In This Issue
- The team from Acala discusses their DeFi network on Polkadot.
- Erik has a report for you on how to survive a bear market.
Premium members also get the following:
- My latest portfolio updates
- Rekt Capital has the latest technical analysis for you on the market.
- Rebecca has all of the latest news for you.
- Upcoming NFT drops
- Defi Dad has a tutorial for you on how to earn up to 18% vAPR with a Curve PUSd LP on Convex.
- Jesse has a ton of hot new airdrops for you.
- Hot new token sales.
- Rebecca breaks down this week’s trending coins.
- Jesse has a deep dive for you on Gala Games.
- Monthly Crypto Alpha Report *NEW*
And much more!
Acala Inverview<h3 id="for-anyone-not-familiar,-what-is-acala? “>For anyone not familiar, what is Acala?
Acala is a decentralized finance network on Polkadot and powers the aUSD stablecoin ecosystem and a DeFi-focused application platform.
Acala is the top engineering team in the Polkadot ecosystem by Github commits, and was the first team to win a parachain auction on both Polkadot and Kusama. Acala is working to enable mass market participates to use Web3 without the difficult user experience and, if needed, a compliant enterprise-grade permissioned environment.
To achieve this goal, Acala is already working with US Fintech Current.com to provide a DeFi backend for their 4 million customers to be able to enjoy the benefits of Web3 without complex tools or new apps. Acala is also working with Alluvial, Coinbase, and Figment to provide enterprise-grade permissioned DOT liquid staking to institutions.<h3 id="it-was-recently-announced-that-acala-is-launching-a-250-million-dollar-ecosystem-fund,-what-is-the-aim-of-this? “>It was recently announced that Acala is launching a 250 million dollar ecosystem fund, what is the aim of this?
Acala’s primary goal is to grow the usefulness, impact, and issuance of the aUSD stablecoin. With that in mind, we launched the $250 million aUSD Ecosystem Fund along with 9 other Polkadot parachain teams and over 25 venture funds to support early-stage startups building applications with strong aUSD use cases on any Polkadot or Kusama parachain.
The fund participants are looking for Solidity or Substrate-based applications driving yield or utility for aUSD, including money markets, DEXs, derivatives, asset management, DAOs, payments, and other use cases.<h3 id="what-is-evm+? “>What is EVM+?
Just like Ethereum can do things Bitcoin will never be able to do, which subsequently inspired many new innovations, Substrate (Polkadot’s software development kit – SDK) and Polkadot are categorically different from Ethereum in a way that will empower many new innovations outside of the legacy EVM technology.
We are firm believers in the power of Substrate and built the Acala EVM+ to also optimize for Substrate’s full potential and longevity, rather than simply redeploying Ethereum on Polkadot and inheriting all the same problems Polkadot was built to solve.
The Acala EVM+ provides a development environment fully compatible with Ethereum while using Substrate’s customizability, flexibility, and upgradeability. Developers will now be able to innovate outside the restrictions of the EVM, meaning existing EVM-compatible applications can be developed but can be improved with new features from Substrate.
The EVM+ is now live on Acala’s experimental parachain Karura, and will launch on Acala and Polkadot in the very near future.<h3 id="tell-us-about-ausd?“>Tell us about aUSD?
aUSD is an over-collateralized, decentralized, multi-collateral stablecoin that is the native stablecoin of the Polkadot ecosystem. In terms of a comparison, you can think of it like a multi-chain version of DAI with improvements to stablecoin mechanism and peg stability by using Substrate. aUSD can be minted with decentralized crypto assets like DOT, KSM, or ACA.<h3 id="what-mechanisms-are-in-place-to-maintain-its-peg? “>What mechanisms are in place to maintain its peg?
aUSD uses various methods to maintain its peg.
First, aUSD is over-collateralized, meaning in order to mint, for example, $100 in aUSD, you would need at least $200 to deposit as collateral, similar to a down-payment on a traditional loan with a bank. If the price of the collateral were to drop, putting the protocol at risk, the protocol will automatically sell the collateral either in AcalaSwap DEX or to liquidation bots run by the community.
AcalaSwap was built to improve upon the DAI model since DAI has run into issues in the past with their off-chain liquidation bot method during high-pressure events like ‘black Thursday’ where the Ethereum network was too congested for liquidation bots to make their purchases of collateral, causing DAI peg to temporarily de-peg. aUSD’s on-chain liquidation bots and built-in DEX allow two options to ensure liquidations can happen at any time.
