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Post by biposter on May 29, 2019 7:55:28 GMT
www.bloomberg.com/news/articles/2019-05-08/mike-novogratz-says-bitcoin-won-the-war-of-cryptocurrencies www.bloomberg.com/news/videos/2019-05-28/kenetic-s-chu-sees-bitcoin-at-30-000-by-year-end-video Don’t know if there are any Bitcoin bulls here (or maybe you do think it is rat poison2), but from the first video above, Novogratz said a few weeks back that Bitcoin (BTC, not BCH) has won out as THE store-of-value cryptocurrency or “digital gold.” All the other alt-coins will be valued according to usage. But in the second Bloomberg video above, that guy says Ethereum (ETH, not ETC) will be one the key winners (per actual usage) because of the all the developers on the Ethereum platform. He even mentions that Vitalik Buterin was on stage with Satya Nadella at MSFT’s most recent developer conference. And Buterin was named as one of the top 25 key tech influencers in a recent poll of developers, I believe. So unless all of crypto does collapse one day under its own weight as a pyramid scheme, it seems like BTC and ETH are the two reasonably safe bets. And with Fidelity soon to provide custodial service to institutions, maybe Bitcoin’s rise is real this time? I thought there would be one more retrace back down to $5,000-$6,000 or so, but maybe not? So it’s clear that the underlying blockchain technology is the future, but maybe at least these two cryptos will ride along with it?
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Post by furbush87 on May 29, 2019 23:05:08 GMT
I still believe bitcoin is the Myspace of blockchain. Waiting for the Facebook
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hort
Full Member
Posts: 111
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Post by hort on May 30, 2019 2:37:53 GMT
I still believe bitcoin is the Myspace of blockchain. Waiting for the Facebook Furbush—I hold your opinion in high esteem...but Facebook as a replacement for Bitcoin as a replacement for fiat? Don’t we all have reason to doubt Facebook’s motives for anything?
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Post by biposter on May 30, 2019 8:06:47 GMT
coinmarketcap.com/ Yeah, furbush, you could be right, and zuckcoin or ripple could win out as the dominant currency in the crytpo space, but bitcoin is too slow for wide adoption as a currency, and so it’s really in a different lane. And as Novogratz said in that first Bloomberg video, bitcoin has already won out as a store of value, or “digital gold.” So unless all of crypto is just a house of cards waiting to come crashing down, it seems bitcoin is a good bet in case it ever does start to displace gold. And as long as ethereum founder Vitalik Buterin puts his weight behind Ethereum (and not Ethereum Classic), it seems all the top programmers/developers will support the ETH platform, and so ETH should at least be one of the winners in the “usage” space. As for all of the hundreds of other cryptocurrencies, who knows which of those other alt-coins will win out? As for the crypto space as a whole, Novogratz mentions that even the endowments of Harvard, Yale, and Stanford are now in. Crypto market penetration is at, what, <1%? And hardly any institutional money is in yet. So what will happen if institutional funds really do decide to get it in? Still, there could be another pullback in bitcoin to the $5,000-$6,000 range, but we’ll see.
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Post by biposter on Jun 19, 2019 7:18:57 GMT
www.cnbc.com/video/2019/06/18/facebooks-cryptocurrency-legitimizes-the-industry-says-michael-novogratz.html? www.cnbc.com/video/2019/06/18/fomo-could-take-bitcoin-from-9000-to-20000-in-months-tom-lee.html
With the introduction of ZuckBuck’s “Libra” today, it seems that bitcoin/cryptos are here to stay and may even go mainstream. In that second video, bitcoin permabull Tom Lee says he thinks BTC will take out its all-time highs this year. It looks like $FB’s cryptocurrency may have the scale to be the next digital payments top dog. Novogratz, in the interview above, says he thinks Libra can be a threat to Venmo and even banks. So maybe MoneyGram, Western Union, etc., might also be threatened if Libra takes off when it actually debuts in mid-2020. And it looks like there are lots of backers, and more coming in. There will be two coins: Libra and the underlying security token. Novogratz thinks it might be worth buying that crypto token. So, maybe we have the crypto winners in each of the three key areas: (1) FB’s underlying security token (not Libra), as Libra wins out as the go-to digital payments platform (so maybe even a threat to ripple?); (2) Bitcoin, as the “store-of-value” winner (“digital gold”); (3) Ethereum, as one of the key platform winners, as developers flock to its highly respected founder to build on its “smart contracts” platform. www.bitcoinblockhalf.com/ According to this website, out of the hard ceiling of 21m, 17.767m bitcoins have now been mined (84.61%). There are only 3.232m bitcoins left to mine. Plus, the next Bitcoin halving will occur next year in May 2020. BTC’s m/c is $163B, with the total market cap of gold equal to ~$7 trillion. I think I read that <1% of retail & institutional investors own any bitcoin. So if crypto begins to go mainstream with the debut of Libra next year, what might the upside of bitcoin be when everyone starts to flock in?
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Post by biposter on Jun 25, 2019 18:07:11 GMT
coinmarketcap.com/ With bitcoin busting through $10,000 over the weekend, maybe we get another 2017 FOMO run? But I believe there’s a gap at ~$10,000, so maybe that might fill. If so, they’re saying that could trigger some panic selling, filling the next gap down at ~$8,500. But FOMO could just take over right past its all-time high of ~$20k.
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Post by biposter on Jun 30, 2019 7:26:30 GMT
www.youtube.com/watch?v=3DByAzGO0QU Not the most professional interview and it’s kinda long, but if you have a chance, check out Tom Lee’s (Fundstrat) bitcoin predictions. If there’s even a 10% chance that he’s right, then I think, at least, even a small chunk of bitcoin (BTC) is a must-own.
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Post by biposter on Jul 6, 2019 18:01:22 GMT
So here's what some of the biggest bitcoin permabulls are predicting. Novogratz sees BTC breaking its ATH and hitting $20,000 by mid/end-Q4. Tom Lee thinks $20k-$40k by eoy. Tim Draper predicts $250k by 2022. And John McAfee insists $1M by 2023 lol. But with Fidelity, NYSE's Bakkt, TD Ameritrade getting their crypto services ready, and with hedge funds, family offices, etc., getting ready to really move into the space, we're going to see institutional money get in. And then you have two very bullish catalysts next year: the BTC halvening in May 2020 and possibly FB's Libra next summer, unless the politicians slow it down. Novogratz believes bitcoin will trade around $10k-$14k for a while before breaking through to the upside in Q4. So as long as BTC can hold support at $10,000, maybe consider buying one BTC and hold to $100k-$1M or bust.
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Post by biposter on Aug 10, 2019 17:32:33 GMT
Been trying to read up on bitcoin. So it looks like there’s a wide swath in crypto who consider themselves “bitcoin maximalists.” There’s bitcoin, and then there are “s--tcoins.” Many even throw ethereum into that bucket. So it looks like bitcoin alone is truly in a unique category: true decentralization (no gov’t can shut it down), immutably scarce (hard cap of 21 million coins, and not a single coin more), unhackable (its underlying base layer has never been hacked; quantum computing is decades away, if ever), etc. Because of bitcoin’s properties, it seems to attract a hard-right libertarian crowd. Check out crypto-twitter and you’ll see what I mean lol. Anyway, all the geeky tech and economics behind bitcoin don’t really interest me. But it is that very tech that allows no central authority to “print” any bitcoins out of thin air. It’s the hardest money ever invented, and it’s scarce. And it’s a virtual currency that solved the double-spend problem. Truly revolutionary tech.
Now, what does interest me is that institutions are getting ready to really move into this space. BTC is stepping into the mainstream. It’s crazy, but bitcoin (and Libra) got slammed in the last few weeks by Powell, Mnuchin, and even Trump! But it’s not going to be banned in the U.S. or anything. It’s that the banks and gov’t really do see the threat of a true peer-to-peer virtual currency like Libra and BTC that disintermediates these financial behemoths. But BTC is not yet a good medium of exchange, so Libra should get the brunt of the regulatory scrutiny. Yet BTC is slowly, but surely, becoming “virtual gold” and is being more widely considered to be a “store of value” and even now as a safe haven macro hedge, just like gold. Crypto (mainly BTC alone) is becoming its own asset class, and institutional money will start to allocate a small percentage into BTC.
So do your dd and maybe seriously consider buying even just one BTC. Forget all the wallets -- too complicated. Just buy it on Coinbase. Remember: BTC, not BCH (fake bitcoin). And beware of “SIM swaps,” so you want to “quarantine” your Coinbase account. Create a brand new gmail account. Don’t use it on any other site, and don’t ever share that email. And be sure to use Google Authenticator as a 2FA (two-factor authentication) and not your cell phone text. Because if someone SIM swaps your cell number and manages to gain access to your Coinbase account, they can steal your private keys, thus losing your bitcoin, and then you’ll have no recourse.
Anyway, in case you didn’t know, one bitcoin is divisible into 100m “satoshis,” so you can buy as little as you want -- even $10 of BTC. Unlike stock, you don’t have to buy one whole bitcoin (which is now ~$11,000), so dollar-cost avg in over the next few weeks/mo. Many predict BTC will hit $20k by eoy, and with the halvening in May/June 2020, double or triple from there. There is a CME gap at ~$8,500 but I doubt it will fill. But who knows. They’re saying that BTC has run up too hard and too fast from the lows of ~$,3300 earlier this year to last month’s high of ~$13,800. It’s correcting and consolidating. Once the 200-day moving avg catches up and gets to ~$9,000-$10,000 (which should be around Oct/Nov) then it’ll start its run (so they say).
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Post by biposter on Aug 24, 2019 17:47:11 GMT
Now, keep in mind, he’s the CEO of Coinbase lol. But I think he’s right (and the article is from Feb 2018). There will only be 21m bitcoin ever produced. Four million are permanently lost (in the early days when bitcoin was just pennies, many lost their private keys). So when all BTC are mined, there can only be 17 million people, out of the global population of seven billion, who own one whole bitcoin.
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Post by biposter on Aug 25, 2019 19:39:18 GMT
unchainedpodcast.com/pantera-capital-how-bitcoin-could-reach-356000-in-a-few-years/ www.panteracapital.com/team As I try to read up more on bitcoin, what’s crazy is that there are so many financial and tech titans who are bullish on the space, and specifically on bitcoin. They might not all have gone out on a limb and put out in public their specific $BTC price predictions, but many have. Here’s one example (and there are countless many) from his interview last month on 7/23, linked above:
- (Dan Morehead: CEO, Pantera Capital Mgmt LP [Founder, 2003]. Former head of macro trading and CFO at Julian Robertson’s Tiger Management. Also global head of FX options at Deutsche Bank in London. Began his career as mortgage-backed securities trader at $GS.)
