SharperDingaan

Damn, this is pretty good! Thanks for posting. SD

The vast majority of people have no idea what Bitcoin is; but know that you can bet on it, make a lot of money, and look really cool. Just as you don't need to know how a calculator works, in order to use it - the same thing applies to Bitcoin. Simply be able to cite a few buzzwords, pull up a price (at any time) on your smart phone, think quick, and possess the 'gift of the gab'. Most more knowledgeable crypto investors see only the mining process, because it is the source of new coin. To them there is only one way, it is the distributed ledger, and it allows you to create and sell your own 'money' through an ICO. The reality is that we have always been able to create and sell our own 'money' - we just call it loyalty points; and almost all crypto applications would run a lot more effectively on a database versus a distributed ledger. To many, a Bitcoin is an asset class - because the taxman says it will be taxed as though it were an asset; the same way that a bond is rated as 'investment grade' because the rating agency says it is. A bond produces a cash flow of interest, a property produces a rental cash flow, a patent produces a royalty stream, a project or piece of machinery produces a future benefit, a bitcoin - produces squat. It's the 'magic' asset. As Gekko (Wall Street) likes to say .... You're walking around blind without a cane, pal. A fool and his money are lucky enough to get together in the first place. SD

Merry Christmas to all! SD

Core to concentration is recognition that you are riding market cycles (macro tides), rather that names (boats on the tide). It's much less about selecting the best stock (boat), and more about knowing how to read a tide table (macro projection). Diversification is only useful if you are investing in the tides at different places. If you're just investing in different boats on the same tide, at the same place, it's pretty useless. Hence either truly diversify, or don't do it at all - there is no in between. SD

Up to the value of a modest 3 BR house in our area, per circle of comptence. After that we start to sell down & return capital. SD

The 18-35's are going to get burned, and there is not going to be a 'rescue'. Bitcoin is this generations 'dot com', it will end the same way the dot com era ended, and CB's have an enormous incentive to stay out. CB's have not imposed market 'discipline' since the collapse of LB in 2008 (10 years), and need the bunnies to learn 'moral hazard' the hard way. Too many people have zero experience with what life is like - when there isn't a 'once in a lifetime' CB put on the economy. Hard to see how they do not get a lesson. SD

I sure hope so. I'm buying more under $9K, under $5K would be ideal. Just curious, but how are you determining your price points to add? There is no real way to determine an intrinsic value, so is it just based on regressions or prior trading ranges? Primarily gut feel, & thinking like a grocer - as there are no real metrics at this point. We have a 10 cases of 'specialty' apples on the shop floor, are charging what we think the market will bear; but are taking the risk that some of our cases will never sell (rot, go obsolete, etc). Or we could put them on sale right now, to clear them out immediately. Which of these options is the more valuable to us - going forward? Make the right decision and you eat well. Make the wrong one and you're eating apples for the next little while. SD

We're in the concentrated camp, and typically hold just 1 company per circle of competence - same as the small business person. Every small business person we've ever met tries to hedge their intrinsic risk - but risk management execution expertise is very limited. Most use property, some use investment in other businesses, but almost nobody uses cash/t-bills or long term sovereign bonds/gilts. As risk management execution is in our circle of expertise, we have the luxury of being able to do it in reverse. We have also broadened 'circle of competence' to now include 'long term thesis' (estate planning kicking in). We have adopted the 50 year view that Newfoundland will benefit from global warming, and the opening of the NE and NW sea passages to Asia, much as Aberdeen and Scotland have benefited from the development of their off-shore oil fields. Panama traffic shifting northwards, Newfoundland resources going west (oil, iron, fish, removal of land locks, etc.), opening of new resources as Labrador melts. Execution via passive investment ranging from housing through to resource investment through to technology creation. Beneficiaries being today's and future grand kids. Newfoundland vs BC? Newfoundland doesn't have the earthquake risk of possibly falling into the ocean tomorrow, and it's a rare 'newfie' who cannot talk his/her way out of trouble via the 'gift of the gab'. Hopefully it works out well for us. SD

And now big enough to trigger circuit breakers and start the mass exits on Asia's exchanges. Hard to see how it doesn't drop another 50-75% from here over the next month or so. SD

