Roller coaster day

Last night was a full moon, Missus caught a picture of it off the front porch as it peeked out from behind a cloud before we went to bed. I knew I was going to have trouble sleeping, I was caught up, and sober, a knew my mind was going to give me a hard time without the drink. I took a melatonin, even though I knew I was probably going to wake up too early and not be able to fall back asleep, and that’s exactly what happened.

When I woke at five the moon had traversed all the way around the house, and was shining brightly in the bedroom window. I tried in vain to go back to sleep, but couldn’t manage fifteen or twenty minutes before I was awake again, and finally got out of bed. Might as well make the best out of it, I thought. I was overdue for a workout, and needed to work my bad knee to keep it in place.

Listened to a couple podcasts while working out. Finished up George Dyson on Team Human. The intro was more interesting to me, a tribute to neuroscientist Mark Filippi, who had passed away. Filippi had a theory that the phases of the moon influences human emotions, based on the phase. There are four neurotransmitters that cycle with the moon. The full moon is when serotonin is dominant, and supposedly gives us more energy and creativity. The waning moon, the last quarter, is the dopamine phase, linked to pleasure and enjoyment. The new moon is the noradrenaline, which makes us defensive, and is when people are more fearful and irritable. As the moon returns in the first quarter, we’re supposedly more receptive to other people (acetlycholine), and we have energy, but not much focus. Good for inspiration, but not detail-work.

That’s the theory anyways. Rushkoff, the host of Team Human, says that he tries to schedule his work around these lunar cycles, writing during certain weeks and editing during others. I’m not saying I buy it, but maybe I’ll start paying attention to it and see if I notice anything.

After that I started an episode of The Breakdown, this one a reading of The Complete Case for $100K Bitcoin. As I was listening, my phone beeped with a Trading View alert. We had just hit an ATH on Coinbase! I checked the TV chat long enough to see all the self-congratulation, and posted “can I quit my job now!” and finished my workout. By the time I had finished the workout and checked the price again, it had already dumped a thousand dollars.

I meditated, hung out with the girls and got ready for work. Premarket was down, looks the markets were going to take back some of yesterday’s historic gains. But as the morning went on, the dip had been bought back up a couple hundred short of the ATH, and by the time the market was open I was up a few grand.

The rest of the day was more whipsaws of volatility. I was nearly at breakeven at one point and finally stopped looking at Twitter and Trading View around lunch, after I’d dispensed with my day job duties. I needed to get some work done on Ether Auction. I stopped to look at my balance at the end of the day, and was up back to where we had started. Huh.

It’s really incredible. To think that in six months I’ve doubled my retirement account, and thought it would take me another two decades to save up as much. I had been resigned to working for my entire life, but now it seems that financial independence is within reach, and in the next few years. Remarkable.

Bitcoin to $100K seems like it’s going to be a cakewalk by 2024. Three hundred seems much more likely, at least for a peak. And I know it’s way too early to look beyond that, but it seems likely that five hundred or one million in the next five to ten years will happen. And beyond that, if I’m still around, who knows. Bitcoin will change the world.

Lord knows it’s already changed my life.

There’s one more thing I’ll share, a piece called Bitcoin Astronomy, about how bitcoin as a global reserve currency will become a driver for human expansion into space. It’s far out.

Even though we hit the Coinbase ATH today, and I truly consider all records broken, my bottle of Glenfiddich 15 still remains in the cupboard. I think celebration is a bit premature. I’m going to wait for us to breach the level and close above it, not just a wick. That moment will really signal that we are on our way. One more touch ought to be enough to do the trick, and I’m guessing we will see it within the next week.

Fingers crossed.

All time high?

$BTC set new records on many exchanges today, following a huge pump as the weekend drew to a close. This followed a drawdown just before Thanksgiving which made lots of people question whether we’d see new highs before the end of the year. $ETH participated in the pump as well, breaching $600 again.

My IRA holdings saw an absolute massive gain today, over 16%, close to three months salary. It’s amazing.

While CT was going nuts about “ATH”, I’m holding off on the celebrations because it didn’t hit on either Coinbase or Gemini. So my celebratory bottle of Glenfiddich will stay corked for now.


Work continues on the Ether Auction subgraph. I kept running into a bug using Hardhat, verified it using Ganache, and got a tip from someone on the Graph Protocol Discord. The bug was fixed in the most recent version of Hardhat, and I was able to get the subgraph working after I bumped the version in my repo.

I’ve now got the bare minimum I need to start putting together the front end. Step one, auction details, with the pot amount, start and end time. I need to figure out how to show the bids, and have the bid events update the auction entity. I may need to go back and update the contract to add a deposit pot event so that I have something to start with. Right now I’m using the auction_start event, which is triggered on the first bid, but that’s not going to work for the actual deployment. I want the functions to be available from the web front end.

So there’s lots of work to do.