- Dan Morehead: “Well, one perspective would be to grasp the price of Bitcoin logarithmically to take away the crazy exponential growth, and it’s typically a pretty consistent line, and there’s a few bubbles, 2013, obviously Bitcoin was up 83X, year on year, and then at the end of 2017, it was also a bubble. It deflated so much that at the beginning of this year, and we’re at the kind of the trough of the crypto winter, we graphed what it would be like if Bitcoin spent the next 12 months getting back to its trend line and then from there out just stayed at its trend, and its trend has been to grow at 235%, compound annual growth rate, and that put…at the time, Bitcoin was $3,000 or $4,000. That put Bitcoin at $42,000 at the end of 2019, which I know sounds crazy, but essentially we’re halfway back there. It’s right on the trend line, and I think it’s a good shot that by the end of the year, we hit that, and then if you just extrapolate that line out for another year, it’s $122,000 per Bitcoin and in one more year $356,000, and those sound crazy, but our first research piece that we wrote on Bitcoin, we predicted it would go to $5,000, and when it was at $100 bucks, everyone thought that was totally nuts, but these numbers, in 2 or 3 years, people look back and go, oh yeah, that makes sense.
- Dan Morehead: “I think having those institutional-grade CFTC regulated exchanges are really going to give institutions more comfort to enter the market, but again, you know, I think it’s not kind of a light switch you just flick on, and we go from 3 percent of institutions having direct blockchain exposure to then 100 percent. I think it’ll be a process, you know, over the next few years, but it’s such a massive investor base that if we go from 5 percent institutional ownership to 15 over the next couple years, that’s a massive amount of money. And we’re seeing that with those announcements, but then you also have things like one of the biggest advisors to pensions and endowments, Cambridge Associates put out a positive paper maybe 4 or 5 months ago about blockchain, suggesting their clients look at it. We’ve talked to quite a number of the largest endowments, who are doing serious work. A few have made investments directly in the space, and the rest are trying to get their heads around it, and so I think you’re going to see most institutions take a look, and 5%, 10%, to 15% of them over the next year or so will make commitments.”
So because he thinks 5%-15% of institutions will get in over the next year, that will be “a massive amount of money.” And thus his justification that bitcoin will maintain its trendline and hit $42,000 by eoy. Again, this is just one of many super-smart guys taking a risk and publicly making the $BTC price predictions.
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Post by biposter on Sept 1, 2019 19:33:29 GMT
stephanlivera.com/episode/93/ So here’s a very interesting, yet alarming, interview with Raoul Pal (Goldman Sachs, GLG Partners, Global Macro Investor, Real Vision) last month. He’s not a permabear like Stockman, Faber, and Schiff, but, like Ray Dalio, he sees dark storms over the horizon. And it’s kinda wild what a Wall Street insider like him has to say about bitcoin. He says the infrastructure is not there yet for funds to invest, but all the hedge funds guys have already gotten into bitcoin in their personal accounts. Very telling. The whole interview is worth a read/listen, but I just c&p’d just some of his key bitcoin comments:
- Raoul Pal: And so while that’s going on, global growth and global inflation has been plummeting. Bond yields in Europe have gone super negative and, guess what, the banks are freaking out. Because banks really make money by lending money, and if interest rates are negative, well that’s the end of your banking system. Now, they’ve already got a ton of debts themselves. So they’ll have debts upon debts that have never been resolved, and their share prices are plummeting. So today, the Spanish banks started hitting all-time lows, Banco de Sabadell, I think BBVA, as I call it, falling off the cliff of death. And this is a big bank, BBVA. Bankinter, which was partly supported by the state, is looking… And Bankia is looking troublesome as well. So we’ve got the Spanish banks, the Italian banks, and the German banks, probably the Swiss banks, and then just behind them the French banks, all looking terrible. And how is Europe going to resolve that?
- Raoul Pal: Meanwhile, the European economy’s slow so what is the answer? Cut rates. Well, if you cut rates any further, you’ll make it even worse for the banks. You’re creating a death spiral. So in which case, interestingly enough, the ECB tried to appoint, or will appoint, Christine Lagarde, who’s the head of the IMF, whose job has been to negotiate bailouts, she’s a lawyer and a politician. So if you’re thinking about where does Europe go from here, it probably has to go to a bank bailout that has to be dealt with Europe-wide, it has to be some sort of monetary… have fiscal stimulus that has to be negotiated at a political level across Europe. The Germans don’t want to spend money, but they have to. You need to break all the Maastricht Treaties about how much money you can spend, so that needs to be negotiated. I mean, there’s a big job to be done, and if that can done in enough time for the banking system to remain solvent.
- Raoul Pal: So, there’s some huge problems going on around the world. China itself has enormous debts, it has a broken financial system, it doesn’t really want to stimulate, and stimulate Australia and the US economy all over again, because it would rather spend the money on trying to defend its own banking system and it’s struggling with not letting its currency collapse. So we’ve got a whole load of stuff going on right now in the global economy.
- Raoul Pal: So, go back to the cycles. The cycle is there’s a debt supercycle. The debt supercycle is, in Austrian terms, Kondratieff Winter. So what we are is we are in the final stages of the debt supercycle. We’ve seen the rolling blow-ups, it started with the kind of tech and equity bust in 2000, it rolled into the housing, financial, the banking system, and I think it’s probably got the corporate debt market to do. So it’s been a rolling bust, as we roll through trying to unwind and unleather some of this, and that is typical of the latter stages of the big debt bust. I think the last major one we had was obviously the 1920s.
- Raoul Pal: So this is a secular cycle. In secular cycles, what you’re looking for is what is the outcome that changes it, coming out of it? And when I first discovered Bitcoin… Because some of my clients had begun to mine it when it was at 17 cents. They were running a hedge fund, and they happened to have electricity included in their office space, and somebody talked to them. They were very, very early adopters. They’re now both quite famous in the crypto space and the blockchain space, but they started mining it in their offices and making money. And they held it all the way through to the big rally, so these guys made an extraordinary amount of money out of the thing. But they became my guiding guys for this, so I started seeing it and thinking about it, and then I realized very quickly how my first understanding was digital gold. I now think that is just one of the nuances of it, whether it’s Bitcoin and the whole space, it’s just a small part of what the whole space is actually becoming. It’s becoming a much, much larger thing than I think most people can get their heads around right now.
- Raoul Pal: So, I wrote an article. I got long, around $200. I wrote an article in, I’m guessing, 2013. I think I was probably the first person to put together a valuation using the above-ground supply and below-ground supply of gold, and imputing that into Bitcoin, which was basically the Stock-Flow model at a very simplistic level. And I came up with a valuation that Bitcoin, if it was a gold equivalent, would be worth a million dollars with gold roughly at the same price as it is today. So that went round Silicon Valley very quickly, and around finance very quickly, because it became the first time anybody had really kind of put a macro framework around Bitcoin. And I was using technical analysis as well, and I was relatively early in that game.
- Raoul Pal: I then started talking about it when we launched Real Vision in 2014. We talked about it then as being an alternative to the financial system, and blockchain and Bitcoin itself being some sort of future, or part of a future, of finance that didn’t involve… that had a trusted ownership of assets, you know this was a key thing that both the smart contract but also the blockchain and the ability to custody all assets. Having gone through Lehman and MF Global and a whole bunch of other stuff, and nobody knows what collateral is whose, who owns what, is a huge problem in this world. Look at Deutsche Bank right now, they’ve got 45 trillion dollars of derivatives on their books, 45 trillion with a “T”, and they potentially are going to go under. A lot of this is all netted off, but who the hell owns what? And whose collateral is whose? And how many times has it been re-hypothecated? Nobody knows.
- Raoul Pal: And what was also interesting in this journey is a lot of people I really respect out of my macro space had moved across and not just to Bitcoin, but to the entire space. Whether it was Dan Morehead of Pantera, whether it was Novo, Mike Novogratz at Galaxy, whether it’s John Burbank from Passport, and most frequently there’s an interview today on Real Vision with Dan Tapiero, another famous macro guy, he’s now completely in this space as well. And they were all over the space, because they were applying kind of macro thinking, big picture frameworks, and that kind of future philosophy that you have to apply to macro thinking, and probabilistic outcomes, to this and seeing okay, the probabilities are, even with a small probability, the risk-reward is so enormous that this is the best opportunity in the world, in the whole space.
- Raoul Pal: Yeah, it’s an option. And, okay, it’s less of an option than it was when it was much cheaper, but if you look at PlanB’s stock flow model, stuff like that, you can see the comparative upside. And if you try and get your head around the digitization of everything, if you try and get your head around an alternative financial system, even if it has a low probability, right? If you recreate a low probability of, let’s say, what’s global money supply and global debt? It’s something like, I don’t know, call it 80 trillion dollars or something.
- Raoul Pal: Okay, so if it’s worth 80 trillion dollars, let’s say you have a 10% probability, that’s 8 trillion dollars. It’s currently worth 200 billion dollars. So even if there’s a 1% chance of working… You know, that’s how probabilistic frameworks work, and what it’s telling you is it’s ludicrously underpriced if any of these probabilities play out.
- Raoul Pal: So that’s how crazy attractive it is, and that’s why it’s sucking in so many of these macro guys, because they’re like, “Damn, nothing else has this payoff.” And they’re used to trading in options, right? Options is what they do, binary outcomes is what they look for, asymmetric bets is how you make a career. So they’re looking at the asymmetries embedded in the space, and they’re like, “Okay, this is super interesting.”
- Raoul Pal: I don’t know anybody who isn’t in it. But they’re not in it as a fund, because that’s still difficult. So you need the ability to have it as an asset within your funds, so many people will use the digital currency, the Bitcoin trust. So some people use that. But the problem is it trades at a huge premium, so you feel a bit of a dick by doing that, you need to be careful. So people are waiting for the custody and ownership abilities. So, the futures contract, the new futures contract that’s fungible, that’s going to help. So when that comes, there’s a number of things in this space, but all of them personally are in it. I mean, I know all these macro guys, they’re all in it. They get it. They get the optionality. They may be complete believers, part believers, partial believers. But even then, if it’s a 1% chance of being right and the upside is 100x from here, you’d do this all day.
