Global Macro Trading Journal

[Daal]

Thanks for your thoughts as always Daal.

I think your discussion about convexity is particularly relevant to Bitcoin and cryptocurrencies in general. Intuitively, I think it's crazy that Bitcoin has a "market cap" of $26 billion, and that the total "market cap" of cryptocurrencies is $49 billion, but the same arguments could have been made last year at much lower values.

It's entirely possible that I could be completely wrong about my cryptocurrency skepticism, and that cryptocurrencies today are like buying Internet stocks in the mid 1990s. Sure there might be a lot of failures (eg. the cryptocurrencies outside the top 10), but for all I know Bitcoin / Ethereum / Ripple / Litcoin might go up tenfold in the next decade.

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Its interesting that you broght this up because when I truly realized how powerful convexity was (which only happened after I read Anfragile for the 4th time and thought more about it), I thought about buying Bitcoin. This thing looked like a bubble in the charts at $100, now its at $1500. That's what convexity does, its exponential, skepticism is stupidity. Its a shame that there is no ETF or a liquid way to get involved otherwise I would be long them. At the very LEAST, they work as insurance for gold. If digital money is the future, gold as a store of value will lose its attractiveness and I own some gold, so having all of that money be down 50%+ wont be fun. Digital coins are even more convenient than gold. They look unstable now because they are repricing but once they finish that, they will trade like EUR, BRL, TRY, JPYs. up and down 1% and that's it. Governments are blocking/banning them now, but the same was true with gold at many points in history
If you compare the market cap of digital coins with gold, one can see the potential that they have.

Gold wasn't always the king, they had seashells, rocks and other things before it became the store of value that it is now. If digital coins are the next big store of value, they would be doing exactly what they are doing now, going exponential as they get repriced higher according to their usefulness

If finance skeptics kept a P&L of skeptiscism as 'short sales' almost all of them would be bankrupt as a result of bitcoin. Despite the fact that they were right 90%+ of the time in their other skepticisms, thats the power of convexity and that's why I want to become more of an optimist every year

 

[Daal]

So instead of being an skeptic with these 'synthetic shorts' or 'fantasy shorts' and having a giant negative virtual P&L, I'm going one step further and saying 'if being a skeptic is so bad, why not take the other side of these trades? why not claim those virtual profits from longs and turn into real profits for me'? And that's my new method but it has to be combined with risk control, filters, discipline, money management, being selective, being responsible, the goal is to combine the best of Jim Cramer with the best of Paul Tudor Jones/Larry Hite

 

[Daal]

The tough thing about convexity and Antifragile is that Taleb himself (the author and pundit side of him) is quite a skeptic, he is a very cynical and negative guy. Its tough to learn that concept and think how it should affect you from a negative guy. You don't fully learn until you look at how many optimists got rich and how their biases helped them (and thus, were not biases but rather, good mindsets). I'm sure Taleb the trader is different but is tough to truly get convexity from Taleb the commentator

 

[m22au]

Its interesting that you broght this up because when I truly realized how powerful convexity was (which only happened after I read Anfragile for the 4th time and thought more about it), I thought about buying Bitcoin. This thing looked like a bubble in the charts at $100, now its at $1500. That's what convexity does, its exponential, skepticism is stupidity. Its a shame that there is no ETF or a liquid way to get involved otherwise I would be long them.

As you might be aware, GBTC is traded on the pink sheets. Quite illiquid, and bid-ask spreads usually between 2% and 5%. Also currently trading at about a $330 to $380 premium (20% or so) to Bitcoin.

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[m22au]

If digital money is the future, gold as a store of value will lose its attractiveness and I own some gold, so having all of that money be down 50%+ wont be fun. Digital coins are even more convenient than gold. They look unstable now because they are repricing but once they finish that, they will trade like EUR, BRL, TRY, JPYs. up and down 1% and that's it. Governments are blocking/banning them now, but the same was true with gold at many points in history
If you compare the market cap of digital coins with gold, one can see the potential that they have.

Yes I noticed that the trading action in Ethereum / Ripple / Litecoin is far more volatile than Bitcoin, which has a much higher "market cap".

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[Daal]

As you might be aware, GBTC is traded on the pink sheets. Quite illiquid, and bid-ask spreads usually between 2% and 5%. Also currently trading at about a $330 to $380 premium (20% or so) to Bitcoin.

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Yeah, this is quite a premium, plus they charge high asset management fees. If I may ask, how do you own your digital coins?

 

[m22au]

Yeah, this is quite a premium, plus they charge high asset management fees. If I may ask, how do you own your digital coins?

I don't own any. But I might reconsider that stance in the months to come.

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[jj90]

Just my 2 cents here gents.

You can buy off an exchange like Kraken(I use kraken) or 1 of the many other exchanges that do accept fiat.

Worst comes to worst you can always buy off localbitcoins or etc and transfer those into a crypto only exchange like Poloniex to get your crypto of choice.

 

[Daal]

Just my 2 cents here gents.

You can buy off an exchange like Kraken(I use kraken) or 1 of the many other exchanges that do accept fiat.

Worst comes to worst you can always buy off localbitcoins or etc and transfer those into a crypto only exchange like Poloniex to get your crypto of choice.

what about buying and owning them in your own wallet? as I understand you can store in those wallet sites but if they get hacked, you can lose it all. if you store with yourself, if you lose your key you lose the money forever. what are your thoughts on benefits and drawbacks of each? I'm inclined towards storing them myself and working on securing it by working on my own security methods rather than to rely on random sites

 

[jj90]

@Daal You could buy them off an exchange and pay market rate vs the premium charged OTC then transfer them out of your exchange wallet to a wallet in cold storage. That is the most secure way.

The drawback is of course speed. You would have to reload your exchange wallet and that takes time but so long as you are not trading short term you'll be fine.