Thanksgiving dip

Last night, Coinbase CEO Brian Armstrong sent out this Tweetstorm about possibly AML/KYC regulations that might be rushed out by outgoing Treasury secretary Steve Mnuchin. It’s worth a full read.

It seems like others have been expecting or anticipating this. Laura Shin just released an episode of Unchained earlier this month: Everything You Need to Know About the Looming Battle Over Privacy in Crypto

$BTC is dumping hard on the news, currently down under $17k.

I may have made a few sub-optimal mistakes.

First I cancelled my $GBTC sell order on Monday. The price blew by it on Wednesday and I felt like a genius, but then bottomed out yesterday. My worry was that any dip might be too brief for me to avoid settlement rules on my IRA account, which is prohibited from engaging in day-trading activities. If the price doesn’t recover before tomorrow, though, I’m looking at a five-digit down day, which won’t be fun.

I also make a small move with the last bit of fiat in my exchange account that was typical. Two days ago i had set a buy order based on a trend line I charted, at $18,450. Last night, before things got really crazy, I replaced the order with the new trend line, at $18,591. The price dipped, my order hit, and came back up. I felt good.

Then, a few hours later, the McDonalds memes started popping up on my Twitter feed, and I saw the price feed. Whomp whomp.

I’m seriously tempted to buy the dip, either by swapping my Yearn BUSD vault over to the WBTC one, but I’m just going to chill. Sticking to the plan is best here. When I get caught up in the market is when I make the worst mistakes. So I’m going to sit on my hands.

It is Thanksgiving, after all, so I’m going to spend the morning puttering around the house. We’re going to my mother in law’s for dinner, and Missus siblings and family will be there. We almost cancelled, due to COVID, but we figure since her mom watches the kids every Friday that we’re not taking that much of a risk. I’m conflicted.

I’m going to close out all of my TradingView and Twitter tabs, and try and try to be present with the family as best I can. I’ll try to remember how lucky we all are that no one has gotten sick and that we’ve got good jobs, a roof over our heads, and food on our tables. This year has actually been really good for us, all things considered, and I just want to stay humble and sober through today’s meal.

Finally, I really am thankful for the opportunity that Bitcoin, Ethereum and other projects has given me. It’s crazy to think how far things have progressed since I got involved four years ago. It’s funny for me to recall that I had set a goal to be working full-time in the crypto space by Thanksgiving 2018. We’re a bit behind schedule, but I’m okay with that. I work from home, I’ve got power and freedom at my job, and it provides just enough income for me to pay the bills and be comfortable financially.

And in spite of COVID, I’ve grown closer to my family, and managed to save enough of a financial cushion that I don’t have to worry about losing my job.

And thanks, Satoshi, whoever you are. Thanks to you I’ve stopped worrying about accumulating money to have things, and less concerned with being rich, and am instead focused on building wealth as a way to escape the trap of employment. My girls will have an opportunity to forge their own path to freedom, to know money as a tool for freedom, so that they can pursue their best lives.

Happy Thanksgiving.

FIRE incoming

Woke up to $BTC over $17k.

40 days, 60%.

I’ve completely obsessed lately, keeping TradingView and my IRA up on my laptop while I’m working on my day job, which has been demoted to just a single screen on my dual monitor setup. I check Zapper.Fi daily, and am on Twitter constantly during the day.

I’m still doing my job, taking care of anything urgent or important, delegating as much as I can. Ultimately, nothing is as important as what’s going on in the markets, so I’m constantly reading and trying to figure out what the long term plan is going to be.

This Tweetstorm has a couple good points. One I’ve been thinking about and seen a few times before is that this isn’t going to be like the last couple cycles, with a blow-off top and an eighty percent drawdown. My plan during the past few months was that I would sell a portion of my holdings off and save it for a drawdown. But what if there’s not a drawdown?

My target is dynamic, it’s based off the moving average at the last top, about 3.6x the 200 day moving average. That equates to a price of $39,000. The longer we take to get there, the higher the price will be, so we might now have a huge runup like we saw before. Since we’re seeing institutional players in the market now, they’re more patient, will move slower, and price action might instead be a slow, steady grind up and up.

Of course, once we see $20k I expect it will be all over the news, possibly triggering another wave of retail FOMO. I’m not sure that it will have as much effect on the market since the market cap is actually a higher due to the block rewards emitted over the last few years. I’m probably completely wrong about this.

There’s also a chance that we’re moving into the next phase in bitcoin adoption: HODL FOMO.

If accurate, it would reduce the chances of a big drawdown, furthering the need to hold on. Still, I expect some sort of pullback. Many in CT are warning that this run up is happening too fast, and are hoping for a bit of a pause here now that we’re at $17,600. Better to let the market take it’s time than have a blow off top later. Still, I’d imagine some sort of resistance at $20k, so I’ve put in a limit order on my recent $GBTC entry that I hope will translate to the $19,800 level. If it hits, I’m hoping to to have another entry before we blast off, otherwise I’ll hold the funds to deploy elsewhere.

