Why leave cash languishing in a savings account when it could be earning six percent in a USD stablecoin account?
My head has been racing with ideas recently. I had trouble falling asleep last night and got woken up by Elder this morning when she crawled into bed with me. Neither of us could fall asleep after that, so here we are, up an hour before our usual wake up time, on the couch, both of us with our laptops open. She’s working on Typing.com, and here I am with you.
Yesterday I opened a BlockFi account. They’re currently offering six percent on BTC and eight percent on Gemini and Coinbase’s USD stablecoins, as well as another Ethereum based USD stablecoin called PAX. The rates seem seems really high until you consider their lending options: over nine percent on BTC-backed loans. (We’ll leave the discussion of that for another day.) So they’re taking a small origination fee and a two or three percent spread. Seems like a decent business model. BlockFi was the first product on the market like this; I remember hearing them on a podcast last year, but more and more competitors are springing up such as Crypto.com and now Blockchain.com
BlockFi uses Gemini for custody, which is good, but they’re not FDIC insured, so there’s a risk that customer funds could be lost if they get hacked, but I rate that risk low, since Gemini is focused on providing crypto custody services to the traditional finance industry, and they’ve got good controls. Still, I’m not ready to go all in with my funds quite yet.
I think that earning interest on my long term BTC is a great idea. I’m not ready to hand them over the bulk of my hard wallet, but I’m willing to try a small transfer until I feel more comfortable. The account signup process was pretty quick, I was able to sign up as an individual in a matter of minutes, and only had to provide my address and SSN for KYC.
Compared to the rates that Compound is offering right now, BlockFi is way higher. Since Compound is an Ethereum smart contract platform, they use wrapped BTC (which could cause a taxable event) and there is inherently more of a risk of a block swan like a contract failure or hack. BlockFi is relying on more traditional cold-storage custody solutions.
I didn’t want to break out my hardware wallet yesterday to move funds over to BlockFi, since I’d rather use it as an alternative to a savings account, so I started a small transfer from my bank in order to deposit to a USD stablecoin. That will take several days to clear. In the meantime, I’ll probably be transferring all of my LTC over there, (since it’s basically worthless to me at this point anyways,) and most of my ETH. I haven’t decided what to do about my BTC yet, but will probably be putting a fraction of my funds there at some point.
The advantage to keeping funds in BlockFi compared to traditional banking account is obvious, if one is comfortable with the risk. Missus is not, and curtly said “we’re not keeping our emergency fund in blockchain,” when I raised the subject. I however, am less risk-adverse than her, so I’m looking at it as an option to keep cash available for long term goals while earning considerable interest on it. For example, I’ve been planning on funding my IRA this year, instead of using the money to dollar cost average into Bitcoin, but I didn’t want to actually move the money to my IRA until near the April 15 deadline next year. In the event that I do need the funds for an emergency, I don’t want to deal with the penalty and hassle of withdrawing it. Putting it in BlockFi will allow me to compound it, as well as easily withdraw the entire balance back to my bank account when I’m ready.
If you are sitting on a lot of cash right now, and you should be saving as much as possible during these times, you may want to consider giving BlockFi a try. Please use my referral code.
Job search, investing performance, and BTC reFIREment plan
So here I am writing at night again today, as getting up early just hasn’t been my thing lately. The girls are enjoying the quarantine bubble that we’ve formed with the family down the street, and they spent most of the day outside playing today. It was the most productive day I’ve had in a long while.
I applied to two jobs the past two nights, one, a fast-growing firm that provides AI-enabled insights for customer data, Outlier.AI, and a startup trying to “cancel the endless cycles of extractive capitalism,” Good Money.
Outlier is a rather large firm that has an office nearby and meets my salary requirements; Good Money is an unknown, but it’s a startup and the culture looks so awesome. I’ll keep applying to my dream list over the next few days: Square, GitLab, Stripe, Twilio. I’m also continuing my consulting gigs, but I don’t know that I can grow that fast enough to reach my goal. We shall see.
Other good news today is that the retirement account hit a new all time high. I was finally able to figure out my actual account performance by looking at my cost basis gains.
