What I’m Holding Through the Bear Market

Welcome to part three in the “boo the fun is over for now” series. Part one was “mistakes I made” and part two was “good decisions I made.” 

Maybe things are going to turn around and we aren’t actually entering a big recession, but who knows! Either way, I’m assuming we’re not going to have a significant amount of liquidity flowing back into the ecosystem until the money printer turns back on, the next halvening, or some other event justifies billions of dollars of new interest. And I don’t think the merge will do that. That’s a future article though. 

But assuming crypto price action is going to be quieter for the next couple years I spent the last few weeks asking myself what I’d be comfortable setting and forgetting, assuming I couldn’t touch anything for months at a time. 

So the list that I came up with are the projects which I:

1. Have good long term conviction on
2. Require zero or minimal maintenance
3. Accrue value without just printing tokens

Here’s where I landed. This is pretty much all I’m holding now. And obviously, this isn’t financial advice, I’m not a financial advisor, I’m an unemployed philosophy major who thinks blogging is a real job. Anywhooo…

ETH as stETH

The main thing I’m holding of course is ETH. I’m the most bullish on the ETH ecosystem of any that have popped up, especially now that we’re seeing some implosions and liquidity runs from the competing L1s of this cycle. All signs point to the merge going off well, it has the lion share of TVL, it’s where most of the new blockchain innovations are happening, it’s just pretty hard to argue it’s not the strongest smart contract platform that’s live right now. That doesn’t mean it won’t be IBM one day, but for now, it’s where I have the most conviction.

I’m holding it as stETH because it’s not only a free, extremely low-risk 4% yield, but there’s a huge discount on it right now where you basically get a year of yield for free by swapping into it. 

So if you have 100 ETH, you can swap it for 103 stETH or so, let it sit and earn interest for a year and a half till you can redeem it and it will be around 109 ETH. 

There has been some FUD recently around stETH because it’s not pegged 1:1 to normal ETH anymore. But it never really should have been trading 1:1, since you give up some liquidity to get the 4% APR. But this is very different from a stablecoin depegging. stETH isn’t a “stablecoin” pegged to ETH, it’s a receipt for an ETH deposit that you can redeem for ETH in the future post-merge. You’ll always be able to redeem it for ETH eventually, you just have to wait. So it’s not worth holding if you want to be able to trade in and out a lot, but if you’re going to hold ETH for multiple years anyway, I feel pretty good holding it in stETH and getting the free interest. 

SOL as stSOL

While I’m still most bullish on ETH, that doesn’t mean something couldn’t eat its lunch or seriously compete against it in the future. Tech platforms seem to tend towards duopolies or small oligopolies (Apple & Android for mobile, Apple & Microsoft for desktop, AWS Azure etc. for cloud, so on) so I don’t see why everything would live on ETH. Even with the L2s and side chains. 

So then the next natural question is: what would be the Android to ETH’s Apple? Or maybe ETH is Android, whatever. I think the clear answer is SOL. An EVM L1 like Avalanche has no chance long-term against L2s and ETH itself, especially with teams like Polygon building subnets directly on ETH for companies that want them. The same goes for BSC. 

The reason I like Solana is they’re building something very different from Ethereum. It’s more centralized, UX-focused, faster, and cheaper, and it will probably attract a lot of business. Most end users are not going to care about decentralization, they’re going to care about the experience. And Solana has a decent chance of delivering that. 

Which makes this the second biggest thing I’m holding. And like ETH, I figure I’d rather just stake it and get a free ~7% APR. The nice thing with staking on Solana too is that since it’s already Proof of Stake, you can convert your stSOL back to SOL any time, so there’s no liquidity premium. It’s always redeemable without a discount. 

MATIC as stMATIC

This one is a little weird since I think MATIC is going to have a hard time driving long-term value to their token, or at least it’s had a hard time so far, but their business development is so damn good, and they keep launching new tech that’s building directly on top of Ethereum. So while I’m very bullish on specific L2s like Arbitrum and Optimism, and competing L1s like Solana, there’s something kinda special about the Polygon team. Maybe I’m bag holding on this one, but they just seem to be a little bit more professional and sales oriented than most crypto teams, and their tech is solid. So MATIC makes the cut too, and again I’m just staking it with Lido to get free interest. 

