Cryptocurrencies

[Paarslaars]

I know you are a good trader SD, but trading BTC is so risky... BTC returned 95% of its annual gains in 10 days per year. No way I am smart enough to find those days.

[SharperDingaan]

3 hours ago, Milu said:

What’s the benefit of trading and trying to estimate if it’s cheap or fairly valued? Just buy bitcoin, have the conviction to hold through the various drawdowns and come out the other end in 10 years with 5-10 times your money. Seems unnecessary to trade it and pay taxes, wonder how much you expect to come out ahead of a simple buy and hold strategy?

 

At it's simplest assume the trades are within a tax-exempt/tax-deferred account, therefore no immediate tax paid. Outside of a tax-exempt/tax-deferred account, assume a round-trip wash-trade in the same security (CUSIP #) within 30 days of the initial sale; in most places there will be no tax paid. No tax tail wagging the dog.

 

Why do it?

 

Reinvest your swing trade gain in the same security, and your same amount of initial capital invested in that security, has now bought more shares; lowering your cost per share. At that lower cost per share, you can now tolerate a lower share price before starting to suffer losses. Risk management.

 

If you have a life changing target amount in mind (400K to pay off a mortgage), the more shares you have the lower your selling price can be, and the sooner you can reach that target. Reinvest swing trade gains in additional shares of the same security, brings your future exit forward. Risk management.

 

Getting paid for your time. The more familiar you are with a few securities day to day movements, the more likely you are to make timely trades. So long as you win more than you lose, you have monetised your time invested. Doesn't mean stare at a screen all day, but it does suggest a more concentrated portfolio, and looking at the days close every other day or so. Respect the money.

 

Volatility as your friend is not what many want to hear, or care to use.

Obviously, not for everyone.

 

SD  

   

[73 Reds]

5 hours ago, SharperDingaan said:

 

Hate to tell you this but in 2025, most every investment house from Blackrock down, recommends a minimum 5% weighting. If you are young and have the runway ahead of you the rep will suggest a higher weighting, and higher still if you are saving to buy a house. You pay good money for that recommendation ... but of course, are free not to follow it.

 

It is just a math driven forecast, if the assumptions are valid .. it is where BTC needs to be, and what mitigation might do. Change the assumptions and you will get different numbers .... just keep in mind that BTC at 500K is a fairly common forecast amongst the major investment houses. The market has long since moved on from BTC as worthless.

 

SD    

Why should I, or anyone on this Board care what investment houses recommend?   Better question, why should I, or anyone on this Board pay anything to investment houses  for their advice?   

Edited April 13, 2025 by 73 Reds
spelling

[73 Reds]

5 hours ago, Milu said:

What’s the benefit of trading and trying to estimate if it’s cheap or fairly valued? Just buy bitcoin, have the conviction to hold through the various drawdowns and come out the other end in 10 years with 5-10 times your money. Seems unnecessary to trade it and pay taxes, wonder how much you expect to come out ahead of a simple buy and hold strategy?

If you feel that strongly about it why own anything else?  

[TwoCitiesCapital]

34 minutes ago, 73 Reds said:

Why should I, or anyone on this Board care what investment houses recommend?   Better question, why should I, or anyone on this Board pay anything to investment houses  for their advice?   

 

Because those investment houses control the flows of hundreds of billions of dollars, if not more, via their recommendations and proprietary models and advice/recommendations. 

 

It doesn't all flow immediately, but Blackrock allocating 1-5% to this in their strategic models is ABSOLUTELY going to influence flows in that direction. And when those flows are going to accumulate a minority of the 19 million BTC currently available? It's likely to drive a price response that is going to last secularly for decades. 

Edited April 13, 2025 by TwoCitiesCapital

[Milu]

1 hour ago, 73 Reds said:

If you feel that strongly about it why own anything else?  

I’m wise enough to realise that there are no certainties in life. When I am confident about something I will make a significant investment, but I’m not stupid enough to think I can’t be wrong.

[Dave86ch]

18 hours ago, SharperDingaan said:

 

BTC is something that everyone needs to have. Could be as BTC itself, a BTC-ETF, or via a stock. Depending upon the investment purpose; it could also be part of the portfolio cash/money market allocation, or the equity component. Default 5% weighting, rising to a 35% weighting the younger you are ... so that you can afford to buy a house when you grow up.  It is also not enough to passively own the exposure, you need to actively manage ... sadly, beyond most people's capabilities.

