Sunday, February 28, 2021

Market Commentary (Rates soar, growth stocks selloff, and how to position yourself in this environment) - 2/28/2021

(for pics, please refer to the original post)

Hello investors,

Thank you very much to those who participated in the poll! I really don't have a good way to gain a sense of what's on everyone's minds so this sort of poll is a good data point for me. I will continue to focus on leveraging options strategy on individual companies.

Today, I wanted to talk about the recent market actions.

I think it's imperative to assess the current market environment given not only the magnitude of the changes in the rates markets but also the speed at which it happened.

If this were the sort of correction that occurred in September 2020, I wouldn't reassess at all because that was simply a large whale in the market coming in and driving up the prices and eventually the market corrected itself. Not much movement in yields or other markets.

This time is a bit different as yields have moved significantly, which has a significant impact on not only risk assets (stocks particularly) but also fiscal and monetary policies.

If you recall from the recent market commentaries (see below), I mentioned that in the short to intermediate-term, risk assets are driven by fiscal and monetary policies.

https://www.reddit.com/r/Midasinvestors/comments/l3ugu7/market_commentary_how_about_that_gme_and_bb_craze/

https://www.reddit.com/r/Midasinvestors/comments/knxgex/market_commentary_2021_outlook_12312020/

Dramatic changes in interest rates can impact the policies so it is time to reassess where we are.

I typically take four steps to pick out the securities I want to trade and these steps include macroeconomics, technicals, and fundamental analyses. As I've repeatedly said before, the name of the game is piecing together different pieces of puzzles to create a whole picture. You can't just ignore what's happening at the White House when picking out securities.

That leads me to make one additional comment, the memos in this subreddit are only for those "actively buying and selling securities", not for those buy and hold ("BH") group.

Don't get me wrong, I am a huge believer in BH strategy. In fact, I suggest you read Warren Buffett's annual letters which went out this past week.

Yes you get to spend less time on markets, pay little taxes, and grow your wealth with discipline.

I have a friend who is an ardent BH person and he keeps trying to convince people "just buy and hold Disney and Amazon for 20 years!" Everyone knows that BH is a good path to wealth creation. Don't need to reiterate that or even try to convince people to do that.

I actually do BH on half of my portfolio and actively trade on the other half.

My point is if you are a huge BH believer and don't want to actively trade, please stop trying to convince me or others to do it. We all know it is a good strategy and this is a game against yourself.

Enough with the intro, here are the main topics for today's memo.

4 steps I take to determine what to trade.

  1. Determine where we are in the market cycle
  2. Decide how we should position ourselves
  3. Select which securities will give you the highest return for a unit of risk
  4. Allocate appropriate weights

These steps are not mine but a mixture of what I was recommended to do by my mentors, bosses, and other resources.

This accomplishes a few things:
- It forces you to step back and see the bigger picture.

- It allows you to be more objective.

- It allows you to assess your performance.

1) Determine where we are in the market cycle

How is the current market environment? Bullish or bearish? Euphoric or panicky? What changed?

Well, let's look at a few charts to see what's changed.

Equity markets

S&P futures

📷

Nasdaq futures

📷

We are just starting to test the 50D MA for the S&P and have already broken 50D MA for the Nasdaq. It's hard to make any conclusions from these so we move on.

Bond markets

10-year yield

📷

10-year rose almost 100 bps from the lows in August 2020. This is attributable to economic recovery, inflation expectations, and Georgia run-offs.

What's more fascinating is how much the yield curve bear steepened since the peak of the pandemic.

This was what the majority of the market participants were expecting throughout 2020 and post-election but I was very off on the timing of the events. The majority of the steepening happened towards late 2020 and early 2021.

This is an expected development as the economy recovers, inflation expectations soar and treasury market is flooded with new issues.

Below is what's making me more concerned.

📷

The MOVE index is basically the VIX for bond markets. The higher the index the higher the expected volatility in rates. It's still at relatively low levels but the rate at which it is skyrocketing is certainly disturbing.

Why is this all happening?

From what I have gathered, it's the Janet Yellen bomb.

On 2/16, Janet Yellen, the Treasury Secretary, announced her plans to drawdown on TGA (treasury general account, a sort of checking account for the federal government).

📷

What this means is that the Treasury will offload its enormous amount of cash ($1.6 trillion) into the banking system for the banks to be able to perform PPP lending and do all sorts of fiscal policy-related activities in the next 3 months.

The magnitude of this balance is simply enormous. Take a look at the chart below.

📷

We have never ever had TGA balance running above $500 billion and now we have close to 3x that flooding into the banking system.

From another perspective, we have about $3T reserves in the banking system. So that $1.6 trillion adds about 66% over the next few months to the banking system.

This video nicely summarizes what happens in the next few months.

https://www.youtube.com/watch?v=VLR0jSNByGA

This provides so much liquidity to the banking system that banks will be buying tons of treasuries, which may push short term rates to the negative territory and experts like the guy in the video anticipate that the Fed may have to actually raise IOER (interest on excess reserves) to prevent rates from falling below zero.

Now, what does all of this mean for the equity markets?

I mentioned before that majority of the bear markets must have some sort of liquidity problems, whether that be short term borrowing rates rising, bid-ask spread widening, or short term rates spread widening.

Right now, there are some signs that the bond markets are volatile but the short term funding rates are so low and so liquid due to the expected TGA drawdown and Fed purchases.

In conclusion, the way I see it, we are likely still in the recovery phase of the market cycle but we are experiencing intermittent corrections on the way. The Fed has not changed its policy stance, the gov't is continuing to push its stimulus plans, and the markets are flooded with liquidity.

Yes, higher long-end rates will inevitably bring down the valuations because by definition, higher rates result in higher discount rates and thus lower present value of future cash flows.