APPLE INC (AAPL)
AMBARELLA, INC. (AMBA)
AMBARELLA, INC. (AMBA)
AMBARELLA, INC. (AMBA)
AMAZON COM INC (AMZN)
AMAZON COM INC (AMZN)
ACTIVISION BLIZZARD INC (ATVI)
BAUSCH HEALTH COMPANIES INC (BHC)
8POINT3 ENERGY PARTNERS LP (CAFD)
8POINT3 ENERGY PARTNERS LP (CAFD)
3D SYSTEMS CORP (DDD)
3D SYSTEMS CORP (DDD)
FORTINET INC (FTNT)
NVIDIA CORPORATION (NVDA)
OCEANEERING INTL INC (OII)
2018 Realized Gain/Loss
Obviously Amazon and NVidia were the big dogs here. My portfolio was imbalanced with the sheer amount that I was holding there, and I had a bad feeling about the economy. I wanted cash in hand, so I sold about half my position via a trailing stop. It looks like genius in hindsight.
2019 wasn’t too great from a gains perspective. On paper it’s only about 4%, but realistically it should be more since I was covering positions, covering my initial capital investment while retaining the rest of the position, risk free. I was able to take profits on GBTC, Paypal, RestoreBio, and Yext, but lost most of it in Aurora Cannabis and Cronos Group when weed stocks collapsed. I also got stopped out trying to play a very volatile penny stock involved in Bitcoin mining operations.
2020 hasn’t seen any major sells, my trading is automated now via my value averaging protocols. Very low volume, so to speak, and a modest 4.7 percent realized gains. My unrealized gains, however, are sitting at a whopping 38.54 percent! Most of that is Amazon (2014), NVidia (2016-17), GBTC, (2019-20; about one-third of my total portfolio,) and Netflix (2013). Major losers include Sierra Wireless, Hive Blockchain Technologies, FireEye, Overstock, and 3D Systems Corp. I’m currently holding thirty-one positions in all, seven of which I’m currently value averaging into.
Before I go tooting my own horn too much, though, I’ve got to acknowledge a bit of cherry picking here in the results. Due to my original brokerage being acquired, I don’t have access to my full trade history prior to the last four years. I’m sure it’s ugly. It’s not really fair to cout gains on positions I’ve held since 2013 while tossing out the ones I lost on during that time frame. I also closed out my traditional brokerage account, about one-fifth of my IRA at the time, and put it into bitcoin in 2017, before it broke 10K.
I am obviously putting my money where my mouth is with Bitcoin. Between my hardwallet and GBTC holdings, I have well more than half of my liquid net worth in the big orange coin, and a smaller bit more in Ethereum and other tokens. I’ve done the calculations and am looking at a BTC price target of $67K, at which point I will have more than enough to pay off all mortgage and student loan debt and establish my financial independence. My target date is sometime before the next halving, which I based off of the stock to flow model, which predicts BTC ranging above $100K before then.
There are lot of details to be worked out before we get there though. Obviously taxes is going to be the big one. I assume we’ll be looking at long term capital gains in the case of Bitcoin. GBTC gains in my IRA are untaxed, but withdrawing anything will be subject to income tax plus 10% early withdrawal penalty. So the best strategy right now is to continue to accumulate and hodl. Since I think BTC is going to accumulate price much faster than my four percent loans, it makes more sense for me to continue to accumulate BTC while making the regular payments.
One change I will be making moving forward is that I am going to resume contributions to my IRA, which I suspended in favor of buying bitcoin directly the past few years. I am missing out on the tax savings from my contributions, which is going to be a big factor next April given my expected increase in income. Once we’ve topped that bucket off, I can make a final decision on where my additional savings will go.
The Devil’s in the details: fees, murky exchange rates and other issues mar what should be a promising crypto to fiat instrument
This sponsored tweet has been coming up in my feed a lot:
I’ve been very interested in crypto-backed credit cards for some time now, (remember TenX, anyone?) and thought I would take a deeper look at this. And since my wife and I are no longer that interested in hacking frequent flyer miles, I’m very interested in something that advertises six percent back in rewards. So I signed up for a BlockCard account and did some testing with it. Let’s just say there’s a couple hiccups with it.
The Blockcard is basically a pre-paid Visa card. You can deposit funds from 13 different tokens including BTC, ETH, LTC, and others, and while they say you can “stay in crypto” until you need to spend your funds, all deposits are converted to the Ternio utility token, TERN, upon deposit. What is TERN, you ask? That’s what I wondered as well, so I took a look at the whitepaper.