- Stephan Livera: Yeah, so look, I think it’s a really interesting space. I think the other question I was really keen to discuss with you is whether people… So let’s say we start seeing a recession occur. As you spelled out in your videos, you’ve got I think the three phases. Will people then start selling off Bitcoin, those Bitcoin investors, because they need to start paying off bills? Or will they keep it?
- Raoul Pal: There’ll be some marginal selling. But you see, what people look at is while people sold gold last time around… So, gold has a different role, currently, and it will happen to Bitcoin in due course, but it’s not there yet. Gold is collateral, so when you see people selling gold, it’s because collateral is being liquidated against bad debts.
- Raoul Pal: Bitcoin is not collateral. So yes, it may be your own personally collateral so, “Shit, I’m going to miss my house payments, I’m going to sell some of my Bitcoin,” sure. But it doesn’t have that institutional selling that gold can have in environments. So I don’t think it’ll get sold much, I think that there are a lot of bigger players who will look at…
- Raoul Pal: As we start moving towards what I refer to as the end game, which I think will probably start with Japan having to monetize all of its debt and maybe try a debt jubilee in the next recession. Once people start seeing that probability coming, I think both gold and Bitcoin explode, because there are larger forces at hand that understand the risks to the system. I don’t think it’s the banking system per se that has the risk, but it’s the risk to fiat I think is a bigger issue in due course. I’m huge dollar bull so there’s a lot of phases before we get to that.
- Raoul Pal: But somewhere within this, Bitcoin, like gold, has an embedded option in it, which is that if you do need security in an alternative financial system… One is a backward looking alternative financial system that’s worked very well in the past, which is gold. The other’s a forward looking financial system that’s yet untested, which is Bitcoin. What is the future value of either of those? In that environment, we don’t know. But it’s a lot higher.
- Raoul Pal: That whole recession scenario is extremely positive over time. It will not be the pure safe haven, because it’s not correlated with that. It’s just not correlated with risk-on risk-off flows, because it’s correlated really with that stock flow model, plus human behavior, the boom-bust cycle of human behavior. But really the stock flows seem to be the prominent driver for the time being. But I think that it does work over time, as a safety.
- Stephan Livera: Let’s talk a little bit about the demographics involved with what’s happening now. We’ve seen this big, big bull market in equities. Is it your view that as certain generations, say the boomer generation, are going to be going through more of a redemption cycle, how do you view that in terms of what’s going to happen for the equity market and the bond market over this next period?
- Raoul Pal: The oldest generation and the largest generation on Earth, in the western world, is the baby boomers. As opposed to in the space around the Indian ocean and stuff, it’s actually the 20-year-olds right now. But the richest generation on Earth, all the assets are held by a bunch of 65-year-olds, whether it’s Australia, whether it’s England, whether it’s Germany, whether it’s the US. Some countries are older. Japan, they’re in their 70s, 75, 80. The Europeans are probably in their 70s and the US are probably in their 60s.
- Raoul Pal: So those people have to divest themselves of assets, but most of them have held on the riskiest of assets because they didn’t have enough savings. They didn’t have the magic number they wanted to retire on, so they’ve taken risk. They’ve taken credit risk and they’ve taken equity risk in obscene amounts. The pension system’s gone out of the curve either further, and they’ve gone into hedge funds and private equity and venture capital, further and further and further out the risk curve to get these guys the money that they thought that they deserved. They’re not going to get that money. And once they realize it, once the next recession comes, the party stops because you’re 65 years old, you’re retired, you can’t buy the dip, you don’t have a salary to buy the dip with, so you’re going to panic to try to protect as much of those assets as you can, so you’ll be out. And you’ll be owning bonds, and you’ll just be out, and whatever pile you’re left with is what you’re left with. But a lot of people are going to lose a lot of money in this, so it’s a very worrying situation.
- Raoul Pal: The flip side of this is the millennial generation. The millennial generation, if they were to buy equities at this point, they’re the most expensive they’ve ever been in all history, roughly… If they buy bonds, they get virtually no yields. If they buy real estate… It’s unaffordable, but even if they could, it’s almost at all time record highs. So what the hell does a millennial do to save for your future, when almost all assets have negative imputed returns for the next 20 years, 10 years? And the answer is well, you take the optionality of crypto currency and Bitcoin, because nothing else gives you that risk-reward profile where you can be wrong but you do it earlier on, you’ve still got plenty of time to accumulate wealth in other assets too. But if it pays off, it’ll pay off so spectacularly that everything will be right. It’s basically like being given a better chance than the baby boomers got when they could buy equities in 1982, and bonds in 1982. That was a gift. That’s why they’re the richest generation there’s ever been, they were given a gift. Equities are trading at a PE of 7 in the US, and bonds are at 15% in the US. They basically didn’t have to do anything but buy bonds, buy equities, go to the beach.
- Raoul Pal: The same opportunities are potentially being given to the millennial generation with both Bitcoin and other aspects of this space. People don’t realize it yet, but it is probably the opportunity. So that’s how I think about this. I think there’s a tremendous amount of selling that has to come out of the baby boomers in assets that do not attract the millennial population yet, and to do so they’d have to be at a much cheaper price because nobody can afford real estate. I was talking to some of the guys who work for Real Vision, I was like how much is an average two bed, 800 square foot, 80 square meter apartment? So, you know, small two-bedder apartment, that’s like the benchmark trading asset of the world. And New York City, Manhattan, was like $1.3 million and outskirts of Queens, $600. And the average millennial, at 30 years old, is probably earning, working in New York City in a semi-professional business, 60 grand. So 10x to buy the shittiest place. There’s no way they can afford it. So it’s fascinating.
- Stephan Livera: I suppose I just see it more like, for me, Bitcoin is the biggest opportunity and I can’t see a better asymmetric bet. But I appreciate other people have different choices and different preferences.
- Raoul Pal: Yeah, again, I’m not saying that Bitcoin does not offer that, I see that 100%. What I’m saying is it’s even bigger than we think, because there’s a whole world moving to digitization and once we go to that, there’s a whole world of opportunities. So if you’re a younger person, your opportunity set is going to be very different to what you think the opportunity set is today, which is right now you’ve got equities and bonds and blah blah blah, and you’re going to have not just Bitcoin but a whole different financial economy for you to get involved in.
- Stephan Livera: I hope you enjoyed the discussion with Raoul Pal. To my mind, with so many macro fund managers being invested in Bitcoin personally, it seems that it’s only a matter of time until they’re investing via their funds also.
So a real eye-opening interview. Who knows if some of his doomsday predictions will come about. Schiff and Stockman have had some valid points over the past decade, but the Fed could always ease longer than their short positions could stay solvent. Anyway, all these macro guys have already gotten in personally. And soon their funds will be able to. NYSE’s Bakkt will go live on 9/23 and will provide institutional-grade bitcoin custody, and its futures will settle in “physical” bitcoin, not in USD. Well, the CME $8,500 gap has a strong pull. I think it would just be best if BTC dropped really quickly, filled the gap, and allowed all the traders to load up there. But the risk is if it doesn’t bounce back quickly, then FUD can set in, and who knows if it could then drop further. Anyway, bitcoin only dropped to $9,100 when the Pres., Fed Chair, SoT, and Congress were all bashing BTC, so I don’t think the gap will fill. But we’ll see.
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Post by blissann on Sept 5, 2019 10:30:47 GMT
I am more restrained in forecasts, but it would be great to see price stabilization in the market that will allow us to develop success in the future. I am using these charts to know predictions cryptolinks.com/cryptocurrency-charts
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Post by biposter on Sept 22, 2019 19:41:45 GMT
So there’s a pseudonymous account on Twitter (PlanB @100trillionusd) who’s posted some excellent charts that’s caught the full attention of all of cryptotwitter. (His medium article/data is linked in his tagged tweet.) He’s an institutional quant investor w/ multi-billion dollars’ AUM. Other professional quants/statisticians have examined his data/model, and it seems to hold. So, it’s based on bitcoin’s stock-to-flow data over its past 10 yr history. “Stock” is the above-ground, mined quantity, and “flow” is the yearly production. His S/F chart has been the most accurate model in tracing bitcoin’s price chart over the past 10 yr., w/ an R^2 of 95%, which is obviously insanely high. Of all the commodities out there, gold has the highest S/F ratio of 62. Bitcoin has an S/F ratio of 25. After the May 2020 halvening (every four years, bitcoin’s mining rewards are halved), bitcoin’s S/F will be 50, getting close to gold. So his model, then, predicts BTC will hit $55,000 after the halvening. It can overshoot, so he says it could even hit $100,000 before pulling back. The only thing is that in the past two halving events, there was a “lag” of a few months up to a year. So $55k may not hit until later in 2020. After the 2024 halving, the S/F model predicts $400K (S/F ratio: 100) and $3M after the 2028 halving (S/F: 200), lol. stephanlivera.com/episode/67/
- PlanB: I have a background in legal and economics, and I worked all my life in traditional finance, and mainly with a focus on quantitative investing, so analyzing models and investments; and also in structured finance, so asset backed securities, residential mortgage backed securities, and collateralised debt obligations; in short, the financial engineering part of an institution. Currently, I work for an institutional investor as an investment manager where we have a big balance sheet, a multi-billion dollar balance sheet, and I analyze, model and source assets for them.
- PlanB: Stock is the current stockpiles of something… gold, it could be Bitcoin, it could be anything, the current above-ground stockpiles… and flow is the yearly production. Now, if you divide stock by flow, you get the stock-to-flow ratio. You could also do it the other way around, so you could divide the yearly production, the flow, by the stock, and then you get the money supply rate, or in Bitcoin they sometimes call it the inflation rate. So, stock-to-flow ratio is nothing less than, or nothing more than, 1 divided by the inflation rate. If we look at some numbers: gold, for example, has a stock of 185,000 tons, and a yearly flow of 3000 tons per year, so the stock-to-flow is 62, which is really high.
- PlanB: What Saifedean also makes very clear is that other commodities, like copper or zinc, or I’ll use the examples of palladium and platinum: they all have stock-to-flow values of around 1 [corrected], less than 1 [corrected], or slightly above 1 [corrected], but it’s actually very rare that an asset or commodity can go beyond the stock-to-flow ratio of 1, and if it does it gets this monetary aspect; in fact, only gold and silver have stock-to-flow ratios above 1, 22 and 62, and they are really monetary assets so they have value. Because of their high stock-to-flow ratio, their scarcity, whereas all the other commodities also can add value; for example, platinum and palladium are used in catalyzers for exhaust gases in cars, but that’s a value derived from utility.