Yet, take a look at the chart below published by Bloomberg.

📷

During most of the periods when the 10-year treasury yields rose, S&P rose together. And this makes sense because yields rising indicates that the economy is growing, which translates to bullish equity markets.

2) Decide how we should position ourselves

My mentor once told me that you can never guess where the rates or stock price will move, but you can probabilistically bet on those movements.

Let's say you are betting on 10yr treasury futures. Do you think it's more likely to go from 1.4% to 2% by the end of 2021 or 1.4% to 0.8%?

We can never guess where it's going to go but I think we can all agree that it is more likely to move up than down.

Same for stocks. You can never guess where NVDA will go but in the next 2-3 years, it will likely be higher than it is now.

My point is that we should position ourselves to benefit from a probabilistic standpoint, not predicting rates movement or stock price movements.

This brings us back to the idea of convexity. As long as we make bets that yield asymmetrical returns, you just need to win half of your bets because on average, you will be up ahead.

Theoretically, out of ten stocks, you only need to win five and those five will asymmetrically outperform your losers. If your losers lose 10% on avg, your winners will win 20% on avg and you end up winning on net.

Given that it is more likely that we are still in the recovery phase of the market cycle, I believe that we should position ourselves cautiously aggressive.

I don't believe we are headed for a bear market, yet. We will likely see an intense correction (5-10% drawdown on S&P) but we won't see anything like 25-30% for a bear market period of 8 months.

Therefore, however deep this correction may go (and it may go further), it is a buy-the-dip opportunity.

With that said, don't underestimate how long this potential correction may last. It may last for 1 month, 3 months, or even 10 months. Buy the dip is not as simple as buying when the markets go down but you have to think about your carrying costs if you use options (theta decay) or margin calls.

Remember, Nasdaq had five +15% corrections on its way to the 2000 top.

📷

📷

Therefore, I am buying the dips in small amounts. I would spend 5-10% of your capital on every dip that happens on a daily basis. This way, you get at least 2 weeks worth of time to deploy your capital.

3) Select which securities will give you the highest return for a unit of risk

This really depends on your risk appetite and your views. I will simply share mine in hopes to provide a guide for everyone but it is up to you to do your due diligence and make sure you are comfortable with what you are holding.

At the moment, below are my plays.

Stocks

- Short-term, leveraged longs (options, margins, etc.): OZON, FUTU, FVRR, FRHC, ENVA, TIGR, OPEN, SKLZ, PDD

- Long-term, BH longs: TTD, ETSY, NTES, JD, TWLO

Bonds

- Long 5/30 spread

Commodities

- Long gold

Currency

- Bitcoin

4) Allocate appropriate weights

Weight allocation is just as important as security selection, as it expresses your conviction and magnitude of expected price moves. Below are my allocations (rough percentages because it's hard to compare futures and shorts in percentage terms).

Stocks (80%)

- Short-term, leveraged longs (options, margins, etc.): OZON, FUTU, FVRR, FRHC, ENVA, TIGR, OPEN, SKLZ

- Long-term, BH longs: TTD, PDD, ETSY, NTES, JD, TWLO

Bonds (10%)

- Long 5/30 spread

Commodities (5%)

- Long gold

Currency (5%)

- Bitcoin

Summary

Look at the bigger picture, see what's happening across not just equities but other asset classes, and determine where we are in the market cycle.

Be very careful with security selection and do not put all eggs in one.

I am also constantly learning. I had no idea the yield would take this long to break 1.5%. I had no idea gold would underperform. It's a game where you learn constantly and I would also appreciate any critiques on any topic I discuss.

As always if you'd like to receive emails, please sign up on this link.

Thank you for reading and happy investing!


Surging bond yields affected Bitcoin's 14% fall in the past week. Experts say that cryptocurrencies are starting to take on the properties of financial assets and they seem to be impacted by financial market events. Do you agree?

https://overb.it/CIKoVD

BTCA AMA REVIEW

At 15:00 February 28, 2021, XT.COM CHANNEL was starting again!

Here was the guest Mr. Vinay Chandra Lal (BTCA CEO) with us. Let’s follow him to explore ‘Bitcoin Asia, World's First Crypto based Travel Package Company’. I know it’s a pity to miss the event. So just review the AMA with me now!

https://preview.redd.it/6ftp2q997dk61.png?width=750&format=png&auto=webp&s=89a7b0a9b7b091a42ff6452cd4afef2b7b831b30

(Q:XT CBO JUN A:BTCA CEO Mr. Vinay Chandra Lal)

Q:

Hi, everyone! Welcome to the XT AMA Channel. I'm Jun, CBO at XT.com. I am hosting today's AMA with Bitcoin Asia. Let me give a brief introduction to XT first.

XT.com is the world's first real-time social trading platform with 0% leverage interest. The XT ecosystem has over 6 million global users with a daily transaction volume of close to $5 billion. The platform has real-time indicators and tools that bring the best trading atmosphere for all users.

XT exchange's innovative social model empowers the blockchain industry through newly developed social trading avenues, which were once not possible. XT has achieved this through a combined effort with our partners, such as Bananatok.

Today, our guest is Bitcoin Asia CEO Mr. Vinay Chandra Lal. Let's talk to him to learn about Bitcoin Asia.

Hello Mr. Vinay Chandra Lal, thank you for joining us for the XT and BTCA AMA!

A:

Hello Jun, First of all, I want to thank XT to give me such a platform where I can directly interact with such a beautiful audience and deliver my project insights. Thanks for setting up this AMA. Hello everyone, Good afternoon. I hope you all are safe and your previous months must have gone well. Let’s hope that the upcoming months go well too.

Q:

Can you give our audience a brief introduction to your project?