This is where the real money is ;) and those efficiency's come from headcount, office space, and working capital reductions. So much so, that most of the big financials could reduce their operational infrastructure costs by an easy 25-33% - almost overnight. SD

https://ca.reuters.com/article/businessNews/idCAKBN1EE02J-OCABS Down 20% intraday before eventually closing down 4.5% on the day, & suggestions that some of the punters are exiting …… “However, for Japanese retail investors who are estimated to account for 30 to 50 percent of bitcoin trade worldwide, a more worrying warning may have come from a Japanese day trader guru known as Cis. The individual trader, who claims to own 21 billion yen ($186 million) in assets, tweeted over the last 24 hours that he had sold cryptocurrencies.” Maybe Makoto reads this board? …. “The listing of two bitcoin futures makes it easier for institutional players to trade bitcoins. Futures also enable players to go short on bitcoins, which was difficult without liquid futures,” said Makoto Sakuma, researcher at NLI Research Institute in Tokyo. SD I noticed that Bitcoin Cash went up while Bitcoin was going down. This drop coincided with Coinbase adding Bitcoin Cash. It could just be people moving some money around. $ flowing out of the high price Bitcoin & into the lower price Bitcoin Cash, is a sign that the retail demand/liquidity of Bitcoin is slowing; retail is seeking cheaper alternates. Problem is that Bitcoin is driving the tide, so as the Bitcoin tide ebbs; all boats fall - including the price of Bitcoin Cash, Etherium, etc. Hence either sell now & buyback later, or short via the futures/options markets for very high premiums. The 'trading' game has changed, and the professionals are now at the table. Nothing wrong in that, but either know what you're doing or be as least as good as they are. SD

https://ca.reuters.com/article/businessNews/idCAKBN1EE02J-OCABS Down 20% intraday before eventually closing down 4.5% on the day, & suggestions that some of the punters are exiting …… “However, for Japanese retail investors who are estimated to account for 30 to 50 percent of bitcoin trade worldwide, a more worrying warning may have come from a Japanese day trader guru known as Cis. The individual trader, who claims to own 21 billion yen ($186 million) in assets, tweeted over the last 24 hours that he had sold cryptocurrencies.” Maybe Makoto reads this board? …. “The listing of two bitcoin futures makes it easier for institutional players to trade bitcoins. Futures also enable players to go short on bitcoins, which was difficult without liquid futures,” said Makoto Sakuma, researcher at NLI Research Institute in Tokyo. SD

We'll have to agree to disagree. It is very much in the interests of a CB to have a interchangeable paper/digital dollar. And as soon as you have a digital dollar you also have a zero cost payment system, and it is that - that makes the cards obsolete. Hard to charge a fee to transact when you can easily do it for free. Notable, is that the Bitcoin 'reversal' also appears to be starting .... https://www.msn.com/en-ca/money/markets/bitcoin-plunges-dollar1000-in-less-than-an-hour/ar-BBH2QSu?li=AAacUQk&ocid=spartandhp SD

The design of CBDC's suggests that the IV of a digital currency should be pretty much at parity with its fiat equivalent - roughly 1 CBDC = $1 fiat. Add maybe a 25-100% premium for anonymity and avoidance of transaction fees, and a Bitcoin is intrinsically worth more - how much more depends on the capital controls & overall level of corruption of the nation you're trading in (ie: worth a lot in a Zimbabwe, but not so much in a Canada). Obviously not what many want to hear. SD

The Cboe brought in a lot of one-time institutional demand; paying up for the underlying Bitcoin, & financing it in-house, with a short term acceptance of the adverse risk capital impacts. With the Cboe/CME open it is now much more practical, and way more efficient on risk capital, to hold the Bitcoin via derivative - which has created a pool of sophisticated, and natural sellers of underlying Bitcoin (comprised mostly of those initial Cboe opening related purchases). Joe Public has been a manic buyer, but for the most part has to put up cash to buy a Bitcoin. Credit isn't as easy for Joe, we know Joe hasn't been prudent, and that there are a lot fewer Joe's who can afford Bitcoin at 18,000, than there are when Bitcoin is at 5,000. It's basic Econ 101 that as price goes up, demand goes down. The underworld is the only natural buyer of Bitcoin, and the price of Bitcoin is essentially a non-issue relative to its other benefits (long term view). Point is that there are few Joe's remaining, & a lot of sophisticated sellers piling up. We also have CB's raising rates - which implies that 'moral hazard' is back in play, and that CB's will drag their feet putting out a fire. It isn't looking good for Joe; and if we can see this - the clock has to be ticking ... .... it will also take very little selling to start an avalanche. SD

