Hello,
I am posting this topic, since I am debating between two strategies for my portfolio (BTC/ETH).
I have currently developed a “fairly good” technical analysis tracking strategy and I can see it fit well with the past 48 hours. It basically boils down to few indicators which determine “peak prices” and “bottom prices” with quite good confidence (at least so do I think, lol).
Here is some simulation data which highlights the outcome of both strategies for 2021:
[Simulation: HODL vs DeFi farm \(\~18% APY\) vs \\”Sell high, buy Low\\”. Market: 2021, BTC.](
I will try to list the Pros and Cons of both, but I would like to get feedback from other seasoned investors in the subreddit (about their experiences):
# HODL with DeFi Interest/Staking:
**➕Pros:**
\- Secure return (paid in coins), together with profits from any price increase on the asset itself. My simulation is done with +18% APY return (simulating some of the best DeFi strategies you can possibly do).
\- Low to almost no risk: Neither the principal, or the interest are in danger (theoretically, I know…)
\- No chart tracking, news following or constant “panic mode” when to buy/sell. You simply can do DCA and add on top of what you already have.
**➖Cons:**
\- Lower returns
\- Asset locking (1-3 months): You can’t withdraw or sell the locked assets even if a new all-time-high occurs
# “Buy Low, Sell High”:
**➕Pros:**
\- More profitable: Mathematically (at least for 1 year intervals), it is more profitable to sell your coins at peaks (for a “stable” coin like USDT) and re-buy the bottoms
\- Short term inflation is not an issue: Inflation adjustment: Mathematically (again), it’s still quite way more profitable to do so (even when I apply -10% inflation adjustment to the final sum). *Simulation ran with: 2 times sell at 60k, and re-buy at 45k during 2021 bull/bear markets, see data at the bottom.*
\- Your assets are not locked: You can move or cash them out freely at any moment (though, you are NOT supposed to do it, remember you are waiting to sell/buy it).
**➖Cons:**
*- Higher risk*: The rumors of “possible big financial crash in 2022” might just come true (as the world is really going crazy apparently lately), thus triggering at least 1-2 years of a “real global bear market”, during which you will have to HODL on your “dear” USDT “profits” (I am not planning to cash out, as I am waiting to re-buy, apparently”
*- USDT risk:* USDT might just collapse, rendering all our coins simply worthless
\- *Long-term inflation risk:* If a longer bear market occurs (6-12+ months as in 2018-2019, when the 2017 ICO bubble blew), remember that inflation will eat your USDT while waiting with your “profits”, while bitcoin is pretty much unaffected (and at least you would continue to earn interest in coin with DeFi).
# Request for opinions:
1. Has anyone succeeded long-term with “Buy Low, Sell High” (selling major All-Time-High points and rebuying the dips)? If so, with what part of your portfolio you do it (10-30-100%?).
2. If you side with the “HODL/Staking” strategy, what are your arguments against “leaving all that money” on the table? If so, please elaborate (with personal experiences/math) beyond simply “it’s less risky”.
Thank you all for sharing your thoughts!
# Appendix:
For a full simulation study which compares these strategies, please see the detailed with data [here]( ➡️ [**\[Data simulation\]: DeFi interest rate farming VS Trading strategies (“Sell high, Buy low” variations)**](
# Notes:
* ***Dollar Cost Averaging:*** *I have not mentioned DCA here, because based on my calculations DCA is really good for “traditional markets” with lower volatility (see* [*this great post*]( however with the high volatility of crypto – mathematically – DCA definitely DOES NOT outperform the “buy low, sell high” strategy, that’s why I don’t mention it.*
Just a warning: Thinking you can consistently Buy-low and Sell-high, might be a bit more complex than it seems. To think you have figured it out because your strategy fits well in a 48-hour span seems, at least, naive.
Can it be done? Probably. Consistently? I doubt it.
Probably what would be best (as with everything investing) is to diversify. Make a mix of both strategies even if that means not maximizing your expected return now, you don’t know how different market situations might affect your results.
And as always: DYOR!
Where you can earn 18% APY on your BTC?
Buy low sell high takes way more work to successfully pull off than you think. You need to first be not only backtesting but also forward testing your algo with data not in your training set.
Second you need to be robust to various network, exchange and other outages, code bugs, api changes, etc.
third you need to consider slippage on large accounts and how you will compensate for it.
Fourth, you need a plan for when the markets do not behave like your model predicts.
Why not both?
I think this depends how much you value mental health aswell 🙂
Personally for me, I am a strong fan of Hodling, I mostly buy and forget as this helps me remove emotions and also take my eyes off the gem.
This paid off when I loaded up on DVDX as I was able to hold without being concerned about the price actions hopefully with the Derived MVP going live soon, the much desired pump is closer than ever.
When a project offers high APY on staking like DAFI protocol then I will go with staking because I know it will give me a good ROI. Buying low and selling high is another good ways of investing
You can do both, farm and accumulate in bear market and clear your portfolio in bull market.
What i do is when stuff dumps i buy and put it for farming or staking. Like when ftm dumped to almost 1 usd recently i bought some for farming. Paired it with another coin and put it in LP its been farming for me since then. Now both ftm and the second coin are moving up so IL is minimized as well as i get rewarded in token also. Similarly i also staked DAFI in dump.
BTW this works for me as i only go with my long term choices so i have more conviction to hold
Now i will sell my rewards or take out intials and ride with the profits
>Has anyone succeeded long-term with “Buy Low, Sell High” (selling major All-Time-High points and rebuying the dips)? If so, with what part of your portfolio you do it (10-30-100%?).
