Cryptocurrencies

[SharperDingaan]

We're out of our BTC at USD 35,002, and it has been quite the ride.

Now it's time for a time-out from crypto - and the nephews studying up on ETH, options, futures, exchanges, and the CME  :-*

Time for the REAL education to begin!

 

SD

 

When does regret set in? $40k, $80k, $500k?  ;)

 

It doesn't - until we buy the put  ;)

A whole lot of stimulus cheques, and a whole lot of Robin Hood, could really make our year. Lots of small trades, collectively and consecutively hitting the ask, and all adding to the network effect - this is where we learn about the REAL use of options.

 

Success at a 50K market strike, a 50% decline to 25K, and a CME derivative, will change lives. And if the premium cost is < the realized gain to date, a punch card punt. When you are young, mitigated risk is your friend NOT your enemy - something often not realized until too late.

 

SD

 

 

 

[SnarkyPuppy]

We're out of our BTC at USD 35,002, and it has been quite the ride.

Now it's time for a time-out from crypto - and the nephews studying up on ETH, options, futures, exchanges, and the CME  :-*

Time for the REAL education to begin!

 

SD

 

When does regret set in? $40k, $80k, $500k?  ;)

 

It doesn't - until we buy the put  ;)

A whole lot of stimulus cheques, and a whole lot of Robin Hood, could really make our year. Lots of small trades, collectively and consecutively hitting the ask, and all adding to the network effect - this is where we learn about the REAL use of options.

 

Success at a 50K market strike, a 50% decline to 25K, and a CME derivative, will change lives. And if the premium cost is < the realized gain to date, a punch card punt. When you are young, mitigated risk is your friend NOT your enemy - something often not realized until too late.

 

SD

 

Nobody makes me feel less educated than when SD writes something.  I have to read everything you write multiple times and still come away not understanding half of it.  Not sure the takeaway from this - but I'm most likely the idiot.  I think you just said you're going to buy puts at $50k strike and get rich at 25k - and then added some guru-like prophetic clause at the end?

 

The current rise is clearly unsustainable, but seems like a tricky thing to trade around given the obvious reflexivity in something like BTC (the more people accept it -> the more valuable it becomes) and the "low float" of BTC available relative to potential demand if institutions are truly purchasing.

[rkbabang]

We're out of our BTC at USD 35,002, and it has been quite the ride.

Now it's time for a time-out from crypto - and the nephews studying up on ETH, options, futures, exchanges, and the CME  :-*

Time for the REAL education to begin!

 

SD

 

When does regret set in? $40k, $80k, $500k?  ;)

 

It doesn't - until we buy the put  ;)

A whole lot of stimulus cheques, and a whole lot of Robin Hood, could really make our year. Lots of small trades, collectively and consecutively hitting the ask, and all adding to the network effect - this is where we learn about the REAL use of options.

 

Success at a 50K market strike, a 50% decline to 25K, and a CME derivative, will change lives. And if the premium cost is < the realized gain to date, a punch card punt. When you are young, mitigated risk is your friend NOT your enemy - something often not realized until too late.

 

SD

 

Nobody makes me feel less educated than when SD writes something.  I have to read everything you write multiple times and still come away not understanding half of it.  Not sure the takeaway from this - but I'm most likely the idiot.  I think you just said you're going to buy puts at $50k strike and get rich at 25k - and then added some guru-like prophetic clause at the end?

 

LOL, thank god I'm not the only one.  Sometimes I read SD's posts and I am not sure if he isn't being clear, English not being his 1st language,  or I am just too dense to understand.  I usually conclude that it is probably a little bit of the former and a good amount of the latter.

 

[clutch]

He probably doesn't give a shit whether other people understand him or not.  ;D

[rkbabang]

He probably doesn't give a shit whether other people understand him or not.  ;D

 

I'm sure he doesn't but I do.  I always get the feeling that there are some great actionable ideas embedded in his posts that I am just not smart enough to extract, understand, and implement.  Take crypto, I have just been very simple, I've bought some and held.  I'd love to be able to create a small highly leveraged bet on the downside when it hits closer to 50K, but I have no idea how to do that.

[JRH]

I'm sure he doesn't but I do.  I always get the feeling that there are some great actionable ideas embedded in his posts that I am just not smart enough to extract, understand, and implement.  Take crypto, I have just been very simple, I've bought some and held.  I'd love to be able to create a small highly leveraged bet on the downside when it hits closer to 50K, but I have no idea how to do that.

