TwoCitiesCapital

It's not a Trump rally. It's the traditional post-halving rally that has happened every 4 years regardless of who was elected. It just happens to coincide with the election cycle this time around. Historically Bitcoin has gone vertical ~6 months post halving. Halving was in April. October was 6-months after that. If it plays out like prior cycles - it'll rally for 10-12 months and a face melting vertical climb with some major 30-50% pull backs along the way. Eventually this cycle will break - enough people will front run it to void the prior trading history. But every cycle people say that is going to happen then it plays out the same so waiting for it to break rather predicting when it will.

Fortunately for me, I bought a slug @ $12k and DCA'd all the way down to $4k and bought all the way back up to $40k over that period. Back then $500-600 still bought an appreciable amount of BTC . Unfortunately, there were set backs like losing 0.5 BTC in the Celsius bankruptcy and diverting my attention away from BTC accumulation to DeFi and altcoins, but Bitcoin covers a multitude of portfolio sins. At this point, $500-600 is dropping pennies in, but pennies I expect to compound at 40+% per year.

Yes. How you size it is up to your risk tolerance. What you sell to fund it is up to you as well. I hold both BTC and Fairfax. BTC is weighted far higher and Fairfax is by far my largest equity position. I recommend starting with a reasonable slug, committing to a DCA schedule either biweekly or monthly, and then have the patience to wait 3-5 years for a whole cycle to play out. The downdrafts are stomach turning, but acceptable with how quickly this compounds. I put $500-600 in every 2 weeks and have for most of the last 4-years. I put another 10-15k in during October to be opportunistic with the rally I expected shortly thereafter. I buy both BTC directly (via Coinbase and stored on a hard wallet) as well as BTC in my IRAs via the ETFs. I don't try to time the tops and bottoms, but I do have targets for when I reduce/eliminate my DCA and targets I'd be willing to let go of a minority of the position in my IRAs go for. We didn't hit those targets last cycle - we may not hit them this cycle - and that's ok with me. Because we'll hit them next cycle and I'll have more BTC.

We may not be quite at 100k yet, but its damn close enough to take the victory lap with 7 weeks left in the year. To be clear, this prediction was made when BTC was @ 61k. It wasn't an guarantee, but was very probable given the valuation of the network, where the price was trading relative to network value at that time, and how BTC has behaved post supply halving in the past cycles. This is the informational edge @james22 is referring to - it's still easy.

It reminds me of BTC in 2013, 2017, and 2021.

The value is in the scarcity of their cars. If people bid up the shares, issue shares to meet the demand. Buy them back opportunistically. Is a better solution than selling the shares, paying taxes, and losing control of irreplaceable asset.

Bitcoin is the representation of the network and required to interact with it. Figure out the value of the network - that's your market cap. Bitcoin is just an arbitrary division of that network into 21 million parts similar to how the # of shares outstanding for a corporation is largely arbitrary and what matters is not the share price of each share but the value as a whole. Value of the network divided by coins outstanding. An agreement that the US government regularly defaults on by actively diminishing the value of the currency that is their liability. How much is a contract worth if one side is constantly breaching the terms of it? Don't all assets have deviations from "fair value"? Or at the very least different estimates among participants of what "fair value" is? I'm not entirely sure I'm understanding what is questionable here? He acknowledges it was manipulated in its infancy back in 2011 -2013. And that's not universally agreed upon. But yes - any micro cap stock can be manipulated. BTC was no different in its infancy. Limited liquidity. Limited regulatory over sight. Limited market participants. That's not the case today. +1

So we're saying Paulson has a better moral compass than Trump? Because that's basically all this hints at.

I suppose that it depends on how one defines "intrinsic value". There is little value in BTC itself - the value is in the network (using Metcalf Law framework). I don't think this is irreconcilable with other theories/values nor is it much different than saying "gold has little intrinsic value - most of its market cap is monetary premium" I believe BTCs characteristics lend itself to obtaining a monetary premium - but that only occurs if the network grows through collective agreement. There are varying estimates of how much has been lost. As of right now, most estimates suggest 3-4 million to be irretrievably lost. If you want to be conservative, use the 21 million hard cap in your valuations. If you want to be more accurate, but have less margin of safety, use 17-18 million.

