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OfflinegeokillsA
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Re: Cryptocurrency: A Discussion on Bitcoin, Ethereum and Related Projects [Re: Nature Boy] * 2
    #27233258 - 03/02/21 07:39 AM (2 years, 10 months ago)

Quote:

Primal Matter said:
Hey geo, I just signed up to ftx.us. Sexy looking site that is. Do you have a referral code?




I suppose I do.  If anyone wants to sign up there with my referral code, they can click this link: https://ftx.us/#a=3265385


Quote:

Nature Boy said:
I'm in New York.  Would I be wasting my time trying to sign up?



Unfortunately yes, as FTX.us does not have a BitLicense they therefore cannot service New York residents (or Washington state residents, for that matter, while we're on the subject).

UNI is performing well, following through on yesterday's short-term trend reversal at its 20 day.  DOT is worth highlighting as well.  I am already loaded on this issue, but it is worth noting its relative strength during the selloff of the past weeks.  You want to hold assets that are showing relative strength over their peers.  Look at the daily candle chart on DOT and note the long lower wicks anytime it touched its 20 day moving average.  This as opposed to ETH or BTC, which traded well below their 20 day moving averages for days (and in fact are still below it!).  There are buyers just waiting to soak up supply on DOT, much more so than most other issues I'm watching.  SNX is staging a nice recovery as well, but not as strong as DOT.  Speaking of relative strength, SOL didn't even touch its 20 day.  Now that is impressive.


Current positions (chronologically):
  • BTC
  • ETH
  • DOT
  • XTZ
  • SNX
  • UNI
  • TZROP
  • HBAR


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Re: Cryptocurrency: A Discussion on Bitcoin, Ethereum and Related Projects [Re: Asante] * 2
    #27233429 - 03/02/21 10:13 AM (2 years, 10 months ago)

Thanks for the kind words Asante.  I firmly believe that in order to be get good (and stay good) at something, you need to be able to justify your positions, hanging them out plainly for critique or question, while also actively reviewing the actions of others who are participating in the same field/skillset.  The reason I share my trades and participate in these discussions is largely on point with the comments I shared from @Scottrades on the SMM forum a week ago:

Quote:

I also want to touch on the importance of Diversity. Not in the environment, though I’m sure that's important. I’m talking about diversity in terms of Thought. You see, one of the major features of StockMarketMentor is our active trading forum. Those who are here every day see a bunch of different traders doing a bunch of different things. Everyone has their own style and chances are you’ve found yourself following another member here or there, maybe even becoming friends. I think one of the strengths and best features of the forum is it’s diverse thoughts about trading because by hearing and seeing the different ways people are trading the same stocks it causes YOU to Challenge Your Own Assumptions. One of the worst things a trader can get is complacent in their own mindset because that’s when you are the most vulnerable and chances are you can get caught off guard. Confirmation Bias will cause you to ride a loser way longer than you should. It will lead to regret, wishing and hoping and could blow up your account. By seeing what traders are doing, even if they don’t trade exactly like you do, it’ll give you a chance to review your positions and make sure you are solid in your thesis. I think of the GameStop trade and see all those people who were just following the crowd, didn’t care what the price was, took out a loan, bought at 300 bucks and now don’t know what to do. You want to be in a position where you’re following the crowd (volume) into a trade but have the ability to think for yourself immediately after the trade is put on. After all it’s YOUR money.

Surrounding yourself with different styles and mindsets will help you figure out what you think and how you trade. At StockMarketMentor.com we are trying to develop you as a trader, not develop you to follow a trader. Hope that helps!

Let’s be protective and open minded. Have a great day!




On topic: crypto seeing a bit of higher volume selling hit the tape over the last hour.  I want to see that $45K level on BTC hold firm this week in order to strengthen the base that is forming.  On a daily close below $45K, a test of $40K becomes the probable outcome.


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Re: Cryptocurrency: A Discussion on Bitcoin, Ethereum and Related Projects [Re: Nature Boy]
    #27233624 - 03/02/21 12:44 PM (2 years, 10 months ago)

LINK has been a great performer, admittedly, but I missed the entries I was looking for and as a present day TOP 10 valued project, I'm not sure how much more room it has to run as more competition with regard to oracles come onto the market.

