The Death Knell of Crypto!

[JRM]

56 minutes ago, TwoCitiesCapital said:

 

So were you buying in 2018 the last time it considered by ~90% or nah? 

 

Because it's easy to say that, but typically people find excuses to NOT buy once something is down 90%. 

I won't make it larger than a 1% position until I'm buying directly from Michael Saylor.

[berkshiremystery]

2 hours ago, JRM said:

I won't make it larger than a 1% position until I'm buying directly from Michael Saylor.

Talking about Michael Saylor,...

... here's a great 3 hour perspective with Lex Fridman. >>>

 

 

 

[Dave86ch]

14 hours ago, berkshiremystery said:

Talking about Michael Saylor,...

... here's a great 3 hour perspective with Lex Fridman. >>>

 

 

 

 

I was pleasantly surprised by this interview, these are interesting arguments to debate. 

[SharperDingaan]

BTC and ETH are currently at USD 31,000 and USD 2,400.

Depending on your risk tolerance, liquidity, and holding period ... there is an opportunity in NFT.

 

Most NFT is priced in WETH. When crypto is buoyant, everyone is flush, and the price of ETH is high, the WETH price of the NFT is bid up. IE: The NFT sells for .3 WETH versus .2 WETH.  When crypto is down, everyone is depressed/broke, and the price of ETH is low, the WETH price of the NFT is bid down. IE: The NFT sells for .1 WETH versus .2 WETH.

 

So what? Had you simply bought ETH, you could only make the market high - low. But had you bought the NFT, you would magnify that ETH price difference by the difference in the WETH bid (1+((.3-.1)/.2))/1. And were you an enterprising lad ... those low price NFT's would have been bought with the MTM settlement on ETH puts 

 

No different to buying NY RE in a slump, and flipping it in a boom - but at multiple times less of a capital requirement. Gotta love crypto!

 

SD

Edited May 10, 2022 by SharperDingaan

[Xerxes]

Saw an interview with a rattled and nervous Mike Novogratz (spell). I like him. Sticking his neck out and staying the course. 
 

at the end of the day, the mega-bulls kept selling this as inflation hedge, but that statement had a disclaimer written with font 3 in the foot print :  if QE-forever persists. 
 

I still think it is all about the “rate” of inflation and not level of inflation in of itself. 

[SharperDingaan]

Lot of crypto 'underpinnings' are being tested, and there will be failures.

Ideally a very prominent peg breaks the buck; following which the big players step in to defend the peg, and run it thereafter. Market reactively does a temporarily 20-30% drop, then business as usual. Down-market version of WEB's convertible share bail out of GS, during the Lehman's collapse. 

 

There is also a lot of garbage in the NFT and Stable Coin space. Those without a 'real' business case unlikely to do well, and their progressive demises contributing to the funk. However, 3-5 years out? everyone screaming 'that was the time to buy!'

 

SD

Edited May 10, 2022 by SharperDingaan

[TwoCitiesCapital]

19 hours ago, Xerxes said:

Saw an interview with a rattled and nervous Mike Novogratz (spell). I like him. Sticking his neck out and staying the course. 
 

at the end of the day, the mega-bulls kept selling this as inflation hedge, but that statement had a disclaimer written with font 3 in the foot print :  if QE-forever persists. 
 

I still think it is all about the “rate” of inflation and not level of inflation in of itself. 

 

While I understand the argument for it as an inflation hedge due to it's fixed supply, it always was fairly obvious that this would be dominated by other price action inputs. 

 

Do we really expect the inflation hedge properties to dominate a 50-100% growth rate in adoption? Do we expect the inflation hedge narrative to trump 2 countries adopting it as legal tender over the last 12 months? Do we expect inflation hedge narrative to trump the fact that retail investors fled the scene in the Summer of 2021 and haven't yet returned? 

 

The inflation hedge piece seems so SMALL in comparison when we're talking about hedging a slight decline in the dollar (or other currency). BTC can only serve as an inflation hedge once it largely has reached full adoption and as a global asset class, which currencies' inflation is it hedging? 

 

Secondly, I'm not even certain that happens then. My prior views have been that volatility in crypto would decline as the asset class became sufficiently big and liquid. And maybe that does happen. But crypto is nearly perfectly inelastic in it's supply and becomes more so with each halving event. Inelasticity breeds volatility as the price is the only input that can change to reflect changes in marginal supply/demand.  

