Baron's Crypto Trading Journal

(The Daily Upside)

CRYPTOCURRENCY
Wall Street Is Dominating The Crypto World
Though cryptocurrency may be a central building block to the decentralized finance movement, its user base is now solidly more institutional than underground.

In 2021, Wall Street upped its crypto investments in a big way, trading $1.4 trillion worth of cryptocurrency on exchange Coinbase Global — a massive increase from just $120 billion in 2020.

Sales From The Crypt
While some critics may still dismiss the average bitcoin buyer as a (possibly basement-dwelling) retail trader, hedge funds, registered investment advisers, and other professional investors are increasingly powering the cryptocurrency market. In fact, a survey of 300 institutional investors conducted by State Street found that over 80% are now allowed to have exposure to the crypto market. (Retail traders are not too shabby, either: they still traded $535 billion worth of crypto in 2021, basement or not).

It’s reached a point where Wall Street is reshaping the crypto market just as much as the crypto market is reshaping Wall Street:
• The most crypto bullish firms also tend to be the largest: funds with assets under management of $500 billion or more have been the most active in the space, and nearly two-thirds have staff dedicated entirely to crypto.
• Gone are the days of crypto as a small, erratic market — institutional investors now largely treat crypto like other risk assets, trading it increasingly in lockstep with tech stocks. In January, bitcoin saw its highest correlation level to the tech-heavy Nasdaq 100 since April 2020, research firm IntoTheBlock told The Wall Street Journal.

A Bit Derivative: You don’t get Wall Street without secondary and derivative markets. And, so far, crypto hobbyists and retailers have largely steered clear of the more advanced financial products. In Q4 2021, professional investors represented 99% of total trading volume in secondary crypto markets, according to IntoTheBlock.
 
Since I started this Journal in the beginning of October, many can look back and see that we've been through some tough times. We saw the overall sentiment tank in November and then we watched a freefall since then as more bad news rolled in from sources related to hacks, pending legislation, and negative crypto news from China and other areas seemingly by the day, which was topped off by a new Covid wave thanks to Omicron, and a Russia/Ukraine war that has captivated us all.

So needless to say, it's been a tough six months to navigate. Due to various timed buys in both BTC and SOL during all the negativity, the net result is that this journal is break-even and the account is no longer down one penny. We are now seeing short-sellers being liquidated by the day and have literally seen all of the drawdown that occurred over the last six months restored in just two weeks of positive market action.

I'm optimistic that the next six months will reward our layering strategy so the one-year anniversary of this journal will end up with a nice return.
 
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Dollar cost averaging, or buying on the way down is a strategy, risky but can be rewarding, I employ it with my stock trading.
It's kind of a process of taking small bites where you think the bottom may be but on a downtrend they are calculated gambles which can prove wrong.
I use significant round numbers to assist in this, but with stocks also some fundamentals to ascertain value. With speculative stocks there's no such thing as value so it becomes a pure technical guess.
I only average down on stocks which I have utmost trust in are going to bounce.
There's alot of talk about for traders not to average down as its stupid, but like all things, there's an art to it and one needs to have thought the strategy out carefully, weigh pros vs cons.
If its good enough to buy more shares when price is rising (buying more expensively) its good enough buying on the way down (getting in at bargain prices). It's a tool which is like contrary trading, going against the crowd, not something a noob should try as it will send them to the poor house. :)
 
(Bloomberg)

And finally, here’s what Katie’s interested in this morning
Is the world ready for Bitcoin-backed bonds? Not quite, says the most vocal corporate advocate of cryptocurrencies.

MicroStrategy founder Michael Saylor explained this week why his software company opted to take out a loan to buy more of the world’s largest cryptocurrency -- backed by MicroStrategy’s massive Bitcoin hoard -- rather than issuing Bitcoin-backed bonds.

“I’d love to see a day where people eventually sell Bitcoin-backed bonds like mortgage-backed securities,” Saylor said in an interview with Bloomberg News. “The market is not quite ready for that right now. The next best idea was a term loan from a major bank.”

Saylor’s comments are interesting in light of El Salvador’s delayed offering. Since the idea was first proposed last year, President Nayib Bukele has pushed back the sale of about $1 billion worth of so-called volcano bonds that would be backed by Bitcoin. El Salvador Finance Minister Alejandro Zelaya said last month that the bond has $1.5 billion in demand and will likely be issued sometime in April.

So, the wait for Bitcoin-backed bonds continues. But every moment pushes us further into the future, and according to the Official Monetary and Financial Institutions Forum, that future involves bonds issued on the blockchain.

Each one of the sovereign, supranational and government agency issuers in a new OMFIF survey answered that they expect their bond market to become “fully digital” at some point, and roughly half of the respondents said they’re looking to test blockchain bond operations within the next three years.
 
SunTrader said:
Whoops - if correct?

https://twitter.com/x/status/1511356987463905286
More...
Its a very interesting predicament. In a way, there is an obvious arbitrage opportunity here, but you have to wonder why? Perhaps there is a discount to take into account that if those coins are lost or stolen, you holding shares means you don't get any piece of the pie. With Bitcoin, "not your keys, not your coins" is paramount.

Since there is no bitcoin ETF in the US, this might be the only way to hold BTC in some accounts, so its the only way for some investors to have exposure to the asset. But I'd love to know deeper reasons for this mispricing.
 
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