We sold the remaining 25% of our Bitcoin this morning. A little under 3 token at an average price of USD 18,810. The sale was to capture the run-up from the CME opening for business. Our view is that there is little reason for a market maker to be long Bitcoin at anything near current levels. The holding can now be widely replicated through either futures or options with built in margin, a much lower regulatory capital requirement, and perhaps even a lower carry cost as well. RAROC favors investment via derivatives - not via a long position in Bitcoin. The presence of CME/Cboe derivatives has now made Bitcoin investment 'scaleable'. Institutions can now trade in/out, with liquidity, without materially impacting the price of Bitcoin itself. The result is that the only natural buyers of Bitcoin are now 1) those that actually need it, and 2) investors who can't use a derivative. To get USD18,000+/Bitcoin, existing owners have to hold back their Bitcoin in anticipation of higher prices - much less likely now. But any small increase in supply will rapidly accelerate as price starts collapsing; with circuit breakers and global trading actually helping the process by damning up prospective sales as word gets out around the world. Global waves of selling feeding a brush fire until the fuel eventually burns out - is a harsh but desirable outcome, and the earlier it is - the better for everyone. At USD5,000+/Bitcoin, it's much easier for a market maker to justify holding a few Bitcoin directly - but until then; the market maker has to justify that high price/high maintenance holding daily, to an increasingly nervous senior management. Career risk suggests that there are real limits as to how long this can go on for. If we're right, we do very well. If we're wrong, we don't think we're giving up much. We live in interesting times. SD

The reality is that at present you can only use futures or options on the underlying. The only way you can actually 'short' the coin is via a naked sale and repurchase (boiler shop approach), or via a 'quasi' repo - which most aren't going to be allowed to do. SD

Your choice here is not when to participate. Yes it may be a lot safer to come in after the 'crash'; but you will be injecting NEW cash, and THINK you know everything - when in fact, you will have zero investment experience with the technology. Whereas your counterpart will be both using HOUSE money, AS WELL AS their investment experience in the technology. Materially less risk, and significantly better prepared to deal with it - is this really the position you want to be in? Yes in your early days there WILL be losses, it's why it is called tuition. SD

I use my bribe, extortion, AML/ATF, and despot money to buy the untraceable token; then find a willing banker to make a collateral backed loan to a number of little old ladies. Who withdraw the money in cash to pay for a trip somewhere - creating untraceable wealth assembly, and near to untraceable distribution ;) SD lol. I have always liked your posts here on CoBF, SharperDingaan. First time, you got me really puzzled was when you were playing the dice with Deutsche Bank. And now Bitcoin. However, I must say, that I do not any longer believe, that you have devoted your [full] time and energy to the rollout of blockchain worldwide. Just an updated learning from interesting conversations of many years ago. As they say - always try to learn from the very good. SD

Yes, it is. There have been hundreds of different coins created, none of which even comes within two orders of magnitude of 100K tx/s. It's certainly a big technical problem, even if it's a problem for which people have proposed solutions. Richard Fair enough...however my point is that it is disingenuous to say "Bitcoin can't even process 10 transactions per second." While technically true at the moment, no reasonable person in the community (whether big blocker or small blocker) believes that in 5 years we will still be limited to 10tx per second. This is still a new space and many teams are taking a precautionary approach to implementing new features (good thing). That said, do you see any technical reasons why at least lightning network won't be able to add at least 100x improvement to tx rates (as well as doing transactions for a few pennies per tx)? Its been in test net for a while and seems to be working fairly well. Furthermore, I know many on here are anti ethereum, but I believe there's a decent chance that sharding ends up working. I think the whole "tx limited to 10 per second and at $20 per tx" is a bit like yelling "where are my streaming movies over the internet?" in 1995. You gotta give it time. These currencies serve different markets. When anonymity and security are paramount (Bitcoin), users could care less if a transaction costs $10 and takes 24 hours - as the intent behind the transaction is not to buy a cup of coffee. To pay for the coffee we would use a CBDC as transaction cost and speed are key requirements. And because that CBDC will be running on a database using a Cray mainframe at 30+ petaflop/second; transaction time will, at worst - be in the very low seconds. Deadly to a bank, as like Bitcoin - the CBDC is ALSO a payment system. There is zero value to paying via Debit Card, Credit Card, PayPay, or an Apple/Google Pay - as each will charge you for a payment that can already be done for free - and very likely takes longer than the CBDC to process the transaction. Owning the existing rails also doesn't help you - as the rails just got replaced with new pipe. And none of this touches the smart contracts (szabo), or artificial intelligence, that can be used to automate these transfers in live time. SD