A:

Yes, with pleasure.BitcoinAsia is an ERC20 token based on the Ethereum blockchain. It's a decentralized peer-to-peer cryptocurrency for the travel & tourism industry.

I feel very proud to say that BitcoinAsia is the world’s first crypto-based travel package company that allows a traveler to book a whole tour package using cryptocurrency. Some companies offer a person to book flights and hotels through cryptocurrency. Still, none has accepted cryptocurrency to book full travel packages, including Flights, Hotels, Local Transportation, Meal plans, Local guides, Visa, and Travel Insurance. But with BitcoinAsia, you can do just about everything.

Our travel website (www.bitcoinasia.travel) and android application (Bitcoinasia - Travel) are live now. One can visit the website or download our android app to book the whole travel package for Asian Countries through paying in crypto.

Q:

I have checked your project has got impressive ratings by some top crypto rating websites. How do you take these ratings?

A:

I strongly believe that if a project has great potential and an excellent team working at the backend, that project has to be appraised and encouraged. Our project has been given a 9.7 rating by CryptoTotem and 9.4 by ICOmarks. And I feel proud to say that this is one of the world’s highest rated crypto project of current time.

Q:

Can you give our community a brief introduction behind the inspiration to build BTCA?

A:

I believe that “Problem and Need” are the inspiration behind building any product. Because Problem and Need give birth to “Opportunity”. First of all, I want to talk about the “Problem” part. Before building BTCA, we were already working in the travel & tourism sector. We used to offer Inbound and Outbound both sorts of travel holidays packages. Then we realized that the fiat currency conversion fee was too high. Traveling one country to another country with fiat currency is expensive.

Now comes the “Need” part. So we started searching for solutions to tackle this problem. By that time, people were talking crypto all over and its adoption was very high. Due to having IT professional teammates, we knew about blockchain technology and cryptocurrency a long time ago. Here we saw the “Opportunity” to introduce blockchain technology into daily usage. During our research, we found that no single company was offering the whole tour package through crypto. Traveling one country to another by paying in crypto, tourists can save a lot of transaction fees. So we took the initiative and converted this opportunity into reality.

Q:

In the Crypto industry, what do you think of the current state? What do you think that needs to be improved?

A:

We are in the era of digitalization and want to digitize every possible thing. It's an irony for us that despite living in 2021, we are still following the 300-year-old concept of paper money, which is centralized and can be manipulated by the government at any time. The travel sector is the backbone of the world economy. Tourism provides 10% of the world's GDP. By building an online platform for travelers to travel through cryptocurrency, we are doing justice to both. On the one hand, the travel industry requires new and secure technology. On the other hand, the technology used in the blockchain and crypto industry needs to be adopted by numerous businesses. Now I have come to adopt decentralized technology. By doing this, we would be able to hand over our upcoming generation a fast, secure, reliable, and trusted environment for travel.

Q:

How does the BTCA team plan to tackle these issues to reach mass adoption?

A:

To reach mass adoption, we would add various tourist destinations across the world to our travel platform so that maximum people could travel through crypto. We have planned to list our tokens in some other top exchanges so that more and more people could join us.

Q:

It sounds like the team is building something unique and special. Can you introduce the core team members of BTCA? We hear the team is highly experienced, can we get some examples?

A:

We’re a team of passionate, experienced, and optimistic blockchain believers. Our team has smart personnel from various domains but all of them share only one goal that is to drive this organization to achieve its objectives. From technical professionals to business executives, from travel advisors to legal advisors, our team is decorated with highly experienced professionals. I have years of experience in various businesses. I founded -“MyPriceVatika” to compare the price of mobile phones offered by different sellers within the territory of a city. Then I founded -“CheapestYatra Holidays” which was an online travel package comparing and booking website. I have been a prolific blockchain investor since 2016.

The other teammates are equally talented and possess extensive knowledge of their respective fields. Their Name and designations are as follows:

2.Harshit Bhatt: Chief Operating Officer

3.Neelam Prasad: Vice President

4.Rohit Prakash:Senior Vice President

Our team members and start-up are from India’s most prestigious technical institute, “IIT -

Indian Institute of Technology”, This is the same institute from where current CEO of Google - ‘Mr. Sundar Pichai’ has completed his graduation.

Q:

What is your timeline, and what can we look forward to from BTCA?

A:

We have been following our roadmap since the very beginning. Our IEO/ICO closed successfully, our travel website is live and we have recently launched our android application on google play store. Now we are listing our token on XT on 1st March 2021. I hope that our efforts would be welcomed by this community members. Right now, we are offering holiday packages for asian countries only. In future, as per the road map, we will cover European countries and whole world letter on.

Q:

Anything else do you want to share with our community?

A:

Yes, I have a gift for all of you. A BitcoinAsia Challenge.

Let me give you a task today. Just open any search engine you like and search for any online platform which could book a whole vacation using cryptocurrency. If you find any such company other than us, we'll be happy to give you 50000 BTCA for free.There are some companies which let you book hotel and flight through cryptocurrency. I request you to please find an organization that gives you a one-stop solution to book a full vacation consists of Flights, Hotels, Local Transportation, Meal plans, Guide, etc through crypto. If you find then email us at [info@bitcoinasia.site](mailto:info@bitcoinasia.site) with full details.. Don't be hopeless if you don't find any such company in your research. You are lucky that you have come to know about BitcoinAsia in before its too late.

It's the same as if you invested your money at the beginning of companies like Amazon, Bitcoin,

Coca-Cola, Uber, Apple, eBay, etc. All these companies were first of its kind in their respective

fields. You might have missed the chance to invest in these companies but fortunately, you've got a great chance to invest in such a company which is the first mover of its field.