 

 

Have you considered the possibility that literally everything he writes is unfalsifiable hyperbole?

[Gregmal]

SD trading or Wabuffo talking about monetary policy....both are kind of like grad level university course poetry. You can see its beauty. You are captivated by its effortless luster, and ultimately leave appreciating it, but not really understanding it anyway.

[clutch]

Reminds me also of French philosophy  ::)

[Xerxes]

Question for everyone,

 

There is no doubt that the narrative supports the continuation of rally-of-everything, including Crypto.

I was listening to an interview with M. Novogratz, where he said that 60-70% of all US dollars have been created since 2010. this is crazy !

 

Specifically, on Bitcoin, why is that no one is talking about the fact that a significant portion of the Bitcoin are held by less than 5%. Surely, that level of concentration, would wreak havoc if unleashed. Now, there is no reason for the 5% to do so, as the bull case supports the going-up narrative, but at a certain point, there will be a data point that will change the base-line going-up narrative. It is hard to imagine that there would be no selling by the very large investors, for diversification sake.

 

My own argument against that is the following:

 

I would classify the crypto investors in three camps:

-#1 hard core early investors (libertarians, entrepreneurs etc.); these folks wont sell, because they were crazy enough to believe in it long time ago, and thus are crazy enough to keep at it.

-#2 MOFO crowd, last seen in 2017 and then again now; emotions will govern their buy/sell.

-#3 institutional/retail investors who are looking at it from a portfolio diversification point of view (putting 1-10% of asset in BTC) portfolio diversification will govern their buy/sell.

 

Of these three, the whales are mostly made of the first batch. So unlikely to sell, but doesn't change the fact that the supply is there. The second and third batch are the most likely source of supply on the sell-side, that should provide short relief to the market.

[LC]

Disagree on the classification on #1. They will sell when their life goals are met and they realize that to buy a home, car, etc....all will need dollars. I read a post on Reddit a few days ago, guy made a few 100k on Bitcoin over 8 or so years and sold to pay off his parents mortgage, buy them a car, give them a nest egg, plus some for himself. Maybe a moot point in the grand scheme but just saying, you may be a monetary anarchist until you need a roof :)

[Gregmal]

^ In that regard I think you just have to manage it.

 

I set a hard accumulate limit under $10K and just stuck to that. Had a good long while to get the position. I thought there was ultra high probability that we retest and then break the old highs. Once enough air gets between you and then ground, you just want to constantly derisk. I have no intention to buy any dips. Just trim small and regularly as this flies. Who knows how wild or crazy the crash landing will be.

 

SD is on point with his implied message that this is purely a traders vehicle. There is no intrinsic value, which is not to be confused with saying it has no utility. But its not like you have fundamental markers such as price to book or whatever with which you can implement a buy/sell strategy.

[rkbabang]

Disagree on the classification on #1. They will sell when their life goals are met and they realize that to buy a home, car, etc....all will need dollars. I read a post on Reddit a few days ago, guy made a few 100k on Bitcoin over 8 or so years and sold to pay off his parents mortgage, buy them a car, give them a nest egg, plus some for himself. Maybe a moot point in the grand scheme but just saying, you may be a monetary anarchist until you need a roof :)

 

 

I half agree with LC. Being in #1 myself, I will certainly sell some at some point.  Everyone has a price.  My price is when I can sell half of my crypto, and after taxes pay off both of my houses + take out my cost basis (which is tiny and practically not significant anyway).  That will be less than a double from here.

 

I think #1 will start selling, but people in this group will never sell everything.

 

It will be a bumpy ride as demand from the broader market and institutions increases, but whales start to cash out and/or diversify. As I wrote earlier in this thread:  https://www.cornerofberkshireandfairfax.ca/forum/general-discussion/cryptocurrencies/msg443127/#msg443127

 

"The Bitcoin store of value theory is just a theory at this point.  Relatively speaking, very few people own it and almost no institutions do yet.  There is a huge risk that the theory is wrong.  Also BTC is very concentrated in a relatively few accounts (so called "whales").    If the BTC store of value theory plays out the way I think it will, it will be a bumpy ride.  Institutions trying to get in driving the price up, the occasional whale cashing out driving the price down.  Quite times like most of 2020 where it drifts.  Eventually this will all settle down and be more stable, but not anytime soon.  It is the largest asymmetric opportunity that I know of.  Maybe a once in a century type thing."