- PlanB: That’s a good point. What you notice is halvings become very important. So, stock-to-flow ratio increases every day a little bit; but then once every 210,000 blocks, there is a halving of the number of Bitcoins that is created in a block every 10 minutes, so that will double the stock-to-flow ratio. The halvings are around every four years. Next halving is May 2020. So, that will double to stock-to-flow ratio to 50… very close to the stock-to-flow ration of gold, 62… and four years later in 2024, it will double again to a little about 100, and then in ’28 it goes to 200, and so on. That really puts us into uncharted waters after the next 2020 halving, which is very exciting, I think.
- PlanB: The stock-to-flow chart is the chart that shows you stock-to-flow on the x-axis, and market value on the y-axis. It’s a scatterplot, and it has 111 data points in there of all the monthly market values and stock-to-flow values of Bitcoin for the last nine years. When I first made that plot, I saw nothing because I didn’t have log scales on… and you really should look at these charts in log scale or use logarithmic values… because if you don’t, you don’t see the long-term trends. So, if you look at lock scale to stock-to-flow and market value, you see this perfect straight line; when I saw it first it was really like, “Whoa.” Perfect straight line from the bottom left to the top right, from low stock-to-flow and low market value, creeping up to high stock-to-flow, current stock-to-flow of 25, and a current market value of around now $80 billion to $90 billion.
- PlanB: Right now the model indicates the value of a little above $6000 US dollars. I get that question a lot, “How much does the model indicate at last all-time high?” Now, in November-December 2017 at the all-time high, it had a model price of $3,700 US dollars, so the real market price was really too high with hindsight; and if we go into the future, next halving, May 2020, the model value jumps to $50,000 US dollars per Bitcoin, and of course the all-time high could be 3-10x higher than that, at least that’s what the price was last two halvings.
- PlanB: So, it’s a rather conservative value. That number, by the way, is going to increase of course next halving, so the halving in 2024 when the stock-to-flow will be 100, Bitcoin will be priced at around $400,000 each. So, yeah, it goes up really fast.
- PlanB: Yeah, good question, and indeed I get it a lot. Maybe one step back, if we go to the model. Coming from this chart, this scatterplot that we just described, I wanted to make a more formal model to see if there is any significant statistical relationship; and since there was a straight-line visual, I thought, “Okay, let’s do a simple linear regression,” and that confirmed what could already be seen with the naked eye, that there was a statistical significant relationship; so F and P values were very, very low, and it had a nice 95% R-squared, so that gives some confidence in the model. Of course, I also added gold and silver in there, which were totally unrelated markets, but they turned out to be right on this model line, and that to me gives some extra confidence in the model.
- Stephan Livera: For those people who are not as familiar with statistical modeling, what does it mean to have a 95% R-squared?
- PlanB: It means that the chance that the change in value is caused by random events, or other events than your input variable, is very low. It’s really the input that correlates with the output variable; the chance of random, other variables, influencing that same output are very low, close to 0 in this case. 95% is really high.
- PlanB: That’s a complex question; let me say two things about it. I view Bitcoin also as the biggest asymmetrical bet of our time. Yeah, if you see it that way, if you did your research, and if you have some money around, go for it and have some fun. But I also think, even if it’s the biggest opportunity in a lifetime, that there is nothing wrong with taking some chips off the table after it goes 10 to 100x. I mean you have to live as well. So, take a couple of percent off, do some nice things, and make sure you survive the next bear market, that kind of stuff. I sure did in the beginning of 2018, so that was after the all-time high; I didn’t sell the top, of course, because that’s really hard to do, almost impossible. But if something goes 10 to 100x, make sure you have some fun with it, and I can tell you I’ll do it again. If Bitcoin indeed overshoots the stock-to-flow model price after next halving, so the $50,000 it overshoots to maybe $100,000 or maybe $200,000, I’ll take some chips off the table. Why not?
stephanlivera.com/episode/86/
- PlanB: Yeah. I don’t know of course, but it’s an interesting point that the stock-to-flow multiple before we dive into that, let me say that the R-squared that I mentioned in the article, and that I mentioned just in the podcast, it’s not understood by everybody. So maybe I should talk a little bit about that. The R-squared is a goodness-of-fit measure. So it tells you how good the model fits the data, and an R-squared of, say, below 50 or 60% is not very good. It’s bad. It basically says there’s no fit. And a 100% R-squared means that you have a perfect fit, a perfect model, and you almost never see that because it’s a model. It’s not the reality. There is always some noise that disturbs it. So the 95% of the stock-to-flow model is really, really good. It shows that the relationship between stock-to-flow and value, and well the chance that it is caused by anything at all than stock-to-flow is close to zero.
- Well, I think the most important thing for myself of the stock-to-flow multiple is that every single year since 2010 or ‘09 actually every single year, Bitcoin was below and above the stock-to-flow model. So a multiple of above one and below one in every single year. That shows sort of a reversal to the model, and yeah, I think it means that you can use the model as a sort of compass that it always returns to.
- Stephan Livera: Are you referring there that that’s a reversion to the mean?
- PlanB: Yeah, where a mean then is the stock-to-flow model in this case.
- PlanB: ...I put this table out somewhere indeed in the tweet. So it’s very rough numbers of course. I’d like to argue orders of magnitudes, and not very precise numbers. So the model predicts 50,000 after 2020 halving, but 400,000 after 2024 halving, and even three million after the 2028 halving.
- So I thought that would be a very nice market to look at. So I looked at gold, I looked at silver, diamonds, platinum, and palladium. Totally different markets. All different stock-to-flows, and all different values. And when I made a stock-to-flow model on all those different markets, I was shocked really to find an R-squared of 99.5%. So basically 100%. It blew my mind.
www.cnbc.com/2019/09/15/tom-lee-bitcoin-and-sp-500-are-heading-to-new-all-time-highs.html In this CNBC video, Brian Kelly thinks there’ll be one more chance of a “generational buy” within the next six mo. It looks like he thinks the CME $8,500 gap will fill, so maybe scale in now and be ready if $8,500 hits. But Tom Lee still sees ATH by eoy, so who knows. ICE’s Bakkt goes live tomorrow. So if institutional money does start to come in over the coming months, I can’t imagine smart money allowing dumb retail to dictate their entry price, so maybe $8,500 will fill? Anyway, if PlanB’s S/F model is correct, we should see $55K/btc sometime after May 2020. It’s been spot-on over the last 10 yr.
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Post by ashsummer on Sept 24, 2019 7:23:38 GMT
Bitcoin totally dominates the crypto market with Ethereum in second place and a long way behind. I always try to keep myself informed on crypto news cryptolinks.com/medium-cryptocurrency and trends through multiple resources
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Post by biposter on Sept 24, 2019 19:58:29 GMT
Well, that was fast, lol. Gap filled. Guess smart money knows how to take a position, lol. Now, who knows how much further it can drop. Bouncing off the $8,100 lows today, but can they take out $8,000 as well?
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Post by biposter on Nov 24, 2019 20:33:07 GMT
Well, been consumed with bitcoin this past year. After it hit its ~$3k lows, it started bouncing back, and I started looking into it again. I first got interested in 2017, but it took off to $20k and I had no position, so I thought I missed the train and lost interest. In 2018 it tanked ~85%, but this year it rebounded back up to $14k. And I thought, this thing doesn’t die. Before 2017, like almost everyone else, I just thought bitcoin was some “magic internet money” created out of thin air and only used to buy drugs online, but I had never really done any dd. Would just see some commentators on bitcoin occasionally on CNBC. But once you really start to read up on it, everyone comes to understand that bitcoin is a deep, deep rabbit hole, and that there’s something there. It’s still very risky, and I think it could drop to as low as $4k-$5k early next year, but might be worth buying a few by DCAing in or waiting for Brian Kelly’s “generational buying opportunity,” which may hit in Q1 next year. Anyway, here’s what I think is bitcoin’s bull thesis, near-term price volatility notwithstanding lol... Bitcoin’s value prop: - It’s the first time in history when you can send, say, $10,000 (or $100k or even $1M) to anyone in the world with an internet connection for about $0.30 in about 10 minutes, needing no one’s approval. It’s a fully decentralized, permissionless, censorship-resistant, peer-to-peer network. Your bank or PayPal can shut you down (https://bitcoinist.com/bitcoin-fixes-this-ex-paypal-cfo-fired-as-customer-by-bank-of-america/), but with bitcoin, there is no central authority. You can send/receive money to/from anyone in the world as you please. Nobody can stop you. And if you lived in a country under capital controls, if you ever had to flee, you could flee with just the shirt on your back yet with all your money, notwithstanding bitcoin’s volatility, safely tucked away on the bitcoin blockchain. No gold coins or jewelry hidden in your socks. No USB drive or anything. Just the seed phrase in your head.
- Bitcoin is the culmination of 30 yr of computer science. It’s the evolution of digicash, hashcash, bitgold, bittorrent, etc.. For decades there were attempts at creating a digital money that was decentralized (no bank, PayPal, AliPay, etc.). All failed until finally bitcoin. With anything digital, how can you solve the double-spend problem? If you send an email, the sender and the sendee both have a copy. If you send an attachment -- a pdf, a pic, a file -- both of you have a copy. So if you were to send a digital payment, apart from using a centralized authority who maintains its own ledger, the sender would always have a copy of that digital dollar he sent, thus double-spend. But bitcoin solves this with its “proof-of-work” required for network node verification. This stuff here gets complicated, and I don’t fully understand the computer science that’s going on here. But what you need to know is that with bitcoin’s public/private keys (like an email address and a strong password), SHA-256 cryptography, vast and increasing mining/nodes power/capacity which increases bitcoin’s network security by the day, PoW, block rewards/transaction fees, difficulty-adjustment algorithm which ensures that it will always take ~10 min to mine a single block thus preventing an increase in its inflation rate, etc., all means that “Satashi Nakamoto” has solved one of the most difficult problems in all of computer science over the past three decades re: digital cash. Yes, there are criticisms of bitcoin’s network energy consumption/waste, price volatility/manipulation, almost-anonymous prior uses for illicit activity, etc., but no computer scientist doubts its remarkable coding achievement.