One thing I’m realizing is I’m probably over-exposed to Lido… I kinda wish there were more good liquid staking alternatives. Oh well. 

IMX

My reasoning for IMX is similar to MATIC. They have a very strong business development team, constant tech updates, the existing tech is good, and the core offering of an NFT-focused L2 to Ethereum catered to games and media makes a lot of sense to me. Also, the Illuvium land sale on Immutable X was phenomenally smooth and inexpensive, it made me much more excited about the chain. 

I also love their staking setup, where staking earns you a share of minting and trading fees for NFTs instead of just gas fees. That means it could accumulate quite a bit more value than you’d expect from an L2 token where the gas is supposed to be cheap or free. Once I saw that was how they were doing staking, I got quite a bit more excited about the token. 

CVX as uCVX

Convex is the first crypto application that isn’t chain-layer that I think is worth holding. If you haven’t read my article on The Curve Wars I’d check that out to see why CVX is such a powerhouse, but the short version is that other teams are continuing to pay CVX holders to earn themselves more CRV emissions and thus more liquidity for their trading pairs. I love that by staking CVX you’re getting a surprisingly good dividend, around 30%, in other tokens besides CVX. And if you use the Llama Airforce Union, you can aggregate all your bribe earnings to one token and not have to sell tons of dust. 

So the Union is pretty good and if you want to maximize safety and earnings that would be a good choice, but I went ahead and put it into uCVX from Redacted (though you can also access it on the Union site) since they take all the bribes you earn and use them to buy more CVX, and your CVX isn’t locked up. Though I suspect the 1:1 peg won’t last forever on the liquid market, you can always redeem it 1:1 for CVX if you wait. 

Anyway, CVX seems to be one of the few apps accruing value that is likely to keep growing until the next run since everyone needs liquidity. So I’m happy holding this and letting it grow. 

My Cryptopunk

The reason I like Cryptopunks as a long-term bet is that since it’s the first NFT PFP project, and since it’s a historic artifact of the Ethereum ecosystem, it’s kind of a leveraged bet on the Ethereum ecosystem itself. I can’t imagine a world where Ethereum is the dominant blockchain worth trillions of dollars and Cryptopunks aren’t among the most valuable NFT assets. I think Apes are actually hurting themselves by constantly trying to build utility for the NFTs, but that’s debatable. Apes are definitely probably a decent hold too, but I feel less secure on those. The fact that Cryptopunks give you nothing besides the artifact itself gives them more long-term durability. 

Smaller Ones

Aside from those big primary holdings, I have a few others I’m holding on to since I think they’re doing interesting things and could turn into nice bets. 

RAIDER

I work with the Crypto Raiders team and designed their tokenomics and keep supporting them on the economy, so I’m biased. But they’ve completely switched gears to focusing on gameplay and downplaying the econ and crypto focus while we’re in a bear market, which I think is absolutely the right move. If they can build a great game over the next couple of years and then create a deeper crypto integration when things get exciting again it could be a good bet. So I’m happy to keep holding quite a few of these tokens.

ALCX as gALCX

The ALCX token has dropped something like 98% from the peak, but they’re getting closer to turning on profit sharing and they seem to be generating quite a lot of yield from their vault strategies. If people are using them to take safe leverage on their ETH and stable coins through the bear market, and they’re generating yield from that and using it to send value back to token holders, it could turn into a good cashflow token. But again, I might be bag holding here. I really like Alchemix. 

DPX as veDPX

Similar to ALCX, the Dopex ecosystem is starting to generate real cash flows, and now that they have their token locking mechanism for sharing revenue it could turn into an interesting hold, especially as they keep developing their options strategies. I talked about them at length here, but if they can win the competition for an on-chain options platform on layer 2, that could be a massive business that’s worth having a share of the profits from. 

Anyway, those are the main ones. I have a couple of other little things like GMX and Looksrare that I think are inexpensive, high upside bets, but these are the ones I feel strongest about. 

I’m curious to hear what anyone else thinks is worth just leaving and checking in on in a year or two. It’s a short list, but worth figuring out to keep the psychic load lower. And if nothing else it will be fun to reflect on this post in a year or two.