Q:

Thank you, Mr. Vinay Chandra Lal, for taking the time to do this AMA with us today. It has been great learning more about BTCA and the team behind it!

A:

Thank you Jun to conduct this valuable AMA. I completely enjoyed this session and hope that I was able to deliver the importance and potential of our project to all of you. It’s been an honor to be among such accomplished individuals and to be able to present my perspective before you all. Thank you again and have a great day.

About XT.COM

XT.COM is the world’s first social infused exchange. Users can chat in communities while knowing the market trend to invest in. In XT communities, users explore valuable coins together.XT.COM is building towards garnering loyalty and bring new potential for the development of the entire blockchain industry. To achieve better development, it is necessary to break the tradition with a fresh model.XT Exchange not only empowers the blockchain industry but leads the industry with its innovation.


Market Commentary (Rates soar, growth stocks selloff, and how to position yourself in this environment) - 2/28/2021

Hello investors,

Thank you very much to those who participated in the poll! I really don't have a good way to gain a sense of what's on everyone's minds so this sort of poll is a good data point for me. I will continue to focus on leveraging options strategy on individual companies.

Today, I wanted to talk about the recent market actions.

I think it's imperative to assess the current market environment given not only the magnitude of the changes in the rates markets but also the speed at which it happened.

If this were the sort of correction that occurred in September 2020, I wouldn't reassess at all because that was simply a large whale in the market coming in and driving up the prices and eventually the market corrected itself. Not much movement in yields or other markets.

This time is a bit different as yields have moved significantly, which has a significant impact on not only risk assets (stocks particularly) but also fiscal and monetary policies.

If you recall from the recent market commentaries (see below), I mentioned that in the short to intermediate-term, risk assets are driven by fiscal and monetary policies.

https://www.reddit.com/r/Midasinvestors/comments/l3ugu7/market_commentary_how_about_that_gme_and_bb_craze/

https://www.reddit.com/r/Midasinvestors/comments/knxgex/market_commentary_2021_outlook_12312020/

Dramatic changes in interest rates can impact the policies so it is time to reassess where we are.

I typically take four steps to pick out the securities I want to trade and these steps include macroeconomics, technicals, and fundamental analyses. As I've repeatedly said before, the name of the game is piecing together different pieces of puzzles to create a whole picture. You can't just ignore what's happening at the White House when picking out securities.

That leads me to make one additional comment, the memos in this subreddit are only for those "actively buying and selling securities", not for those buy and hold ("BH") group.

Don't get me wrong, I am a huge believer in BH strategy. In fact, I suggest you read Warren Buffett's annual letters which went out this past week.

Yes you get to spend less time on markets, pay little taxes, and grow your wealth with discipline.

I have a friend who is an ardent BH person and he keeps trying to convince people "just buy and hold Disney and Amazon for 20 years!" Everyone knows that BH is a good path to wealth creation. Don't need to reiterate that or even try to convince people to do that.

I actually do BH on half of my portfolio and actively trade on the other half.

My point is if you are a huge BH believer and don't want to actively trade, please stop trying to convince me or others to do it. We all know it is a good strategy and this is a game against yourself.

Enough with the intro, here are the main topics for today's memo.

4 steps I take to determine what to trade.

1) Determine where we are in the market cycle

2) Decide how we should position ourselves

3) Select which securities will give you the highest return for a unit of risk

4) Allocate appropriate weights

These steps are not mine but a mixture of what I was recommended to do by my mentors, bosses, and other resources.

This accomplishes a few things:
- It forces you to step back and see the bigger picture.

- It allows you to be more objective.

- It allows you to assess your performance.

1) Determine where we are in the market cycle

How is the current market environment? Bullish or bearish? Euphoric or panicky? What changed?

Well, let's look at a few charts to see what's changed.

Equity markets

S&P futures

https://preview.redd.it/1005ek8reck61.png?width=676&format=png&auto=webp&s=91b5d08c035da6d84bcaead43ad91a283cd020a6

Nasdaq futures

https://preview.redd.it/ibhbg0uzeck61.png?width=677&format=png&auto=webp&s=a1c7a16199214204ef52cd0872dd1500e901dbfc

We are just starting to test the 50D MA for the S&P and have already broken 50D MA for the Nasdaq. It's hard to make any conclusions from these so we move on.

Bond markets

10-year yield

https://preview.redd.it/4hwzqix7hck61.png?width=747&format=png&auto=webp&s=0d8214faabba15cf13bec97bd89ef6e8d8a94b9e

10-year rose almost 100 bps from the lows in August 2020. This is attributable to economic recovery, inflation expectations, and Georgia run-offs.

What's more fascinating is how much the yield curve bear steepened since the peak of the pandemic.

Processing img nnn3nfyfhck61...

This was what the majority of the market participants were expecting throughout 2020 and post-election but I was very off on the timing of the events. The majority of the steepening happened towards late 2020 and early 2021.

This is an expected development as the economy recovers, inflation expectations soar and treasury market is flooded with new issues.

Below is what's making me more concerned.

https://preview.redd.it/y6jmre7kfck61.png?width=1200&format=png&auto=webp&s=8275a86c036204c5d824c0433981ea684f88efed

The MOVE index is basically the VIX for bond markets. The higher the index the higher the expected volatility in rates. It's still at relatively low levels but the rate at which it is skyrocketing is certainly disturbing.

Why is this all happening?

From what I have gathered, it's the Janet Yellen bomb.

On 2/16, Janet Yellen, the Treasury Secretary, announced her plans to drawdown on TGA (treasury general account, a sort of checking account for the federal government).

https://preview.redd.it/qfv3msurkck61.png?width=748&format=png&auto=webp&s=bef22372dd4e2569dccf206405eb2eab6892eac5

What this means is that the Treasury will offload its enormous amount of cash ($1.6 trillion) into the banking system for the banks to be able to perform PPP lending and do all sorts of fiscal policy-related activities in the next 3 months.