- Of course bitcoin’s price is volatile, but it’s been the best performing asset over the past 11 yr of its history. Ten years ago, one bitcoin was less than $0.25 lol. If one had bought just $100 of bitcoin back then, he’d be a multi-millionaire today. That’s no guarantee for the next ten years, but it does oblige you to at least take a good, hard look at it.
- Now, unlike stocks & bonds, It doesn’t throw off a dividend or interest. There’s no cash flow or profits. But all this could be said about gold. But gold has underlying utility, gold bugs object! But it’s generally accepted that gold’s utility in electronics, dentistry, and in jewelry alone only accounts for ~20% of its current market value. The rest is its investment premium as a store of value. So on utility alone, gold should only be ~$300/oz. Bitcoin doesn’t have any other underlying utility. You can’t even burn paper bitcoin to keep warm. But it’s all about its thesis as the other 80% of gold’s value. There is no other digital asset in the world that cannot be copied, inflated, diluted, or created out of thin air. Unlike the U.S. dollar, no central authority, or NO ONE, for that matter, can create even a single bitcoin by direct fiat apart from the vast energy usage computing equipment requires to mine it. Hence, fiat currency. No one decrees the existence of bitcoin; it’s bound by math, subject to the laws of physics, and protected by cryptography. Even Nakamoto himself had to mine the very first bitcoins. All of this can’t be said about any of the other “sh-tcoins” out there, incl. ethereum.
- Now, gold is very hard to mine. Of all the precious metals, it has the highest “stock-to-flow” ratio (current inventory/annual production) of 62, meaning it would take 62 yr to mine the equivalent of all the current above-ground stock of gold we have today (which, btw, would all fit into a single Olympic-size swimming pool). This also means it has the lowest inflation rate (1 divided by the S/F ratio, which would be 1.6% for gold). Bitcoin’s S/F ratio is now 25, which gives it an inflation rate of 4%. Now, bitcoin’s mining reward is halved about every four yr. The next halvening will be in May 2020, when its S/F ratio will increase to 50, approaching that of gold, with an inflation rate then of 2%. So, if Plan B’s S/F model is correct, bitcoin will hit $55,000 or higher by YE21 (there’s up to a 1 1/2 yr lag after the halving event). As he said, if bitcoin doesn’t hit $100,000 by Xmas 2021, then the model is invalidated. But up till now, the model has a 95% R^2, which means the correlation is not spurious, and that it’s almost impossible it’s due to chance. So that’s what the math and statistics are saying. But we’ll see. Plan B himself says the S/F model is not a guarantee. There are many big names on cryptotwitter who are skeptical. As they say, this model is “too good to be true.” Could be. We’ll see.
- What makes for a good store of value? That it’s durable, portable, fungible, verifiable, divisible, scarce, has an established history, and censorship-resistant. (For more info, read: medium.com/@vijayboyapati/the-bullish-case-for-bitcoin-6ecc8bdecc1). Against these qualities, it can be argued that bitcoin has better characteristics as a store of value than even gold. Two months ago, there was news $JPM discovered some gold bars with the same serial #s. What they found was that there were gold bars with some other base metal at its core. Some suspected it was a nation-state (*cough* China) that did this. All this is to say, gold isn’t easily verifiable. You cut open the bar or melt it down. But bitcoin is fully verifiable. And unlike gold, it is easily transportable, and it’s easier to transact with.
- Bitcoin is a deflationary asset (or technically, its inflation rate is decreasing). Its inflation rate is fixed and will be halved in seven months. So with less supply and probably increasing demand in 1/2 a year, that seems like it could be bullish. It has a hard-cap of 21 million coins total, which cannot be changed. So unlike the Fed Reserve or our favorite biotech lol, there will never be any dilution risk. There can be no fed funds rate change or the printing of new money. There will be no capital raise increasing the o/s and no proxy vote to increase the a/s. With your current bitcoin stash, you will know that you will always own the exact same % of BTC’s total market cap.
- Except in those countries who see it as a threat (e.g., China, India, etc.), bitcoin has a global market. It’s not restricted to U.S. investors. And even in restricted countries, there are ways around it. Its market never closes. You can buy/sell bitcoin 24/7. You can’t “shut down” bitcoin. You can’t haul in bitcoin’s CEO to the halls of congress. It has no CEO. It’s completely decentralized. You can restrict the onramps/offramps by targeting exchanges, but the bitcoin network will always exist. The only way to shut it down is to shut down the whole world’s internet. And once the internet’s up and running again, you can then restore the bitcoin network.
- For the foreseeable future, bitcoin will probably be retail-driven. But with the increasing infrastructure (e.g., Bakkt’s institutional-grade custody/trading, and soon, futures) and hopefully more regulatory clarity, the bullish thesis is for the eventual entrance of the institutional investors. Right now, there’s too much regulatory uncertainty, and thus too much risk. The infrastructure/apparatus is coming into place nicely, though. Right now they face reputational/career risk if bitcoin backfires on them. One day this could change and the risk will reverse. Like missing out on the FANG/growth stocks over the past decade in unconstrained funds, the bullish thesis is that there will one day be a “flippening.” There will be career/reputational risk for not having at least a small portfolio allocation to the best performing asset of the last decade.
- Beyond institutional entrants are sovereign states. Just like Russia and China are stocking up on their gold reserves, what happens when a developed country makes public its acquisition of bitcoin to its reserves? There’s rumors/speculation that some rogue states have already dipped their toes in, mainly to avoid sanctions (Venezuela, Iran, N. Korea, etc.). But with $17T in negative-yielding bonds, world-wide QE, and the race to devalue their currency, maybe for once stocks, gold, and bitcoin may all become positively correlated. In a recent interview (https://www.castleisland.vc/podcast#), one of the few Wall Street bulls, Fundstrat’s Tom Lee, who correctly called this year-end S&P rally, believes stocks and bitcoin have entered into a new bullish cycle. In this interview, because of the mass wealth transfer from baby boomers to millennials over the next 25 yr, this huge demographic shift will cause a huge bull run in the S&P 500 to, get this, 19,000! Again, he’s not calling for the Dow to *fall* to 19,000. He’s calling for the S&P 500 to *rise* to 19,000 over the next few decades, lol. Who knows? He’s been right so far. And he also makes a strong bullish call for bitcoin. Though Tom Lee is more hesitant about near-term institutional entrants and says nothing about sovereign states (though he did say, back in 2017, that central banks will consider buying digital currencies when their total market value tops $500B), can you imagine the influx of millennials (who overwhelming prefer bitcoin over gold), institutional investors, and then one day, developed countries. If so, then bitcoin could end up being the “stock of the century” lol from here on out, even though it could be said it’s already attained that status over its past 11 yr history since inception. But the argument goes that it has achieved a certain level of legitimacy only over the past year or so. Thus, its run is just beginning.
- Pres. Xi, a few weeks back, pumped the virtues of blockchain on the very next day after Congress grilled Zuckerberg about Libra. China’s central bank is working on a digital yuan. Not only will they then be able to surveil every transaction of its citizens (today, ~50% of all transactions are on WeChat/AliPay, which can be monitored; 25% are credit/debit cards; and 25% renminbi cash), it seems they’re threatened by the possibility of Libra, while also trying to compete with the dollar as the world’s reserve currency. A month ago, two U.S. Congressman sent a letter to Fed Chair Powell to consider creating a digital dollar (https://finance.yahoo.com/news/us-congressmen-ask-fed-consider-230804719.html). And Fed Reserve is now hiring a manager to research digital currencies (https://www.coindesk.com/us-federal-reserve-hiring-retail-payments-manager-to-research-digital-currencies). The time window for the U.S. to ban bitcoin has now long passed. This is a fast-moving space, and the U.S. is, by the day, realizing it must compete on the digital currency front. In Congressional hearings a few months back, representatives slammed Libra while a few extolled the virtues of bitcoin. There’s a drastic shift in perspective taking place, and it’s happening quickly. Listen to what Sr. Vice President of the St. Louis Fed said in an interview last month (https://unchainedpodcast.com/fed-economist-on-the-prospect-of-the-usd-losing-global-reserve-status-who-cares/):
- David Andolfatto: “On the other hand, [bitcoin’s] monetary policy is kind of probably arguably very good for as a long run store of value. So, if you’re willing to live with the volatility that it might not be a bad place to park a bit of wealth as kind of a long-run store of value. So, kind of that’s what kind of motivated my comment that I can see it as kind of a, you know, flight to safety security or is it kind of a long-run store of value, kind of something, the digital equivalent of say some sort of commodity like gold, but that has kind of an everyday monetary payment instrument it’s probably not likely to be taken up any time soon.”
- And listen to what Congressman Patrick McHenry said a few week ago (https://unchainedpodcast.com/congressman-patrick-mchenry-bitcoin-will-be-of-enormous-value/): “I think Libra has opened a lot of new people’s eyes about the value of cryptocurrency. Libra is not cryptocurrency, however, and we need to stop lumping it together with very real, very important projects that are out there like Bitcoin. And that’s not to bash Facebook or the Libra project, but the distinction between a wholly new financial invention like Bitcoin. I think that has enormous long-term value, enormous long-term value. And like many things Bitcoin is at such a very early stage relative to the rest of human invention and so how Bitcoin will be used we don’t know. In 20 years what Bitcoin looks like I don’t have the capacity to predict, but I do think it will be of enormous value and utility. When it comes to the question of a digitized US dollar I think that is a reasonable next step for our central bank. Your interview with the Federal Reserve’s chief economist was quite instructive because it exposes the fact to the public that the Federal Reserve is contemplating and is trying to understand digital currency and their appropriate role as a dollar is a store of value and international trade. So I think there’s enormous value there. I think as an American I would like to have a response to Alipay. We should not allow the Chinese to write the rules of the road of international finance and we therefore have to have a more competitive mindset about ensuring that there is international commerce using a system that is not Chinese-based.”
- There are a lot of big names who have gotten in. Raoul Pal has said that all the hedge fund managers he knows have already bought in long ago in their personal accounts (but very few in their institutional accounts since the infrastructure/regulations still needs to be built out). But none have a bigger position than the Winklevoss twins. Together they own 1% of the total supply: 210,000 bitcoins. They bought back in 2012 at ~$7-$10/btc and are already bitcoin billionaires today. They still have their full position and have predicted it will, over time, overtake gold’s total market cap of $7.5-$8 trillion. And check out this article from a few years back: bitcoinmagazine.com/articles/bitcoin-perhaps-promising-investment-opportunity-age-1422679512
- After it had been praised by tech moguls as Bill Gates (“A technological tour de force.”) and gmail founder Paul Buchheit (“Bitcoin may be the TCP/IP of money”), the money started speaking. We saw investments into Bitcoin by top venture capital brass such as Marc Andreessen, Reid Hoffman, and Fred Wilson; by billionaires such as Richard Branson (Virgin) and Li Ka-shing (richest man of Asia); by iconic executives such as Vikram Pandit (Citigroup), Max Levchin (PayPal), Tom Glocer (Reuters), Bill Miller (Legg Mason Capital); and recently also by large cap companies such as Google, New York Stock Exchange, USAA (American bank & insurer), BBVA (2nd largest bank of Spain), and NTT Docomo ($75b Japanese phone operator).