[SharperDingaan]

Keep in mind that the closer we get to 21M token, the more the price of a BTC is driven entirely by demand. And that as demand becomes larger with increasing adoption, price volatility declines at an accelerating rate. Daily volume changes dividing over a progressively larger total volume, reducing price volatility, lower price volatility accelerating adoption, and further raising total volume. The feedback loop until BTC equilibrium is reached...

 

On a fixed supply, the higher the volume (demand) transacting in BTC, the higher the price of BTC will be. And as the price of BTC rises, it drags the rest of the crypto asset class up with it. Lots of ways by which to play this; but it comes down to knowledge, risk tolerance and time horizon.

 

If you have the temperament. It is essentially Microsoft at cents in the dollar.

We live in interesting times.

 

SD     

[Xerxes]

13 hours ago, TwoCitiesCapital said:

 

While I understand the argument for it as an inflation hedge due to it's fixed supply, it always was fairly obvious that this would be dominated by other price action inputs. 

 

Do we really expect the inflation hedge properties to dominate a 50-100% growth rate in adoption? Do we expect the inflation hedge narrative to trump 2 countries adopting it as legal tender over the last 12 months? Do we expect inflation hedge narrative to trump the fact that retail investors fled the scene in the Summer of 2021 and haven't yet returned? 

 

The inflation hedge piece seems so SMALL in comparison when we're talking about hedging a slight decline in the dollar (or other currency). BTC can only serve as an inflation hedge once it largely has reached full adoption and as a global asset class, which currencies' inflation is it hedging? 

 

Secondly, I'm not even certain that happens then. My prior views have been that volatility in crypto would decline as the asset class became sufficiently big and liquid. And maybe that does happen. But crypto is nearly perfectly inelastic in it's supply and becomes more so with each halving event. Inelasticity breeds volatility as the price is the only input that can change to reflect changes in marginal supply/demand.  

 

On the second point, volatility should definitly go down as adaption takes hold, ideally, but adaption also brings in Wall Street and its margin casinos etc. bringing back excesses both to the upside and dowside. In this current bear market, once the excesses are washout, one should hope that the die hard complex should remain intact as a seed for the next bull market.

 

It is clear this cycle would have gone much longer in a QE infinity scenario 

 

unrelated:

Bitcoin whale Michael Saylor tries to defuse fears over MicroStrategy margin call (yahoo.com)

[Xerxes]

8 hours ago, SharperDingaan said:

If you have the temperament. It is essentially Microsoft at cents in the dollar.

We live in interesting times.

 

SD     

 

Or $25 for the whole for Mr Buffett

[SharperDingaan]

Think of the margin casino as expanding day-to-day volume, and reducing volatility as a by-product; plus an overlay of progressively less frequent market discontinuities as adoption increases. You can still get your teeth kicked in (if you have to sell), but you can manage the risk via use of a VaR model, and a longer time horizon.

 

The margin casino itself as an event generator. Sell into (when sentiment is buoyant), and buy out of (when the sky is falling), as/when you need to. 

 

SD

[Xerxes]

what i find interesting is that the BTC mega-bulls seem to have only one version of the future. It may very well work out, but WILL YOU be around to see it.  .... i.e. when MSTR keeps buying only BTC with its FCF, when Galaxy Digital got rid of its gold (they had some, given that its CEO was a macro-trader)... i.e. ARK etc. As if no other future is possible, other the one you have decided it will be. And no other short-term future is possible on the trendline. 

 

There is a certain level of hubris. Contrast that with folks that think in terms of a distribution of events in probablistic terms. Yes now and then, those folks miss a big win, we call them loosers & out of touch, BUT they stay afloat.

 

[SharperDingaan]

Always nice to have a confirmation, a day or so after predicting a failure.. 

https://www.theglobeandmail.com/business/international-business/article-bitcoins-2021-gains-wiped-out-as-stablecoins-send-shockwaves-around/

 

Tether slipped below its 1:1 dollar peg, hitting as a low of 95 cents around 0724 GMT on Thursday, based on CoinMarketCap data. 

 

“The lack of transparency provided by Tether on the quality of commercial paper they hold to back the peg made it the obvious next target,” said BCB Group’s Usher. “However, Tether is a very different animal to Terra, with a more proven ecosystem and I have far more confidence that when volatility subsides it can regain its peg and stability,” he said. Paolo Ardoino, Tether’s chief technology officer, said in a Twitter Spaces chat that the stablecoin had reduced its exposure to commercial paper over the last six months and now holds the majority of its reserves in U.S. Treasuries. Ardoino said a quarterly update on Tether’s reserves would be available later in the month.