Hence why SOL and SNX caught my eye.  They are still relatively undervalued with respect to the crypto leadership plays, and with SOL as an impressive layer 1 platform, and SNX tackling some of the more complex issues to face the DeFi sector (which has been a huge driver of momentum in the space generally), I believe these have better upside potential than LINK.

Speaking of which, I got my fill on SOL @ $13.80, peeled off from my ETH stash, as again, I think SOL has the propensity to outperform ETH.  Why not then, you might ask, swap all my ETH into SOL?  Risk aversion.  I want the proven leadership to be the cornerstones of my portfolio, but I will seek to diversify into higher beta names when an opportunity presents itself.


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Re: Cryptocurrency: A Discussion on Bitcoin, Ethereum and Related Projects [Re: geokills] * 1
    #27234411 - 03/02/21 10:05 PM (2 years, 10 months ago)

Some compelling data in this article: More Institutional Investors Jumping Into Bitcoin Leaves Less to Go Around, Data Shows

Quote:

Four million. That’s roughly how much bitcoin is circulating freely right now, blockchain data show. The number has been getting a little smaller with each passing month over the last year.

It’s the assessment of Glassnode, an analysis firm that tracks blockchain data. The pattern suggests that the ever-decreasing supply of bitcoin available to buy and sell might lead to a price surge as more institutional investors embrace the largest cryptocurrency as an investment.

Bitcoin’s “liquid supply change” – the amount by which the number of coins in circulation has changed over the prior 30 days – has been negative for most of the past year, according to Glassnode:

   

As of Monday, there were only about 4 million BTC in constant circulation and available for buying, trading and selling, according to Glassnode. The 30-day net change of BTC supply held by liquid and highly liquid entities has been in the negative territory since last April, except for a short stint between July and August and again briefly in December.

“This has never happened before for such an extended period of time, and could lead to a massive supply squeeze soon,” Glassnode wrote on Feb. 26 in its weekly newsletter.

   

[...]

Data from another blockchain-analysis firm, CryptoQuant, show that more than 12,000 BTC, worth roughly $600 million, was moved out of the cryptocurrency exchange Coinbase Pro Tuesday – seen as a likely withdrawal to cold storage for long-term holding by one or more institutional investors. It might be a sign the investors took advantage of the price dip to accumulate bitcoin at a discounted price.

Exchanges like Coinbase Pro are among the few preferred platforms by institutions to buy and sell bitcoin, according to John Willock, chief executive at digital-asset exchange Blocktane. It means that bitcoin’s already finite supply is only more scarce to these large bitcoin buyers.

“Coinbase will only touch coins through their exchange, liquidity providers and network of other partners that are brought to their liquidity pool by parties which are able to be fully vetted for the source of legitimate funds,” Willock said. “The bitcoin available on that platform can be considered ‘clean’ and not having recently been the proceeds of a hack, theft, ransomware or darknet markets.”

Fewer bitcoins are becoming available to institutions “because they have higher standards than the general market, “ Willock said. “So, as a result, these sorts of institutions can be forced to start bidding up coins on these ‘clean’ exchanges, and that drives up the price overall.”




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Re: Cryptocurrency: A Discussion on Bitcoin, Ethereum and Related Projects [Re: The Mycologist]
    #27238308 - 03/05/21 08:20 AM (2 years, 10 months ago)

Quote:

The Mycologist said:
If a publicly traded company like Tesla could rationalize that investment in btc, then I think its a pretty safe play.




Keep in mind that publicly traded, doesn't necessarily mean smart.  Now I'm not knocking TSLA's treasury allocation to bitcoin, but to put it in perspective, TSLA had nearly $20 billion of cash on hand at the end of 2020.  So their $1.5 billion allocation is less than 10% of their treasury reserve.  Also keep in mind that because they are publicly traded, they can tap the capital markets with secondary offerings to raise additional capital, for the most part, whenever they please.