Risks - So what are the risks? If any of the major U.S. crypto exchanges like Coinbase, Kraken, or Gemini were to get hacked, and some bitcoins from their hot wallets were stolen, BTC would probably immediately drop by 30% or more. Keep in mind, though, the vast majority of these exchanges’ stored bitcoin are safely locked away in “cold storage” (disconnected from the internet).
- One of the biggest but unlikely threats: regulatory risk. I think this window has closed, but Trump, Mnuchin, and Powell did all criticize Libra and bitcoin this past summer. But China’s forceful move into digital currencies will, I think, change the calculus of the U.S. gov’t. But, let’s say, if the U.S. were to ban the owning and trading of bitcoin, BTC would probably immediately fall by 80%-90%, down to maybe $1,000, imo.
- Very unlikely, but nonetheless a big threat: quantum computing. Though it’s just a technical term and not quite as ominous as it sounds, Google recently achieved “quantum supremacy.” But there are vast issues with quantum computing. Listen here for a brief intro to this topic from a former quantum physicist: www.whatbitcoindid.com/podcast/the-quantum-threat-to-bitcoin-with-quantum-physicist-dr-stepan-snigirev. If quantum computing ever did progress so as to break SHA-256 cryptography, then all of the internet would be compromised. From what I’ve read, bitcoin can make changes to strengthen its security if quantum computing did advance enough to start posing a real threat.
- 51% attack: the aggregate mining/hash power that runs and secures the bitcoin network is so high now that not even a nation-state could amass the computing power necessary to mount a successful 51% attack. The capital outlay, even for a superpower like the U.S., would be so massive, they’d just outright ban bitcoin instead. Some figures say it would cost in the hundreds of billions of dollars to mount such an attack.
- More realistic risk: With the regulatory uncertainty and career/reputational risk, institutional investors may be slow to allocate a small % into bitcoin, thus leaving BTC’s price appreciation in the coming years solely in the hands of retail buyers. And if Plan B’s bitcoin stock-to-flow model ends up being incorrect, then the most likely risk is BTC drifts and goes nowhere, and maybe even drops quite a bit.
My (probably way off and wrong) price predictions: - Hopium/kool-aid view: Who knows, but the optimistic view is that there will be a run-up into the May 2020 halvening. So the hopium view goes like this: maybe around two months or so before the May halvening, all the whole world’s retail investors will start to anticipate this big event. In bitcoin’s past two halvenings in 2012 and in 2016, BTC’s price went up 10x, but there was a 1 - 1 1/2 yr lag. “The Halvening” will move from exclusively cryptotwitter to CNBC, Bloomberg, etc., and then to water coolers everywhere lol. At this point BTC has a nice run-up and FOMO kicks in. This is not an investment limited to U.S. buyers. Literally the whole planet is eligible to buy (except China, India, Indonesia, which is, like, half the world’s population lol!). If Plan B’s S/F model is correct, then sometime in the next two years, BTC will hit $55k to $100k+ lol. It really comes down to supply & demand. The supply issuance of new bitcoin will be reduced by 50% in seven months. Most likely, anticipation of this halving event will drive up demand. So, you’ll have decreasing supply, increasing demand. So that’s the bullish case.
- Maybe more realistic/bearish view: small miners capitulate with decreasing BTC price and since the halving will favor large miners. Large whales know dumb money retail is pinning all their hopes on the May halving, so they’ll keep prices depressed through May. When BTC is still around $5k after May, there will be one final capitulation by despondent retail. Whales load up at <$5k, and then let it rip in 2H20, lol.
- Anyway, of course, pls do your own dd. There’s real risk here. If you do decide to buy some, there’s the risk of being SIM-swapped. I recommend Coinbase, Kraken, or Gemini. These are the three most reputable, secure exchanges. Be sure to use a brand new gmail address to be used solely for that exchange and for nothing else. And never share that email address with anyone. Of course use a unique, strong password (ideally, using a password manager). Then enable 2FA (two-factor authentication) using Google Authenticator. Do NOT use your cell phone number for 2FA, because if someone knows your exchange email address and your cell phone number, they can contact Verizon or AT&T and through social engineering, they could cleverly convince the provider rep to port over the phone number to their own device. Then they do a “forgot password” reset on your crypto exchange, confirming it with your cell number, which they now control. Now they’re in, and they can transfer out your bitcoin and sell it. And you have no recourse. The exchange is not liable in the case of a SIM swap and there’s no recompense. You’ve lost it. And remember: BTC, not BCH or BSV. Those are s--tcoins and will probably go to zero.
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Post by biposter on Jan 1, 2020 3:53:00 GMT
So it looks like some of CT’s big dogs are saying the bottom’s in. In early Dec., hedge fund Adaptive Capital’s Willy Woo indicated he thought the bottom was in, with possibly one final sweep of the $6ks, which happened about two weeks later ($6.5k on 12/18). And so he thinks bullish PA will follow sometime in Jan. Blockstream’s CSO Samson Mow also called the bottom a few days later (BTC @$7.2k on 12/11). Global macro PM Timothy Peterson, CFA, said his metrics indicated that the 2019 BTC bubble would fully pop in mid-Dec., and that then he would be calling the bottom. TradingView’s #1 ranked bitcoin analyst, Jacob Canfield, thinks one final dip to $6.7k in Jan will be the bottom. Capriole Investment’s Charles Edwards believes we won’t see BTC at <$6k ever again.
Still, some of the top TA traders think the bearish trend isn’t over, and that BTC will tread lower over the coming months. Who knows? I thought we would see $5k in Q1 sometime before the Mar.-May run-up, but not sure. From the dozen tweets above, it could be that Jan will be the bottom. Anyway, a new decade starts in a few hours (technically, I guess not till next year lol), and my bet is that BTC will again be the best-performing asset of the next decade, handily. If you’re still skeptical, maybe just buy one, and see what happens lol. Well, be safe tonight! Happy New Year, gents!
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Post by biposter on Feb 9, 2020 20:21:10 GMT
Is this the start of the bull run? Who knows. Could be. Could see a quick pullback shortly. Anyway, someone’s got too much time on his hands, but it is an epic edit, LOLOL:
The S/F model (95% R^2 w/ cointegration) says $100k within the next two years. Math and statistics say the model is sound. Simple economics would suggest the same: If new supply drops and demand remains constant (actually, throughout its 10+ yr history, demand increases, at minimum, 2x/yr), then what might happen with the price? It took off after the last two halvings (in 2012, 2016). Here’s what happened after the 2016 halving: So bitcoin’s third halving is in three months (~May 9th), which means that there will be 50% less newly-minted bitcoins available for miners to sell. Mining is an intensely competitive, low-margin business, so most block-reward bitcoins are immediately sold to cover opex. After the halvening, you’ll have only half that supply flooding the market. So, a drastic cut in (new) supply, a mad rush in demand as this catalyst approaches… Get ready for global FOMO. Btw, if you’re fine with the risk, some of the top TA traders believe that s--tcoins will give you a better pop than BTC. Some of the top altcoins oscillate and orbit around BTC’s price. So as long as BTC really is in a bull cycle, these s--tcoins may give you better returns if you don’t want to do a BTC 5x leverage lol. Or a 100x leverage on Bitmex LOL! They’ve already pumped more than BTC. Here’s a knowledgeable TA trader and some of his top altcoin plays: Of course it’s the s--tcoins that pump the hardest. Here’s two of the worst: $BCH YTD: +140%; $BSV YTD: +275% lol. So from this Josh Rager video, it seems these are his favorite altcoins: $ETH (Ethereum), $XTZ (Tezos), $LINK (Chainlink). But he says his favorite is $ZEC (Zcash). @satoshiflipper on Twitter has been nailing it. His favorite altcoins are $ETH, $LTC (Litecoin), $LINK, $XTZ. I think he also likes $EOS. But when it’s altseason, everything pumps, so don’t fight the trend. Literally, throw a dart at any of the coins on coinmarketcap.com lol. Still, everything’s pumped hard over the last month, so maybe a pullback soon?
Keep in mind, there is a CME gap at $7,700. Will it fill? Doubt it, but you never know. It’s always filled in the past, so….
