As per our agreement, the first Wednesday of every month is the day to review our live Bitcoin holding strategy. However, due to the National Day holiday, this month’s review has been postponed to the second Wednesday.

In this review, I’ll talk about three things: first, the confusion caused by the rate cut; second, replacing ETH with JLP; and third, the extreme rebalancing results of tBTC.

1. Impulse is the Devil

A big event occurred last month. At 2 a.m. on September 19 (Beijing time), the Federal Reserve announced a 50 basis point rate cut. This marked the start of a super rate-cutting cycle, and with more liquidity being released, the prices of risk assets like cryptocurrencies were expected to rise.

Sure enough, after the news broke, Bitcoin and Ethereum rose by 3.15% and 4.82%, respectively, with their prices reaching $62,073 and $2,436.

Some believe that during rate-cut cycles, altcoins tend to outperform Bitcoin. The logic is simple: with liquidity pouring in, smaller altcoins are more likely to see price surges. On the day of the rate cut, Ethereum's gain was indeed higher than Bitcoin's, seemingly supporting this theory.

As a result, I thought that Ethereum, as the largest altcoin, should perform better. So, on September 29, I adjusted my BTC:ETH ratio from 95:5 to 50:50, exchanging 0.1388 BTC for 2.56 ETH.

However, while writing this article, I discovered that historical data does not support the conclusion that Ethereum outperforms Bitcoin during rate-cut cycles.

1.1 Data Doesn’t Lie

Since Bitcoin’s birth in 2009, there have been two major rate-cutting cycles:

2019 Rate-Cut Cycle:

• Timeframe: July, September, and October 2019, when the Federal Reserve cut rates three times, each by 25 basis points.

• Bitcoin’s performance: The price rose from about $3,700 at the start of the year to nearly $13,000 by June, but was volatile during the rate cuts, ending the year at around $7,200.

• Ethereum’s performance: It rose from around $130 at the beginning of the year to around $350 by June, but fell back to around $130 by year-end.

2020 Pandemic Rate Cuts:

• Timeframe: March 2020, when the Federal Reserve made two emergency rate cuts, bringing rates close to zero.

• Bitcoin’s performance: Prices dropped to about $5,000 during the March panic but quickly rebounded, rising to over $28,000 by year-end.

• Ethereum’s performance: Prices fell to about $110 in March and rose to around $740 by year-end.

Looking at the price changes, Bitcoin and Ethereum’s trends were generally consistent, with no significant differences.

In conclusion, my assumption that altcoins outperform Bitcoin during rate-cut cycles, and therefore my deduction that ETH would outperform BTC, is not supported by the data. I need to correct this conclusion immediately.

1.2 Immediate Correction But Not Perfect

On October 1, I exchanged 2.61 ETH for 6,954 USDC and then converted the USDC into wBTC.

However, due to initial margin requirements, I could only borrow another 5,000 USDC and convert it into 0.07808 wBTC.

This left a 1,900 USDC shortfall in my wBTC position, all thanks to impulsive decisions.

2. Replacing ETH with JLP

In last month’s review, I had already made it clear that ETH is not for holding. Instead, it should be used more actively in the DeFi ecosystem, such as staking and re-staking. The only reason I kept 5% ETH was to maintain rebalancing flexibility. (For more details, see the article: "Perception Determines Profits: A New Strategy for BTC Holding.")

However, after discovering JLP, I realized ETH wasn’t necessary anymore. JLP is like an index fund, consisting of BTC, ETH, SOL, and stablecoins. More importantly, it offers a passive return of 38%, which can be achieved simply by holding it. So, I converted all my ETH into JLP.

For more details on what JLP is and where its returns come from, check out the tutorial "Perpetual Contracts for Beginners."

3. Extreme Rebalancing Results of tBTC

Remember the test I mentioned last time about replacing WBTC with decentralized tBTC? Well, we now have some preliminary results, and the rebalancing effect is quite significant.

Since the pool was established on August 29, it has seen a 7.64% increase (see the image above). If you had just held tBTC, the price increase would have yielded 4.29% (see the image below). Rebalancing brought an additional 3.35% in returns.

The pool’s address is available here, so feel free to check it out. I’ll cover this project in more detail in the future.

Conclusion

The extreme rebalancing test of tBTC has validated the feasibility of the theory, and replacing ETH with JLP was a logical choice based on reasoning. Both decisions stem from a deep dive into investment strategies—one from practical execution, the other from logical analysis.

However, the rate-cut confusion serves as a reminder that investing is not just a battle of data and logic; emotional management is equally critical. Impulse is often the biggest enemy on the investment journey, and to overcome it, you need clear strategies in place to ensure steady progress with each step.

Previous Reviews:

• September 4, 2024 Review: Perception Determines Profits: A New Strategy for BTC Holding

• August 7, 2024 Review: Bitcoin’s Big Drop – Did Leveraged BTC Holding Collapse?

• July 1, 2024 Review: BTC Holding Review: How Did DeFi Strategies Perform?

• June 5, 2024 Opening: [Live Trading] How to Properly Hold Bitcoin and Not Miss the DeFi Boom

About Airdrop Reference

Airdrop Reference is an innovative blockchain education and promotion platform aimed at spreading basic blockchain knowledge and helping ordinary users understand and participate in the development of blockchain technology. The mission of this project is to lower the entry barriers to blockchain, promote high-quality blockchain projects, and allow more people to enjoy the benefits of the Web3.0 era.

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