What's Up with my SOL bag
How to make the best of a bad situation
Back in the last bull run, I, like everyone else was caught up in a bout of FOMO. Flushed with cash from some recent sells, I was looking to plop my money down somewhere, or anywhere really (Well, not quite because I’m still not ready for the super-degen/risky stuff).
When I realised, too late, that the bull run was over, I was left clutching a whole bag of tokens, one of them being Solana (SOL).
What happened to Solana?
The project itself is fairly solid. Billed as the best of the “ETH Killers”, it had potential and its DeFi ecosystem was just starting to ramp up. It boasted one of the fastest transaction speeds per minute for a blockchain and they had a lot of serious investors putting good money in for things to work.
I’d written about the Solana project in a previous issue if you’d like to take a look.
The Risks Faced by Solana
However, what made things dicey was its close association with FTX.
Most of you, even if you’re not too paying close attention to the crypto world, have likely heard of Sam Bankman-Fried (SBF) and FTX. The fall of the exchange, how he went from poster boy for cryptocurrency advocate to fraud and scam certainly made for very juicy water-cooler talk. Doubtless, someone is likely penning a script and getting ready to sell it to Netflix/Amazon Prime/Apple TV for a mini-series.
During the entire FTX ordeal, there was a fair bit of speculation on Solana’s survival as a project. We were also in the middle of a bear market, so things did look very iffy at some point. Solana’s price was a stark reflection of the sentiment surrounding it.
From the glorious highs of $260, it fell to a low of $9.46 or thereabouts during crypto winter, even lower than when it first got listed at Coinbase. If you had had confidence in the project and bought anywhere in the $10 range, you could’ve made a 10x gain during this recent bull run. That’s a lot of money in a year. But then, would you have had the conviction to do so?
The other problem that plagued Solana was the somewhat frequent outages on the blockchain back in 2022. People were not happy as the NFT marketplace was starting to take off and there was also more talk about the project’s centralised aspect.
What’s happened since?
In the last months of 2023, Solana’s price was supercharged as you can see from the chart above. It went from strength to strength and it’s regained some of the ground it lost during the doldrum period. What’s going on?
Well, quite a number of things, really. The CoinBureau has a great video about the project that’s fairly recent, which I suggest checking out if you prefer a visual delivery to reading. :) Here are a few:
They fixed their outage problem. There haven’t been any reports of outages since the second half of 2022.
They are the first blockchain to launch their smartphone based on the Android OS. It’s called Solana Saga.
A ton of meme-coins got issued on the Solana blockchain which generated a lot of transaction fees, making both the validators and degen traders very happy.
Amazingly, the SOL token also had a bit of a price pump after SBF was found guilty, if only to let the community know that Solana is stronger even without SBF’s money. Even though FTX has a lot of SOL that might need to be liquidated to service its obligations, this may affect Solana’s price but it would not be as much of an issue for the builders and users of the blockchain.
My Terrible Mistake
Ok, now that we have an idea of what Solana is, the next focus is: what am I going to do with my SOL?
I have bought SOL at various points: near the peak of the bull run, and some more as it was on its way down. Unfortunately, not cheap enough. Here are the 4 prices I bought SOL at: $115.85, $111.89, $50, $150. Note that the first price itself was the average of several buys.
Here was where I made a very bad mistake. Math has never been my strength or even passable. The janky math I did in a spreadsheet made me think that my average price from the whole lot was around $51.
When SOL started moving up, I got very excited and thought I did the smart thing by selling half my bag at 63.05 and 77.80. Then I had another idea on how to record my trades and in the new format, it was clear that my average price for SOL was a lot higher than $51. In fact, it was in the ballpark of $108. [Majorr facepalm]
I’d just sold half my bag at a huge loss. *Sob *sob
What next?
The good news is that I still have half a bag left. The bad news is that my average price for the remaining bags has just gone up a lot more. In short, either I sell the rest at an average of $140 and above just to break even or I aim for an even higher average of $160. That would give me a 20% profit margin even after accounting for the earlier loss.
Or… there is the third way.
Recently, someone was kind enough to offer to teach me how to trade, just by looking at the charts (without indicators!). One of the tokens I’d bought encountered a similar situation. The first time I bought it was at price X. After buying it, the price went down to Y.
My initial reaction was to see the two buys as one big one, and average out so I got a lower average overall. However, he offered another way of looking at it, which is:
For price Y, which is the lower one, If it goes up enough for me to be in profit, why not take back what I’d initially put in and let the leftovers be the profit? In other words, it was measuring profit not by the dollar value but by the amount of tokens left that I didn’t have to sell.
Example: If I bought 10 tokens at $1 each, I’d have put in $10 as my initial capital. When the price went up to $1.20, I’d sell $10 worth of my tokens, which would be about 8.5 tokens. My profit is 1.5 tokens. Those tokens cost me nothing (because I’d already gotten my capital back), so I could sell it at whatever price and realize the dollar value of it later.
This idea greatly changed my thinking about how I evaluate my “losses” and “bags”.
What I like about this concept is that I get to protect my capital, which allows me to go in and buy again, and I’m not being weighed down by a loss. It could keep my cash flow healthy while helping me to accumulate tokens.
If it’s a project that has decent potential, I don’t need to be in a hurry to sell them, thus I get to HODL them at zero cost.
What I can do with my SOL
This is where SOL is as of the time of writing:
Those nice big green candles were the meteoric rise that SOL had since the end of last year until now. After peaking at around $125.00, it’s slowly moving down to probably more normal levels. It’s reasonable to imagine that lots of people would’ve taken profit and gotten in and out numerous times, as seen with the mixture of red and green candles.
There’s a good chance that it could go down even lower, and it probably needs to, if it wants to push past the $125 peak. So what I can do is put in a few orders at likely price points and wait to see if those buy orders are filled.
When they do, I’ll take whatever profit I am comfortable with and those extra tokens can go towards the half bag waiting for a good selling price.
The best-case scenario is that I manage to accumulate enough in this manner to make up for the ones I sold earlier.
If this was your bag, what would you do? Leave your comments!
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