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Post by biposter on Apr 22, 2020 18:21:01 GMT
Wow, it’s been a wild month. When that virus hit and the market crashed, it triggered a vicious cycle of cascading liquidations on Bitmex. Levered longs got wiped out. Had Bitmex not had that ddos attack -- or, more likely, had Arthur Hayes not intentionally shut down his exchange lol -- BTC probably would have gone to $0 lol. Crazy. Well at least it wouldn’t have gone to negative lol. Well, here’s a very informative podcast interview from a miner’s inside perspective on what we might expect to see. The bitcoin halving should take place ~5/11. If BTC’s price continues to tread right around here, it’ll be below the breakeven price after the halving, which will force all the inefficient miners (those with old mining equipment and/or high electricity costs) to capitulate. As he says below, that could cause a few months of continuous selling pressure. After capitulation, the efficient miners should benefit after the protocol’s algorithm difficulty adjustment. Then BTC should start its move up. As he states below, the overall daily trading volume dwarfs the total daily sum of bitcoin sold by miners. But traders will get back in, so it’s basically churn. Miners’ sells are permanent. Here’s a good article explaining it: coinmetrics.io/coin-metrics-state-of-the-network-issue-44-understanding-miner-economics-from-first-principles/?clid=00Q1I00000KJy0CUAT. But definitely worth listening to the full podcast interview below. Here’s part of the transcript: So if he’s correct, my guess is that it could tread ~$5k-$7k until July. Then it starts its move up to $10k ~Aug/Sept. EOY it hits its ATH. In 2021, it begins its steep ascent to the S/F target of $55k-$100k lol. I guess we’ll see lol. If the S/F model breaks down, I’ll still take $25k in 2021 lol! If you’re interested in getting in, instead of trying to time the lows, I’d recommend DCAing in weekly. All of crypto, incl. Bitcoin, is risky, but if you’re not fazed by all that risk, I’d recommend 80% BTC, 15% ETH, and 5% LINK. Just remember, when BTC drops/tanks, alts will sink/crash even harder lol. But if BTC takes off, alts will moon with real force. ------------------ stephanlivera.com/episode/162/Stephan Livera: So, Matt, I know you’ve done some pretty cool work here with this recent Bitcoin Halving and mining analysis research report just recently released and that is from 17th of March, 2020. So but let’s start with a little bit about you and what is Blockware solutions and how did you get into Bitcoin mining? Matt D’Souza: ...It was, you know, I really started investing in this space in 2015 and 2016. I launched a digital currency hedge fund called blockchain opportunity fund in 2017 and it was far more Ethereum focused, far more web 3.0 focused. And then probably around quarter three of 2017, a friend of mine had brought up these arbitrages in the mining space and kind of showed how there’s, there’s a lot of friction between the U.S. And China. And that’s really how we launched blocker solutions as hardware brokers. So what’s critical is that allowed me to see how much infrastructure was getting spent around the world for Bitcoin mining rigs. You know, people discuss how there’s ICOs and other things getting the spending on web applications for Ethereum and web 3.0. The amount of spending in the Bitcoin network, the network effects that’s created dwarfs web 3.0 and, everything else in blockchain, you have billions of dollars worth of infrastructure, electricity spending, facilities spending to secure the Bitcoin network. Matt D’Souza: ...So over the past 12 months, we’ve probably sold about 30,000, 86 to the U.S. market, placed about 25 megawatts worth of miners in hosting facilities. And in quarter four of 2019, I launched another fund. It’s a Bitcoin mining fund with my partner Mike Stelzner. It’s called Blockware mining or mining in Kentucky. We’re running about 180 Petahash and it’s a three prong strategy. Matt D’Souza: We self mine, we resell our mining rigs, we allow miners to mine in our facility. And what we’re doing is we’re looking to bring as much hash to the US as possible and we’re making it really easy for us miners to mine in the U.S. And do it economic. We’re getting miners all in costs about 5.8 cents. They don’t have to wait two months or two and a half months for lead times on mining rigs. And they have an exceptional group of technologists that are managing these units… Matt D’Souza: If you’re, anyone who’s involved in Bitcoin for the most part is pretty bullish. I mean, all these investment funds and HODLers, they’re just about all alone only, and they have high conviction, but the thing is they could buy their Bitcoin and in two weeks they could, they could lose conviction and sell and they’re done. The miners are truly the most bullish. They have the highest conviction. They’re buying mining rigs with 3-4 year life cycle. They’re buying a hosting fee. They’re buying a warehouse and repurposing it into a mining facility, ripping up the walls, putting in these industrial grade fans. And those have five year life cycles. That’s what they’re getting married to three to five years. And they’re putting, they’re injecting all their capital in there and they may not earn back for 18 months and they can’t just turn around in two weeks and sell that stuff. Matt D’Souza: Right? It’s, illiquid. It’s not as repurposable these ASICs right? They’re mining rigs ASICs, only for Bitcoin. So they can’t change their opinions. They’re the ones with the highest conviction. But the thing is they’re getting their Bitcoin every day and they have to sell the Bitcoin to cover their electricity expenses. And that’s what’s going on in the space, which creates sell pressure on the Bitcoin network every day. You know, I think it’s 1800 Bitcoins a day, 54,000 Bitcoin a month. That is issued you know, pre Halving and that’s how much Bitcoin is released to miners. You know, when you think about how do prices get affected, it’s not, the trading volume on exchanges is really churn. It creates volatility and it affects price more short term. Right? BitMex had that liquidation. Bitcoin was at 7,800. It fell all the way to 3,800 but look, we’re right back at 6,600 right? Matt D’Souza: That’s churn and volatility from speculators. That’s not what affects the intermediate and long term price. What affects the intermediate and long term price is net cash in net cash out and miners, unfortunately are net cash out because they have to fund their electricity expenses. It’s not because they don’t have conviction, it’s they have a bill every month and they have to fund it, so we’re getting net cash out from the miners. They have to sell their electricity are their Bitcoin to fund electricity. Sometimes they’re buying more mining rigs and we need positive sentiment. We need positive sentiment from funds and HODLer’s to be buying bitcoin as well to counterbalance the mining sell pressure. Stephan Livera: Yeah. That’s a really interesting way of putting it because you’re saying basically that investment funds might, although generally are bullish, they have the ability to exit at any moment and walk away if they get tested. And then similarly now I think longer term HODLer’s , they have pretty strong conviction as well. But they can theoretically exit their position at any time. But I think the point you’re making here is that miners, because of their big upfront investment, they can’t just walk away at the drop of a hat. And so they’re in some way, there is a commitment there and that’s a pretty interesting fact that you could almost say a Bitcoin miners are more bullish than you are, than the typical HODLer. Matt D’Souza: Exactly. And when you put things into numbers, 54,000 Bitcoin released every month is a quarter billion dollars. That’s $540 million of potential sell pressure going to miners to sell for their electricity. Now they don’t sell it all, but that’s the potential. Now, how do you counterbalance that? Are funds and HODLer’s raising a half a billion a month, no chance. And of course miners aren’t selling all that, so it’s not as pessimistic as I initially proposed it, but that’s the potential. And realistically, and that’s what we show in the paper. We only model out how much electricity needs to get spent and that accumulates to about 40 to 50% of that, you know, half a billion. That’s what needs to get spent unless a mine, you know we’re getting some interesting minds out there and are raising a ton of capital. You know, it’s fun. It’s there. VC funds, hedge funds, they’re raising a ton of capital, they’re getting excellent balance sheets and they’re just accumulate in the Bitcoin. So those miners are high conviction. They’re paying electricity with cash rather than their Bitcoin and they’re holding all their Bitcoin. Those guys are the best for the network because they’re truly removing supply off the network. They’re getting all the new Bitcoin and they’re holding it. That is excellent for the price of Bitcoin. Matt D’Souza: He raised some family office money and they launched like in November of 2019 you’d think? All right halvings coming up they’re buying next gen’s no, they have sub two cent power and they went and bought a bunch of the ebangs because their earn back is two or three months. So markets are efficient. I think cryptocurrency markets are the least efficient market of markets, but it’s still a market. And when you pour water at the top of the mountain, you have gravity and the water is going to go to the lowest point. It’s going to trickle down to the lowest point. And that’s what’s going to happen in the mining rig space. The S9’s, if someone has 6 cent electricity or 5 cent electricity, they have to sell it. You won’t be able to mine it at a hosting facility and it’s going to the cheapest power in the world. Matt D’Souza: It’ll, it might take three times. They might sell it to someone with three cents and then, and then it’s going to become unprofitable for the individual three cents and he’s going to sell it to someone with subsidized power and it’s all going to flow and trickle down to the cheapest power in the world. And these S9s are flowing to Kazakhstan, they’re flowing to Venezuela, they’re flowing to subsidized power in Iran. We have a client in Arizona who’s got solar power and he’s got zero cost and they’re flowing over there. So markets are fairly efficient. These S9s many of them are going to shut off and become obsolete. Many miners are just not going to want to deal with doing the shipping and stuff and they’ll junk them, but other ones are going to flow to the cheapest power in the world. Someone may have a negotiated deal with the utility where the power is basically free or they’re just paying variable costs, you know, the cost to deliver the electricity. So that’s how it’s going to work. These will disperse a cost across the globe and get to the cheapest power. Stephan Livera: Yeah, I love that insight. I think that’s a very underappreciated point and that really comes through very strongly from your report. Could you please just outline a little bit around what the different rigs are? So you’ve got the old generation Bitmain S9 and the next generation S17. Can you just spell out a little bit for the listeners around, you know, what’s that dynamic there and what are the different generations? Matt D’Souza: That’s a great question cause this really influences the market. I think we focus on 2, units, the S9, which is 13.5 Terahash and consumes 1400 Watts. Now the S17 plus, which is what we’re running at Blockware mining and that is 3 Terahash and consuming 3000 Watts. So it’s about, it’s about 2.1 times the amount of energy consumption, but it’s about 5.5 I think it 5 or 6 maybe. Yes, 6 times the Terahash output. So 2.1 more watt consumption, but six about six times the Terahash output, right? So, you’re consuming 2 times the Watts, but getting 6 times the output. That is radical efficiency, significant efficiency. So what does that, what does that do? You know, before I needed to run 70 machines, 70 S9’s to get one Petahash now I’m running 14 machines to get one Petahash 70 S9 to get one Petahash, 14 S17+ to get one Petahash and the watt consumption, you’re running the math, you’re I think it’s so 14 x 3000 Watts = 4.2 Right? Matt D’Souza: And the S9, 1400 Watts times, 70. Here I got my calculator eight times 1400 that’s 98,000 Watts. So it’s significantly more efficient. And what that does is it reduces the impact of electricity because you’re consuming less Watts to get more hash. And that’s why it keeps, and that’s why it keeps these high electricity miners in the game. So people with 5 cents, 6 cents that are at hosting facilities, they can mine very profitably if they’re in the NextGen. But if they have S9’s, they’ve blown out, you’ve gotta be two and a half cents or lower because of, you know, difficulty in the price of Bitcoin. So it’s a complete game changer. Stephan Livera: Yep. And so, I guess that’s, so you’re outlining there, why if you have a high electricity cost, not like crazy high, but like reasonable in the high, in the higher ranges, you can still make it work with next generation hardware. And then you’re saying also that if you have in the lower range of electricity costs, right, you’re in the better and the you can make a work even with the old hardware. Now the other question I guess is it just that because of the capital expenditure required to get the new hardware, that’s why