We've all heard something similar to: "start young and dollar cost average your way to financial freedom." If you're anything like me and enjoy procrastination, the measures you hear to judge your progress have little to do with how long you've been at it, only with where you are, making hard to get motivated and start.
A recent Celsius clubhouse conversation caused me to notice something exciting about my portfolio. I want to share because I believe it will motivate you to start hodling and earning yield, and keep hodling through the volatility.
Current Yield vs HODL Yield
Look at some of the most popular coins so we have some example math. Look at BTC, ETH, CEL, LTC... the rates are right about 5%.
This is the current yield. If you put $100 of Bitcoin into your Celsius wallet, you'll "yield" about 5% annually or $5 a year.
But, and here's the exciting part... what if you had bought $100 of Bitcoin a year ago? Today, that $100 would be worth more than $1,000 (let's keep the math simple, assume you bought about $5K BTC and now it's about $50K).
Now this is important... You're earning 5% on today's value. You're earning 5% of $1,000, or $50/year. That's 50% yield as measured against your original investment.
Current yield hasn't changed, but something important has. I like to think of this as HODL Yield. HODL Yield factors in how long you've been at it, and the benefit of getting started and just hodling.
In my book about dividend reinvesting, which tells a story similar to the Celsius model but for equities, I refer to this as the Actual Yield and explain that legacy finance calls it Yield on Cost. It isn't popular, which is surprising, because it's such a fun metric for people building long-term wealth with dollar-cost-averaging (as compared to day-traders trying to time and beat the market).
This measure of yield, whatever you call it, should provide a sense of accomplishment for starting young and holding through whatever price moves there are.
How to calculate HODL Yield
Here's a simple formula for Celsians:
Celsius weekly compounding accelerates HODL Yield increases
If you had bought a year ago, you'd also have compounded your interest weekly. Each and every week, your reinvestment increases the interest earned for all weeks following. So in my example, you'd actually be earning more than 50%.
From a US tax perspective, that reinvestment increases your cost basis. However, you've still only put in that original $100. You've only sacrificed one $100 indulgence. And your interest keeps growing. This isn't tax advise, but hopefully you're taking Alex's advice and borrowing against your assests rather than selling them.
If you want to learn more about this specific topic, about how we limit our success metrics to those metrics that the IRS tracks, and why it's crazy to do so, have a look at (and maybe share with your loved ones if you really love them) my most popular story ever at almost 33,000 views – A Crack in the Matrix: A Financial Fable.
I was asked on Clubhouse how much I've made using Celsius. I won't share that. I started with Celius about 2.5 years ago, and have been accumulating and compounding since. I've done well.
I will share two numbers though, that I think aren't obvious, but are worth tracking for anyone focusing on yield, whether it's with Celsius or not.
My blended rate is the current yield I have balanced across all of my holdings.
My blended rate is currently 4.76%, on average across the handful of coins I own. That gives me a good sense of how much income I might expect based on the value of my porfolio.
My HODL Yield is about 40%. That means, every single year, I get back about 40% of what I originally invested in crypto. Of course, this number doesn't remain static. As prices increase, and I compound more, my HODL Yield will increase over time.
Start now, hodl on.
How to Get Started
If you'd like to get started with crypto, but don't know where to start, download the Celsius App for iOS or Android (web app coming soon), and you can try to buy straight from the App (there's a separate KYC – know your customer – process to buy, but they walk you through it).
Use my link and we'll both get $30 in BTC if you move more than $200 worth of cyrpto into your wallet. I'm not sure if you get that bonus if you buy straight from the app, but don't worry. Just get started. And, always check the Celsius website for any promo codes that might be available.
If you want to be sure to get the bonus, or if you can't buy directly from the app (as some in the US can't), use Coinbase to make a purchase and then transfer it over to Celsius. In that case, I'd stick with Bitcoin as the fees to transfer Ethereum at the moment can be quite high. Again, use my link for Coinbase along with my link for Celsius and we both get a little something.
On those rewards, I think we get $10 on Coinbase if you buy more than $100 of crypto, and $30 of BTC on Celsius if you move $200 or more in one coin to Celsius in one transfer. Meaning, if you buy and move $200 BTC, you end up with $240 of BTC, a 20% gain just for getting started! Caution: If you do that, make sure that you buy enough so if the price drops a little, the amount you have remains above the reward threshold. You may want to buy $220 worth of BTC to get started, so even if the price moves a little, you'd still have $200 worth to move to Celsius.
If you're not sure what to do once you download the app or how to transfer from Coinbase to Celsius, drop me a note in the chat icon on the bottom right or a DM on Twitter.
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