+1 It was reading about the history of money, how societies exploited less-hard currencies, and how the world eventually agreed on silver/gold independently through multiple failed alternatives is ultimately what led me to evolve my views of BTC as just a payment network to understanding its use as a store of value/currency. The history didn't even have a pro-Bitcoin bend. It simply demonstrated that universality of harder currencies absolutely dominating lesser ones regardless of politics/policies/etc and that those who adopted the harder currencies, or 'shorted' the exploitable currencies, massively benefited from the expanding monetary premium. Once you understand that, and understand that Bitcoin's characteristics are the hardest currency characteristics we've known, the conclusion is natural.

Timothy Peterson of Cane Island Digital has pioneered the use of Metcalf's Law for Bitcoin. https://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=2848613 This is my preferred valuation tool based on network use and adoption. Plan B is credited for popularizing stock-to-flow for Bitcoin, but its a theory that was applied to many commodities beforehand. You can find his material on YouTube/Twitter, but probably can just google stock-to-flow. This is a supply-side model only and will eventually break as BTC's stock-to-flow approaches infinity (when the halving cycle ends and the network operates only transaction fees) - but is probably still useful for now while the stock-to-flow is comparable to gold/silver/real estate/etc. Giovanni Santosasi popularized the use of power-law for Bitcoin. This is very similar to the stock-to-flow model for the first 10-years or so of BTCs history, but is diverging to the more conservative side of valuation. This, again, is probably due to stock-to-flow trending towards infinity and becoming less useful over time. Other than hearing interviews on podcasts, I haven't personally googled/read Giovannai's stuff to link you. But you can google him.

My hope would be similar to my hope for Exor and their Ferrari position. I don't necessarily want Exor to sell Ferrari when Ferrari's valuation is stupidly high. I want Exor to exert its majority control to compel Ferrari to issue shares/capital at those levels. It's not as clean as a share sale and probably doesn't lock in as much of the upside, but it avoids taxes, maintains a control position (assuming you don't get diluted too much), and puts in a higher-floor for the Ferrari shares while giving them balance sheet flexibility. I would hope the same for Fairfax/Digit until the market is more mature.

There are cohesive answers earlier in the thread where this has been discussed. Stock-to-flow, Power Law, and Metcalf's Law are three such theories. One is a mathematical relationship observed in often in nature, one is a supply side function, and the other is a demand side function. Neither will give you the exact right answer or the whole picture. But all suggested BTC was cheap this year and is going dramatically higher in the next year due to the continuation of the trend, the continued decline in the stock-to-flow, and the projected demand growth on the network.

Is it not ironic that the office leading the charge for government inefficiency redundantly has two leaders? Not a great start LOL! 100%. Was skeptical of it from 2011 to 2019 and then something clicked and realized I was wrong the whole time. At at that point, at $12-14k a coin, I felt like I had missed the boat entirely. Over time, my understanding of it has evolved, as has my methods for estimating its value, and it turns out that 2019 was still very early. 2024 is too.

And the Republicans did it to Iraq and others before them. Our foreign policy has been atrocious regardless of party. Trump might be a slight improvement here, but I remain to be convinced. Yes. There are attacks from the left. But the right is no better and arguably more dangerous IMO. The media is far from perfect. But as of right now it is only Fox that has paid the largest settlement in history to avoid going to trial for knowingly lying for clicks and eyeballs. Additionally, Elon has taken over Twitter and is doing the exact things he complained about the prior board doing, but to elevate his voice, his conspiracy theories, and to quiet the dissenters against himself. All media is propaganda. But the way the left tends to propagandize is through silence on a topic. The Right does it by outright lying. I view both to be bad, but one is worse than the other. The left could use a dose of respect for self responsibility. So could the right - because they're all about it until they were hamstrung by the political climate, or unfair competition, or immigrants willing to work more cheaply, or the election being stolen, etc etc etc Same. I'm fairly center and primarily voted independent or right until Trump came into the picture. Now I support candidates on the left not because the policies are better but because they aren't absolute terrible people help bent on power by any means necessary like most MAGA Republican politicians seem to be.