At any rate, this does indeed look like pretty normal market action, and it would not surprise me to see us chop around between $40-$52K-ish for another several weeks.  Although nothing is out of the question, I'd be a little surprised to see new highs this month, rather expecting an attempt to breakout of this consolidation pattern in April or May.  Sit tight folks, nothing goes up in a straight line.  Cryptocurrency is not a great vehicle for active trading.  Head over to the equity market if that is your thing.


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Re: Cryptocurrency: A Discussion on Bitcoin, Ethereum and Related Projects [Re: trees] * 5
    #27239150 - 03/05/21 05:56 PM (2 years, 10 months ago)

Well now I just feel weird. :toomuchacid:

Not trying to be a king or to prove anything, I get things wrong plenty and I definitely don't try to hide those fumbles.  I'll readily admit that the "six figures" comment was a bit brash and generally uncharacteristic of my preference not to use dollar figures, but to instead focus on percentages such that the numbers are relevant to everyone reading.  I remember hesitating to make that comment, but in the end I decided that it was indicative of how far this market has come.  For those of us who have been involved since the inception of this thread, it offers something of a reminder that the swings can still cut deeply, but wow, how much this experiment (and our accounts) have grown is truly remarkable.  I've put far more active effort into my equity trading, and despite having done it for nearly four times as long, my crypto returns quite simply dwarf what I've achieved in the stock market.

Anyways, this thread isn't about me.  I post here with regularity because I use it as a journal to aid my own growth and enjoy the sounding board offered by the many participants who also share here.  If people want to share their personal stories, so be it.  I generally think it's a little silly to talk about however many thousands any given individual has made or lost, but we are human and sometimes the numbers are impactful enough that we can't help but share that too.  Whatever.

The real focus here, as the title states, is the fascinatingly novel financial and trustless paradigm that is cryptocurrency/blockchain and its related applications/projects.  Let's keep our eye on the prize.  I do still genuinely feel like this is the gift that will keep giving for some time.


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Re: Cryptocurrency: A Discussion on Bitcoin, Ethereum and Related Projects [Re: Nature Boy]
    #27240316 - 03/06/21 11:03 AM (2 years, 10 months ago)

Quote:

[...] if someone could please confirm my interpretation of the ETH/BTH ratio I see on Cryptowatch, I'd be appreciative.  It's up to 5.24% - again, not going to do it...but it's the first time I've seen such positive numbers.




A ratio is a common fraction; one number (the numerator) divided by another number (the denominator).  When you are analyzing a ratio between two assets, the directional movement of the ratio defines the relative strength (or weakness) of the first listed asset (i.e. the numerator).  All you're doing is dividing the price of one by the price of the other.

Let's presume we have two assets, apples and oranges.  Both of these can be bought at the corner store for $1 each.  Their ratio (the price of the apple divided by the price of the orange) is 1, meaning they have an equal nominal value.

If the price of apples increases, so accordingly will the apple/orange price ratio.  If for example apples increased in cost to $1.25, the apple/orange price ratio (1.25 divided by 1) is now 1.25.  The increase in the apple/orange ratio indicates the relative price strength of apples.  Put another way, whereas one orange could be exchanged for one apple before the demand of apples increased, now, you would need more oranges (1.25 to be exact) in order to exchange for one whole apple.

The ratio can be similarly affected by a decline in the price of the oranges.  If for example, the price of oranges was reduced to $0.80, the apple/orange price ratio (1 divided by 0.80) is now 1.25, indicating that even though the price of apples didn't change, the fall in the price of the orange gave relative strength to the price of the apples.

Same thing with the ETH/BTC ratio.  ETH advanced while BTC suffered a slight decline over the last day.  ETH's relative strength caused the ETH/BTC ratio to rise rather strongly, because the numerator (price of ETH) grew at a good clip while the denominator (price of BTC) declined.  Either of these moves (a rise in ETH OR a fall in BTC) in isolation would have caused the ETH/BTC ratio to rise.  With both of these moves combined, you get an even larger rise in the ratio.

