There comes a time in every crypto bull market when you count up your gains, glance at the double digit percentages displayed in green on coinmarketcap, and something in your gut says this is too good to be true! That's about when you panic and consider dumping everything to lock in those wonderfully braggable gains.
Selling back into cash is a perfectly sound thing to do when you feel like you've made enough, but there are other ways to take money off the table without leaving crypto markets. I'm not a tax attorney, but I don't believe the IRS or other tax authorities around the world have issued guidance about whether moving funds within crypto triggers a taxable event.
Price-Stable Cryptocurrencies
An easy solution is to park your gains into price-stable cryptocurrencies, like bitUSD, Steam Dollars, or Tether. These are digital representations of USD created with smart contracts that dynamically adjust the quantity of an underlying asset to equal $1.
Bitshares and bitUSD
Bitshares is, in my opinion, one of the most undervalued crypto projects, given its capability, history, and community activity. Just swapping some BTC, ETH, XMR, Dash or whatever you just made a killing on into BTS isn't a bad idea given the relative valuations; however, some of the core products Bitshares offers are price-stable cryptocurrencies like bitUSD, bitEUR, bitCYN, bitGOLD, bitSILVER, etc. whose values denominated in BTS always equal one unit of the pegged currency or asset.
Steem Dollars
Our very own Steemit community offers another price-stable USD option, the Steem Dollar. Steem Dollars are similar to bitUSD, but the contracts are denominated in STEEM. As of now there are about 1.2 million Steem Dollars in existence, so there's some room to park funds here if you feel like crypto valuations are at relative highs and could retract.
Tether Uses Currency to Back Its Tokens
Tether is another interesting option to convert crypto into ...well, a USD, EUR, or Yen version of crypto.
Tether converts cash into digital currency, to anchor or tether the value to the price of national currencies like the US dollar, the Euro, and the Yen.
Each token has 1:1 reserves of the underlying currency backing it up. As of now there seems to be a supply of about 10 million Tether. You can see the value of such an option on a big down day for Bitcoin with this snapshot:
Bitcoin's down about 13%, but the Tether token maintains its $1.00 value.
Note: DigixDAO (DGD) does this for gold.
Diversifying Is A Good Idea
All of these products are relatively new as far as technology goes, so it's best to spread your funds across platforms. Park some in the Bitshares products, buy some Steem Dollars, and try out Tether and DGD to further gain exposure to underlying currency or metal. Volumes aren't spectacularly high either, and your safe haven loses value if your bids push the spot too far beyond par.
What are your thoughts?
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Rob Viglione is a PhD Candidate in Finance @UofSC with research interests in cryptofinance, asset pricing, and innovation. He is a former physicist, mercenary mathematician, and military officer with experience in satellite radar, space launch vehicles, and combat support intelligence. Currently a Principal at Key Force Consulting, LLC, a start-up consulting group in North Carolina, and Head of U.S. & Canada Ambassadors @BlockPay, Rob holds an MBA in Finance & Marketing and the PMP certification. He is a passionate libertarian who advocates peace, freedom, and respect for individual life.
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