I suppose it depends on what you mean by "collapse". I've held it through the last two 75% crashes in 2020 and again in 2022. Held and added. Not sure if that answers your question, but also not sure what you mean by collapse to have a better one. BTC will do to gold what gold did to silver. It will de-monetize it. It doesn't mean gold is going to zero - it means BTC will eat it's monetary premium and gold will be more akin to silver (perhaps the historical relationship of gold and silver will re-assert itself now that they're both in equal footing as non-monetary assets). I also believe BTC is eating the monetary premiums of fiat currencies around the world. I'm happy to answer DMs on this from those with genuine interest, or take it to the crypto thread, but at this point I think we're derailing the thread and making it harder for other more-related conversations to occur

To the man with a hammer, everything looks like a nail. Having more tools means you can use the appropriate tool for the job. Valuing BTC is more akin to valuing commodities/currencies and cash flows aren't really part of the equation. Utilizing tools like stock-to-flow and theories around network valuations and growth lends themselves to BTC valuation in a significantly better way than tools intended to analyze as businesses. I can use one set for Fairfax to have seen it was stupid cheap back in 2021 and made it my largest stock position and I can use another set today to see that Bitcoin was stupid cheap at the start of this year and have it be my largest asset position. BTC is still probably stupidly cheap when we look back from 5-years, but like all investments it becomes less compelling and more risky the higher the price gets.

I'm saying that there are numerous examples of things that have immense value that don't lend themselves to DCF valuations. Bitcoin is but one example. Relationships another. They don't have to be similar to one another is outside of the angle that they have value outside of a DCF calculation. Every stock price moves only because people are buying it or selling it. Sure - you provide the example of Fairfax. Now go to the Fairfax India thread and scroll back to anything from more than a month ago - is years worth of posts expressing discontent that the price doesn't reflect the NAV despite underlying business performance and the company repurchasing shares. Bitcoin price only going up with new buyers, and those buyers having a vested interest in its rise, is not limited to Bitcoin, or companies who don't repurchase their own shares, or companies that do. All are subject to the same arrangement of supply/demand dynamics that can be entirely disconnected from the underlying fundamentals for extended periods of time. Bitcoin isn't a Trump trade. It has done this every 4 years. It did it last when Biden was elected. And last when Trump was elected. And before that? When Obama got his second term. It doesn't matter who is in the White House - sound money wins over unsound money.

Gold doesn't produce income and has a multip trillion market cap and has been a store of value for generations. Currencies produce no income and have multi trillion market caps. My relationships with family/friends provide no income, but have immeasurable value. We have to recognize that there are more ways to evaluate the world, and value, than forcing everything to fit a DCF model.

That's pretty common with European companies

On this note: https://www.nytimes.com/2024/11/09/us/politics/donald-trump-ethics-transition.html

All that requires is a renegotiation of the sweep. Just like how it got renegotiated to be retained by Mnuchin last time around. Why would Paulson be expected to dispose of his positions if Trump isn't required to? Trump was actively negotiating for a hotel in Moscow last time he was running for President. Do you really believe this administration cares about self-sealing or conflicts of interest? Self-sealing is the ONLY way they get released. I don't think it happens. But that's because I don't think Trump cares and it doesn't benefit him. Where I concede I could be wrong here is the possibility of some political favor trading going on where he does it to benefit someone in his administration in return for something from them, but I think the odds are low because he could've done that last time too.

I don't believe higher short rates are stimulative to a society of net spenders with little savings. It's weird to believe lower long rates are stimulative while simultaneously believing higher short rates do the same.

Does it really matter the legality of it? The Treasury will do what it wants regardless of legality. Those wanting to challenge them on it can fight in court for the next 15 years. But I have a hard time believing that they're just going to give up $400 billion in value to make minority shareholders rich. Nobody cares what the common is worth to the government - it's not on their books for them to suffer a write down of any sort of the common goes to zero and there is zero incentive for them to forfeit 100% of profits into perpetuity in the SPS in exchange for 80% profits in perpetuity by owning the common.

Can't we all just agree that it is hard money and that is important and valuable enough without needing these weird abstractions that serve to confuse and alienate newbies? The new oil? No. The new money. Yes.