 

[wabuffo]

SD trading or Wabuffo talking about monetary policy....both are kind of like grad level university course poetry. You can see its beauty. You are captivated by its effortless luster, and ultimately leave appreciating it, but not really understanding it anyway.

 

Hey Greg - what if I explain monetary policy with memes?

 

 

wabuffo

[SharperDingaan]

Nothing prophetic ....

 

Rise to 50K/BTC+? Most BTC quote screens show both total volume and current price. It's not hard to determine the size of the most recent trade, and multiply by current price, to get the value of the trade. Do this a few times, and you'll find that most trades have a value of < USD 2,500. If novices (Robin Hood) keep hitting 'market' order on their device, they are always buying at the ask of the bid-ask spread. If they all do this, and at the same time, every trade goes off at a higher price - and we have a feedback loop. Both on the way up, AND on the way down  :)

 

Put gains at 50K strike? 25K market price on expiry?, CME? On expiry, the put holder has the right to put the BTC on the seller at 50K/BTC. Settlement either by delivery of the  BTC, or in cash - equal to contract quantity x ( strike - market price) - or 125K if the stars line up. And guaranteed by the CME if the counter-party fails.

 

Net gain thing? Make $10 on your trade to date, pay $5 to buy the put, and you remain up a net $5 if the put expires worthless. But if the put expires in the money ......

 

The more the strike is below the current market, and the stronger the price trend, the cheaper the put premium.

 

The take-aways here are two-fold:

1) If the above application was news to you, walk away - 'cause you're the patsy. Your counter party is a Goldman Sachs.

2) Fast money is fast corruption. Get rid of it safely, or you're the one in the drug rehab clinic.

 

All about the risk management.

Good hunting!

 

SD

 

 

 

   

 

[Gregmal]

Now it all makes sense! Both you fine fellas.

 

Hahah cheers.

[clutch]

Disagree on the classification on #1. They will sell when their life goals are met and they realize that to buy a home, car, etc....all will need dollars. I read a post on Reddit a few days ago, guy made a few 100k on Bitcoin over 8 or so years and sold to pay off his parents mortgage, buy them a car, give them a nest egg, plus some for himself. Maybe a moot point in the grand scheme but just saying, you may be a monetary anarchist until you need a roof :)

 

I half agree with LC. Being in #1 myself, I will certainly sell some at some point.  Everyone has a price.  My price is when I can sell half of my crypto, and after taxes pay off both of my houses + take out my cost basis (which is tiny and practically not significant anyway).  That will be less than a double from here.

 

As stated earlier, my price is when I can buy a brand new 911 with half of my BTC investment. ;D Still a bit long way for me as I only got into this in 2017.

 

At the same time, I also think of it as schmuck insurance. Because of this thinking, I have trimmed it a couple of times (once recently) when it got above 10% of my liquid asset. Also, I will buy if another significant dip occurs based on its value compared to my asset.

 

 

 

[SharperDingaan]

"Specifically, on Bitcoin, why is that no one is talking about the fact that a significant portion of the Bitcoin are held by less than 5%. Surely, that level of concentration, would wreak havoc if unleashed. "

 

We have been, and on this board too!

There have been a number of multi-billion off-market transactions of late, in cumulative BTC quantities so large, that they could only have come from the 5%. They were essentially derivative transfers of beneficial interest to IB's, repackaged into various funds, etc.

 

Most would expect they receive an annual rent fee, plus some kind of an annual market value kicker.

The 5% are not going to be selling.

 

SD

 

[elliott]

Somebody, somewhere, bought bitcoins for a few dollars.

...and sold them for a few hundred.

 

One might think they were stupid. Another one might think they acted judiciously, considering the information they had at the moment.

The choice belongs to each of us.

 

 

[DeepSouth]

I am long BTC. One risk I haven't been able to get comfortable with:

 

If 2/3 of hash power resides in China and if Xi effectively controls all of China in a totalitarian/fascist manner, what is to prevent a 51% attack from the CCP if they deemed it strategic?