In addition to liquidation mechanisms, aUSD’s peg and protocol health is also maintained using interest rate adjustments and arbitrage. Interest rates can be adjust up to increase price (by decreasing supply) and interest rates can be decreased to increase aUSD price (by increasing supply).
In addition, aUSD is listed on different exchanges and will continue to be available in more venues, causing a large network of arbitrage opportunities which naturally help to continuously bring aUSD as close to $1 as possible at all times.<h3 id="is-there-any-risk-of-what-happened-to-ust-happening-to-ausd? “>Is there any risk of what happened to UST happening to aUSD?
There is a 0% chance of the same thing that happened to UST happening to aUSD because the two stablecoins are completely different. UST was an algorithmic stablecoin backed by nothing and used an unproven, experimental algorithm of minting and burning a sister token (LUNA) to maintain its peg. aUSD is backed by crypto assets in an over-collateralized manner, meaning there is always more collateral backing aUSD than there is aUSD issued in the market. aUSD uses a similar model to DAI which has been live since 2017 and has weathered several ups and downs in the market.<h3 id="what-have-you-done-/-will-do-to-bring-ausd-into-the-crosschain-world? “>What have you done / will do to bring aUSD into the crosschain world?
Cross-chain is in aUSD’s DNA from day 1 since it was built as the native, decentralized stablecoin of Polkadot. Polkadot is a blockchain of blockchains, connecting and securing up to 100 application-specific blockchains. aUSD is already on various parachains within the Polkadot and Kusama ecosystem and will continue to be used by nearly all parachains and DApps on Polkadot. Over time, aUSD will also be exported outside of the Polkadot ecosystem via bridges to other layer-1 ecosystems.
How to Survive a Bear Market by Erik
Crypto bear markets are brutal, and understandably but unfortunately knock out investors that are new to the game: ‘I’m done with this shit!’ Experienced investors, however, love bear markets. They see them as a great time to accumulate coins and generate future wealth. But to thrive, you first need to learn how to survive.<h3 id="the-crypto-bear-market-of-2022“>The Crypto Bear Market of 2022
In the way that Tolstoy stated that each unhappy family is miserable in its own peculiar way, every bear market is painful in its own unique fashion. The 2022 crypto bear market unfolded as a perfect storm of external forces exposing self-inflicted damage.
The American Central Bank started raising interest rates and slowing down the money printer. This was bad for stocks and crypto – bad, really, for everything that wasn’t called the dollar.
As crypto prices kept slumping, it became clear which projects and companies had taken on too much risk. When the Terra ecosystem collapsed, we saw hedge funds and lending platforms being exposed to leveraged positions. This caused forced selling left and right: a brutal capitulation event that tanked prices by more than 50% in a few weeks.<h3 id="dealing-psychologically-with-your-bear-markets-losses“>Dealing Psychologically with your Bear Markets Losses
Let’s retrace a bit and linger on how you are feeling in this bear market.
Unless you magically sold the top, you might be looking at pretty steep losses in your portfolio app – at least compared to the top. As it sinks in that these are not just numbers on a screen, but losses that might impact the way you live your life in the coming years, it is no wonder that you feel bad.
It’s ok to mourn these losses. Grief comes in five stages, and, as the guys from Bankless point out, these can apply to financial losses as well:
image source: psycom.net
<h3 id="should-you-invest-in-the-crypto-bear-market?“>Should you Invest in the Crypto Bear Market?
It’s to be expected that you go back and forth a bit between these stages until you reach the stage of acceptance. This is crucial. To learn from what happened, you’ll have to face some hard truths. And that’s when you can get productive again and build your wealth. So let’s do it.
After having picked yourself up, you can proceed with asking yourself a key question.
Is crypto here to stay? Have the events that led to the 2022 bear market (monetary tightening and irresponsible behavior by crypto companies) led you to believe crypto is dead?
You can answer that question for yourself, but in the meantime look at this adoption curve. In the end, adoption is what drives prices.
image: Global Macro Investor<h3 id="the-key-question“>The Key Question
Do I believe that crypto is here to stay? That it will be bigger than it is now in let’s say 5 or 10 years?
If you answer this question with ‘probably yes’, then it’s worth staying around and investing. And what better time to do that than during a bear market? If you are very unsure about this answer, educate yourself and answer the question again.<h3 id="rules-for-making-money-in-a-crypto-bear-market“>Rules for Making Money in a Crypto Bear Market
#1 Psychological Survival is Key
So you’ve decided to keep investing during the bear market. How much? Not so much that in case the market tanks, you will lose sleep over it, freak out and sell the bottom. So we’re talking psychology here. Most investors will tell you survival is a game of psychology. This is also the opinion of crypto veteran and NFT philosopher Punk6529. Know yourself, he says.