The paper, published sometime prior to the TERN token sale in April of 2018, describes it as “built to transform and ultimately disrupt the $224 billion per year digital advertising approach.” Basically, they’re building a platform to connect advertisers, publishers and users, providing scalability, auditing, and payments. Of course, TERN tokens are used for the payments, and must be front-loaded to participants accounts. According to the whitepaper, Ternio relies on an internal blockchain called Lexicon, a modified version of IBM’s Hyperledger protocol, and the public token, TERN, on the Stellar network. Lexicon purportedly runs over a million transactions a second, and was accepted by Amazon as an AWS Advanced Technology Partner a little over a year ago.
The rest of the whitepaper describes the projected use case for the Ternio netowork, token sale and airdrop and social bounty program. The BlockCard is also described. That said, the Ternio team seems to have dropped their focus on advertising, and now seem to be focused primarily on building a payment network and driving adoption of the BlockCard.
Using the BlockCard
I signed up for an account a few days ago and was immediately struck by the fee disclosure. First off there’s a $5 monthly “subscription” fee if you don’t spend at least $750/ month. Deposits, withdrawals, and point of sale (swipe) transactions are free, but using the card as a debit, with a PIN transaction, will cost you, as will any ATM cash transactions, even declined withdrawals. They also charge ten dollars for a physical card, or you can get a metal one for fifty.
To BlockCard’s credit, they claim that theses fees are required by their banking partners.
I needed to load at least ten dollars on the card to make it usable, so I sent eleven dollars of BTC over from Ethos wallet when I ran into what seems to be BlockCard’s biggest problem. BlockCard undervalued my deposit. I was surprised when the transaction completed and my card only had a total balance of $9.37. The transaction history actually showed the value at a more reasonable $10.71, but it still showed an inexplicable deposit amount of 1.52 BTC (I wish!) instead of the actual 0.00156. This still left me with sixty cents under the ten dollar threshold, so I went ahead and sent a transaction in ETH. There seemed to be less lost on the conversion, $9.98 sent versus $9.85 deposited.
In total, I deposited $20.99 cents to my account (not including on-chain transaction fees), after which my account showed a $17.99. This was quite concerning, but after a few more minutes the balance updated to show $20.56. Less dramatic, perhaps, but still a problem if one is expected to spend $750 a month on the card. That’s a lot of slippage, likely more than a $5 monthly membership charge. On top of all this, the UI for the website seems to be extremely slow to update the conversion. I noticed several times when I logged in and the balance didn’t update for almost fifteen minutes.
A few days after my initial deposit and my balance flipped back to eighteen. I’m not sure if this is the buggy UI or just fluctuation in the price of TERN. The FAQ indicates that the value of TERN is pegged against the USDD stablecoin and is “tied to TERN on the BlockCard ecosystem”, independent of trading on any other exchanges. “As users deposit on BlockCard, the value of TERN increases. As people spend, the value decreases. TERN is never issued at less than $0.008”
This is all very problematic from a transparency standpoint and seems very ripe for abuse, especially since their use agreement allow up to 36 hours for deposits to clear. Without any clear exchange rates as part of the deposit process, users are basically at the mercy of BlockCard to treat them fairly. With no clear indication of the TERN/USDD price, users are left to do the math to make sure they’re not getting ripped off. Even by my own calculations, my current balance is being valued at 0.0069.
So does this mean that incoming transactions are converted to TERN at the 0.008 exchange rate, but then immediately lose value upon being credited to a user’s account? If this is accurate, it seems like a very bad deal for users.
The marketing for BlockCard touts the six percent rewards on spending. While on the surface, this seems like a deal, until you find out that these reward levels depend on staking TERN.
At the base rate of $0.008 TERN/USDD, that’s a minimum of $240 worth of TERN for the bottom tier, and almost twelve hundred dollars required for the top. Granted, one might be able to cut that quite a bit if one is able to acquire TERN at a discount on a exchange, but given the hype that BlockCard is putting on the rewards aspect of their card, it’s disingenuous not to mention the staking requirements on their marketing.