The simplest way of understanding the price ratio is to understand that it is the price of one asset divided by another.  If you believe that ETH and BTC "should" generally maintain a high correlation over time, then if you see the price of ETH skyrocket while BTC stagnates (indicated by a big move higher in the ETH/BTC ratio), you might consider shifting your allocation of ETH into BTC, under the presumption that the ratio will normalize as BTC plays catchup and ETH ultimately stagnates or retraces.

While I do glance at price ratios from time to time, I don't often actively trade off of them.  It can be a confidence booster however, if you are considering allocating to an altcoin for example, and you note that the price ratio of that altcoin vs eth in on a steady track higher.  That relative outperformance of the altcoin (provided you're not too late in noticing it), can help support your decision to allocate into the outperforming altcoin.


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Re: Cryptocurrency: A Discussion on Bitcoin, Ethereum and Related Projects [Re: budmanman]
    #27240384 - 03/06/21 11:39 AM (2 years, 10 months ago)

You can thank Ythan for that :wink:


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Re: Cryptocurrency: A Discussion on Bitcoin, Ethereum and Related Projects [Re: Grimsweeper]
    #27240447 - 03/06/21 12:12 PM (2 years, 10 months ago)

Different exchanges will offer different base pairs.  Kraken offers base pairs in various fiat currencies as well as BTC and ETH for most of the assets they carry.  You'll want to pay attention to the volume on any given pair however, as in many cases there are pairs that are so seldom traded, you could have a hard time getting a fill at your intended price.


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Re: Cryptocurrency: A Discussion on Bitcoin, Ethereum and Related Projects [Re: Grimsweeper]
    #27240814 - 03/06/21 06:30 PM (2 years, 10 months ago)

DAI is probably fine.  Although I prefer USDC if I'm going to a crypto-driven fiat analogue.  USDC is produced by federally regulated institutions and the global accounting firm Grant Thornton produces monthly attestments to USDC's 1:1 backing by reserve dollars.  USDC pairs generally offer pretty decent volume as well.


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Re: Cryptocurrency: A Discussion on Bitcoin, Ethereum and Related Projects [Re: budmanman]
    #27241792 - 03/07/21 11:46 AM (2 years, 10 months ago)

UNI is threatening new highs.  That change in short-term direction I noted on the 1st has been offering some really solid follow through.  A little hard to buy now, I think.  Especially as BTC and ETH continue to grind around more or less sideways.  Might work, but you generally don't want to chase a 30%+ move inside of a week too aggressively.

Heading out to the coast for a few nights, I'll have connectivity, but not sure how much I'll be using it... at least so long as the surf's looking good and we're not rained out by the weather. :tongue2:


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Re: Cryptocurrency: A Discussion on Bitcoin, Ethereum and Related Projects [Re: Asante]
    #27249592 - 03/12/21 09:33 AM (2 years, 10 months ago)

Hey thanks for the endorsement Asante, but to be fair, I am no prognosticator, and in the interests of transparency I definitely don't make money all of the time.  It is difficult to make money when swimming upstream, and generally speaking, the best you can do when the market trends against you, is to do less (in conjunction with having incrementally skimmed some profits on accelerated moves higher).  Let's not forget that at this particular point in time, practically anyone who has ever put their assets into the crypto majors is presently profitable.  This rising tide effect can make us all feel a bit smarter than we actually are.

On that note, it seems relevant to update my allocations, since I did in fact completely divest myself of Synthetix (SNX) yesterday, for an aggregate +7% gain, in favor of swapping the bulk of the funds into Solana (SOL), due to both the relative strength in Solana's price action, in addition to their broader application set and higher levels of active development.  As an aside, I also took a small chunk of the proceeds to the bank, as my wife's road bike of the past 20 years suffered a catastrophic failure (fortunately from a stand-still so she did not get injured), and we have acquired a slick new Seven Cycles Axiom SL titanium bike with several upgraded components for her to enjoy, since this is how she achieves the bulk of her physical exercise with daily rides averaging around 30 miles.  I don't cycle regularly, so it was a little crazy to note that this bike cost more than most cars I've purchased throughout my life, however as it will see such regular use, I believe it is a fair investment in the health of both body and mind.