Where? Well I have noticed today that many of the crypto industry tickers had double the gains that $GBTC did:

I’ve got some value averaging protocols engaged for several firms, and I’m low on cash, so I’ll either need to liquidate some GBTC to free up some capital, or stop the protocol. I’ve set an expiry on the GBTC sale for Thanksgiving. Hopefully we’ll blow right past $20k while the market is closed and I’ll be able to close my position without selling.

Overally, my IRA was up over 6% today, while the major indexes were down one percent. I nearly had a five-digit day. So close. My point is that it looks like things are moving according to plan. BTC is on a run up, and it seems like every day I’m a bit closer to my goal of financial independence.

On top of this, President-elect Biden signaled that he will absolve up to $70,000 in student debt for everyone, regardless of income. This will wipe by debt completely. There are questions about how fast this will happen. Apparently he can do it via executive order, so we’ll see. One thing is now clear, that I will be making the minimum payment on my loans, of which the first payment is due in January.

What an exciting time!

Continued optimism

Nose to the grindstone.

So I actually got a quite a bit done yesterday since I wasn’t obsessing over $BTC price action yesterday. I spent most of my time working in Hardhat, trying to figure out how to make tests work using the Waffle/Chai suite. I’m having a hard time wrapping my head around all the different dependencies so that I can do things. It’s a lot to take in, even for me, so I just had to turn in early last night and give my brain a rest.

I’ve been reading Kurt Vonnegut’s Player Piano for the past week. I finished Slaughterhouse Five earlier last month — it’s a short read — Player Piano is much more like a regular novel. I only gotten through the first fifth of it, but it’s quite amazing from a futurist standpoint. The novel deals with the economic and class consequences of automation and computerization, and even touches on things like standardized test scores determining one’s algorithmic destiny. It’s really making me think about the kids’ education.

Elder is really spending a lot of her day working on schoolwork. I know it’s really not a lot compared to how much time she would be spending in class if they were in person, but it just seems like a lot of work for a third-grader. I find she’s often not paying attention to what the teacher is doing, and is doodling or reading something else she’s not supposed to, and I feel like a hardass constantly telling her to pay attention. She gets frustrated by the homework, having to type everything up; I’ve been trying to reinforce her touch typing, but she often falls back to two-fingers when she’s working.

And I’m pushing Younger with her reading. We’ve been doing IXL every day for the most part, and I’m working with her on language arts as much as I can. It’s stressful, cause she gets frustrated easy, so we have to take it in short increments, a few questions, a TV show, a few questions, another show.

And trying to fit all this in while “working”…

Zombie, LLC’s home franchise was having their virtual convention yesterday, and I spent half of my workday yesterday trying unsuccessfully to get sound working in the Windows 10 VM that I use for work. I don’t know if it’s a problem with QEMU, or the Pulse Audio subsystem, but I tried to convert my QEMU image over to a VirtualBox image and ran out of space. I tried watching the Zoom meeting on my host, but I’m stuck on wifi (another problem with the ethernet card), and the meeting was pretty much unwatchable. I also tried using the Azure VM that I use for the meeting, but the throughput on that was pretty horrible.

I really don’t know what to do about the networking issue other than just put my head to the grindstone and figure out what the hell is going on. I’m not sure if it’s a driver issue with the card itself or some sort of Network Manager / NetPlan issue that I messed up. I’m just not getting an IP address unless I run dhclient directly, and that only works for a few minutes. I really wasn’t looking forward to debugging the entire Ubuntu network stack.

I did have some small wins over the past few days. Lambo1, my six-GPU mining rig, had been acting up, so I wound up disconnecting the rig and pulling out every card one-by-one and spraying then off with air. It looks like one of the power cables stopped working, but it took an hour of swapping and restarting to figure it out. The riser support was slipping down as well, which may have contributed. I also managed to finally figure out how ssh-agent and ssh-add work together with ssh to allow automatic login. It had always been one of those things that I managed to clobber together once in a blue moon, but I had to redo my Gitlab and Github keys on both my development workstations, and now I’ve got it figured out. It’s so nice to be able to clone my repos and push without having to lookup passwords.

I think my BTC bullishness may have caught on with the Missus. She’s sitting on a lot of cash right now and just opened a Vangard account, per her FIRE peeps. I bought a small amount for her during the 2017 run up, and it’s now worth three times what she paid for it. We were comparing notes on portfolio performance she said, “OK, I’ll buy some more”. I’ve been trying to get her to setup a BlockFi account, but she’s had other things on her mind. I’ll probably just have her set the account up with some cash, and we’ll feed the interest into BTC. Maybe I’ll add some dollar cost averaging into the mix if she want to fund it further.