The magnitude of this balance is simply enormous. Take a look at the chart below.

https://preview.redd.it/rb1thbsyjck61.png?width=1161&format=png&auto=webp&s=fd022999bf3f9340d89f3e61b01d66ecd3d1eff6

We have never ever had TGA balance running above $500 billion and now we have close to 3x that flooding into the banking system.

From another perspective, we have about $3T reserves in the banking system. So that $1.6 trillion adds about 66% over the next few months to the banking system.

This video nicely summarizes what happens in the next few months.

https://www.youtube.com/watch?v=VLR0jSNByGA

This provides so much liquidity to the banking system that banks will be buying tons of treasuries, which may push short term rates to the negative territory and experts like the guy in the video anticipate that the Fed may have to actually raise IOER (interest on excess reserves) to prevent rates from falling below zero.

Now, what does all of this mean for the equity markets?

I mentioned before that majority of the bear markets must have some sort of liquidity problems, whether that be short term borrowing rates rising, bid-ask spread widening, or short term rates spread widening.

Right now, there are some signs that the bond markets are volatile but the short term funding rates are so low and so liquid due to the expected TGA drawdown and Fed purchases.

In conclusion, the way I see it, we are likely still in the recovery phase of the market cycle but we are experiencing intermittent corrections on the way. The Fed has not changed its policy stance, the gov't is continuing to push its stimulus plans, and the markets are flooded with liquidity.

Yes, higher long-end rates will inevitably bring down the valuations because by definition, higher rates result in higher discount rates and thus lower present value of future cash flows.

Yet, take a look at the chart below published by Bloomberg.

https://preview.redd.it/u46glffnfck61.png?width=1280&format=png&auto=webp&s=8beae646701fc1d8dd5e674a9df10c34c78f3719

During most of the periods when the 10-year treasury yields rose, S&P rose together. And this makes sense because yields rising indicates that the economy is growing, which translates to bullish equity markets.

2) Decide how we should position ourselves

My mentor once told me that you can never guess where the rates or stock price will move, but you can probabilistically bet on those movements.

Let's say you are betting on 10yr treasury futures. Do you think it's more likely to go from 1.4% to 2% by the end of 2021 or 1.4% to 0.8%?

We can never guess where it's going to go but I think we can all agree that it is more likely to move up than down.

Same for stocks. You can never guess where NVDA will go but in the next 2-3 years, it will likely be higher than it is now.

My point is that we should position ourselves to benefit from a probabilistic standpoint, not predicting rates movement or stock price movements.

This brings us back to the idea of convexity. As long as we make bets that yield asymmetrical returns, you just need to win half of your bets because on average, you will be up ahead.

Theoretically, out of ten stocks, you only need to win five and those five will asymmetrically outperform your losers. If your losers lose 10% on avg, your winners will win 20% on avg and you end up winning on net.

Given that it is more likely that we are still in the recovery phase of the market cycle, I believe that we should position ourselves cautiously aggressive.

I don't believe we are headed for a bear market, yet. We will likely see an intense correction (5-10% drawdown on S&P) but we won't see anything like 25-30% for a bear market period of 8 months.

Therefore, however deep this correction may go (and it may go further), it is a buy-the-dip opportunity.

With that said, don't underestimate how long this potential correction may last. It may last for 1 month, 3 months, or even 10 months. Buy the dip is not as simple as buying when the markets go down but you have to think about your carrying costs if you use options (theta decay) or margin calls.

Remember, Nasdaq had five +15% corrections on its way to the 2000 top.

https://preview.redd.it/pugo3wv2sck61.png?width=810&format=png&auto=webp&s=2a9bb66dc0f382ead66218c2c3a96cf33bd1c5ec

https://preview.redd.it/aon45a5ktck61.png?width=808&format=png&auto=webp&s=a65992031fee7e885e5016fe385c6f9abbd61cb8

Therefore, I am buying the dips in small amounts. I would spend 5-10% of your capital on every dip that happens on a daily basis. This way, you get at least 2 weeks worth of time to deploy your capital.

3) Select which securities will give you the highest return for a unit of risk

This really depends on your risk appetite and your views. I will simply share mine in hopes to provide a guide for everyone but it is up to you to do your due diligence and make sure you are comfortable with what you are holding.

At the moment, below are my plays.

Stocks

- Short-term, leveraged longs (options, margins, etc.): OZON, FUTU, FVRR, FRHC, ENVA, TIGR, OPEN, SKLZ, PDD

- Long-term, BH longs: TTD, ETSY, NTES, JD, TWLO

Bonds

- Long 5/30 spread

Commodities

- Long gold

Currency

- Bitcoin

4) Allocate appropriate weights

Weight allocation is just as important as security selection, as it expresses your conviction and magnitude of expected price moves. Below are my allocations (rough percentages because it's hard to compare futures and shorts in percentage terms).

Stocks (80%)

- Short-term, leveraged longs (options, margins, etc.): OZON, FUTU, FVRR, FRHC, ENVA, TIGR, OPEN, SKLZ

- Long-term, BH longs: TTD, PDD, ETSY, NTES, JD, TWLO

Bonds (10%)

- Long 5/30 spread

Commodities (5%)

- Long gold

Currency (5%)

- Bitcoin

Summary

Look at the bigger picture, see what's happening across not just equities but other asset classes, and determine where we are in the market cycle.

Be very careful with security selection and do not put all eggs in one.

I am also constantly learning. I had no idea the yield would take this long to break 1.5%. I had no idea gold would underperform. It's a game where you learn constantly and I would also appreciate any critiques on any topic I discuss.