There’s other issues with BlockCard as well that are worth mentioning. For one, I’ve been unable to use the card since I don’t have the option to complete KYC on my account. I’m guessing I have to request a physical card to do that, but I’m hesitant to do so since it’ll cost me ten dollars. I’ll likely reach out to BlockCard for confirmation on this, and just to be fair I’ll give BlockCard’s CEO Ian Kane a chance to respond to this article and address any inaccuracies.
The last issue is related to taxes. Sending depositing crypto to your BlockCard account and automatically converting it to TERN qualifies as a taxable event. Spending the funds on the card does as well. Kane said in a tweet that they plan on adding CSV export for transactions, but for now users will have to copy and paste the details manually.
Finally, I want to be clear that this post is not just meant to be a complete dump on the work that Kane and the BlockCard team have done. They’ve done well so far to put together this link between cryptocurrency and traditional payments system. While I’ve yet to use BlockCard for a payment, it does seem to be one of the fastest ways to spend crypto to fiat. My concerns are mainly with the execution of the crypto components of the system. Using TERN as an intermediary currency, without clear indications of how either deposit or balance calculations are converted, is especially troublesome. And the prospects of their so-called rewards system is completely offset by the staking risk, which is again compounded with the lack of transparency in the exchange value.
For now, I’m going to hold off further judgement on BlockCard until they’ve had a chance to respond.
I spent some time this weekend working on my GBTC price predictor. The original idea behind this tool is to take the price action of BTC while the market is closed and use it to predict what will happen to the price of GBTC after the market opens. The original implementation uses the last close price of GBTC, and the price of BTC at the same time, then calculates the premium. It then retrieves the current price of BTC, then uses the calculated premium to determine what the current price of GBTC should be. It’s rather rudimentary, but serves as a quick and dirty calculator.
My hunch is that there are huge arbitrage opportunities to be found within the price action, especially when there are big moves in BTC’s price action. The big unknown, however, is the GBTC premium. The actual underlying value of a GBTC share is 0.009BTC, but the actual trading price fluctuates around 0.0012, so there’s some possibility to take advantage of this spread. We’re talking about the possibility of potential dollars in share price.
For example this morning, our calculation, based on the price of BTC at $7157, is that GBTC should be at $7.98-8.01 range. Here’s the current premarket spread.
The 7.82 bid order was quantity 800 about half an hour before open. Here’s the chart about five minutes after open.
The difficulty that we’re facing right now is matching the price action between the equity, GBTC, and the underlying crypto, BTC. For our inital purposes, it was enough to use the daily OHLCV data for the equity, and hourly data for the crypto. We only needed to track the crypto price at market close to get our initial premium value. But to do a proper arbitrage bot, we’ll need minute-by-minute data. This presents problems, since all of our work through the TDAmeritrade API has been via the REST API, and this work will involve streaming data via websockets, and likely some async programming.
It would be nice to be able to see the intraday price action of the GBTC premium. Right now our free-tier TradingView account only gives us the daily interval, so being able to chart this ourselves is one of our priority. From there we can calculate some sort of moving average and standard deviation to determine when a price is out of band, and represents an arbitrage opportunity. It might be possible to configure something similar with TradingView, but since they don’t support TDA brokerages, we would be subject to a fifteen minute delay on the GBTC data. There’s also the cost factor. As an OTC listing, GBTC trades still have fees associated with them, so any arbitrage situations will have to be large enough to offset the trade.
I’ve got lots of changes that I need to make to the code; right now I’m running into some testing issues related to monkeypatching out the API calls. I’m planning on doing some real time charting using the Bokeh library, and this will have it’s own set of issues, I’m sure.
It’s no secret that I am a huge bitcoin bull. For all my worries about risk and capital management with my financial investments, both equities and cryptocurrencies, I have thrown caution to the wind as far as bitcoin is concerned. I’d say that roughly two thirds of my total net worth is invested in either bitcoin or GBTC right now. Most of that is held directly in BTC in a hard wallet, and the rest via GBTC in my IRA.
About two months ago I started implementing a value averaging protocol to purchase GBTC. Each Monday, I would gauge the value of my GBTC holdings against a predetermined value, one-twentieth total capital times the number of weeks, and then place a buy or sell order, depending on whether I was above or below the target. The total capital that I planned for this deployment was about a third of my entire portfolio. I had set stops on several of my larger positions to gain cash, many of which triggered during the general market dip in 2019.