Why? Only when you know your risk tolerance, can you take calculated financial risks. Of course, you can only really experience a bear market once it happens. Still, a few questions can help to gauge your behavior. Honestly confront yourself with the following thought experiment:
“Whatever you invest, write it off to zero the next day on your balance sheet, and don’t look at it for 10 years.”
Could you live with that if it actually went to zero? Can you honestly look yourself or your partner in the eye and say: my portfolio is down 80% and that’s cool? Then you are in a good place for long term survival. Your psychology is key.
#2 Make a Plan
So the first pillar of survival is the psychology part. Second, to survive, you have to have a plan to manage your investments. A lot of investors have been wrecked because they didn’t have a plan and just threw money at the market without a long-term plan.
If you had no plan before, now is the time to make one.
- What percentage of your total investment portfolio will be in crypto?
- What coins are you going to buy? How do you diversify between ‘blue chips’ and more risky projects?
- How frequently do you buy and in what amounts?
- Will you hold those coins for a long time or will you take profits – if so: at which price points?
Make a plan and stick to it – unless the assumptions you based the plan on changes drastically.
How long will the crypto bear market last? Be prepared for multiple scenarios
Bear markets can last for years. In crypto, a year or two. But there’s no guarantee. So don’t try to predict the duration of this bear market. As nobody knows where markets will go, you want to think in scenarios. For example:
- The market goes sideways for years.
- There is a catastrophic crash after the US government unexpectedly bans possession of Bitcoin.
- Crypto goes up only after Central Banks put Bitcoin on their balance sheets.
You want to make sure that your investment plan and your psychology can handle all these outcomes. Thinking in scenarios beforehand can help you stay grounded: you are prepared to at least survive each outcome in good financial shape.
#3 Get your Security in Order
If you see investing in crypto as a game of survival then you have to figure out what can kill you and what could knock you out of the game. What can kill you is poor custody of your coins. Not your keys, not your coins.
Get your key management and backup in order. If you lend out crypto to earn yield or want to experiment in DeFi: fine. But you probably want to do that with a part of your portfolio.
#4 Get a Life Outside of Crypto
Crypto trader and ‘personality’ Cobie has said how he knew people who were very stable personalities but because of crypto, they gradually lost it. They couldn’t look away, they couldn’t unwind.
Make sure that is not you. Don’t get too hung up on how much your portfolio was worth at the top. That number is fiction anyway: no one sells the top. If you took profits 50% before or after the top you did great. And as a newbie, it’s totally expected to end your first bull/bear run with a loss. All the OG’s have been through it.
Work out, and take care of your health in general. Walk away from crypto Twitter and get social with friends and family. Get new hobbies or pick up what you used to love outside crypto.
#5 Delete your Portfolio App
It’s fun looking at your portfolio app during a bull run, but it’s less pleasant on the other side of the cliff. So maybe just delete that app from your phone. After all, unless you are an active trader, why check the prices every ten minutes? It’s no use and won’t cheer you up.
Also, the more you look at prices, the more you’ll be inclined to make impulsive decisions that were never part of your plan.
#6 Go Build Something
Bear markets are for building. Many crypto companies feel that they can finally focus on what matters during bear markets. The hype has died down, and instead of frantically onboarding clients, they can improve their products. What could you do?
- Educate yourself on finance, crypto fundamentals, and specific sectors of the market like NFTs
- Apply for a (freelance) job in crypto. As a coder, a writer, an artist that sells NFTs, you name it. Or even just a ‘normal’ occupation like as a customer service agent at a crypto company.
Accept where you are now and learn from your behavior in the previous cycle. Know yourself. Make a plan based on some scenarios you can envision and stick to it. In the meantime, work on your crypto knowledge (or new job) as well as your life outside crypto. Really, there is one!
Thank you so much for your support, and I truly hope that today’s issue will give you insights needed to help you master your wealth.
If you are reading this it means you are on the free version of the Wealth Mastery Investor Report, which is great for news and tips on the crypto markets.
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See you next time!
Lark and the Wealth Mastery Team
TCL Publishing ltd (director Lark Davis, owner of Wealth Mastery) is not providing you individually tailored investment advice. Nor is TCL Publishing registered to provide investment advice, is not a financial adviser, and is not a broker-dealer. The material provided is for educational purposes only. TCL Publishing is not responsible for any gains or losses that result from your cryptocurrency investments. Investing in cryptocurrency involves a high degree of risk and should be considered only by persons who can afford to sustain a loss of their entire investment. Investors should consult their financial adviser before investing in cryptocurrency.