As always if you'd like to receive emails, please sign up on this link.

Thank you for reading and happy investing!


What brought you to the dark side?

What was the event/realization/moment when you went from being an r/bitcoin person to an r/buttcoin person?


What happened? What's going to happen? The 10-year, the DXY and the USD. Stimulus + Infrastructure = JPOW goes Brrrr. The China 5-year plan announcement and how all of this will effect steel and metals.

What's going on with the market?

What's going on with steel?

What happened to our "Commodity Super Cycle"?

I'm sure if you are here, those are your most pressing questions.

I'm going to try and lay it out as I see it and where I believe we are going next.

This is going to be long and detailed and as many of you already know, I don't TL;DR.

So if you are one of those afflicted with ADHD, now is time to take your Adderall.

What's going on with the market?

The return of $GME fever coincided with a spike in bench mark 10-year yields to over 1.6% on Thursday along with a strengthening USD.

Why is the 10-year yield important?

Treasury bond yields (or rates) are tracked by investors for many reasons. The yields are paid by the U.S. government as interest for borrowing money via selling the bond.

Treasury Bills are loans to the federal government that mature at terms ranging from a few days to 52 weeks.1 A Treasury Note matures in two to 10 years, while a Treasury Bond matures in 20 or 30 years.

The 10-year Treasury yield is closely watched as an indicator of broader investor confidence. Because Treasury bills, notes and bonds carry the full backing of the U.S. government, they are viewed as the safest investment.

The importance of the 10-year Treasury bond yield goes beyond just understanding the return on investment for the security. The 10-year is used as a proxy for many other important financial matters, such as mortgage rates. 

This bond also tends to signal investor confidence. The U.S Treasury sells bonds via auction and yields are set through a bidding process. When confidence is high, prices for the 10-year drops and yields rise. This is because investors feel they can find higher returning investments elsewhere and do not feel they need to play it safe.

But when confidence is low, bond prices rise and yields fall, as there is more demand for this safe investment. This confidence factor is also felt outside of the U.S. The geopolitical situations of other countries can impact U.S. government bond prices, as the U.S. is seen as safe haven for capital. This can push up prices of U.S. government bonds as demand increases, thus lowering yields. 

Another factor related to the yield is the time to maturity. The longer the Treasury bond's time to maturity, the higher the rates (or yields) because investors demand to get paid more the longer their money is tied up. Typically, short-term debt pays lower yields than long-term debt, which is called a normal yield curve. But at times the yield curve can be inverted, with shorter maturities paying higher yields.

https://preview.redd.it/t60akc3xobk61.png?width=1284&format=png&auto=webp&s=eb1542e311d02ded4aaa63cb1133d74178ac9c1f

Benchmark 10-year Treasury yields surged last week to the highest in more than a year, leading traders to yank forward their expectations on how soon the Federal Reserve will be forced to tighten policy. For now, officials are stressing that the central bank has no plans to raise rates given lingering weakness in the labor market. That will make Fed Chairman Jerome Powell’s comments on Thursday at a Wall Street Journal event all the more interesting.

Many are comparing this to 2013's "Taper Tantrum":

https://preview.redd.it/ocnryomxpbk61.png?width=712&format=png&auto=webp&s=6e62eeb182ec811cc4cd0b12667b054592b87a16

As you can see, the yields are currently at levels not seen since late 2016; coincidentally, when we saw a change in US leadership and the stock market went on one of it's strongest runs in history.

An increasing yield is a sign that the economy is becoming healthier; however, it's the speed at which the 10-year treasury has risen since January that has investors spooked, fearing that JPOW will not keep such a dovish stance and the money printers going.

https://preview.redd.it/cru5s5oerbk61.png?width=1702&format=png&auto=webp&s=d9b535691f1f7ef9d0150651ee734b8f949d0028

As you can see, the yield has almost doubled since the beginning of the year and topped out late last week.

“With a lot of the move in yields due to the improving growth outlook and reopening prospects, risk appetite is holding up,” said Esty Dwek, head of global strategy at Natixis Investment Manager Solutions. “The pace and scale of the move in yields is more important than the absolute level, suggesting that as long as the move is gradual, risk assets should be able to absorb them.

https://www.bloomberg.com/news/articles/2021-02-28/yields-in-focus-as-stocks-set-to-open-cautiously-markets-wrap

“What happened Thursday was a complete dry-up of risk appetite in the fixed income space,“ said Hu, managing partner and founder of hedge fund Winshore Capital Partners, in an interview, who added he had been sitting on the sidelines since last week when the selloff in Treasury markets gained steam.

Hu had previously served as the head of inflation trading at bond fund giant Pacific Investment Management, or Pimco, and his career has included stints as a trader at BlueCrest Capital Management and a market maker at Credit Suisse.

His experience suggested that once bond-market sell-ofs, like the one experienced in the past week, got rolling, assessments of the appropriate interest rate based on economic and inflation forecasts didn’t matter to where yields were headed in the short-term.

Part of the issue in the bond market was that market-based measures of inflation expectations could not keep trucking higher if front-dated Treasury yields were dormant, anchored by the Fed’s accommodative stance.

But traders worried that in the event that price pressures did rise as much as feared, the Fed would have to tighten policy more quickly than it had planned, which would then curb inflation.

Those fears helped drive short-term rates higher, contributing to losses in popular strategies designed to profit from a surge in price pressures. Soon after, market participants unwound crowded trades like yield-curve steepeners, when traders simultaneously buy short-dated Treasurys and sell their long-dated peers to bet on a wider yield spread between the two maturities.