For the first fifteen weeks it was straight buy orders. I calculated the price that would trigger my max sell order, and on week eighteen, during the January run up, it triggered. Then the following week, I had a sell order. The last two weeks, as the price oscilated around the $10,000 mark, I was right on target, and didn’t have to place any large orders. During these few weeks, doubt began to creep and I found myself questioning the plan.
What if this was the start of the bull run to $50,000 or higher? Why would I sell? I questioned whether to break the plan and re-enter, or go even further and allocate even more than I had planned originally. I was able to squash this FOMO, and held firm. I had taken some profits, my position was up, and I would have at least another month to buy back in, as my profit taking had decreased my cost basis below my original target.
And good thing I did. Effects of the Coronavirus caused a selloff in the markets, and bitcoin has fallen with it, about fifteen percent. I’m still holding to the plan, and will wait until Monday to buy back in. Patience, patience.
Also, I continue to accumulate BTC on a weekly basis, although on a much smaller scale. I’ve written a Python script to purchase a small amount through Gemini and transfer it to my hardware wallet. I’ve got one address for myself, and one for each of my children. The script alternates between them each week, placing buy orders and sending the proceeds to each of our addresses.
I plan on sharing this script via a Git gist or something shortly. It’s part of a larger trade planning library that I’m working on, and I’ve got to triple check that I’m not disclosing anything that shouldn’t be made public. I’ll do the same with the GBTC value averaging results, but that will be more difficult to scrub.
A recent Medium post on 2020 IPOs got me thinking about places that I’d like to work. Part of me has no desire to go back to work for a large company, I did four years with a Fortune 500 company, and while it was good for a while, the environment became toxic and I wound up self-destructing util they fired me. I haven’t had the best track record with any jobs up until my present position, to be honest. The place I’m at now isn’t ideal, but I guess I’d rather be a big fish in a small pond, so to say.
Now while I have no desire to go work for a retailer, or an exploitative company like Instacart, if I was to go back to work at a large firm and trade my freedom for a hefty package, these are some of the ones I would be interested in.
One of the first companies on the list was GitLab. I’ve been a fan of theirs and have been using them over GitHub for the past few months. My university has an internal instance, and I’ve been using it a lot, figuring out how to use their CI/CD pipelines. They apparently have a culture of radical transparency, and have all of their guidebooks up online. Their interview and selection critiera are there, along with job responsibilities and performance metrics. Based on the compensation calculator, it looks like even a basic support position would be a step up from where I’m at today. It seems really appealing.
Stripe has been doing very well in the payments space. They’ve got no plans to go public, but have a crazy valuation. They’ve got a lot of remote technical opportunities that could be interesting. On the downside, they recently discontinued support for Bitcoin payments, although the CEO remains optimistic about cryptocurrency in general.
Not on the IPO since they went public in 2016. (Man did I miss that one…) Another payments company with several remote positions, as well as jobs in Atlanta, Denver, and Austin. Several front-end positions that I could qualify for, even with my limited experience. And the Cash App does Bitcoin, so it seems like it may be a good fit.
I used to be an advocate for Asana, but stopped using their software in favor of Basecamp. I originally skipped over them in consideration but just took a look at their job board. Nothing remote. I have no desire to move to San Fransisco, but if I wanted to move the family to Iceland it might be worth considering. I like how they have their values listed on their job postings, as well as this Day in the Life featuring one of their engineers.
I’m not a customer — get IRAs already! — but have been following them for some time and respect the efforts they’re doing to make investing more accessible. Fractional shares investing is a really good idea. And they offer crypto trading as well. No remote jobs available, but Denver is starting to sound like a good place to live. Go Broncos!
Not on the original list, but I’m adding it here after hearing Junayna Tuteja, TD’s Head of Digital Assets and DLT on the On The Brink podcast. She makes it seem like a really great place to work. A quick look at their job board, however doesn’t match anything crypto-related. There’s a couple contract positions in Omaha and New Jersey, not two places I have any interest in moving to.
