BITCOIN

Malthusian

HCIMbtw said:

Couple of challenges I have with the way you frame your argument malthusian, you refer to claims other media shills make about BTC projections, but apply these as a generality for all people who invest

I was responding to a specific claim that anyone can make 30%pa by trading shares and crypto.

Arbitrage is an entirely different kettle of fish. This is a thread about investment, i.e. passive returns. It is never unbelievable that someone could eke out a return of 30% on their capital by sitting in front of a screen for hours looking for mispricing opportunities, but not very interesting. Most people aren't going to be capable of it and if most people were capable of it, the opportunities wouldn't exist.

There's a reason Savings and Investment threads don't all end with "just go to the Matched Betting forum and find out how to make money from arbitrage".

On GME, that show is not completely over, sure some courts have thrown out class actions on the basis citing that message exchanges between citadel and RH were suspicious but not enough to prosecute. But there is no denying the impact of closing down buying ability on the main retail investor exchanges and I think the retail investors involved have some right to feel aggrieved by the manipulation.

No they don't, as most of them would have lost money if they'd got the shares they were stopped from buying. That's not a judgment on their trading ability but simple mathematics. Punters' money in == punters' money out and the smart money had already been taken off the table when RH crashed. That isn't going to stop them feeling aggrieved, of course.

The cases have been tossed out but the show is not over? Sounds like over to me unless there's other cases you're not mentioning.

It's over, regardless of whether the losing bros are happy to let lawyers milk them for a bit more.

HCIMbtw

Malthusian said:

HCIMbtw said:

Couple of challenges I have with the way you frame your argument malthusian, you refer to claims other media shills make about BTC projections, but apply these as a generality for all people who invest

I was responding to a specific claim that anyone can make 30%pa by trading shares and crypto.

Arbitrage is an entirely different kettle of fish. This is a thread about investment, i.e. passive returns. It is never unbelievable that someone could eke out a return of 30% on their capital by sitting in front of a screen for hours looking for mispricing opportunities, but not very interesting. Most people aren't going to be capable of it and if most people were capable of it, the opportunities wouldn't exist.

There's a reason Savings and Investment threads don't all end with "just go to the Matched Betting forum and find out how to make money from arbitrage".

On GME, that show is not completely over, sure some courts have thrown out class actions on the basis citing that message exchanges between citadel and RH were suspicious but not enough to prosecute. But there is no denying the impact of closing down buying ability on the main retail investor exchanges and I think the retail investors involved have some right to feel aggrieved by the manipulation.

No they don't, as most of them would have lost money if they'd got the shares they were stopped from buying. That's not a judgment on their trading ability but simple mathematics. Punters' money in == punters' money out and the smart money had already been taken off the table when RH crashed. That isn't going to stop them feeling aggrieved, of course.

The cases have been tossed out but the show is not over? Sounds like over to me unless there's other cases you're not mentioning.

It's over, regardless of whether the losing bros are happy to let lawyers milk them for a bit more.

First para,

Agree, saying 'anyone' can make 30% is like saying anyone can get an A in GCSE maths.. there are some pretty simple ways to get double digit returns, but I don't use them myself (even though I could), would rather have money in an ISA wrapper than bother taking it out for reasonable cash equivalent returns on some unregulated platform 

But that said, it is possible.. and I don't dismiss it.

Second para, 

I don't think the money in money out mantra is the best to use in this example where big funds have taken out short positions exceeding the total float of the stock. Essentially putting themselves in the position where if the stock is bought up and not traded they become liable for infinity losses. Yes it wouldn't happen because people would take their profits, but theoretically the hedge funds had screwed themselves into a corner they were paying ongoing fee's to hold and taking massive risk.

I'm not particularly up to date on GME but I believe the funds holding short positions have largely been able to close many of them throguh the use of synthetic shares of the past year, which is a point that makes me sympathise with investors as they've been playing on a completely lopsided pitch. But I don't believe the show is over, one because there is still short interest and this will always be a target for squeezing (yes no moon, but still pump opportunities), but more importantly because of a lot of the planned gamestop development, all this talk about zkrollups on the loopring protocol to establish an NFT platform for gaming. This might sound like nonsense, but even with a basic understanding I can see possibility of the largest retail gaming institution reinventing themselves as the online platform for game trading, probably a little bit harder for a company that has such a high cost base associated with physical retail, but they have made some really interesting management changes, and if they pull it off.... There is much more to play out here in my opinion, behind the memes, some real industry leading ideas. 

Frequentlyhere

I try not to be drawn in to this, and fail every time. The reason why this debate goes around and around is not because of the envy of nocoiners, its because they have some very good points to make about some outrageous statements.

To be clear, there could be a potential future for crypto. There are certainly big returns to be made and have been made in the short term. It's an exciting place that's currently a wild west and has some potential of arguable size.

Where crypto bros really need to hold up and listen is when they make arguments like this:

"There are legitimate ways for people to regularly return rates close to 30% with little risk (aside from the lack of regulation/platform) primarily related to arbitrage"

This is horse manure. Have people been making these returns? No doubt. Might they still for a while? Sure.
With little risk and regularly going foward in the medium/long term? No.

At present, there are little/no intrinsic returns to crypto. The only 'profits' generated are by others entering and carrying some heavy baggage. It's a way to make some big money, but if you believe there's little risk in that then you really need to take a reality check. Also, if you think crypto staking represents low risk, you also need to read up on some counters to that.

Bottom line, you can't earn 10%+ in a zero rate environment with little risk, no matter what the asset type or market environment.