Bitcoin election pump

I have been completely useless for the past two days. I wrote Tuesday’s two thousand word post as a way to distract myself from anxiety around the election, and that was probably the last productive thing I’ve done. It seems that Biden has won, while Trump is contesting the results as we knew he would. Meanwhile, bitcoin has gone on an epic run that has put me in a state of ecstatic shock.

BTC waited until the polls closed on Tuesday to breach an eighteen month high. Betting markets swung wildly to Trump after he won Florida and it became apparent that this would be the Blue Wave that Dems were hoping for. I actually managed to go to bed at a decent hour, to my credit, instead of staying up for hours past my bedtime, obsessing over Twitter and results. I think I was mainly tired of Trump trolls in my TL.

By next morning the odds had swung back in Bidens favor, and bitcoin began it’s nonstop climb from $13,500, up two grand as I write this. It’s been completely insane. My high exposure to crypto funds in my IRA paid off handsomely today, as I was up over seven percent today, over five figures, before dropping by the close.

Of course CryptoTwitter has lost their minds. There have been arguments over which candidate would be better for crypto (answer: either), but my theory is that the markets have been pricing in a Biden victory since the run we say from $11,600 mid-October. More specifically, I think that they’ve been anticipating a peaceful transition.

Trump still refuses to go quietly, he just held a presser that the national networks had to cut off lest he undermine democracy any more than he’s already done. He’s even lost Fox News, and now it’s just down to his rabid fan base. I’m actually much more hopeful than I thought I would be, I just hope that we can have some resolution out of these last remaining states in the next day or two and that the Supreme Court doesn’t have to get involved. God help us.

This quick run near $16,000 has really put me in a pickle, and is really putting the pressure on my decision making. I’ve revised my moving average targets to match the 200-day MA that the Mayer Multiple tracks (I’d been using 100-day,) and have revised my sell target, keeping it in line with the 3.6x 2017 peak. Current target: $36,000. Of course this is a moving target, the longer we take to get there, the higher it will be. Or we may never hit it, who knows. Maybe this time is different.

My whole philosophy behind this sell plan is to try and time the market top, then buy back in after we see another pullback. The goal is more BTC. That said, I will be looking at a huge long-term capital gains tax bill if I sell. My average entry price is around $6,000. So, as an alternative, I’ve been throwing numbers around to see what I price I need BTC to be at in order to maintain my current income using only interest generated via lending platforms.

That number ranges from $250,000 for something conservative like BlockFi to a more reasonable $75,000 if I’m willing to try some of the riskier platforms using wrapped BTC. I’m still not convinced either way.

And to show just how degenerate my mind has been, I’ll tell you something. I got a credit card offer in the mail today, offering balance transfers and zero percent APY on purchases for the next twenty months. My brain immediately started scheming on how to take advantage of this. Step one, find a fiat on-ramp that allows zero-fee credit card crypto purchases, and max out cards. Step two, deposit stable coins with BlockFi at 8%. Step three, earn compound interest for twenty months, then convert to USD via ACH to bank and pay off card.

No one has gone broke faster than by playing with borrowed money, as it is known, but this is also basically how the big banks have made money off of the fed for years. Borrow funds at zero percent, then buy bonds or make government backed loans at prime plus. It’s still risky, and Missus would likely divorce me if I tried to pull something off. She got mad at me when I told her I was delaying my mortgage contributions cause we had too much cash in our shared accounts.

Well, it’s probably for the best. I’m well positioned as it is, there’s no need to get greedy and so something completely stupid. It’s not like BlockFi is zero risk. Who knows what will happen. I am trying to spread my funds around different platforms: BlockFi, Yearn, and I think I may take a dip with Fulcrum to see what it’s all about. One of the problems with these platform is the variability in profitability. It may be better to just stick with BlockFi for a stable rate, at least with wrapped BTC. Stablecoins seem much more lucrative on DeFi, but I’m seeing less and less incentive to hold fiat right now.

Right now I’m not sure how much more we can sustain, we’re almost at $16k, so either the price pulls back or otherwise just plows through it to the stratosphere. I’m just holding on to my hat at this point and watching the green candles come.

It’s already been a hell of a ride.

Crypto exposure in equities markets

Introduction to cryptoassets for traditional investors

Sometime in the past few weeks, after Microstrategy and Square announced that they were holding $BTC as a treasury asset, someone put together BitcoinTreasuries.com as a way to track other public and private companies that have exposure.

Earlier today I checked the list and noticed a new name on the list, Bit Digital ($BTBT), which lead to a conversation on Twitter which I felt needed explanation beyond the two hundred and eighty character limit. So this post is squarely aimed at traditional equities investors who are trying to understand crypto and the industries around it.

Getting started

First off, if you want to understand Bitcoin, I recommend The Bitcoin Standard (affilliate link). I’m not the biggest fan of the author, but the book does a good job of explaining things despite the tone. The Nakamoto Institute has a crash-course as well that is probably handy, although I haven’t read the entire collection.