The big news today seems to be a three percent pullback in the stock market due to Coronavirus fears, or the threat of a Sanders presidency, depending on who you ask. I wrote yesterday that Trump’s obsession with a health economy leading up to the election was leading forcing the Fed to inject liquidity into the markets, and that efforts were likely to fail at some point and lead us into a recession. What goes up, as they say… I also noted that the Coronavirus might be a big monkey wrench that throws us into global recession sooner than later. And while I haven’t bought face masks for my family yet, I am thinking about it.
This interview with Bitcoin bull Tim Draper was really interesting. The first two minutes are slow cause he just keeps repeating that the market’s are “frothy”, but then he gets into talking about bitcoin for several minutes. At one point he repeats his $250,000 price target for 2024, and is asked how much of his net worth is in crypto and he refuses to answer.
His point about the credit card fees versus Bitcoin is well-made also, as well as his arguments about banks in general. He throws out OpenNode as an example. Taking a quick look at it, they charge less than one percent per transaction, and even process the first $10,000 free of charge. They also have plugins for Shopify and WooCommerce. Neat!
Social Democracy vs. Unfettered Capitalism
I’ve been using Basecamp for several months lately, and have been using it with several clients lately. One of the founders, Jason Fried, has been on the Peter Attia pod a couple times since he started and I really appreciated the approach they take to running a business, work-life balance, and success. It really seemed like a breath of fresh air and a really healthy outlook.
A little over a year ago I participated in my first startup competition, and Angel investor Jason Calacanis was one of the keynotes. Afterward I got a bit caught up in the prospects and started listening to his The Week In Startups pod, but quickly burned out on it due to the number of episodes they put out and some general antipathy to the culture in general. So when I saw Fried’s co-founder, David Heinemeier Hasson, was a guest on TWIS, I added it to my feed and listened to it earlier today. I was not expecting what I heard.
Hasson is from Denmark, and the conversation quickly went to discussion about how America can “get to Denmark”, this is, providing citizens with basic services like healthcare and education for free. And Hasson is a pretty strong advocate for social democracy, and a fierce critic of exploitative capitalism, especially gig economy firms like Uber, of which Calacanis is an early-stage investor in. This was a really interesting conversation, and one that I will be sharing quite a bit with people in the run up to the Democratic primary here next week.
We’re already a week into February; it seems like this year is flying along already. And what a crazy one it is. I’ve been spending a lot of time watching the price of Bitcoin; it seems like the bull market is here and ready to fulfil my dreams of wealth. Also, it seems like Sanders is in position to take the Democratic presidential nomination. On the other hand, Trump just got acquitted by the Senate, and the Democratic party seems to be doing everything they can to fuck things up.
I’ve been very low-key about crypto lately. I don’t talk to people much about in real life. I have fun with it on Twitter, but the fact is that if things go right, I don’t want people to know how much I’m involved with it. Keeping control of your bank is all fun and games until someone gets kidnapped. Someone on Twitter was bragging about being a member of the 10BTC club, and I warned them about OPSEC. They took the tweet down after.
I’ve done my best to protect my holdings. I’ve got redundant hardware wallets plus the private keys protected, but it’s starting to get to the point where I don’t feel entirely safe. I could literally make more from hodling this year than I do at my day job. That’s insane. Many months ago, during the depths of the bear market, I set some dynamic price targets to sell some of my holdings once things took back off using the Mayer Multiple (MM), or the price of BTC as a multiple of its 200-day exponential moving average. I’ve also posted the current MM chart and the TradingView PineScript I used to create it as well.
study("Mayer Multiple", overlay=false)
psma_length = input(100, title="Price SMA Length")
msma_length = input(250, title="Multiple SMA Length")
ma = sma(close, psma_length)
multiple = close / ma
mma = sma(multiple, msma_length)
plot(multiple, title='EMA Multiple', color=#891A0D, linewidth=3)
plot(mma, color=orange, linewidth=2)
Looking at the above chart, one can see that the price of bitcoin has usually peaked when the MM hits 1.9. The winter 2017 bull run peaked just under 2.9x. So a possible strategy would be to start selling as the MM approaches these numbers. I won’t be dumping my holdings at these points, rather I’ll probably start scaling out gradually. I’ve been using a dollar-cost averaging approach, or accumulating, every week, so I think I may start selling the same amount as the price reaches 1.55-1.60x, which is currently $12,900. However, I have made a decision to sell a significant portion of my holdings if we reach 2.88 like we did at the end of the last bull run. That would be just under $24,000. Of course those numbers are dynamic and will likely be much bigger if we take our time to get there. Otherwise, I assume we’ll have some sort of blow off top with opportunity to buy back in later.