 

So, 10 years out ... USD 500K/BTC; 10 yr forward discount of 17.5%+ 

 

SD

 

 

Numbers example

Assume you are US based and measure price in BTC_USD.

 

Base price of USD 100K/BTC, 3.5% average inflation over the 10 years (tariffs driven), 15% USD devaluation to whatever the reserve currency alternate is (tariffs driven). Base price just to stay 'even' , 10 years out .... 162K/BTC (100x(1.035)^10 x 1.15

 

Assume US equities continue to deliver a 10yr CAGR of 8%, and 'on average' BTC is 2x more risky that the market. At the required risk-adjusted  16% growth rate, the base price of BTC, 10 years out, needs to be .....  507K/BTC (100x(1.16)^10 x 1.15. 10 year risk-adjusted CAGR of 17.6% (100,000X(1+.176)^10 = 507,000)

 

Assume this is not a buy and hold position; it will be aggressively swing traded while the price is 'cheap', and the net gain reinvested in BTC, raising the unit count by 10%. Swing trade base price to stay 'even' is 147K (162/1.1), risk-adjusted it is 461K (162/1.1) 

 

 

 

 

Thank you.

 

An interesting take on stablecoins, Taproot Assets, and Lightning.

 

https://njump.me/naddr1qqxnzde5xs6rjv3kxcer2vp3qgsgym5l39dcr26p53fzy69jf8ng6qk2s9sgmm6k9fynem34llzuwkgrqsqqqa289cdz6w

 

 

It's fairly long, so I'll post an AI-generated summary.

 

Stablecoins have demonstrated clear product-market fit by addressing the demand for dollar-denominated digital assets with efficient payment rails, despite criticisms from Bitcoiners about reinforcing dollar hegemony and relying on unnecessary blockchain infrastructure. While existing stablecoin models on non-Bitcoin blockchains face scalability limitations and centralization risks, Taproot Assets (TA) on Bitcoin’s Lightning Network offer a technically superior alternative by enabling atomic swaps and multi-issuer settlement without relying on a single dominant entity like Tether.

 

Key Arguments and Evolution

Current Stablecoin Limitations:

 

Scalability Issues: Blockchains like Ethereum and Tron struggle with transaction throughput, leading to high fees and centralized "layer 2" workarounds that negate decentralization benefits.

 

Market Dynamics: The dominance of Tether (80% market share) creates systemic risk, as users must trust a single issuer, mirroring centralized banking flaws.

 

Taproot Assets and Lightning Network:

 

Atomic Settlement: TA enables trustless routing of stablecoins over Lightning, bypassing centralized intermediaries and allowing interoperability between different issuers.

 

Economic Incentives: Unlike fee-driven models on other chains, TA’s Bitcoin-based settlement leverages Lightning’s efficiency, reducing costs as adoption grows.

 

Transition to eCash:

 

Bearer Instruments: eCash could replace TA by offering private, cash-like stablecoins settled over Lightning, eliminating on-chain issuance costs while retaining atomic swaps.

 

Hyperbitcoinization Pathway: As payment rails standardize around Lightning, switching from fiat-denominated eCash to Bitcoin becomes frictionless, accelerating Bitcoin’s adoption as global money.

 

Addressing Bitcoiners’ Concerns

Dollar Hegemony: While TA/eCash stablecoins initially use fiat, they create infrastructure that incentivizes eventual Bitcoin adoption by bitcoinizing payment rails.

 

Blockchain Necessity: Bitcoin’s role is limited to neutral settlement, avoiding the "decentralization theater" of other chains. TA and eCash focus on pragmatic utility rather than ideological purity.

 

Conclusion

Stablecoins on Taproot Assets and Lightning represent a transitional phase, combining Bitcoin’s sound money with practical fiat interoperability. This setup not only addresses current stablecoin flaws but also lays the groundwork for a seamless shift to a Bitcoin-centric financial system as users gravitate toward superior monetary properties.

 

[Dave86ch]

Related to my last comment.

