Global Macro Trading Journal
- Thread starter Daal
- Start date
So there was that guy that bought a pizza in 2010 with bitcoin, paying 10,000 BTC for them. That had to be one of the worst financial mistakes ever as that stash would be worth just under $200 MILLION dollars today. Which leads to the question, what can be learned from this?
1-BTC has a lot of optionality. You forget a few bond certificates under your mattress, not much will happen. You forget hundred BTCs and you can wake up a millionarie one day.
2-Lots of people that saw BTC early on failed to see how much it could rise and how popular it would become. This could be happening right now with MYSELF and other BTC defenders
3-BTC had a lot of soul crushing drops that "taught" some people to take profits on the way up as a way to remedy the situation
So with these lessons in mind I think its important for me to develop a robust plan for my crypto holdings so I dont make a mistake similar to that guy. I might decide to keep a certain percentage of my BTC holdings (say 30-50%) in a HODL bucket and the rest in a Trading bucket where I would sell when contrarian indicators popped. The HODL bucket would ensure I wouldn't lose in case this just keeps going and no real crash occurs, all the way to its final fair value. Who knows what that final fair value is it but if this is the "Uber" (innovative disruptor) of stores of value, 50% of the gold market cap seems possible to me heck, probably even more than that as it can become a bubble and go even higher. If during the Japan bubble the Tokyo's Imperial Palace was valued at more than all the land in Florida, why cant bitcoin go to ridiculous levels? Why cant it, temporarily, be worth more than gold one day, at the height of the mania?
And the Trading bucket would ensure I wouldn't just sit by huge drops of 50-70%, also, it would give me the fiat cash to buyback BTC on large drops
1-BTC has a lot of optionality. You forget a few bond certificates under your mattress, not much will happen. You forget hundred BTCs and you can wake up a millionarie one day.
2-Lots of people that saw BTC early on failed to see how much it could rise and how popular it would become. This could be happening right now with MYSELF and other BTC defenders
3-BTC had a lot of soul crushing drops that "taught" some people to take profits on the way up as a way to remedy the situation
So with these lessons in mind I think its important for me to develop a robust plan for my crypto holdings so I dont make a mistake similar to that guy. I might decide to keep a certain percentage of my BTC holdings (say 30-50%) in a HODL bucket and the rest in a Trading bucket where I would sell when contrarian indicators popped. The HODL bucket would ensure I wouldn't lose in case this just keeps going and no real crash occurs, all the way to its final fair value. Who knows what that final fair value is it but if this is the "Uber" (innovative disruptor) of stores of value, 50% of the gold market cap seems possible to me heck, probably even more than that as it can become a bubble and go even higher. If during the Japan bubble the Tokyo's Imperial Palace was valued at more than all the land in Florida, why cant bitcoin go to ridiculous levels? Why cant it, temporarily, be worth more than gold one day, at the height of the mania?
And the Trading bucket would ensure I wouldn't just sit by huge drops of 50-70%, also, it would give me the fiat cash to buyback BTC on large drops
Point is, in a optionality/convexity/exponential market its MUCH easier for SELLING to be a mistake than for buying/holding to be, also selling can be a much BIGGER mistake vs buying/holding. That is because in these markets the RULES are different. That's why New York Dinosaurs like Dalio struggle and San Francisco idiots dont when it comes to crypto. Sillion Valley folks intuitively get these concepts
This is also the reason why I stepped in EARLY in 2018 to buy BTC ($8,500-$9000 avg) rather than to wait for the perfect bottom. In a convexity market I rather be early than to be a dick for a tick. I play it differently from how I would play other markets. It turns out I was 2.5 years early but there was a world were BTC 20k to 6K crash would have stopped at 7K and ripped to 50K as a Japan style bubble took price that same year. I"m always trying to avoid missing out in these markets because its a much BIGGER financial mistake. That said I will try to do better in the next crash
when you're managing a moonshot portfolio, think about minimizing your drawdowns by reducing portfolio covariance. e.g. BTC might be a good long term hold and it would be foolish to "sell the dips" if you think it is on a secular rise. However, how does one stomach the interim volatility? By pairing it with other assets. Thinking about it singularly is the wrong approach.
You mean regular financial assets like stocks, bonds, gold ,etc? Can you explain further what you mean?
I don't mean to the downside @Daal I mean the upside. We are both bullish so great if BTC hits 100k. What if it goes down to 1K at some point after hitting 100K? That's not a good HODL. Hence the Imperial Palace.
Sure in the short term if BTC hits 5K that's an even greater buy, we aren't discussing price targets however, but path dependency. I love a dip when bullish but at some point we all have to sell.
Sure in the short term if BTC hits 5K that's an even greater buy, we aren't discussing price targets however, but path dependency. I love a dip when bullish but at some point we all have to sell.
Yes, that's why I have a trading bucket and a hodl bucket. And the trading bucket is bigger than the hodl bucket (something like 65/35). I will let the trading part go once things get overheated in terms of mainstream people and cocktail parties. Now if it goes to 100K, I sell the trading and my hodl goes down to 1K, I can tolerate that, that's the cost of doing business. I will be up so much that losing some hodling is the price I pay. Because there is the chance it will go to 1K but also there is the chance that it will triple from there and then crash but the crash price it will still be higher from when I sold the trading portion. In other words, it will be like selling Qs in 1998 or Japan in 1987 but its even worse because fundamentally, bitcoin might sustain itself in the trillions of market cap one day. So if I sell it all at 100K, then it goes to 250K, then crashes to 130K and grinds and eventually rips to 500K, I might stay out of the whole move because I dont feel like paying up after bailing it all at 100K. I rather risk a drop to 1K then to miss a move up I didnt predict.
This is part of my different investing philisophy when it comes to convexity assets, that I was explaining earlier. I rather make the mistake of being too bullish and long than to be too bearish and out (or worse, short), because while that is a bad idea in mature conventional assets in convexity assets its the right decision due their tendency towards exponential payoffs
Furthermore, I can decrease the risk of my hodl bucket through rebalancing (by selling some and keeping it a constant part of my portfolio, like 4-5% if it grows too big)