I truly believe that Bitcoin represents the greatest financial opportunity that I’ve seen in my lifetime, and one of the main difficulties I’m struggling with is how to balance my risk. I’ve already got a majority of my net worth in crypto, and the temptation to go even further is strong. I’ve written about GBTC in the past; in the next week I’ll complete a 20-week value-averaging plan that I’ve been executing. It’s just hit it’s max payout target for the first time, and we are fully in the black. More about that next week.
That said, it’s hard finding a sell strategy. The important thing is to have a plan, and having the discipline to execute it. My hope is that I can use some of the longer-term trend indicators to build a cash reserve that I can redeploy during the next bear market. If we’re setting up for another multi-year parabolic bull run, then I want to make sure that I take profits and do so slowly enough that I don’t miss too much of the top.
I’m still operating a two year old crypto mining rig here at the house. For the couple months I’ve had it mining Arrow, a Zcash clone that has all of the non-private transactions turned off. I’ve accumulated quite a bit of it, and found out this past week that it was released on the Safe.Trade exchange. Me being me, I immediately went looking for the API docs to see what was available.
I have yet to sell any of the accumulated tokens since I turned the rig on, but feel like I have enough of a stockpile that it’s time for me to start selling some of it for Bitcoin. So what I would like to do is write a program that will interface with my Arrow mining wallet, see how much has been deposited in that day, and transfer said amount over to the Exchange. From there, place a market order, and transfer the proceeds to my bitcoin hard wallet.
I managed to download the CCXT Docker image and run the tests, but figuring out how to do test driven development in Node is going to be a bit more than I had originally bargained for. I’m going to have to spend a few days figuring out how to set things up and get in the flow.
Of course, yesterday was also the first day of school, so it’s going to be interesting figuring out how to fit all this in. I’m also still doing work with the Value Average and GBTC Estimators, so I’ll have to balance doing all that as well. Still, having a commit in the CCXT library would be like a badge of honor, so I’m going to give it a shot.
Grayscale Bitcoin Trust (GBTC) is the name of a publicly traded OTC investment product listed on the public OTC markets. It’s a way for US investors to take a position in Bitcoin through brokerage and retirement accounts like IRAs. A lot of OG crypto-types scoff at the prospect of purchasing such an asset, since you don’t actually control the BTC or the private keys, but for some this is an attractive option, or an only one. I’ve been personally taking positions in GBTC over the past 3 or so years through my retirement IRA. One of the most underlooked qualities of GBTC through an IRA is that all transactions are tax-free. I can take profits in my IRA at any time without worrying about tax liability, which is not something I can say for my actual crypto holdings.
Two of the downsides of GBTC is that Grayscale takes a two percent management fee. This isn’t a big deal to me because of the expected gains in a bull run. The other is that there is a premium on GBTC over the underlying asset value. Each share of GBTC represents .00096884 Bitcoin, but the GBTC’s price is usually 30-10% higher than the value of the underlying asset.
One of the main differences between the equities and crypto markets is the fact that crypto is 24/7. Often, during times when BTC has made a big price movement, I’ve wondered what the corresponding change in the price of GBTC would be (and in my portfolio!) So, I have written a small Python package to calculate this that I call GBTC Estimator.
I have it setup to get public BTC prices from Gemini (via the excellent CCXT package). Right now it’s using IEX’s daily GBTC data (and required an IEX API key), so it only has access to daily OHLCV (open, high, low, close, volume) data. We take the close price of GBTC, and divide it by the price of BTC at the same time (4PM EST) to come up with the actual BTC per share. This number is then used with the current BTC price to come up with the estimated GBTC value.
This current version is run from the command line and returns the estimated price as well as the difference from the last close in dollars and percentage. I have plans to put this up as a website that updates automatically, but first I think I’m going to do some backtesting to see how accurate this is. I think there may be some arbitrage opportunities to be found here. I’ve already started refactoring and will have more updates to follow.