Ardoino on Lightning private channels and scaling stablecoins.

[73 Reds]

15 hours ago, TwoCitiesCapital said:

 

Because those investment houses control the flows of hundreds of billions of dollars, if not more, via their recommendations and proprietary models and advice/recommendations. 

 

It doesn't all flow immediately, but Blackrock allocating 1-5% to this in their strategic models is ABSOLUTELY going to influence flows in that direction. And when those flows are going to accumulate a minority of the 19 million BTC currently available? It's likely to drive a price response that is going to last secularly for decades. 

Investment houses do........what's good for investment houses.  Nothing whatsoever to do with me.  Again, the suggestion that everyone must own BTC is preposterous.  It is nothing but a newfound, substitute form of a currency.  How many here have ever owned, or felt the need to own a currency for investment purposes?

[wachtwoord]

23 hours ago, SharperDingaan said:

 

BTC is something that everyone needs to have. Could be as BTC itself, a BTC-ETF, or via a stock. Depending upon the investment purpose; it could also be part of the portfolio cash/money market allocation, or the equity component. Default 5% weighting, rising to a 35% weighting the younger you are ... so that you can afford to buy a house when you grow up.  It is also not enough to passively own the exposure, you need to actively manage ... sadly, beyond most people's capabilities.

 

So, 10 years out ... USD 500K/BTC; 10 yr forward discount of 17.5%+ 

 

SD

 

 

Numbers example

Assume you are US based and measure price in BTC_USD.

 

Base price of USD 100K/BTC, 3.5% average inflation over the 10 years (tariffs driven), 15% USD devaluation to whatever the reserve currency alternate is (tariffs driven). Base price just to stay 'even' , 10 years out .... 162K/BTC (100x(1.035)^10 x 1.15

 

Assume US equities continue to deliver a 10yr CAGR of 8%, and 'on average' BTC is 2x more risky that the market. At the required risk-adjusted  16% growth rate, the base price of BTC, 10 years out, needs to be .....  507K/BTC (100x(1.16)^10 x 1.15. 10 year risk-adjusted CAGR of 17.6% (100,000X(1+.176)^10 = 507,000)

 

Assume this is not a buy and hold position; it will be aggressively swing traded while the price is 'cheap', and the net gain reinvested in BTC, raising the unit count by 10%. Swing trade base price to stay 'even' is 147K (162/1.1), risk-adjusted it is 461K (162/1.1) 

 

 

 

 

 

Wow SD, couldn't agree stronger with this. Absolutely the best asset to hold passively. Could you make a but on top with trading? Sure, some people can, as eg you yourself have demonstrated but imo that's a negative return if you would properly correct for risk taken. Yes the main risk materializes infrequently but when it does the losses are so enormous it doesn't compensate for the hundreds of quarters you picked up from in front of the steamroller before.

 

Everyone needs to have btc sure. But buy and hold only. 

[Milu]

27 minutes ago, 73 Reds said:

Investment houses do........what's good for investment houses.  Nothing whatsoever to do with me.  Again, the suggestion that everyone must own BTC is preposterous.  It is nothing but a newfound, substitute form of a currency.  How many here have ever owned, or felt the need to own a currency for investment purposes?

I’d tweak that slightly and say it’s a new form of gold(scarce, finite asset) rather than currency. Lots of people including many respected ‘value’ investors hold gold as part of their portfolios and it proving to be quite the portfolio diversifier in times such as now. Bitcoin has a good chance of serving the same purpose.

[73 Reds]

10 minutes ago, Milu said:

I’d tweak that slightly and say it’s a new form of gold(scarce, finite asset) rather than currency. Lots of people including many respected ‘value’ investors hold gold as part of their portfolios and it proving to be quite the portfolio diversifier in times such as now. Bitcoin has a good chance of serving the same purpose.

Perhaps, but now we've moved on from "everyone must own it" to "it may be a good investment for some".  If comparable to gold, one would hope it provides better returns.  

[Milu]

1 hour ago, 73 Reds said:

Perhaps, but now we've moved on from "everyone must own it" to "it may be a good investment for some".  If comparable to gold, one would hope it provides better returns.  