Other resources that I’ve found helpful in the past includes: Cryptoassets: The Innovative Investor’s Guide to Bitcoin and Beyond and the HashPower series by Invest Like The Best’s Patrick Oshaughnessy. Laura Shin’s Unchained podcast is a great source of current news about what’s going on in the space. And one of the best minds in the space is Andreas Anotonopolis, who has written numerous books on Bitcoin and Ethereum.

The current recommendation that I would give to investors coming into the space is to convert between one and five percent of your current net worth directly in BTC. Dollar cost averaging is perhaps the best strategy to use instead of a lump purchase, due to bitcoin’s volatility. Coinbase and Gemini are two fiat on-ramps that I recommend, but there are more springing up all over the place, RobinHood, Square, and now Paypal. If you plan on investing more than a couple hundred dollars, however, you’ll want to invest in a hardware wallet and use an on-ramp that will let you withdraw your coins to your own wallet. There’s a lot to cover here, more than I have time for today in this post.

In general, most OG crypto people follow the maxim “not your keys, not your coins”. The entire premise around bitcoin is that of self-sovereignty, and entrusting your funds to a custodial entity, such as onramps or exchanges, goes against this ethos. That said, there are places where it can’t be avoided.

Crypto exposure in equity markets

While I have been building up my crypto positions over the past few years, I also have a larger IRA that I’ve carried over from 401Ks accumulated over two decades in traditional corporate jobs. (I cashed out my traditional brokerage account for BTC last cycle.) So I’ve spent the last couple months trying to find exposure to crypto markets, where I can take advantage of tax deductible deposits and tax-free capital gains.

Grayscale

The most direct exposure to crypto in the equities space for US investors is via Grayscale Investment’s Digital Trusts, mainly the Bitcoin ($GBTC) and Ethereum ($ETHE), and to a lesser extent, the Digital Large Cap fund ($GDLC), which is a basket of BTC, ETHE, and a couple other alts. I do not recommend the Ethereum Classic trust ($ETCG), and the other single-asset funds are not available through standard broker accounts yet.

Until there is a straight bitcoin-derived ETF, which may be a long way off, Grayscale is probably the best bet for exposure to Bitcoin. There are a few things to keep in mind though. Grayscale operates with a two percent annual fee, and the bitcoin per share of GBTC is currently at 0.00095320, according to their website. However, the Grayscale vehicles trade at a premium to the underlying value of the BTC in the trust. The GBTC premium is currently at twenty percent, and the ETHE one is at fifty, although this is near an all time low.

Other equities

Let’s take at the companies listed on the BitcoinTreasuries page. I’ll mention the ones that I have positions in: RIOT, HIVE Blockchain (HIVE/HVBTF), MGTI, and Voyager (VYGR/VYGVF). I also have two other positions not on the treasuries list, Marathon ($MARA) and DPW Holdings ($DPW), that have exposure to BTC as well.

A number of them are involved in mining activities, so let’s break that down.

Bitcoin is the world’s first truly scarce asset. The mining process, as it’s called, is actually a competition to see who can win a mathematical contest to mine a new block, and win the block subsidy, (currently 6.25 BTC) as well as the transaction fees. There are a couple analogies that one can use to describe this, but I like to use coin flips.

Imagine that you and I are in a contest to see who can flip ten coins in a row and have them all come up heads. It may take the two of us a while to do that, but as more people join our game, the amount of time before someone ‘wins’ will decrease. This is essentially what happens with bitcoin, but in this case the game is a contest to perform a cryptographic hash function using the last block and a random nonce as inputs. In this case the winner is the one that can generate a hash with a sufficient number of zeros in the front. This process is known as proof of work (PoW).

Another critical component of the bitcoin algorithm that makes it work is the difficulty adjustment. This adjustment, built into the bitcoin PoW protocol, is triggered every 2016 blocks, or about every two weeks. It changes up or down to keep bitcoin’s blocks coming every ten minutes on average. As more miners enter the blockchain network, this adjustment ramps up. As you can imagine, this leads to a race for hashpower, as manufacturers put out faster, more power-efficient hardware to mine faster.

So when someone asks what the “intrinsic value” of bitcoin is, I usually point them to the capital cost of the hardware securing the network, as well as the cost of electricity used to run those machines. There’s a lot more detail to go into about the mining process, especially with regard to the stock to flow model and halvening process, for example, but that will have to wait for another post. What I will mention is that we just had the second largest difficulty adjustment in history, as a number of Chinese mining companies shut down their equipment. Most of them were taking advantage of low-cost hydroelectric power during the recent rainy season, and are relocating due to higher prices. The takeaway here is that it will mean better returns for others who are still mining on the network.

One last note about mining companies. There are number of cryptocurrencies beyond Bitcoin that can be mined. There are forks of bitcoin that can be mined using the same specialized ASICs, although I recommend staying away from them, and there are other currencies that use traditional graphics cards like those used for video games, called GPUs. I mention this because there have been ASIC mining operations that focused on non-bitcoin during the last bear cycle that weren’t able to stay afloat.