Finally, the evaporation of buyers and a rush of new supply on Thursday led to the worst showing in the 7-year Treasury note TMUBMUSD07Y, 1.109% auction’s history since its reintroduction in 2009, the trigger for the 10-year Treasury yield’s TMUBMUSD10Y, 1.411% brief surge to 1.60%. The benchmark maturity rate pulled back to 1.46% Friday.

Primary dealers who were left to take up the unsold bonds, one of their responsibilities in return for the privilege of trading directly with the Fed, may have needed to temporarily push yields higher to get rid of the bonds by the end of the day, Hu said.

“I suspect every trade was a risk-reduction trade on Thursday. Then you had the Treasury needing to issue so many bonds, but buyers not being in a mood to deal with it. Once [the auction] tailed, then there was just pure panic from the dealers,“ said Hu, referring to how bond-market traders describe a poor result in a Treasury auction.

https://www.marketwatch.com/story/heres-what-one-hedge-fund-trader-says-happened-in-thursdays-bond-market-tantrum-which-sent-the-10-year-treasury-yield-to-1-60-11614376522

Now that you know about the importance and action of the 10-year Treasury, let's take a look at the DXY:

https://preview.redd.it/k5tk2nx7nbk61.png?width=2268&format=png&auto=webp&s=fba655a0c1569c7edf95bb7f725a220f97488b2d

The dollar index lifted off a seven-week low on Thursday after yields on 10-year U.S. Treasuries jumped as high as 1.6% following weaker than expected bids in a U.S. government debt auction.

The move was the latest example of currency markets taking their cue from bonds, which have been moving on the changing outlook for economic growth and inflation following unprecedented government stimulus and monetary easing along with increasing COVID-19 vaccinations.

The dollar was up 0.13% against a basket of currencies in the early New York afternoon after dipping as much as 0.26% to 89.677, its lowest since Jan. 8.

The 10-year Treasury yield was 1.50%, still up 11 basis points on the day.

The rise in bond yields, after adjusting for inflation, has accelerated in recent days, indicating a growing belief that central banks may begin to pare back ultra-loose policies, even as officials maintain a dovish rhetoric.

"It has been a global move," said Vassili Serebriakov, an FX strategist at UBS in New York. "Those higher bond yields are a symptom of expectations of a strong economic rebound after the pandemic." Data on Thursday showed that fewer Americans filed new claims for unemployment benefits last week amid falling COVID-19 infections.

Federal Reserve Chair Jerome Powell reiterated on Wednesday that the U.S. central bank would not tighten its policy until the economy improves.

Commodity-linked currencies, including the Australian, New Zealand and Canadian dollars, all hit three-year highs earlier in the day as their bond yields surged.

"The U.S. has actually lagged a lot of these other countries in terms of the yield moves,” said Erik Nelson, a macro strategist at Wells Fargo in New York, noting that New Zealand’s 10-year government bond yield had gained 18 basis points on Thursday.

The Aussie reached $0.8007 against the greenback and was last down 1% at $0.7882. New Zealand's kiwi hit $0.7463 and then fell, last off 0.8% for the day.

The Canadian dollar got as far as 1.2468 per U.S. dollar, but was last at $1.2569.

The euro rose to a three-week high, gaining 0.5% before backing off. It was last up 0.04% at $1.2175. The safe-haven Japanese yen, which tends to underperform when global growth improves, weakened as far as 106.29 yen per dollar.

“Some of the currencies that typically don’t do well in a global rebound are lagging,” Serebriakov said.

Changes in the dollar have been different against different currencies recently.

"It’s not just across the board the way it was last year when everything was driven by U.S. real yields falling and selling dollars across the board.”

https://www.reuters.com/article/global-forex/forex-dollar-firms-on-sudden-spike-in-us-treasury-yields-idUSL1N2KV28I

Put together the increasing 10-year yield PLUS the strengthening USD and commodities/cyclicals took a DOUBLE WHAMMY.

Commodities are priced in US dollars (even the Europeans buy a barrel of oil in US dollars). So, WHEN THE US DOLLAR GOES UP IN PRICE, THEN COMMODITIES GO DOWN IN PRICE (all other things being equal).

https://www.finimize.com/wp/us-dollar-going-up-makes-commodities-goes-down-why/#:~:text=Commodities%20are%20priced%20in%20US,all%20other%20things%20being%20equal).

Ok, with all of this now being explained - where do we go from here?

My opinion is that the US Dollar will weaken on the back of the $1.9T stimulus package that passed the House and is now on the way to the Senate for approval.

While there is a lot of news on the scope of the $1.9T stimulus package and much non-COVID related spending packed into this bill, a Quinnipiac University poll taken Jan. 28-Feb. 1 showed nearly seven in 10 Americans supported the stimulus plan against 24 percent who opposed it.

I believe this bill is passed.

Once the bill is passed, the printers are fired up and the value of the USD declines.

Remember over 20% of US dollars that are now in circulation were printed in 2020.

The U.S. Federal Reserve has printed massive amounts of funds in 2020 and bailed out Wall Street’s special interests during the last seven months. On October 3, 2020, Redditors from the subreddit r/btc shared a video called “Is Hyperinflation Coming?” and discussed how the U.S. central bank has created 22% of all the USD ever printed this year alone.

“The U.S. dollar has been around for over 200 years and for the bulk of that time, it was backed by gold,” one Reddit user wrote on Saturday. He added:

Having a quarter of all USD printed in a single year is more than alarming, it’s mind-blowing.

https://news.bitcoin.com/9-trillion-in-stimulus-injections-the-feds-2020-pump-eclipses-two-centuries-of-usd-creation/#:~:text=Estimates%20say%2C%20in%202020%20alone,during%20the%20last%20seven%20months.

Now we are adding another $1.9T into the system.

Next on the agenda is an infrastructure package.