While I own some bitcoin myself I’m not in the everyone must own it camp. The bitcoin community is a diverse bunch each with their own beliefs and approaches. My preferred portfolio would be 100% in top quality companies at fair prices. I’d rather not have to hold unproductive assets like cash, gold, bitcoin. But when I have a decent cash holding and don’t find many investments that meet my hurdle rates I need to be able to hold at least some of my dry powder in assets that can maintain their value. I’m not as comfortable as buffet his holding 30% of his assets in t-bills. Even with the good 5% yields I’m not sure they are keeping pace with actual inflation on a gross basis and definitely not after tax. Gold/Bitcoin at least give an escape hatch should the money printers get revved up again.

Edited April 14, 2025 by Milu

[73 Reds]

27 minutes ago, Milu said:

While I own some bitcoin myself I’m not in the everyone must own it camp. The bitcoin community is a diverse bunch each with their own beliefs and approaches. My preferred portfolio would be 100% in top quality companies at fair prices. I’d rather not have to hold unproductive assets like cash, gold, bitcoin. But when I have a decent cash holding and don’t find many investments that meet my hurdle rates I need to be able to hold at least some of my dry powder in assets that can maintain their value. I’m not as comfortable as buffet his holding 30% of his assets in t-bills. Even with the good 5% yields I’m not sure they are keeping pace with actual inflation on a gross basis and definitely not after tax. Gold/Bitcoin at least give an escape hatch should the money printers get revved up again.

The one thing all BTC owners have in common is they are speculating.  History has not proven terribly kind to speculation.  There are plenty of non-speculative investment assets that will hedge against inflation.   

[Milu]

52 minutes ago, 73 Reds said:

The one thing all BTC owners have in common is they are speculating.  History has not proven terribly kind to speculation.  There are plenty of non-speculative investment assets that will hedge against inflation.   

Yes I'd agree their is a speculative component to it. It's very hard to value assets with zero cashflows like Gold, Bitcoin, Collectibles etc. I think everybody would agree they have some 'value' but what is fair value who knows. It's impossible in my opinion to value gold. I think this description by Tony Deden summarised it best.

 

"What makes gold compelling are the risks we do not take by owning it. No forecasting or guesswork is required. The risks we do not take owning gold could fill volumes. With gold, there is no duration risk, credit risk, or liquidity risk. The metal is not moved by financial instability nor threatened by national insolvency or chaos in foreign exchange markets. There are no margin calls and no refinancing risks. There is no risk of technological obsolescence, depletion, depreciation, or decay, nor does it require cheap energy, cheap credit, or cheap trade to remain viable. It does not care about your national energy policy or who you buy your gas from or how many pipelines are running. You do not have to keep the lights on or even keep it warm. There are no financial accounts to pore over, no balance sheet to blow up, no cash flows to dwindle, no stale inventory and no margin pressures in difficult times. There are no key manpower or supplier risks, no competitive risks, no management to squander its future. It does not depend on the character, skill, or enthusiasm of any one. It does not require the faith or good will of others. It does not require you to trust anyone at all, except that you must hold it in a very safe place." Bottom line: Gold is the only universally liquid financial asset that is no one's promise, which is why demand for it rises whenever trust in promises declines."

 

Bitcoin has a lot of similar properties.

[73 Reds]

1 hour ago, Milu said:

Yes I'd agree their is a speculative component to it. It's very hard to value assets with zero cashflows like Gold, Bitcoin, Collectibles etc. I think everybody would agree they have some 'value' but what is fair value who knows. It's impossible in my opinion to value gold. I think this description by Tony Deden summarised it best.

 

"What makes gold compelling are the risks we do not take by owning it. No forecasting or guesswork is required. The risks we do not take owning gold could fill volumes. With gold, there is no duration risk, credit risk, or liquidity risk. The metal is not moved by financial instability nor threatened by national insolvency or chaos in foreign exchange markets. There are no margin calls and no refinancing risks. There is no risk of technological obsolescence, depletion, depreciation, or decay, nor does it require cheap energy, cheap credit, or cheap trade to remain viable. It does not care about your national energy policy or who you buy your gas from or how many pipelines are running. You do not have to keep the lights on or even keep it warm. There are no financial accounts to pore over, no balance sheet to blow up, no cash flows to dwindle, no stale inventory and no margin pressures in difficult times. There are no key manpower or supplier risks, no competitive risks, no management to squander its future. It does not depend on the character, skill, or enthusiasm of any one. It does not require the faith or good will of others. It does not require you to trust anyone at all, except that you must hold it in a very safe place." Bottom line: Gold is the only universally liquid financial asset that is no one's promise, which is why demand for it rises whenever trust in promises declines."