A common allocation to trading (whether short- or long-term) is generally 10% of the net value of your portfolio. In my fund, I use a flat amount. You can make money with any amount trading but you will see exponential returns with higher base capital amounts, naturally.
Learning trading via market-making isn’t cut-and-dry. Buy low and sell high requires the equivalence of securities analysis to do consistently – and consistency is reliant on your methodology. To answer your question, I have had more than several trades that have returned 2x+ and others that return less and some that are losses. Trading is a different discussion.
I disagree with the other user about consistently profiting off trading. You have to do it a lot and be prepared to risk a lot of capital and understand that in long-form you’re not profiting as much as if you would have held as-an-investment. The purpose of trading is to market-make for profit.
>If you side with the “HODL/Staking” strategy, what are your arguments against “leaving all that money” on the table? If so, please elaborate (with personal experiences/math) beyond simply “it’s less risky”.
Your example doesn’t account for rate changes, for one. Secondly, most interest rates are calculated on the quantity of tokens owned and not the dollar value associated with it. For example, if you are lending Bitcoin at 18%, but you only have 1 Bitcoin, you’re earning 18% on the quantity of 1 and not $45,000. It’s only marginally better than keeping it liquid. I don’t really need to tell you the math on this one.
However, keeping the asset liquid is beneficial if you want to set a limit order *or* keep it ready to buy for opportunities. I can’t tell you the amount of times I saw an opportunity to buy something and had to wait days for my lend-for-yield unlock. It’s awful, and I often would miss the price buy-in.
All of this really depends on your temperament. I enjoy being active with my trades and investments, in a way, tinkering and refining the process. Not everyone likes this. (Contrary to your belief, you don’t always have to tune into news or chart-watch or draw TA lines – in fact, I avoid nearly all of those and only use a few indicators to make a decent profit – it isn’t the highest yield, but certainly a learning process.)
Consider that you could, fundamentally speaking, earn a near-equivalent yield with two different strategies. You could do both but this requires more work and more capital…which is the point.
Anyways, let me touch on your strategies briefly:
>HODL with DeFi Interest/Staking
Assuming you’re diversifying strategies across holding (as-liquid) / LP-farms / staking-for-in-kind-interests:
* Liquid capital doesn’t earn but allows for opportunistic buys on-demand. If you have price targets you can lend for variable time-periods.
* LP-farms with volatile assets subjects your portfolio to a degree of impermanent loss unless you develop a sophisticated near-delta-neutral strategy.
* LP-farms yield consistent fees on certain protocols with high volumes and rates are variable.
* Staking offsets dilution-of-assets related to inflationary protocols. For non-inflationary assets (e.g. Bitcoin), again, lending on the quantity of the asset needs to be mathematically weighted against lending against the dollar value of the asset. (e.g. what’s more profitable – lending 1 BTC at 6% or 3 ETH at 6%?)
>”Buy Low, Sell High”
Assuming you’re using multiple trading horizons from <1 year (short-term) to >1 year (long-term):
* Even a decent strategy for short-term trading will outweigh fees – these ones are lower-risk. The best strategies are higher-risk and in both cases, risking a greater amount of capital yields more income.
* I recommend tracking profits based on principal capital, price of cost basis per-share, and theoretical gains per-share per-bps (basis point). There’s actually some sweet spots for this – try running simulations on assets that are $0.10 vs. $1.00 for your base capital and then applying the volatility simulation (bps).
* Trading *takes practice*. I don’t like the sentiment that trading isn’t viable (especially without algobots) that proliferates on crypto subreddits. You have to be willing to put down $1k and watch it drop to $850 in a flash, maybe even $0. Yes, it sucks. Go again. Most people don’t stick it out to this point and either quit or settle for algobots.
* Another pro of trading *in tandem with investing* is that you can generate more capital because you are doing more work (by market-making). You can therefore create a more robust portfolio this way.
* A recession is the *best* opportunity to repurchase into the market and effectively buttress it. That is why you have liquidity on-hand even if “it doesn’t make anything.”
* This also applies to your comments about inflation. Over sustained periods of time, yes, your cash is going to lose purchasing value, but it’s a complex topic; is the increase of goods and services you purchase affecting your cashflow? To give you an example – Warren Buffett is notoriously very minimalistic in lifestyle (as are many other wealthy individuals). If “losing purchasing power” means “cannot go out to eat every weekend” then it may be, personally, for you, for the better.
* The USDT risk is nonsense, personally, and if you’re that worried about USDT go drop your money in Anchor and call it a day. Don’t like that? USDC is reputable, and so is Dai.
Honestly, I am a big fan of Hodling; I typically buy and stake or partake in any DeFi feature since it helps me get rid of emotions while also taking my gaze away from the gems.
This rewarded me well when I piled up on AXL since I was able to hold without worrying about price movements. Hopefully, with the forthcoming projects releasing on its launchpad, the much-anticipated pump is closer than ever, and it has undoubtedly begun with the gate io listing.
Hello, as promised I am providing a link to the follow-up topic, where I run a simulation with some extrapolated data for 2022-2032 in order to better visualize and help us understand the pros and cons of “DeFi farming” versus “Active trading” strategies.
➡️ Link to topic: [**[Data simulation]: DeFi interest rate farming VS Trading strategies (“Sell high, Buy low” variations)**](https://www.reddit.com/r/defi/comments/tr433y/data_simulation_defi_interest_rate_farming_vs/)