Author Topic: Cryptocurrencies  (Read 331088 times)

Xerxes

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Re: Cryptocurrencies
« Reply #1150 on: January 08, 2021, 09:47:42 AM »
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

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Re: Cryptocurrencies
« Reply #1151 on: January 08, 2021, 09:56:23 AM »
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 :)
"Lethargy bordering on sloth remains the cornerstone of our investment style."

Gregmal

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Re: Cryptocurrencies
« Reply #1152 on: January 08, 2021, 09:57:45 AM »
^ 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

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Re: Cryptocurrencies
« Reply #1153 on: January 08, 2021, 10:08:31 AM »
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

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Re: Cryptocurrencies
« Reply #1154 on: January 08, 2021, 10:26:28 AM »
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

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Re: Cryptocurrencies
« Reply #1155 on: January 08, 2021, 10:27:47 AM »
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



   
« Last Edit: January 08, 2021, 10:34:03 AM by SharperDingaan »

Gregmal

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Re: Cryptocurrencies
« Reply #1156 on: January 08, 2021, 10:28:17 AM »
Now it all makes sense! Both you fine fellas.

Hahah cheers.

clutch

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Re: Cryptocurrencies
« Reply #1157 on: January 08, 2021, 10:38:10 AM »
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

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Re: Cryptocurrencies
« Reply #1158 on: January 08, 2021, 11:05:16 AM »
"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

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Re: Cryptocurrencies
« Reply #1159 on: January 08, 2021, 11:10:21 AM »
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.