Global Macro Trading Journal

sss12 said:
Hey, enjoy reading your thread. So to use your 97/98 tech stock analogy, where /what is your final exit strategy ? 100k invested in "tech 97/98" when to 1mm and THEN to zero. Where was the success in that ?
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Hi,
I got some safety nets around my trades/investments that I think most bubble plays don't

1) Lets say I allocate 3% fo them (between core coins and swing coins), as they go up, I lock some profits. This 'rebalancing' (keeping the exposure at 3% by locking in profits) means I will be constantly cashing out and putting money in my pocket. It protects me against the end game because I might have accumulated 10%+ gains by the time they crash down and die. I will also decrease the exposure from 3% to 2% to 1% as the bull market plays out

2)In my swing plays, I will have some kind of exit strategy in case they don't work

3)I would like to think that I know how to spot a really overheated/bubbly market better than most. I have been reading about markets/history/trading for about 15 years, how much mom and pop has devoted to understanding how markets cycle work? I got a big advantage there. By the time they crash, I will probably have only 1% in cryptos and will sell on the way down. In fact, I will problably short them and maybe bank on the way down as well!
 
I know one of the traits of a bubble is people thinking "this time it is different" but in this case we are looking at some pretty world-changing technology. I think the key is to look at each project with some common sense. To me 4k bitcoin is ridiculous and many of these projects are 100% scams. Some of these projects though, with a couple hundred million market cap could have true value in the billions+. I think it is even more skewed because those market caps are bogus, so buying in now with still relatively small amounts of money involved big picture can actually make a lot of sense. I am trying to take a hard look at some of the more innovative technologies, and if I can see a logical argument for that tech disrupting a major industry, to me that is worth investing in. I'm not talking some BS like a crypto driven online pet store, but projects with the potential to directly compete with banks and exchanges.
 
One component that might suggest that cryptos are an early stage bubble is the fact that they rose so much but a lot of that rise (in the years after 2008) it was COMPLETELY JUSTIFIED. The market was right (and the idiotic contrarians were wrong). They will be used as payment and other systems, and this demand will rise (faster than global GDP) for a long-time. So the price was rising exponentially but the intrinsic value was doing that as well. It feels to me that only recently (this year) we started to see them detach from intrinsic value (a bubble type behavior). So the 'analysts' with linear mindsets will think 'this is up a lot, for a long-time, its time to cash out'. This is wrong, and its the result of having a right side of the brain type thinking (mean reversion mindsets, typically found in NY), which is dangerous in convexity and new markets.

Of course, its hard to estimate instrinsic value but transactions (both current and expected) are some sort of proxy and they started to detach this year. Before that, these coins were a value asset, its just that the linear thinking world kept hammering the idea that it wasn't. but they were wrong.
So yes, its a bubble, but thats why its a buy. Key is to keep risk controls in check so you dont get killed if you buy at the wrong moment
 
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Imagine an angel Sillicon Valley investor in Mastercard. He will be up 10,000% after a few years, then he will see contrarians talking about 'this is up so much, its time to sell', missing out that a huge chunk of the rise was justified to begin with. Eventually the stock might dettach from the fundamentals and get really overvalued and then crash but in the case of cryptos, this seems a great story to become a bubble (so the crash will only come MUCH later). lots of millionaries, exponential rises, being a 'new tech' that will change everything, people will run wild with this nonsense. I agree with Henry Blodget, this is a perfect market to become a bubble
 
1501687071_damodaranbtc.jpg


Chart from Damodaran. Seems to me that before 2017, Bitcoin was simply a 'growth' stock that traded at a premium to the fundamentals, not much differently than the rich premiums that Visa and Mastercard trade at. In 2017, it started to go exponential. Nobody knows how high it will go and how long it will rise, but I do know one thing, its A LOT more robust to be bullish than to be bearish. Bears only continue with their nonsense because they don't hold their crap to account by keeping a ledger of losses/missed profits everytime they open their mouth
 
Here is a crazy thought: This is the first time in history the entire planet is speculating on something. A guy in Uganda with a PC can buy bitcoin. How many people do you know that are buying/talking about Australian Real Estate? In this crypto market the pool of greater fools is just so large. If you have to play a speculative game with 10 people locked up in a room, its very hard. Everyone will try to outsmart each other, this will lead to false trends and a mean reverting market. No one wants to be the idiot buying at the top. But the entire planet is now speculating on cryptos, and they already have shown willingness to ignore fundamentals.

This might just become the greatest bubble the world has ever seen
 
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