For what it's worth, after many discussions I do know that there is a breed of crypto enthusiast who has it right and will find little argument here. Their views usually are some/all of:

1) Recognition that Crypto is highly speculative, and as such have an appropriately low % of their portfolio allocated
2) Recognise that much of the crypto space is closer to gambling than investing, and avoid those areas.
3) Act humbly whilst they are making money, and don't make ridiculous claims like 'guaranteed returns' 'low risk' and insults towards the intelligence and education of others.

These people I have time for. What I shall loosely call Crypto Bros YOLO'ing, pumping, flexing, talking nonsense about inflation hedging and pristine assets, I don't. 

Frequentlyhere

If you'd like a good centrist take by the way that neither dismisses or worships crypto, I can recommend this one (and the blog in general is excelllent too).

https://ofdollarsanddata.com/fear-and-loathing-in-cryptoland/

Zola.

Anyone who is serious should recognise "cryptocurrencies" are pretty much the riskiest things you can invest in right now. But with that high volatility comes the potential for high returns. History has shown thus far that Bitcoin has returned A LOT of money for those who are patient. 

Anyone who bets the farm on Bitcoin (and especially other cryptos), is a mug, likewise, I think anyone who shuts down this financial technological revolution completely and just doesn't get it, may later deeply regret it..

Time will tell. 

Frequentlyhere

I think I can agree with all of that, Zola. Unfortunately, there are far too many people like that.

I mean, look at this one "The Doctor's 100% bet on Bitcoin". In a financial independence forum no less, not even crypto! The hubris is palpable, and the scary thing is the number of similarly brainwashed comments. I think in reality this guy is very well insulated, but still, the sentiments are quite something to behold.

Zola.

I saw that thread. Whilst he came off a bit arrogant, he has the deep conviction of someone who has been "orange pilled" by Bitcoin. He also got a bit wound up by the sarky replies.. He seems to have only read "The Bitcoin Standard", which is mostly an excellent book, but one book wouldn't be quite enough for me to do what he has done... who knows though, it may work out the best decision ever, or not. I doubt he'll be crippled if bitcoin somehow goes to zero. 

He's not the only one going all-in though, you do see more and more stories like this emerging, maybe it's a top signal

https://www.foxla.com/sports/rams-wr-odell-beckham-jr-to-receive-full-salary-in-bitcoin

Malthusian

I mean, look at this one "The Doctor's 100% bet on Bitcoin". In a financial independence forum no less, not even crypto! The hubris is palpable, and the scary thing is the number of similarly brainwashed comments. I think in reality this guy is very well insulated, but still, the sentiments are quite something to behold.

As you say, he is very well insulated. So insulated that his claim to have made a "100% bet on Bitcoin" is complete nonsense.

Let us assume he earns the average UK doctor's salary of £76,300pa. That would mean his personal annual contribution to his NHS pension is 13.5%pa. The NHS also pays 20.68%pa into the scheme. That's all his money paid in exchange for his labour, so in total he is investing £2,173 per month into the NHS pension scheme. So if the NHS pension and £1,000pm into Bitcoin are his only two investments, he is actually making a 31% bet on Bitcoin.

But this is of course an underestimate because "contributions" into the NHS scheme are a cargo cult ritual. The doc's NHS pension will in reality be paid by taxpayers when he is retired, not from his contributions. "NHS pension contributions" consist of the Government shuffling money around from one pot to another before spending it in the present.

What the doc is actually accumulating as an investment, by working for the NHS and joining the pension scheme, is a promise to pay 1/54 of his salary from State Pension Age for each year he is an active member - so 1/54 * 76,300 = £1,413pa. The value of a promise to pay £1,413pa from 68, index-linked and guaranteed for life with a spouse's pension, is £78,035 based on open market annuity rates.

You could argue that the value of that promise needs to be discounted if you are not yet 68, but you would be wrong, because the promise is linked to inflation and there is no prospect of it being invested to generate growth above inflation until retirement date because it's taxpayer's money. So the value of that promise in the present is still £78,035 in today's money.

So in reality the doc is accumulating £1,000 each month in Bitcoin and £6,502 each month in NHS pension; so the thread should be titled "The Doctor's 13% Bet on Bitcoin".

The reason this matters is that the people professing to be the most bullish about crypto consistently don't put their money where their mouth is. Either they don't have any money to put there because they are skint. Or they are selling shovels in the gold rush (e.g. running crypto exchanges, making a modest living from transaction fees so that other people can hodl crypto and get rich). Or like the Reddit bro they are investing what actually turns out to be a very modest proportion of their wealth.

If even the most bullish crypto promoters aren't actually that confident in it going to the moon, there's no reason the general population will be either, which means no new money and number no go up.

Zola.

He quite clearly stated that he will only invest in Bitcoin outside of his pension contributions, so that is 100% of his net pay 'investing money' going to Bitcoin until 2030. But don't let that stop you from rambling on

No matter what his salary is, investing £1000 a month into one thing is pretty bullish. Will be interesting to see if he has that same conviction when Bitcoin takes a hard crash..

Malthusian

Money = money. I might as well say that I'm going to put 1p a month into Bitcoin and proudly tell Reddit that I'm putting 100% of my Bitcoin savings into Bitcoin. Witness me!

No matter what his salary is, investing £1000 a month into one thing is pretty bullish.

And to be fair putting 13% of your retirement fund into Bitcoin is still pretty bullish. Even some of its advocates often say that you should only put in 5-10% of your free assets. (Although the only point in doing so is to kick yourself when it next pumps for not putting more in.) It's just not a "100% bet" by any stretch of the mathematically literate imagination.

It's a bit like saying you're going to jump off a cliff because you believe that Jesus will protect you, and not tell the faithful that you've thoroughly scouted the water beforehand. There is the same disconnect between what you want people to believe you are doing vs what you are actually doing. When someone points out that it's not really a leap of faith you can't retort "I'm still jumping off a cliff so what's the difference".