Another two months since my last report and a lot has changed once again. September was the most profitable month of my life as the Defi craze continued and I got better and better at taking advantage of it. But with overwork came some burnout both from my business partner and me and by the end of the month all work had stopped.
Competition grew and our break dampened our edge. So in the second half of October, I started working on creating strategies for the robo-crypto-asset manager Yearn. I’ll talk more about that later.
As for my other businesses, most things have been neglected and are slowly dwindling. This blog is losing traffic and my table tennis business is slowing. The only one that has been doing well is Pipehouse Gin, and that is because Emma, my wife, is running it rather than me.
And finally, we also bought a flat. We completed in September and we will move in in December. So September and October has been a lot of project management as we do it up. Getting all the gadgets that we couldn’t have when renting or travelling. Emma is getting a new kitchen and I am trying to put a hot tub on the roof.
So let’s dive in.
Arbitrage vs Investing
Now that is a very simplified diagram but it is really to make a point highlighting the shift that I have made and to try and correct a common misconception.
Innovations like flash loans mean that arb houses like mine really don’t need much capital at all. We make the max we can from an opportunity and taking on outside capital makes very little sense. But arbitrage is limited. If the max we can make from an arb is $200 before the price corrects, then $200 is all we will ever make. Even if it only cost us $1 to do the arb and we’re making 20,000% a trade.
The same was true when I made a living doing arbitrage on horse racing. I used to average a 7% return on each bet and was doing multiple bets a day. Often people would get very excited and do some maths and realise that if they invested just a little bit it would compound to be worth millions in a very short space of time. But missed the point that arbitrage is not scalable. We never accepted investment because capital wasn’t our bottleneck.
Investing is different. In investing you are looking for much lower returns, returns that aren’t exciting when investing a single person’s money, but that get very exciting when scaled. Yearn is the first community lead decentralised investment firm. It has averaged over $500m under management for the last few months and picks its strategies based on the best submissions from ‘strategists’. ‘Strategists’ then take a percentage of the profits they generate for the fund.
I have been working with them and my first strategies are live and currently being tested. Hopefully that will become a decent business in the future. I like the idea of creating a strategist house that brings together the best investing strategists in crypto.
Testing out another v2 Vault and Strategy created by @arbingsam— banteg (@bantg) October 31, 2020
Same alpha warning and 100k deposit limit apply.
LeveragedDaiCompStrategyV2 0x4C6e9d7E5d69429100Fcc8afB25Ea980065e2773 pic.twitter.com/tFmN2UUlB9
Disclaimer. Strategies are still in testing phase. Please don’t invest.
There is another motivation behind this shift. If you have been following for long enough you may know that one of the reasons I stopped gambling professionally is that I felt I wasn’t providing any value to the world. The same is true for arbitrage in crypto. At least by creating strategies I will be rewarded for adding value.
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Pipehouse Gin had one of its best months ever in September. Summer was still going and everyone was making up for being locked at home for months. In the end, we haven’t suffered too badly from the virus and lockdown. We had a few months of close to zero sales and some bad debt, but were able to scale back successfully and only lost a bit of money that was more than made up for by August and September.
But now what? We’re entering another lockdown and there doesn’t seem to be an end in sight. I don’t know. I don’t know what the future will hold for Pipehouse Gin.
Emma has been running things and has been doing a very good job. I don’t think the business would have survived without her.
Amazon FBA & Table Tennis Businesses
Up until crypto really took off my main income was from my Amazon FBA businesses. In fact it was the partial suspension of FBA in March that spurred me to start looking into crypto.
Amazon FBA made a comeback and April was our best non-Christmas month in years. I assume as everyone bought table tennis bats during lockdown. But since then sales have really suffered and the last few months have been some of our worst in years.
Hopefully sales will return to normal and we will have a good Christmas.
I’ve also decided that Amazon ads are pretty much a scam. I made a mistake with one of the ad settings and ended up 10x my ad budget in September with Amazon ads reporting that they were converting well and making money. But they weren’t and our sales had no noticeable change from when the ads were active and when they weren’t. Be careful!
I have mainly been writing about crypto on the blog lately because that is what I am interested in. But that’s quite a change and has confused Google. Not to mention that most of my readers aren’t interested in crypto. I’ve therefore been slowly losing traffic. I’m down to around 1,000 readers a day, a drop of around 30% from before crypto. I don’t keep track of blog income accurately any more but I think it is down to about £1,500 a month.
The other thing is that I am not monetising any of my crypto posts. It gets very shady very quickly when talking about something like crypto when I would get paid for you investing. I don’t want to do that. In fact, my advice is to stay well away from crypto and defi. It is still the wild west and most people get burned.
So what should I do? Emma thinks I should recommend learning resources. Stuff like tutorials on how to learn solidity, the programming language behind Ethereum. I quite like that idea but we’ll see.
One of my ideas for investment during lockdown was to buy a property. I had the idea that there would be a lot of uncertainty that would lead to some good deals.
We offered on a lot of places, including quite a few sight unseen. And got turned down a lot. The one we eventually landed on was on the market for £550k before the virus and we managed to agree on £440k. I also got a very low 1.55% 5-year fixed mortgage and were lucky enough to get out of paying stamp duty. And it is pretty much our perfect flat in our favourite location.
So currently I am feeling pretty smug. But again we will see. I was very negative about house prices a few months ago and now magically after I own one I assume prices will go up. Home ownership is also a lot more expensive than renting. So while I am feeling smug and my mother is finally happy, I will probably end up poorer because of it.
So there we go. I plan to get more into the habit of regularly writing and hopefully you’ll find some of the crypto stuff as interesting as I do.
Until next time!