I use my bribe, extortion, AML/ATF, and despot money to buy the untraceable token; then find a willing banker to make a collateral backed loan to a number of little old ladies. Who withdraw the money in cash to pay for a trip somewhere - creating untraceable wealth assembly, and near to untraceable distribution ;) SD

'Anarcho Capitalist'. Trust no one but yourself, Bitcoin as the currency and payment solution; block chain and smart contracts as close cousins. It is super disruptive because it forces material changes in how business is conducted - and hence, truly is the 'friend' of the masses. All CB's have 2 faces. The 'dark side' is systematic debasement (Eastblock, Zimbabwe, South America, etc.) and capital controls (Belarus, China, Russia, etc.) to trap a population within a national border. The 'light side' is the mitigation of economic cycles, and the nurturing of business climates that you describe. One has to have experienced the 'dark side' to fully appreciate the 'light'. Obviously not all CB's are the same - so choose your partners wisely! 'Old bones' get to be 'old bones' - because they are very good at being anti-fragile. They may lose a battle, but will almost always make the finish line - when most others will not. Hence while the features of the Bitcoin may get updated (CBDC), the original is never going to go away - as there are way too many old bones about. No different to comparing notes with a consigliere - same business issues; just different approaches. Everybody learns from each other :D SD

People seizing power and covertly stealing from the general population? The economy is best left untouched by 'policy makers'. They'll only fuck things up like they have shown throughout history. Policy makers are messed up in their own ways but there is a very sound economic rationale behind why fiat is better than bitcoin. No there's not. There is Keynesian dogma and brainwashing which a child understands is bullshit. People never spend their money if it increases in purchasing power? How naive must you be to buy that ... But believe what you wish. This falls under freedom of religion for me. To the people not understanding why it's an improvement over gold I simply refer to this blogpost from 2012 http://moneyandstate.com/bitcoin-libertarian-introduction-used-care/ Very good stuff in this blogpost. Thanks for posting. SD

Gold serves as a 'store of value', because in troubled times everyone wants it - whichever side of the street they are on. The problem is that it's heavy, vulnerable to theft, and you cant prove this oz belongs to you. Bitcoin 1.0 running on a distributed ledger solves these issues - and that is part of its brilliance. We 'trust' because to the criminal element, it is worth far more to them to leave it unmolested - than to debase it. Bitcoin 2.0 (CBDC) does the same as Bitcoin 1.0, except that a CB backs the token (value & liquidity). If we think of the CB as being a global versus national entity (ECB or World Bank versus US Federal Reserve), we would have the cyber equivalent of the gold 'store of value' function. We 'trust' the global CB (the force!) over the criminal element (the dark side!), but retain the ability to switch back to Bitcoin 1.0 at any time. Bitcoin 1.0 holders are about to discover what happens to price when there is no liquidity, CB's have already had the negative rates 'experience'; and neither are likely to want to repeat it. The basis for, and the 'plumbing' of the CBDC is well understood; and much of it has already been tested on the Corda platform. The options, futures, and collateral loan infrastructure supporting Bitcoin 1.0; is easily transferable to Bitcoin 2.0. It is no longer 'if' - it is 'when'. Just one of the 'game changers' from the Nakamoto paper. SD

Offer a predetermined valuation, but make it vest over different periods. 1/3 year over 3 years for <25%, 1/5 year over 5 years for 25-49%, etc. It averages out the gaming possibilities, and reduces the liquidity drain on the business/remaining partners. It also permits partners to buy out future vests at a market discount (without rancor) - if they have the additional liquidity available. SD