This is my primary strategy, It is steady, it is conservative, but it is solid. I have discussed ideas mentioned here before in a variety of other posts, but today my aim is to consolidate everything into one post to make it easier for the reader to follow.
I was a more conventional trader initially but I got burnt in the September 2020 correction and I determined never to be burnt again and thus far I have managed to avoid my portfolio going up in flames again and this is largely because I adopted DAI Pairing.
However, there are a few of things that need to be noted:
- I have chosen DAI as my StableCoin simply because I use Coinbase and as a bonus it stakes at 2%. In truth any StableCoin will do.
- If USD is not your fiat currency most StableCoins are not truly stable as they will move against your fiat in the same way as the USD does against your own currency. However, there will be relative stability and significantly less volatility. For me GBP would be ideal, but there isn’t a viable option available on Coinbase. However, DAI is close enough.
- This model makes gas fees largely irrelevant
- While GBP is my fiat I am going to use USD in my illustrations because it matches the DAI price
- Using this method can play the market both ways, but reading the market is still essential and this is not a guarantee of success so always DYOR.
So now that is clear let’s get down to it.
The first thing is to stop thinking of your fiat as your base currency and think of DAI instead. Your driving ambition now is to acquire as much DAI as you possibly can.
It's all about getting as much DAI as you possibly can
DAI pairing during a period of Growth mirrors very much normal trading practices only with everything coming back to DAI. It is easier to illustrate what I mean with an example
Let’s imagine you have a seed of 100 DAI (you probably will have needed to buy this initially) that you wish to invest. I always recommend using a round amount when pairing as it will make your life a lot easier; 50, 100, 150, 200 DAI, etc.
You decide to invest in my favourite fictional currency ABCx (don’t bother looking for it – it doesn’t exist!) Let’s imagine that the current price of ABCx is $0.10
One of the keys to playing Coinbase is to Convert rather than Buy. So now I convert as close as possible to 100 DAI to ABCx. This is not exactly possible and you may need to toggle it a little bit to get it right.
So I end up with:
99.9994568 DAI converted to 999.154343 ABCx
(Yes – the figures don’t fit exactly because Coinbase still takes something from the spread)
Now I wait for the value of ABCx to increase. Anything over 100 DAI for the reconversion is growth, but you want to at least exceed what you might have got for holding it as DAI on 2% per year – this isn’t too much on a daily basis so just go for it. Let’s imagine the price of ABCx goes up to $0.12. Now before you do the next transaction always use preview and verify.
Select Convert ABCx to DAI and Convert All and see what it comes up with
As each ABCx is now worth $0.12 you will find something like this
999.154343 ABCx converts to 118.845794 DAI
(Again don’t expect it to be exact because Coinbase take something from the spread)
So my actual DAI profits are almost 19 DAI and as a StableCoin it will retain a constant value.
In reality you probably won’t see a 20% gain just like that, but I wanted to exaggerate to illustrate the point and I re-emphasise that any return above 100 DAI is profit. Realistically I generally achieve anywhere between 1% and 10% on the invested funds (please note this is not on the portfolio value - only the invested DAI value)
Personally I then pass the 100 DAI around the merry-go-round again and retain the 19 DAI to add to my underlying (and staking profits).
We can also do the same in reverse when the market dips.
Now imagine you already have some ABCx which you bought for $0.10. Let’s say $200 worth. So you have 2000 of them. Then they surge and they reach $0.15. You have a decision to make. Will they surge further or will they correct? 50% is a huge surge so you should expect a correction at some point and this is how you utilise it.
- Convert your surging currency to DAI (remember when you do it starts staking at 2% so no losses). In this case
- 2000 ABCx converts to 299 DAI (again remember Coinbase always take something)
- Now wait for the correction – let’s imagine ABCx prices drop to $012 and convert back. The summary for both conversions is provided below.
I know I am repeating myself but remember the figures are not exact because Coinbase always takes something.
So now the principle of leveraging the dip has been illustrated why not go one step further. Instead of reconverting the entire 299 DAI back to ABCx why not only convert 250 back. If I do this I will still be +49 DAI and have 2080 ABCx (again +80). So I will have gained both currencies.
Ok so this is a fictional currency – what about reality?
During times of growth I use the first principle over a wide range of currencies and I look for a correction as an indicator that it is due some upward movement. It is largely intuitive based on general knowledge of prices and occasionally I get it wrong – in which case just hodl till the prices are right. Remember despite Elon Musk the overall trend is always upwards.
When it comes to dips I focus on Coinbase staked currencies, namely TEZOs, COSMOs and ALGORAND. Again worst case scenario I don’t lose and it stakes at 2% as DAI and best case scenario I leverage growth in both DAI and the aforementioned currencies. I do this by making sure I leave some DAI behind when I reconvert for a higher quantity of the target currency
And I remind you that it is all staking – so I don’t lose.
And if you want to be sure of growing your underlying profits why not drop excessive profits into Celsius. Just do it in larger drops and watch the gas.
Finally remember these principles work for any StableCoin, I only opted for DAI because it stakes on the Coinbase exchange. Remember that by using such pairing gas becomes irrelevant.
As always stay safe and stay well.