 

Now with a bit of luck, BTC drops to USD 20,000, stays there for a while, and we can go shopping 

Then Uncle Warren shows up with a stack of treasuries, in exchange for a convertible 

 

SD

Edited May 12, 2022 by SharperDingaan

[rkbabang]

11 hours ago, Xerxes said:

what i find interesting is that the BTC mega-bulls seem to have only one version of the future. It may very well work out, but WILL YOU be around to see it.  .... i.e. when MSTR keeps buying only BTC with its FCF, when Galaxy Digital got rid of its gold (they had some, given that its CEO was a macro-trader)... i.e. ARK etc. As if no other future is possible, other the one you have decided it will be. And no other short-term future is possible on the trendline. 

 

There is a certain level of hubris. Contrast that with folks that think in terms of a distribution of events in probablistic terms. Yes now and then, those folks miss a big win, we call them loosers & out of touch, BUT they stay afloat.

 

 

 

You are correct.  The "all-in" people are nuts.  I'm confident enough to keep crypto around 20% of my net worth.  I recommend having a significant position in BTC, but I'd never recommend putting in any amount that would really hurt you if the thesis ends up being very wrong.

[lnofeisone]

https://www.currentaffairs.org/2022/05/why-this-computer-scientist-says-all-cryptocurrency-should-die-in-a-fire

 

Interest read for sure and provides counter balance to all the crypto bulls.

[SharperDingaan]

Most applications (80%+) don't require a blockchain solution; they could be done better, or just as well, using a standard data base. There is a well known paper outlining a technology cascade by which to determine when blockchain is the better solution. 

 

Smart contracts are about automation of the 80% of everyday business, not the legal. A smart contract just has to divide up the legal requirements, code and assign them between buyer/seller, and include a tolerance range on each major variable. There is no contract until the buyer signs; and if there are bugs the buyer has accepted them. It's just a different way of doing business; eliminating 'undo' in favor of higher buyer/seller accountability - you make a fat finger error, you wear it.

 

Stable coin, as they are currently used, are obsolete; CBDC is a far more efficient/effective alternative, and already exists in a major currency (digital yuan). The best use of a stable coin is in securitization; assets maintained at a custodian bank, code automation replacing the workforce processing payments, and an annual audit.  

 

Bitcoin itself, is the Yin to the Yang of CBDC. In many parts of the world, CB's are just not trusted, and for very good reason. The genies out of the bottle are  the 'every man' ability to evade capital controls, and protect against inflation - and they are never going back. Like the clap, learn to live with it.

 

The real issue is the rapid obsolescence, and permanent job loss, that the underlying block chain technology generates via automation. Creative near term destruction, while the technology evolves to the greater good. Premium on Change Management, ESG reporting, and Corporate Social Responsibility.

 

The various Ponzi schemes are coming to an end, but without them - the technology would not be where it is today. Back in the day there were similar schemes when horses gave way to motor cars, and sail gave way to steam.

 

Lots of opportunities 

As at 2022-05-15, 12:59PM UCT, BTC is USD 30,269

 

SD

Edited May 22, 2022 by SharperDingaan

[lnofeisone]

16 minutes ago, SharperDingaan said:

Smart contracts are about automation of the 80% of everyday business, not the legal. A smart contract just has to divide up the legal requirements, code and assign them between buyer/seller, and include a tolerance range on each major variable. There is no contract until the buyer signs; and if there are bugs the buyer has accepted them. It's just a different way of doing business; eliminating 'undo' in favor of higher buyer/seller accountability - you make a fat finger error, you wear it.

I'll preface this with, I bought ETH (along with few others) few years back and sold and haven't purchased any crypto since.  I have a mining rig and convert excess of our solar energy because it's hella more profitable than net metering as long as ETH stays above $900.

 

I think the ability to return stuff incentivizes the seller to provide quality product. Similarly, it gives the buyer a protection. Buyers don't always know how to test what they buying is quality and nor should they. An irreversible smart contract basically breaks that. 