Generally speaking, I don’t recommend exposure to any of these mining companies unless you’re very familiar with the space, and/or as is my case, looking to take a gamble that one could see an outside return during a BTC bull run. Caveat emptor.

Other cryptocurrencies

As I alluded to a moment ago, anyone can take the Bitcoin source code, modify it, and create a new bitcoin fork. There have been many attempts over the years, and I won’t name them. I generally stay away, and agree with most bitcoin maximalists that the original BTC is the best store of value out there. That said, there are other blockchain projects out there that have different aims and use cases. The only one that I’ll mention is Ethereum, which is a smart contract platform, and allows one to program applications on the blockchain and have them run in a decentralized, autonomous way. It’s been around for several years, and is the king of the Decentralized Finance (DeFi) space, which is generating huge interest amongst developers and finance types. It’s the main focus of my activities right now.

There is a lot going on with Ethereum right now, so I recommend caution before taking a position in it, at least until you understand the landscape. I advise even greater caution with other cryptocurrencies, or altcoins. I’ve been in the space since 2014, and have spent hundreds of hours researching various projects, reading white papers, and the number of scams, hacks, contract failures and rug pulls that I’ve seen in this short time is staggering.

Fiat onramps like Coinbase, Gemini, and others have been adding other cryptoassets to their platforms over recent years, mainly cause the demand is there, but anyone who thinks that any of these tokens will see price appreciation anything like bitcoin over the last four years are probably going to be in for a rude awakening. Are double digit gains possible? Sure, but I am not betting anything other than a small stake, especially if we’re on the cusp of a BTC moon run.

A note about trading pairs: a few years ago, your owly onramp into cryptoassets from fiat was into bitcoin, which was then traded for other altcoins. As a result, most traders tracked their performance by the BTC price. The rationale here being that if you lost value in BTC terms you would have been better off not trading. As fiat on-ramp have made it possible to go directly from USD to other tokens, some have stopped this practice, although I still stick to it. More recent trading and market making platforms have introduced swap mechanisms which make it possible to go from one token to virtually any other, performing whatever third or nth level conversions necessary in the background. Since my long term goal is to accumulate BTC, not USD, I still track all trades via the BTC pair.

Stablecoins and Tokenization

Another trend that I think is worth mentioning is that of stablecoins and tokenization of hard assets. Basically, fintech companies have figured out that they can use a type of Ethereum asset called an ERC20 token as a digital dollar, and transmit these tokens over Ethereum as an alternative to the traditional fiat settlement system in traditional finance. Ethereum transactions settle in as little as twelve seconds, compared to ten minutes for bitcoin, and days for banks. These tokens go by the name Tether, USDC, DAI, or GUSD, and are supposedly backed by physical reserves of the various issuers. There is a lot going on in this space, I recommend you checkout The Crypto-Dollar Surge and the American Opportunity if you are interested in more.

Lastly, I wanted to mention asset tokenization, cause it will likely be huge in the coming years. Stablecoins are basically tokenized dollars, and we’re already seeing companies tokenize traditional equities on blockchains, and real estate is right around the corner. I bring this up cause I was asked directly about Vemanti Group’s plan to offer a gold-backed crypto. I’ll only speak in general terms, since I’m not familiar with Vemanti. I have seen a host of gold-backed crypto projects in my day, and I’ve got a general unease about the concept.

While there’s generally nothing wrong with gold-backed crypto per se, the whole idea as bitcoin as an alternative to gold makes me question the motivation behind such aims. The whole point of bitcoin as an alternative to gold as a store of value has to deal with gold’s difficulty to transport, as well as seizure risk. It seems like a step backward to me.

The main risk here that I see is one of custodial risk. Bitcoin, Ethereum and blockchain technology as a whole are decentralized projects, and one’s which allow trustless interactions between adversaries. When you start talking about asset tokenization, you’re putting trust in a third party. Tether for example, has been highly controversial because of accusations that they print more Tether than they actually have reserves for.

Color me skeptical about gold-backed crypto projects. Again, there’s nothing wrong with it in general, but for the most part, I think that the more people understand how bitcoin works, the less interest they’ll have in gold in general. Again, I do think there is a huge opportunity in tokenization of assets, and I’m looking forward to see how this plays out in the future.

TL;DR:

To sum up, I hope this serves to answer some questions traditional asset investors have about the crypto space. I truly think it’s the greatest opportunity of my lifetime, and that we’re on the cusp of widespread adoption by retail, institutional and sovereign investors that will be unlike we’ve seen. The tech is moving super fast, and truly understanding Bitcoin requires a fundamental shift in thinking about money and economics, especially scarcity.

