investors navigate through the different upcoming events and many uncertainty that is coming.

Russia attacking Ukraine

This has been a huge catalyst for me to build up my stables position as the situation has been a roller-coaster ride as with the prices, we have seen lower lows as days pass and the whole situation seems to escalate as sanctions and actions from the governments around the world.

There are some people who are going towards risk-off assets. Depending on how you assess risk-off but it definitely wouldn’t be crypto. Although the conflict and macro environment has been a free advertisement on why you should hold some bitcoin. There are also interest rate hikes coming our way as we await the Fed on their decisions. Many people expected 2022 to be a volatile year but no one really expected the war where inflation seems very very likely throughout the year and also to be at a rapid pace as oil and gas are already seen having much higher prices than usual.

Why I am holding onto stablecoins (for now) and where my capital came from?

I sold almost all my SG stocks (I sold them awhile back in Jan of 2022) as I wanted to shift the capital for cash and decided to switch them into stablecoins as I believe for SG stocks, it really is for the stability of it and also dividends which means it is worth it only if you have a substantial capital invested. I am currently still building up my portfolio value so if one day, my net worth increases and I hope to have a more stable portfolio or have REITs that give me good dividend payout with no withholding tax, I will buy back into SG stocks.

No one knows the best time to go in but considering that we are still early into 2022, I believe that I will need to slowly go in and not catch a falling knife. So as I slowly DCA in, holding stablecoins can earn me yield while waiting on the sidelines.

I have shared previously on using Anchor to hold UST and earn 19% APY in interest. I have also allocated around 20% of my crypto portfolio to stablecoins and this allows my money to have some growth while waiting on the sidelines. Of course, the proportion of stablecoins is just a small portion, I still hold my emergency funds in fiat.

Read more: How to withdraw your UST from Anchor & how do I usually off-ramp crypto to fiat?

My current plan is to observe when is good to go in. Otherwise with the monthly interest, initiate positions and once we see an uptrend, deploy the stablecoins. In theory, of course it sounds like a good plan but no one knows when the rebound will be and whether it will even be this year. As always, be flexible and plans might change along the way, also to take note that holding stablecoins carries some form of risk (eg. algorithmic stablecoins have risk of de-pegging).

Read more: How I change and transfer my fiat (SGD) to UST via the various exchanges to earn 19% interest on Anchor Earn

Still DCA in monthly otherwise just hold

I am also still dollar cost averaging in monthly although might not be as aggressively but making sure I am buying in at the various price points, I will still initiate positions when I get my salary. Otherwise, just hold my positions and wait it out. Hope this video has been informative!

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  1. Hi, curious, given the risks of depegging that you mentioned... for the 20% of your crypto portfolio that you allocate to stablecoins, are these stablecoins mostly parked in Anchor protocol? Also what sg stocks did you sell in jan, if you dont mind sharing?

    Just to share on my side... I also hold crypto and it's been a painful downmove since end Nov. Will be looking to par down my positions if they are any upcoming bounces to increase my cash / turn unrealised profits into realised. Just a plan too and crossing my fingers, hope I can execute this well! All the best to you too!

  2. Hi! Yes, I have all my stablecoins in Anchor at the moment as the amount is not large (higher 4 digit), I do not really separate it but if you do have a larger amount and you are worried that UST depegs although LFG and Do Kwon has emphasised that there is a large amount of reserves available to balance, you considered splitting it btw other stablecoins and earning the yield at different places.

    I sold OCBC, SGX, STI ETF and a few REITs. I did make profits on OCBC, SGX, CapitaLand China Trust and STI ETF, the rest like the hospitality REITs eg Far East Hospitality and Far East Orchard was a loss for me but if including dividends, it was a break even.

    I was lucky to get into crypto in end of 2020 although I have been DCA-ing in the highs as well. Yes, the drop was rather drastic. But yea, we will get through this! All the best to you too!