 

I played with Solidity and smart contracts at work just to see how it all fits. My focus was on developing automated methods to test potential use cases that can break the contract, i.e., exception cases and bugs. I'm open to changing my mind but what I found was that it's great for small, very concrete, basic use cases. You get to "real" contracts, it becomes cumbersome and unwieldy. Honestly, it reminded me of a flatbed scanner I bought when I started college. I thought it would be cool to scan my notes and save them (that lasted about a month). I had people stop by and scan random stuff, until our library upgraded their printing machines with scanning (that would email you your file) that was embedded. Maybe that's what CBDC going to end up being. I can see a global DC that pairs with individual country CBDCs. 

 

I appreciate the fact that there are countries where central bank and gov't is not trusted. I came from one such country that was experiencing hyperinflation in the 90s. Dollar was king. I get that some people won't have the luxury of buying a dollar and have to resort to buying cryptocurrency to export their savings at a price of insane volatility. 

 

As far as automation, I haven't seen blockchain automate anything that UIPath or any other RPA vendor can't. I also haven't seen any real creative destruction. Just more people that previously didn't know how to write a macro can now drag and drop stuff and "automate."

[SharperDingaan]

Good feedback.

 

Widespread smart contract automation is already 'in the box' (Proven daily NYSE, NASDAQ, TSX trade/confirmation/settlement in seconds). It's just not yet implemented, re the widespread change management and CSR impacts that implementation will produce 

 

Digital smart contracts are not yet widespread, as the physical world hasn't yet caught up to them.

Deliver 100 units to XYZ location, dock 4, at  2pm on Tuesday is easy to program; but hard to reliably do in practice. Short ship you don't get paid, arrive late, the warehouseman doesn't sign off on the delivery, you don't get paid. A delay at the border, a crash on the highway, the contract goes force majeure, and you don't get paid. 

 

The digital solution is to simply add a buffer, deliver between 2-8 pm on Tuesday.

The problem is that physical implementation is a nightmare - a truck cannot just show up at a busy loading dock anytime within a 6 hour window and expect to be served, just as a plane can't just show up at Newark airport anytime within a 6 hour window and expect to be served. Similarly, it is just not physically practical to test every item received; you accept the 1,000 units, accept that 2% will not work, and build the costs into your contract (consumer electronics). Industry physical standards take a while to work out, and until then, smart-contract automation stalls.

 

Add to this the lack of economical 'off the shelf' smart contract solutions, that can easily integrate with a small/mid sized company's existing CRM, manufacturing, inventory, and accounting systems. Most companies in NA excluded, simply 'cause the software isn't there.

 

The potential benefits/savings of smart contract solutions are obvious to most managements. But unless you are big enough to do this on your own, you're stuck at the glacial pace of vendor roll-outs. Hence (Estonia excluded) for now, it is hard to see broader implementation.

 

The world needs to catch up.

 

SD   

  

Edited May 15, 2022 by SharperDingaan

[Xerxes]

https://s27.q4cdn.com/973063916/files/doc_news/2022/A-Letter-From-our-CEO-Mike-Novogratz_5.18.2022.pdf

[crs223]

15 minutes ago, Xerxes said:

https://s27.q4cdn.com/973063916/files/doc_news/2022/A-Letter-From-our-CEO-Mike-Novogratz_5.18.2022.pdf

 

What does "balance sheet capital" mean in this sentence:

 

Our principal investments team invested in Luna in Q4 of 2020 using balance sheet capital.

 

[SharperDingaan]

1 hour ago, crs223 said:

 

What does "balance sheet capital" mean in this sentence:

 

Our principal investments team invested in Luna in Q4 of 2020 using balance sheet capital.

 

 

Essentially, the Galaxy Enterprise Value.

 

SD

[Xerxes]

Correct he means investing through his balance sheet as oppose to his client’ funds that he is managing. 

[crs223]

2 minutes ago, SharperDingaan said:

 

Essentially, the Galaxy Enterprise Value.

 

What does that mean?  Paid cash?  Diluted shareholders?  Took out a loan?

 

"I purchased X using balance sheet capital"

 

"I purchased X using Enterprise Value"

[crs223]

Just now, Xerxes said:

Correct he means investing through his balance sheet as oppose to his client’ funds that he is managing. 

 

Okay TY.  Must be that his clients' funds do not appear on the balance sheet.

[Xerxes]

Citigroup must be managing several trillions dollars of assets. They do not appear on its balance sheet. It is not Citigroup money. 
 

I think same concept.