Again, the best exposure is direct exposure to BTC, preferably in self-custody, but getting started with an institutional custodian while you figure that out is ok. It’s how most people start. There are a number of new instruments popping up for retirement or institutional accounts that we didn’t cover, Grayscale is probably the best option out there for those getting started.

Once you understand the technology, good luck to you, cause I don’t know anyone that has invested the time to make it that far that has ever gone back. It’s a whole new world. Please do your own research before you make any significant investments.

Hopefully this helps! If you have any questions, feel free to hit me up on Twitter or leave a comment.

Quick PRIA Update

Spent some more time working on TheGraph today. Managed to get a subgraph up that shows PRIA transfers. I’ve got to study GraphQL to figure out how to use this, and modify the schema to make it usable. I think a lot of people want to see the top holders by address, and I’d like there to be a way to query the top burnable addresses. I thought of an incentive app that would use these results and allow people to push a button to sign a transaction to burn them, whilst reimbursing them for the gas plus a bonus.

It sounds like something that could be done, although it might need another contract deployed to pull it off properly. These kind of proposals should be voted on by the community, so I really think the first order of business is some kind of DAO or other voting mechanism among PRIA LP providers. If you’ve got experience with doing so, let me know.

Right now the liquidity pool is the only safe haven for tokens, but given the possibility for divergence loss during the run up, there might need to be a better way to incentivize liquidity. That also brings up another point as well: the deflationary phase might cause additional divergence, but on a net positive on the Eth side. The way I understand it, the Uniswap stake loses ETH value compared to hodling as the price appreciates, but loses value slower as the price depreciates. This needs further exploration before I can speak with certainty.

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The above chart shows an ETH/DAI pairing. Source: Understanding Uniswap Returns

It looks like there are many ways to play this game, and the more time I spend on it the more avenues I see.

I’m not gonna shill given all the uncertainty in the market, especially given the fact that US elections are less than a week away. That said, I’m pleasantly glad to see that PRIA is holding up well. There seems to be healthy liquidity and volume, and the TG/CT communities are pretty active. And we’re not even at 80k supply yet!

Source: Uniswap pair info

That said, my main holdings are still in BTC, and to a smaller extent, ETH. I’m very anxious about the election and what effects it’s having and will continue to have over the next few weeks. I’ve spent the last few months exiting from traditional equities, AMZN, NVIDA, TSLA, hoarding cash in anticipation of a buying opportunity. This week’s pullback, caused by lockdowns in Europe, no sign to COVID cases in US, and failure to launch a second stimulus package, was enough for me to pull the trigger. I’m all in.

So right now, a majority of holdings are in BTC, but I’ve got even more in my tax advantaged retirement account that is in Grayscales GBTC, ETHE, and GDLC products. I’ve also got mining companies like CAN, RIOT, and MARA, and Canadian-based exchange Voyager.

My bags are packed. Now I just need to sleep for a year.

Irresponsibly long

flying plane with contrail during nighttime

Today has been crazy. I woke up this morning to find that $BTC had made a bit of a run overnight, making a nice wick up from $11.2 to $11.4. I’m sitting on some cash in my IRA, and I was very tempted to add to my $GBTC position at market open. It seems like we’re at a turning point, and that things are going to move very, very quickly. As a reminder, in 2017, the price went from $11.6 to 19.8 in two days.

Ultimately, I didn’t do anything, which is fine, even though we had some healthy price action today. I often joke about being all-in on crypto, but it’s really not a joke. I’ve got some equity in my house, along with a mortgage, but pretty much all of my liquid assets are in crypto. Most of it is in BTC, and I’ve got Eth and other alts as well. I’ve got the bulk of my savings in my IRA savings. Most of it is rolled over from my 401k from my corporate days, and it has the benefit of allowing me tax-free gains. I don’t have exact percentages, but about a third of that is in $GBTC. Over the years I’ve been adding positions in $MARA, $RIOT, and Hive Blockchain, and I’ve recently opened positions into $ETHE and $GDLC.

So I’m pretty invested in the success of BTC right now. I understand that having all this money in correlated assets like this doesn’t spread the risk at all, but it feels better than putting it all in GBTC.

Until recently, the long-term plan for the liquid assets had been to wait until they were enough to pay off my debts, mainly the mortgage and student loan debt. I actually have a whiteboard on the fridge with the break-even numbers written down. I update the debts whenever a new statement comes in, and I’ve been updating the BTC price first thing every morning.

Now though, I can’t imagine actually selling everything. I do plan on taking some profits at a certain point, I have a target. But with the recent rise of DeFi platforms for lending and interest, it seems like a better approach to try and leverage some of these platforms to generate income.

That’s the difference between being rich and having wealth. It might take me longer to get to the point where I’ll have enough to live off the interest generated by lending, but if everything goes the way I anticipate, then selling my bitcoin to pay off my debts early could well be one of the worst financial mistakes I ever make.

