What will happen to Ethereum: another Moonshot?

You have to invest deeply if you are going to do everything right. Handing over your investment decisions to others or skimming the surface of the investment dynamics your capital is committing to is a well-traveled path to underperformance.

I’m taking a deep dive into DeFi (decentralized finance) because it’s the next big thing. Period.

Having sung the praises of bitcoin this year from the pit of around $ 5,000 down to $ 18,000 today, I am a happy hodler. Meanwhile, DeFi drives me crazy.

So today on my tour I noticed that Ethereum transaction fees are on the rise, exiting their descending channel and going up. I noticed this because a DeFi transaction startled me at the cost.

Rather than crying for a dollar or ten, it led me to the obvious conclusion that the aether is about to explode again, because the increase in transaction costs equates to increased transaction activity and therefore increased interest. .

Why shouldn’t the ether be on the verge of a big bull move? If bitcoin is hitting its all-time high with a strong chance to cross it, why shouldn’t ether follow it and head towards $ 1,000.

I could still buy a large amount of ether because I am still heavily in cash waiting for the catalyst that could collapse US stocks. The Federal Reserve is no ironclad guarantee of the current stock bubble and a crash could still occur even with vaccines in the pipeline. However, diversification remains the golden rule and I hate actively breaking that law with my cryptocurrency even when the price action is still breaking the rule, hurling my current positions towards the moon.

So rather than investing irresponsibly, I have decided to invest in more ether recklessly instead. Also, I decided to use full DeFi in the process.

I have a lot of long term token positions like uniswap, kyber, compound and the like. So I deposited them with Compound and Aave, cryptographic rescue and loan platforms. I borrowed 50% of their value in USDc coins, a stablecoin worth one dollar each, and then used it to purchase ether.

I am now a margin trading cryptocurrency degenerate. I wanted to do that, improve the skills on these platforms, and go through the torturous process of all the clicks and fees of the Ethereum wallet that goes into setting up this type of exchange. It really takes a lot of focus and attention to get it right.

So the result is that I borrowed a piece of stablecoin at around 7% interest per year with a coverage of around 200% and used it to buy ether on the basis that it is going to the moon.

So what have I learned?

You have to move in blocks of at least $ 10,000 or the costs are prohibitive. Workflow is important because you can easily end up sending cryptocurrencies on various unnecessary and expensive trips, especially if you don’t plan your campaign properly, with each stage having a cost. As such, you need to know what the platforms expect you to borrow, which is different for each, so once again the experience has real value, because getting it wrong costs transaction fees.

I feel I’ve learned that you don’t want to be too indebted because if prices go down – and you guys can do it in cryptocurrency – auto-liquidation robots that monitor positions without enough collateral will break down and give you a 10% haircut and it wouldn’t be. not nice at all. You can, of course, use the purchased ether as collateral and everything becomes recursive.

The key point is that this is risky stuff. There is so much to go wrong and while everything looks both surreal and gamified, it’s also real money at stake and a lot.

To play this game with six or seven figure sums, and people do, you really have to have platinum nerves or maybe not have nerve endings, but playing it with a few thousand will be expensive. Going to five figures sounds brave and most likely it is.

So the idea is that the ether will go up to say $ 750 a coin. I’ll sell it for USDc and repay the USDc loan I took and pocket the profit, perhaps leaving it in ether for the $ 1,000 run. If it goes south, I’ll just repay the loan, keep the collateral tokens, and go back to being a boring and reasonable crypto hodler without leverage. Anyway I will have tasted another part of the DeFi phenomenon, where I borrow a five-figure amount, no form filling, no human being in a call center somewhere in Asia to be honored with my business and please wait the line, no KYC (know your customer), no AML (Anti-Money Laundering), no 3% to 5% currency conversion scam, no waiting for hours or days, no arbitrary T&C to scroll through. This was pure, clicking the wrong button and screwing up a lot of money, libertarian, don’t stand on me, anarcho-capitalist finance, not in some futuristic visionary talk fantasy, but right on my PC right now. This is hilarious.

To feel that rush was why I tapped into some cryptocurrency, like the time I walked into a cowboy saloon, staggered to the bar and ordered some whiskey in a shot glass to knock it down in one gulp. JFDI (just launch it), because until you do, you’ll never gutly understand what this new nascent reality really is.

And what it is, it’s amazing.

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Clem Chambers is the CEO of the private investor website ADVFN.com and author of 101 Ways to Choose Stock Market Winners e Cryptocurrency Trading: A Beginner’s Guide.

Chambers won Journalist of the Year in the Business Market Commentary category at the State Street UK Institutional Press Awards in 2018.