Why I'm Prioritizing Credit Over Gains: A Core Number Compounding Deep Dive

Things are in place to begin a new season of Core Number Compounding . My core number is $2000 in eBTC. I have decided to increase my sell signal from 1% to 2%, so when my eBTC reaches $2040, I'll sell $40 of eBTC to bring the position back to $2000. This means there will be fewer sell triggers, but there is less drag from selling $40 than $20. My buy signal is still 4%, so if my eBTC drops down to $1920, I'll buy back $80 of eBTC to restore my core number to $2000 in eBTC.

I deliberated on the decision to bump up from a 1% to 2% sell signal. Something I had not thought about was the transaction cost, which eats into the profit. It can be meaningful on a round trip, a buy and sell cycle. You pay the cost when you buy and pay again when you sell. I expect to asymmetrically have more sells than buys over the long term. Still, bumping up to 2%, or $40 sells, rather than 1%, $20 sells, gives me a better cushion.

Stepping Things Up

My long term plan is to step up my core number in $500 increments. When I reach $600 in USDC, I will buy $500 worth of eBTC to increase the core number to $2500. In doing this, my 2% sell increases to $50. My 4% buy would be $100. The risk of this is that if I have more than one consecutive buy signal, I won't have enough USDC to buy back up to my $2500 core number. I'll have to think about how much cushion I need in my bankroll to cover multiple drawdowns in a row.

I expect core number compounding to work in the coming months as it looks like the market will be trending up. If I had tried it when BTC was $120,000 in 2025, it would have been extremely frustrating as I would have had to buy, buy, and buy some more. The whole idea of core number compounding is not merely to capture gains, it is to capture volatility. By design, core number compounding ensures you always buy 4% lower and sell 2% higher.

Clarity of Priorities

In a recent blog post, I wrote about deciding my priorities for my Ether.fi account. Even after writing it, I still gave it more thought. My priority is to increase the size of my collateral so that I can increase the amount of credit available to my Ether.fi (affiliate link) Cash credit card. There is a strong case to just buy eBTC and let it appreciate in value over the long term. With buying and holding, there are no taxable events, lower transaction costs, and is much simpler to execute. But, in terms of credit, it is not as effective.

Let's say my $2000 eBTC does a 2X to $4000. With a 52% LTV, my credit would go from $1040 to $2080.

By comparison, if that same $2000 of eBTC generates $2000 worth of USDC, then my credit would be $1040 from eBTC and $1800 (90% LTV) for USDC, yielding a total of $2840 in credit. This assumes staying at a $2000 core number. The numbers change when you consider the plan to step up the core number in $500 increments.

I also ran numbers on the increments. Here are the highlights.

As you can see from the table, the longer I run Core Number Compounding and step up my basis in $500 increments, the fewer rounds of sells needed to achieve the next step up. The $500 core number increments speed up the longer it runs.

One thing I have not addressed is the size of the USDC bankroll. It makes sense to have dry powder in case there is a big drawdown, as Bitcoin is fond of doing. My initial thought is to have 50% of the core number in USDC. But rather than catch a falling knife, I would likely only buy into three consecutive drops of 4% before sitting it out. Maintaining a USDC balance would be more beneficial as collateral than trying to find the eBTC bottom. Once eBTC finds a new bottom, I'd reset the core number and rebuild from down there. Draining the bankroll is not an option.

By deciding to prioritize credit, other considerations such as tax, transaction costs, and drawdowns, have less weight in the decisions. Obviously, there's no free lunch. There will be costs. But those costs may be covered by having more available credit.

Thinking about the tax implications, by selling upswings and buying downswings, I'd be constantly raising my cost basis over the long term. So, the actual taxable amount would diminish, depending how how volatile the market is in the uptrend.

What do I do with all the credit?

The point in doing all this is to increase credit, not to generate cash for spending. For spending, I plan to continue relying on income. With income, it is possible to pay down debt over time. But it's easier with the 4% interest the Ether.fi Cash Card charges versus the 20% or more interest regular credit cards charge. More importantly, there is no monthly minimum payment. With increased credit, the idea is to have the means to finance emergency or other sudden, necessary expenses. There are reports that the average American couldn't come up with $500 in an emergency. I don't want to be that guy.

With that said, the plan is to continue to live within my means. The credit is simply a way to avoid going into catastrophic debt. Obviously, this mostly helps for expenses that can be paid with a credit card.

Generating Income

The best example I can come up with is farming. A farmer can use his land as collateral to buy supplies and equipment to grow crops. Then from the profit of selling those crops, he would pay off the loan. The price of land goes up over time, meaning he can borrow more to keep up with inflation. A farmer can scale up his operation by buying up neighboring land. With more land is more credit and more crops.

In my mind, this is similar. A farmer doesn't spend land. He spends the money he can borrow against his land. I won't be spending the eBTC or the USDC bankroll. I'll be borrowing against them to cover living expenses and business expenses. The credit building component has to remain adiabatic.

The Risks

To further run with the farmer analogy, farms sometimes have bad years. If the farmer has managed his finances well, he has enough credit to withstand a bad year or two. Similarly, the crypto market has good years and bad years. By not tapping into the capital, I can ensure that I can weather the bear markets.

Financial responsibility on my part will consist of staying well below the liquidation level. Besides higher LTV, holding a USDC bankroll mutes market volatility. In a bear market, I can offset eBTC losses simply by increasing my USDC holdings until it's time to start core number compounding again.

More importantly, it is crucial to live within my means. My budget will need to be based on my income. Credit is not income.

Another risk is DeFi contract security. Things might go screwy some day. I will still need separate savings. It would be a mistake to put all my eggs in this basket. For savings, I could simply put my money into BTC. With increased credit at 4% interest, it becomes less necessary to use savings cover unexpected expenses. By growing credit with Core Number Compounding, it ensures that my savings can grow uninterrupted.

I think that's all for today. My goal was to emphasize how important having clarity on what you want makes decisions easier. In addition, having a hard think about credit made it more clear to me what purpose it serves. I hope to have sparked some ideas for your own finances.

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