     


But I digress... onto the crypto!  I'm not going to provide explicit percentages, as I manage multiple accounts, and some have accounting based restrictions preventing me from investing in certain assets which I can invest in on my other accounts.  But generally speaking, from largest to smallest, I've got:
  • BTC
  • ETH
  • DOT
  • SOL
  • XTZ
  • UNI
  • HBAR
  • TZROP


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Re: Cryptocurrency: A Discussion on Bitcoin, Ethereum and Related Projects [Re: bodhisatta]
    #27249611 - 03/12/21 09:40 AM (2 years, 10 months ago)

Yeah, I have a motorcycle that cost less than HALF of what this road bike cost. :lol:

     


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Re: Cryptocurrency: A Discussion on Bitcoin, Ethereum and Related Projects [Re: trees]
    #27250279 - 03/12/21 06:12 PM (2 years, 10 months ago)

Quote:

trees said:
Isnt every crypto sale made at profit taxable even if it's a swap to tether or USDCoin? I think selling many times might cause some undesirable tax effects to catch up with you eventually.



Yes, currently any exchange of crypto, whether for fiat or another crypto, is a taxable event.  It is a worthy consideration, one which a lot of people new to investing don't consider.  In the US, property held over 1 year before sale holds the following tax schedule:
  • 0% if your gross income is less than $53,600
  • 15% if your gross income is $53,601 to $469,050
  • 20% if your gross income is more than $469,050


Property you sell that is held for less than one year is subject to your ordinary income tax rate, which are presently:
  • 12% for $9,876 to $40,125
  • 22% for $40,126 to $85,525
  • 24% for $85,526 to $163,300
  • 32% for $163,301 - $207,350
  • 25% for $207,351 - $518,400
  • 37% for $518,301+


Quote:

If you never sell anything - ever, and your crypto portfolio is strong you can just borrow money against it if you need cash instead of selling your stack, because its cheaper to borrow money from a bank than to sell your crypto and face taxes. I think that somehow works out best in the end tax wise and overall wealth wise




Borrowing against your crypto as collateral is a very intriguing tax plan strategy.  If crypto were guaranteed to do nothing but go higher, you are correct that this would be the way to go, without question.  As things are, crypto is still subject to some fairly violent swings.  Because you need to have far more crypto collateral on hand with respect to whatever loan you would want to take out, it makes it an increasingly risky proposition to employ this strategy on a large scale in the here and now.  Nevertheless, it could work, depending on what kind of crypto stack you're working with relative to your cash flow requirements.

Quote:

That's why I believe stakeable cryptos are the best long term for decades. They grow in 3 ways at once - compound interest, price growth - and no tax because you never sell it.




Keep in mind that your staking rewards are taxable as income, at the value when they are issued.  Then when you sell them, your basis is the income value you already paid tax on.  Just delegated all of my SOL tokens for a 14%+ annual reward.  DOT for 12%.  XTZ for 6%.  Haven't moved my ETH to ETH2 staking, as I prefer the liquidity.  Have also considered adding tokens to liquidity pools on DEX's such as Uniswap and Raydium, but I am weary of the potential divergence losses when one asset appreciates against the other asset in the pool you are providing liquidity for, as well as the obvious risk related to hackers/manipulation of the AMM (automated market maker) contracts.

Quote:

I cant neglect that I think all the crypto exchanges report our activity to the IRS in not a 1099 but some other one



Yes, during any tax year, if you have more than $20,000 in total proceeds and/or 200+ transactions on a crypto exchange, 1099-K (or -B if you're lucky) forms will be filed with the IRS.  The 1099-K does not report your cost basis, only proceeds.  So if you're an active trader with a $50,000 account, it would not be uncommon to have $1,000,000+ in recorded annual proceeds.  If you don't provide the basis on your tax return, the IRS will assume your basis is $0 and the full proceeds from trading are taxable.  You can of course prove otherwise after the fact, but that's a headache (and penalties) you should avoid by reporting as accurately as you can on your timely return.

This is actually one of the reasons I don't like to actively trade crypto.  Unless all of your trades are conducted on a single exchange, the reporting calculations be a real pain in the ass to chew through.  I use CoinTracking.info which works reasonably well.


