Monday night, I stumbled upon a video on making money with cryptocurrencies. The video explained a method called Core Number Compounding (CNC). To me, it sounds like scalping. Scalping is where you buy a position, wait for it to rise in price a small percentage, then you cash out before it has a chance to reverse itself. CNC is different in that you are scalping, except you are only selling your gains, not the full position. If the position draws down, then you top it up. On the up side, gains of 1% or greater get cashed out. On the drawdown, anything at or below 4% gets topped up. The "core number" part comes from choosing a core number where you will maintain your position. Practitioners use the method with crypto or stocks. It works just as well on both.
One example of Core Number Compounding, which is credited to a YouTuber who goes by the name Oracle, is that you pick a core number. We will use a core number of $2000. You actually need $3000 to make this example work. The $2000 will be split up into $1000 for BTC and $1000 for ETH. The other $1000 is just a reserve in fiat or stablecoin. If the value of your ETH or BTC rises above $1010, you cash out the gains to bring the balance back down to $1000. There is a twist to this, which I'll bring up in the next paragraph. If the value ETH or BTC drops below $960, you top up your position to reach $1000.
The twist mentioned above is that in order to avoid having to watch their portfolio constantly, some of the people using CNC will make $2000 their core number. So, if their combined position is up $20 or more, they sell off the gains. If their combined position drops below $1920, they top up. The trick is that ETH or BTC may be going in opposite directions. So, they may have to top up one and sell off the other.
The Core Number Compounding method works great during bull markets or sideways markets with lots of volatility. This method ensures that you are always buying low and selling high. Bear markets require either a deep reserve to keep buying, or you can pull out of the positions until a bottom is reached. Those who have been using CNC are able to generate income from their crypto as they are cashing out up to several times per day. $20 here. $30 there. It adds up.
Personally, I have not tried the Core Number Compounding method. I am currently moving some money around to give it a try. My only apprehension is that this can turn into a tax nightmare, particularly if I use ETH and BTC, which I also hold. To avoid confusion, I will be using BNB and ADA as I have reasonable expectations that these will be making gains during this bull run. And, even sideways trading is an advantage. By using tokens I would not typically hold, I can completely cash out my positions to zero to simplify tax calculations.
If this does turn out to do well, it is also possible to add a third cryptocurrency to the mix. I may consider LTC as the third. I have only seen CNC practitioners use up to three cryptocurrencies at once. Some even have multiple setups to generate cash for different purposes. For example, they one uses CNC on Crypto.com for spending money, Coinbase Pro for gambling money, and other exchanges for long-term earnings.
Obviously, this does require a large investment to work well. Still, I have seen some CNC practitioner videos using as little as $500 per position. In later videos, they are up to $20,000 per position. I don't know if they grew they positions to the larger amounts. Or, if they brought in funding from elsewhere to increase their positions. I think whatever gains I make will be reinvested to get to $2000 positions once the cash reserve gets to $4000 (adds $1000 to BNB, ADA, and cash).
This could turn out to be a bunch of hooey. Or, it could turn out to be a legitimate way of generating income from cryptocurrencies. If the latter, then it makes sense to have a plan to scale this to larger amounts. I think the largest positions I saw were of $50k each. A 1% gain on that is $500. A 4% drawdown on that is $2000. It would require nerves of steel to get through a 30% drawdown as is typical in crypto. That's $15,000 out of the reserve to top up.
Well, that's it for now. I'll update our progress after 1 month of using the Core Number Compounding method developed by the Oracle. Cheers!