A lesson: about eight years ago I needed a new car. I had been driving a $1500 Ford Escort for several years that I had bought after my last car had been repossessed. It was a junker. The insulation around the doors was torn out, so every time it rained water would pour in on me from above. After several years getting my life back together after a business bankruptcy, I decided that it was time for an upgrade. I decided to get a used BMW, and set my budget at $7500. After weeks of searching, I found the perfect car, but it was $8500. I decided to sell a small stake of some Netflix stock that had done very well, and used it to buy the car.

I loved the car, but fifteen year old BMWs need a lot of work, and I probably put another $3-5k into that car before I got rid of it three years ago. Before I did, I looked back at the price of that thousand dollars worth of Netflix stock that I sold and calculated the value.

Eighteen thousand dollars.

So yea, the next six months might see my holdings get to the point where I could liquidate them, pay half to Uncle Sam, and pay off all my debt. But now, I fully expect bitcoin to go 4x from that point, enough to generate income for the rest of my life. Enough FU money to say “no” to almost anything, and have the financial freedom and independence that most can only dream about.

My dad recently retired, my mom did so a few years ago, and my wife’s parents did so recently as well. They worked their entire lives, making a life for themselves and raising us right. And my wife and I have been fortunate beyond belief to be not only surviving during this pandemic, but thriving. We talk every day about what’s going on, and I’m more confident that ever that our plans are going to work out.

Crypto Twitter is abuzz right now, and everyone is excited. I’m trying to remain calm and prepare for the craziness that is going to happen when BTC hits another all time high. It’s going to happen fast.

Even now, at the end of the day, bitcoin is still minting new yearly highs. I only hope that the feeling I feel right now isn’t greed, it’s opportunity.

This Saturday, Halloween, is the anniversary of the Bitcoin whitepaper. Satoshi had a strike of genius timing the halvings around the US Presidential elections. I’m not sure how much of what we’re seeing is in anticipation of a Trump or a Biden win, but the divergence to the stock market, which is reacting negatively to a rise in COVID cases, could just be the start.

I’ve been packing for this rocket ship for years, during this entire bull market. The fuel is loaded, the trajectory is set, and I’m strapped into my seat listening to the countdown. Now I’m searching my mind wondering if there’s room enough for a little bit more mass, an extra oomph that will take us out of the solar system and get us to Alpha Centauri a little bit faster.

I, and you, better act fast, cause liftoff ain’t gonna wait for either of us.

Wash trading PRIA for airdrop slots

Things are nuts right now.

I’ve spent most of my time thinking about PRIA and how to game it. I there’s a way to compute the minimum future airdrop payout. By comparing that to the current price and gas costs of a transaction, one can sell the future payout for ETH, burn that eth for gas on a transfer, and will be guaranteed at least the same amount of PRIA back in a future airdrop, two hundred blocks later. That’s the plan at least.

I’m still working out the calculations. I can only estimate the gas as this point, and I’ve still got to simulate the transfer cost, which includes burn, treasury and airdrop fees. This holds increases at some point during the airdrop cycle, so the question is whether I code this up in the main Javascript module that I’m creating, or set up an actual contract in Truffle that I can run it against. I’m not sure yet.

What I do know is I woke up this morning to find a huge run up on price. Gas costs are still high enough that it means flooding the airdrop queue will cost more than the ultimate payout, but if one assumes that PRIAs deflationary price action will continue, then one may be willing to risk more.

We’re also talking profitability from a minimum future payout. One can assume that the actual future payout will be higher than the minimum, since any transaction with a fee larger than the airdrop payout will increase the airdrop balance, not drain it.

I have also determined that flooding the entire airdrop queue in one transaction is likely impossible, due to gas costs, and I believe the upper bound is around 20 at a time. Still, I should be possible to sell PRIA on Uniswap, and self transfer enough to qualify for a spot on the queue in one transaction. One could cover gas costs, and insure that you get back at least as much as the total costs, both the gas fees and any transfer funds.

This process would theoretically allow someone to accumulate PRIA with zero capital risk. They would basically be arbitraging the costs now for the expected payout on the next airdrop cycle.

$PRIA price chart

On top of all this, it looks like $BTC has crossed a critical threshold. I had to zoom out on the weekly to get a bit of perspective on this.

Not only have we broached the critical rsistance line at $12,060, but we’re also about to break through a multi-year uptrend support that was only breached by the COVID-dump. We saw a little bit of action above this line a few months ago. And yes, I know these kinds of lines on a log scale aren’t sustainable, but it’s clear to me that we are in a bull market.

The orange line at the top is a moving profit-taking target based on the Mayer Multiple, the factor of price to the 200-day moving average. I calculated the 2017 peak to be around 2.8 times, so when we get to that price level, I plan to take some profits.

I had that feeling this morning that things were happening. Recently, I saw a Tweet that said if you feel like bragging, then it’s time to sell.

I’m starting to feel that way right now.