sometimes people will stay using the old hardware if they have a good elctricity cost. Matt D’Souza: You hit it on the head. There’s an opportunity cost, the opportunity cost of depleting your Bitcoin treasury to upgrade to NextGen. If you’re at two and a half cents or lower, it doesn’t make sense. You’re better off holding the Bitcoin. You’re not really doing much for your, for your shutoff price. You’re not really lowering your breakeven price that much and it just doesn’t make sense to take on spending, you know, 2000 or 2,500 for NextGen depleting your Bitcoin and it’s a game of marginal returns. Matt D’Souza: You’re hitting marginal returns cause your electricity expense is lower. But if you’re at 6 cents, you have no choice. You got to get the NextGen. And that’s what’s really cool about this and how we’ve modeled it all out. You know, Blockware mining. We’re at 5.5 cents and we’re able to, we’re better off not depleting our capital towards infrastructure. You know, building out a facility transformers, because we’re in the newest technology, the most efficient technology. So we’re actually far better off having the 5.5 cent rate, not deploying 150 or $300,000 per megawatt for transformers, switch gears, electrical infrastructure, paying for management, paying for a facility, rent, all that stuff. We’re better off deploying all that capital just into machines maximizing our hash. And it’s because the 5.5 cents isn’t as impactful to us because we’re in such efficient machines. Stephan Livera: Yeah. Right. And just for some context for the listeners just reading from the chart here at 5.5 cents electricity rate per kilowatt hour. The break even costs if you are on S9 is $7,762 Bitcoin price. But the break even cost at S17 is $2,700. So it’s a big difference there because you’re using the next generation hardware. So I think this is a much more accurate way to think of this idea of shutting off. And so Matt, could you just explain a little bit around this idea of miner capitulation and then why is that so commonly misunderstood or what’s wrong about people who say “Oh miners are going to capitulate and it’s all over for Bitcoin”? Matt D’Souza: It’s I call it a healthy cleanse. It’s look at what happens. It’s an efficiency. We’re creating efficiencies in the market. You know, I think one of the biggest, I don’t want to get too deep into what’s going on with the economy and all that stuff. It’s going to be a big tangent, but when you do bailouts and all that stuff, you’re keeping inefficient companies in the game. There’s things that you need to bill out and kind of intervene a bit, but there’s no reason everyone should get a bailout. If you’re an inefficient company you go through bankruptcy, an efficient company comes, takes your assets and takes pieces of your departments that are healthy and profitable and the stuff that’s unprofitable gets wiped out and that’s healthy for an economy. Mining is one of the best examples of this. Matt D’Souza: You get a miner who overspent on their facility, have S9s running, running at 7 cent a watt electricity, they should get wiped out. They, they are going to get blown out. And what happens is there’s 12 and a half Bitcoin that’s released that’s going that every, you know, every block that’s going to go to whoever is mining. So once miners, when the price of Bitcoin goes down and those miners shut off, when the price of Bitcoin goes down, it creates margin pressure for everyone on the network. Now when the inefficient miner shuts off the Bitcoin he was earning, it gets distributed to everyone else. And that improves the margins of the miners that survive. And that’s what’s critical. It’s a self correcting mechanism. Miner capitulation is about difficulty and then also inefficient miners blowing out the inefficient miners blow out difficulty adjusts right? Right now in a couple hours, difficulty is going to adjust 60 or 70%. Matt D’Souza: It’s going to be one of the largest ever. The price of Bitcoin went down. Everyone’s experiencing margin compression. All these miners running S9’s probably have shut down and we watched the pools. All the Asian pools were really shutting down. So I think it’s a lot, in Russia and China that are actually shutting down the S9 there. They’re no longer gonna earn Bitcoin and that Bitcoin is going to go to the guys who are running S17s and who are running efficiently and their margins are going to get better. It’s going to, right now, Bitcoin’s at 6,600 in, in a couple of hours as difficulty adjusts 16%. It’s going to be like Bitcoin being at 7,800. That’s how it works because the margin, because of difficulty, profit goes up 16% and that’s what’s critical. Capitulation is a very good thing. It’s removing the inefficient miners. Matt D’Souza: They no longer get their rewards, their rewards get allocated to the efficient miners. The guys that have deployed correctly that have low electricity and those are the strong hands. We want Bitcoin in their hands because they don’t have to sell as much Bitcoin. Their margins are good. They don’t have to sell as much Bitcoin. There’s less sell pressure on the network and Bitcoin price could increase. I almost think of it like the equity markets. Think about like Fidelity Contra or Vanguard account. These are the large funds who know what they’re doing and, and when the market drops a bit, they don’t just, they don’t sell. They’re coming in and they’re supporting the market and they’re buying and these equities, they go into strong hands and they have a time horizon of one year, one, one to four years. So coin is getting, when you get miner capitulation, Bitcoin starts getting allocated to the efficient miners with strong balance sheets, low electricity rates, the proper mining infrastructure. And it’s, it’s getting accumulated with guys who’ve been doing this for years who have seen this show before and they’re going to be holding that Bitcoin and now you’re taking Bitcoin off Bitcoin supply off the market and you’re reducing sell pressure on the network. And that’s what positions us to move up to the next leg in the price of Bitcoin.
Stephan Livera: Yeah, that’s really fascinating. So I guess just to summarize for listeners, it’s something like as the Bitcoin price tanks, some miners have to shut off, right? The inefficient miners have to shut off and it becomes more profitable for the better miners. And also we get the downwards difficulty adjustment, meaning it becomes slightly less difficult to mine that Bitcoin. And that is what in turn rewards the best miners because they can now make more for the same amount of work that they were doing. And then as you were saying, they’re the strong holders they want to hold. And so that in some way diminishes or decreases the downwards sell pressure that exists just permanently or just continuously on the network. Matt D’Souza: You’re writing our second report. You got it. Stephan Livera: No, I think it was a, it was a great explanation from you and from reading the report. I think that was really interesting. And so let’s now that, what we spoke through, there was like the example where the price goes down, right? We have a crash. What, can you just talk through what it looks like when the price is on the bull run? Like when the price is rising, what does it look like? Does that invite more people into the market and then some of those people are inefficient and then they just get wiped out in the next crash? Matt D’Souza: Yeah, it’s totally cycles and just, you know, you explained it really well. I think we really need to give a tip of the hat to Satoshi. I mean, one of the most ingenious pieces of the Bitcoin network is difficulty. It’s just a self correcting mechanism that maintains the margins of the efficient miner. When too many miners come online and Bitcoin corrects, you know, too many miners come online, margins get compressed, Bitcoin corrects and miners have to shut off. Then difficulty kicks in, improves the margins for the efficient miners. And now what you just discussed, it’s going to be the opposite. Difficulty is going to, it’s going to Bitcoin, when Bitcoin starts to rise, everyone starts buying mining rigs. You know, it’s human psychology. It’s truly a market. People don’t buy low and sell high. Most people buy high and sell low, right? Matt D’Souza: They, it’s fear and greed. So when Bitcoin starts to rise, all these miners start deploying to mining rigs again and, and there’s that finite amount of Bitcoin that’s released. So it’s getting distributed amongst several miners and that’s what makes difficulty go up and difficulty. Like I said, it’s a self correcting mechanism. Difficulty is going to punish all these miners that have chased price and deployed mining rigs. If you’re going to get difficulty’s going to go up. Mining margins are going to compress. And once Bitcoin corrects in price those inefficient miners get wiped out again, and the cycle continues, then difficulty will be a positive where it’s gonna adjust lower and restore margins. So it, it keeps things in a band. Difficulty keeps margins in a band. And when price gets too high and too many miners come online, you get margin compression. And when you get miner capitulation on the downside, bitcoin price corrects miners shut off, difficulty adjust favorably and margins get. So it’s why I say difficulty is this ingenious self-correcting mechanism. It’s kind of a gravity. And what it’s doing is it brings margins back for those efficient miners over the intermediate and longterm. Stephan Livera: Very cool. And so if we, so we’ve spoken through if Bitcoin’s price goes down or up just on its own. Now, if we talk about actually the halving impact, right? So the amount of block reward or block subsidy to be precise, halves, can you talk us through some of the ways to think through that? Matt D’Souza: So it’s, it’s going to be extremely healthy. We, believe that the miners at about 6.5 and there’s differences. You know, you actually brought this up, I kind of missed it explaining it. But if you’re paying 6.5 cents, that’s not horrible. If you’re not paying anything towards capex. If you’re just paying for machines and you’re getting 6.5 that’s pretty good. If you’re getting three sons, you’re paying for infrastructure and all that stuff, then that’s how that balances out. So that’s critical. I don’t recommend miners who are paying 6.5, 7 cents, eight cents, and they’re running it at their house, paying for their own infrastructure, transformers build out, they’re going to get wiped out. That’s horrible. So that’s number one. When you see those layers of people at 5.5, 6 and a half, 7, they’re in hosting facilities, but that’s also their break even price at the end of the day. Matt D’Souza: So I just wanted to clarify that. Now when you’re discussing the halving and what’s happening, we encourage the Halving. We don’t fear it. We welcome it because we understand what it’s going to do and what it’s going to do for our profit margins over the next six months. Being at our layer, 5.5 for blockware mining is extremely healthy. What’s going to happen is it’s going to be, it’s going to be like an onion. There’s going to be layers that peel off this onion, those S9s are gonna blow out. If Bitcoin is still around 10,000 after the Halving. S9 are going to blow out, that’s all the old generation. So S9 from 7 cents to probably two and a half, three, two and a half cents, they’re going to blow out. They’re going to shut off. Now you have that other tier, of those T2T30’s InnoSilicon, they’re like mid generation. Matt D’Souza: Those are all going to blow out too, up to probably five cents. They are going to blow out. And if Bitcoin happens to be at five, six thousand after the halving even six and a half, 7,000 miners with 7 cents running S17s are going to have to shut off. So people at six and a half and lower running next gen, they’re going to have an amazing difficulty adjustment, right? When all those miners shut off, difficulty is going to adjust significantly. 30-40% and their margins are going to come back. There’s going to be friction. It’s not like a light switch. You know, it takes time for these miners to shut off because a lot of these miners who are in hosting contracts, they don’t, if they don’t pay their hosting contract, they lose their equipment. So they’re not going to just let their equipment go. Matt D’Souza: They’re going to wait to deplete their balance sheets and all that. So it might take two to four months of friction for all of that to wipe out. And there’s other large miners who have negotiated rates with utility companies that they have to consume a specific amount or their 4 cent electricity turns into five and a half. There’s all types of deals out there that are going to make some miners operate at a loss, which creates more sell pressure ’cause all the Bitcoin they’re mining is going to get sold and then they have to tap into their treasury and that has to get sold too. So that’s more sell pressure. So we need all that to blow up. I think, I don’t like price targets, but if Bitcoin is in these suppressed levels through the Halving, it may take another two or three months of extreme miner capitulation for all those miners to blow out. And then difficulty is going to adjust and profit margins are actually going to be better for these efficient miners running the S17 pluses and in that six cent band or lower their profit margins are going to be better after the halving than before.
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