 

If anyone has a good view or link to a view that would be helpful

Thanks

[TwoCitiesCapital]

 

The current rise is clearly unsustainable, but seems like a tricky thing to trade around given the obvious reflexivity in something like BTC (the more people accept it -> the more valuable it becomes) and the "low float" of BTC available relative to potential demand if institutions are truly purchasing.

 

I, too, am flip-flopping to try to manage both potential upside and downside.

 

Prior rallies have gone 10-40x from the point they really took off. So let's keep the current context of the roughly 4x rally from 10k in mind. That's roughy where it traded at pre-pandemic and where it traded out before going vertical so that's the base I'm using.

 

That being said - it's easier to 40x @ a $40 million market cap than a $400 billion, so that must also be considered. Also the unprecedented disconnect  in daily supply and demand must also be considered due to institutional demand having stronger hands and buying larger $. Ultimately, I imagine this will behave similar to others and maybe 10x is about what we can expect to see out of this rally before it blows up again and drops to 20-30k all over.

 

I've been struggling with how to manage this because it's literally unlike anything I've ever owned. Fortunately, I had foresight that this might be an issue by envisioning what I would do if it did sky rocket to 100k as I was buying it.

 

I made the decision to DCA BTC to HODL and buy GBTC in an IRA to trade. I'd trade the GBTC around the NAV premium expansion. Buy when it was <15% and sell when it was >25%. Also decided that my total look-thru BTC exposure should be ~30% higher than my desired long-term holding of it to provide me flexibility to trade around it if it did rise without dipping into my desired end-state allocation.

 

The rise from 15-20k provided an opportunity to exit GBTC, tax free, at 30-40% premiums. I was selling a little every day and neutralizing most sales with new purchases of BTC. Reducing risk, tax free, and making it feel like I was doing something to put my nerves at ease after such  quick run.

 

Post 25k I stopped neutralizing the GBTC sales. Still selling ~1% of the position every other day or so, but am now actually reducing BTC exposure in a tax free manner. Still holding all of my taxable BTC with limit orders put in ~15% under the market price to catch any downdrafts and consolidations. Have the confidence to do this, even at these elevated prices, because I'm still selling GBTC regularly and these would just act as partial neutralization transactions.

 

All in all - feeling comfortable about the results. I've taken thousands off the table, tax free, still have roughly 90% of my overall BTC position and am still above my threshold of desired ownership with room to make more sales if we continue to rally. Having the system and the trade activity does relieve some of the anxiety around the position now that 15% of my entire net worth is in it after just 2 months....

[rkbabang]

Somebody, somewhere, bought bitcoins for a few dollars.

...and sold them for a few hundred.

 

One might think they were stupid. Another one might think they acted judiciously, considering the information they had at the moment.

The choice belongs to each of us.

 

There's this guy: 

 

[rkbabang]

"a decade ago he was given 7,002 bitcoins as a reward for making a video explaining how the cryptocurrency works... the contents of his wallet are valued at $240m. But Thomas has forgotten the password that will unlock his fortune. Thomas has already entered the wrong password eight times, and if he guesses wrong two more times his hard drive, which contains his private keys to the bitcoin, will be encrypted – and he’ll never see the money"

 

https://www.theguardian.com/technology/2021/jan/12/in-bits-the-programmer-locked-out-of-his-130m-bitcoin-account

[beerbaron]

"a decade ago he was given 7,002 bitcoins as a reward for making a video explaining how the cryptocurrency works... the contents of his wallet are valued at $240m. But Thomas has forgotten the password that will unlock his fortune. Thomas has already entered the wrong password eight times, and if he guesses wrong two more times his hard drive, which contains his private keys to the bitcoin, will be encrypted – and he’ll never see the money"

 

https://www.theguardian.com/technology/2021/jan/12/in-bits-the-programmer-locked-out-of-his-130m-bitcoin-account

 

That is a bit of BS, if could setup a mirror of the drive and try again and again. Painfully long but for 240M I'm sure he could even give it to a firm that would do it for him. That is especially true if the password is somewhat short 12 characters of less.

 

BeerBaron

 

[clutch]

20 years from now, people will scavenge for encrypted hardwares that contain BTC private keys... just like deep sea treasure hunting :-)

[NewbieD]

20 years from now, people will scavenge for encrypted hardwares that contain BTC private keys... just like deep sea treasure hunting :-)

 

20 years from now BTC security will be long since broken by quantum computing.