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Edited by geokills (03/12/21 07:12 PM)


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Re: Cryptocurrency: A Discussion on Bitcoin, Ethereum and Related Projects [Re: ManianFH]
    #27250364 - 03/12/21 07:11 PM (2 years, 10 months ago)

Quote:

mick said:
Geo have you ever considered an self directed LLC IRA for trading crypto?



Yeah, I have thought about it, just never got around to working through how to make it a reality.  I like stock trading, so I typically max out my self-directed brokerage Roth IRA right at the beginning of the New Year.  Tax-wise, it would have been preferable to have held my crypto assets in such a tax advantaged account... but hindsight is always 20/20.



Quick note on staking rewards (since added to my above reply to trees).  Staking rewards are considered taxable income, at the value they hold when issued.  When those reward tokens are ultimately sold, their basis is the taxed value they were issued at.


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Re: Cryptocurrency: A Discussion on Bitcoin, Ethereum and Related Projects [Re: Nature Boy]
    #27250844 - 03/13/21 07:08 AM (2 years, 10 months ago)

I have bought the bulk of my physical metals from https://apmex.com

Frankly, while I think it's generally a good idea for well capitalized individuals to have some exposure to metals, I am in no rush to allocate additional funds to that sector.  The storage and safety requirements are onerous, and the on/off ramps are slow or with wider spreads than I would prefer.  Silver in particular, although pretty, is just a pain in the butt to deal with in any quantity.  Palladium has been my best metals holding, up just over 3X.


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Re: Cryptocurrency: A Discussion on Bitcoin, Ethereum and Related Projects [Re: Nature Boy] * 1
    #27255362 - 03/16/21 09:05 AM (2 years, 10 months ago)

A fantastic article self-published by the legendary (and presently fugitive founder of BitMEX) Arthur Hayes, that will take at least a half hour to digest, and I strongly recommend finding the time to chew through it:


TLDR: Long crypto for the inherent inflation risk derived from globally persistent negative real interest rates, and balance that exposure with instruments that can profit from interest rate volatility.

The later can be difficult to source.  For my part, I am considering longer dated put options on the TLT as a more conservative strategy, or possibly long calls on the TBT for a more aggressive strategy.  There are some newer instruments mentioned in the comments of the Hayes article which I will also be looking into, namely TDTF and IVOL.  All of these trades have already started to move.

If anyone has additional ideas here, please share.


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Re: Cryptocurrency: A Discussion on Bitcoin, Ethereum and Related Projects [Re: Nature Boy]
    #27256904 - 03/17/21 08:31 AM (2 years, 10 months ago)

Interesting to note that in the summer of 2019, Fortress Investment Group sent me their first solicitation regarding my MtGox civil rehabilitation claim, offering $900 per BTC on my claim.  They have continued to raise their bid across several offers since, with the most recent arriving this week for $7000 per BTC.  This amount represents approximately 70-75% of the full claim value, which is not a terrible discount given bitcoin's historical volatility in conjunction with the expectation that a final payout from Japan will not arrive until well into 2022.

Nevertheless, if a major investment bank is so persistently confident in raising their bids, I have to believe that such behavior lends credence to the sentiment that BTC still has plenty of room to run. :strokebeard:


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Re: Cryptocurrency: A Discussion on Bitcoin, Ethereum and Related Projects [Re: budmanman]
    #27257128 - 03/17/21 10:27 AM (2 years, 10 months ago)

Quote:

budmanman said:
But also sounds like [Fortress Investment Group is] under bidding the shit out of you [on your MtGox claim].



Naturally, they are an investment bank, not a charity.  They expect to be paid for assuming risk pertaining to both the time delay of the final payout from the bankrupt estate which includes volatility risk in the price of the underlying assets in addition to potential mismanagement (loss or theft) of the private keys by the Japanese trustee's office, as well as an unexpectedly large award to the disputed Coinlab claim that is currently in litigation.  Frankly, for a payout that isn't expected to arrive for another 12-18 months, I think a 25-30% discount is fair given the underlying volatility of the asset.  BTC suffered a 25%+ correction just one month ago.  So if you cash out now at the discount, you not only gain the option reallocate a portion of the funds, but can also put the money right back to work in BTC during potential/probable future corrections.