 

Bitcoin has a lot of similar properties.

Yes, but gold has a long history of other utility which creates demand independent of its investment potential.  I see utility in BTC for illicit purposes and desperate people.  To me that doesn't make for a favorable investment thesis and anyone who is risk-averse (i.e., not a speculator) should not own it.   Mr. Deden seems to be saying that everyone should own gold, similar to certain BTC proponents.  Yet if history is any guide, few have become wealthy owning gold and among the wealthy, gold is likely non-material to total wealth. 

[rkbabang]

On 4/13/2025 at 11:22 AM, Santayana said:

Recommending a portfolio weighting for the minority of people with enough in their portfolios to even think about weightings is not the same thing as "everyone needing it". 

 

True.  I know so many people that don't have stocks (no 401K, nothing), no house, owe more on their car than it's worth, literally own nothing.   I've tried to talk to some of these people (as they are family members), do they need stocks, Bitcoin, a house, to stop spending every penny they make, to get out of debt?  They don't think so.  Who are we to say what everyone needs?

 

[james22]

4 hours ago, 73 Reds said:

The one thing all BTC owners have in common is they are speculating.  History has not proven terribly kind to speculation.

 

Was Amazon speculative when it had zero cashflow?

 

No.

 

History has been very kind to those who recognize adoption curves.

[73 Reds]

32 minutes ago, james22 said:

 

Was Amazon speculative when it had zero cashflow?

 

No.

 

History has been very kind to those who recognize adoption curves.

Are you comparing Amazon to Bitcoin?  Are you equating the two?  One has nothing to do with other - in any way.  What does a for-profit business enterprise share in common with Bitcoin?

Edited April 14, 2025 by 73 Reds
Words

[thepupil]

i don't really wish to participate in this debate, but AMZN has had positive operating cash flow since 2002 and positive free cash flow most years since then except for the '20-'21 capex binge. 

 

it has not consistently had net income, for a number of reasons (stock based comp, growth effectively financed by suppliers via growing negative working capital, substantial depreciation, etc). 

 

AMZN has not been consistently net income generative, but it has been consistently cash generative (as has most of big tech, the others are generally NI and cash generative).

 

again, don't wish to really engage in the bitcoin debate. 

 

below is AMZN's OCF and FCF per share. whether or not the price paid relative to observable and predictable inputs at some given point of time made the investment "speculative", I leave to those smarter than I to determine. 

 

Edited April 14, 2025 by thepupil

[james22]

7 minutes ago, 73 Reds said:

Are you comparing Amazon to Bitcoin?  Are you equating the two?  One has nothing to do with other - in any way.  What does a for-profit business enterprise share in common with Bitcoin?

 

Amazon digitized retail, Bitcoin is digitizing money.

 

(Just like Google digitized information, Facebook digitized social networks, Netflix digitized entertainment, Spotify digitized music, YouTube is digitizing education, and AI will digitize labor.)

 

Their growth is best understood by adoption curves, not cash flow.

[james22]

 

[james22]

 

[james22]

 

[73 Reds]

5 minutes ago, james22 said:

 

Amazon digitized retail, Bitcoin is digitizing money.

 

(Just like Google digitized information, Facebook digitized social networks, Netflix digitized entertainment, Spotify digitized music, YouTube is digitizing education, and AI will digitize labor.)

 

Their growth is best understood by adoption curves, not cash flow.

Growth is not the issue.  The issue is BTC and Amazon as assets to be owned.  BTC doesn't generate anything and you can't even use it to make purchases directly on AMZN.  In fact, you can't use it to buy much of anything.  Even if I could, who wants a volatile currency?  Volatility is precisely the reason why people in unstable countries don't trust their own currencies.  Let's revisit the issue when BTC is accepted as payment for taxes, contractual obligations and trade.