For my part, I haven't accepted any of their offers to buy my claim and do not intend to.  But if I had immediate cash flow requirements, this would be an attractive option to take.  Keep in mind we are going on 8 years now since MtGox went under.  The price of BTC has vastly appreciated during that time.  So for someone who may have put most of their eggs into MtGox's proverbial basket, their ROI after accounting for the estate's losses and even in consideration of the risk-discounted Fortress buyout offer are likely to be well in excess of 1000%.  My personal claim at present values looks to return in excess of 3000% of what I originally wired into MtGox (although I suspect my returns are better than average, as I was actively trading into the weakness once the exchange shutoff fiat withdrawals and BTC price on the exchange subsequently decoupled from the global average).  For people who put a lot in there, it may make sense to accept the discount simply to avoid the potential risk of BTC crashing, if their MtGox claim now comprises the bulk of their net worth.


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Re: Cryptocurrency: A Discussion on Bitcoin, Ethereum and Related Projects [Re: geokills]
    #27257370 - 03/17/21 12:32 PM (2 years, 10 months ago)

Quote:

geokills said:
A fantastic article self-published by the legendary (and presently fugitive founder of BitMEX) Arthur Hayes, that will take at least a half hour to digest, and I strongly recommend finding the time to chew through it:


TLDR: Long crypto for the inherent inflation risk derived from globally persistent negative real interest rates, and balance that exposure with instruments that can profit from interest rate volatility.

The later can be difficult to source.  For my part, I am considering longer dated put options on the TLT as a more conservative strategy, or possibly long calls on the TBT for a more aggressive strategy.  There are some newer instruments mentioned in the comments of the Hayes article which I will also be looking into, namely TDTF and IVOL.  All of these trades have already started to move.

If anyone has additional ideas here, please share.





There are some potential counterarguments offered in this interview as well:

An interesting, if not also dense economic dialogue that touches on the subject.  Listening to economists and the layered hedges in their speak is an exercise in the endurance of my attention span... but I do think there were some relevant points made between roughly 15-25 minutes in the interview.  What I took away was the idea that there are two primary avenues to avoid inflationary risk, namely 1) raising taxes or 2) GDP growth catching up to offset debt growth.  Option 2 is unlikely, as the US remains on a path to vastly out-borrow GDP.  So if GDP isn't growing fast enough and debt keeps growing, confidence in the debt erodes, treasuries begin to get dumped, and that money flows into goods resulting in inflation.  This "powder keg" of debt is an underlying instability that can result in a debt rollover crisis when the bond market decides it doesn't want to play game any longer, but one that is difficult if not impossible to time.  History also suggests that interest rates don't reliably predict inflation or disinflation (e.g. 1970's interest rates were not high ahead of inflation, in the 1980's interest rates were not low ahead of disinflation).

On crypto specifically, it is noted that crypto has value because it has liquidity use, useful for anonymous transactions and is in limited supply.  But because there is no barrier to creating substitutes or derivative claims on a crypto asset, the value has to eventually goes to zero.  This is an intriguing argument, part of which I hear from detractors often.  It is true, we see thousands of cryptocurrencies in the sector, most of which aren't unique in their function or design.  I am not sure what the ability to create derivatives on the underlying has to do with the asset ultimately declining to zero however.  If someone with a better understanding of economic theory can put that into layman's terms, I'd be interested to hear it.

The network effect of the leading crypto asset, bitcoin, in conjunction with its ability to function outside of a central authority, seems to place it in a unique position (kind of like gold).  However, I suppose that just as the bond-holders must continue to dance in order to support a sustained growth in government debt, network participants (miners in particular) must be reliably incentivized to continue to support the bitcoin ecosystem for it to maintain value.

I admittedly ducked out of the interview after they transitioned to healthcare and insurance around the mid mark... as I can only handle listening to economists in small doses.


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