During the presidential campaign, Biden pledged to deploy $2 trillion on infrastructure and clean energy, but the White House has not ruled out an even higher price tag. McCarthy said Biden's upcoming plan will specifically aim at job creation, such as with investments to boost “workers that have been left behind” by closed coal mines or power plants, as well as communities located near polluting refineries and other hazards.

“He’s been a long fan of investing in infrastructure — long outdated — long overdue, I should say,” White House press secretary Jen Psaki said Thursday. “But he also wants to do more on caregiving, help our manufacturing sector, do more to strengthen access to affordable health care. So the size — the package — the components of it, the order, that has not yet been determined.”

https://www.wcnc.com/article/news/nation-world/biden-looks-to-infrastructure-after-virus-relief/507-5cda6bc4-bceb-46ad-99c6-ae7c2b2160ee

As one of our Vitards pointed out, the power grid problems seen in Texas during the recent cold weather gives even more national focus and credence to the need for infrastructure improvements.

Business groups are ramping up pressure on the Biden administration to move forward on infrastructure and arguing that a climate change component is critical to their members.

The growing consensus among business leaders is that an infrastructure package should tackle green initiatives, but executives say they’re leaving it to Congress and the White House to determine the provisions and overall price tag.

Senate Majority Leader Charles Schumer (D-N.Y.) on Tuesday said infrastructure, along with technology-focused legislation, will be the next priorities for congressional Democrats following the passage of COVID-19 relief. He indicated that climate change proposals will play a key role in the package, making it a harder sell with Republicans.

Democrats are hoping that momentum and support from major corporations will help put pressure on Republicans in Congress.

The U.S. Chamber of Commerce, along with more than a hundred local chambers and the Bipartisan Policy Center, urged Congress last week to “enact a fiscally and environmentally responsible infrastructure package.”

“As a nation we must be able to build big things quickly to accelerate the economic recovery and build the resilient low-carbon economy of the future,” the groups wrote.

The Chamber is calling for the legislation before July 4, saying that in addition to climate provisions the measure needs to create middle-class jobs, improve federal project approvals and address the digital divide.

https://thehill.com/business-a-lobbying/business-a-lobbying/540424-business-groups-rally-around-green-infrastructure

Stimulus Package = money printing

Infrastructure Package = money printing

Money printing = weakening USD

Weakening USD = higher commodity prices

Infrastructure = higher demand of commodities

This is ALL WITHOUT taking into account the reopening of the US, thus the many calls of inflation and the beginning of "The Commodity Super Cycle".

That brings me to China.

I have talked in previous DD's about the removal of the export rebate on steel.

A key topic reverberating around the Asian steel market over the past month has been the possibility of China reducing steel export rebates to 9% from the current 13%, or possibly axing them altogether.

Market chatter on this topic has grown increasingly louder, with industry sources in China hearing more and more details about these plans from late January onward.

"This is likely in line with China's ongoing drive to reduce steel capacity, and cutting the rebates would force steelmakers to concentrate on domestic markets and not produce excessively to service overseas markets," a Chinese trader told Fastmarkets.

The cutting or removal of export rebates would be extremely impactful; without an export rebate of 13%, or even a reduced rate of 9%, would mean a general increase in steel prices.

It would mean Chinese mills will no longer play such a major role in steel seaborne markets, leaving a supply gap for other steelmakers to fill. This would likely boost spot prices.

This is indeed good news for steelmakers around the world, because this would mean that Chinese export prices will no longer be among the lowest in the world and would reduce the competitive pressure on suppliers in the Asia Pacific region, such as Japan, South Korea, Taiwan, Vietnam and India.

https://www.amm.com/Article/3975751/Comment-What-Chinas-possible-steel-export-rebate-cuts-means.html

The removal of the export rebate could come after China's annual meeting of parliament and the announcement of their next 5-year plan.

Here’s what to expect:

WHAT ARE THE ‘TWO SESSIONS’?

The annual meetings of the National People’s Congress (NPC), China’s rubber-stamp parliament, and the Chinese People’s Political Consultative Conference (CPPCC), are known as the “two sessions.”

The NPC is expected to sit for about a week, beginning on March 5. The CPPCC, a largely ceremonial advisory body, runs in parallel.

The events typically draw a combined 5,000 delegates and will be held under strict COVID-19 controls. Last year’s meetings were delayed to May because of the coronavirus.

Among the most-watched parts of the agenda are the presentation of an annual work report for 2021, and the release of China’s 14th five-year plan, expected to include hundreds of pages spelling out priorities for the world’s second-largest economy up to 2025.

Votes for new laws at the NPC follow the ruling Communist Party’s wishes and generally pass by overwhelming majority, but delegates have sometimes departed from the party line to vent frustrations over issues such as corruption and crime.

All citizens older than 18 are technically allowed to be elected to the NPC via votes through lower-level bodies, but most delegates are hand-picked by local officials.

Typically, Premier Li Keqiang and the government’s top diplomat, State Councillor Wang Yi, hold news conferences.

WHAT WILL BE ANNOUNCED IN THE WORK REPORT?

China usually announces its yearly GDP growth target, although last year it did not because of economic uncertainties caused by COVID-19.

Policy sources have told Reuters there will again be no target this year, although analysts expect growth may top 8% amid a strong recovery from last year’s coronavirus-induced slump.

Targets for inflation, job creation, the budget deficit and local government bond issuance for 2021 are expected.

China also typically includes a projection for growth in defense spending. Last year it was 6.6%, the lowest in three decades, although an improving domestic economy and rising tensions, including over Taiwan, are expected by many analysts to spur accelerated growth this year.

WHAT ABOUT THE 14TH FIVE-YEAR PLAN?

A draft of China’s blueprint for economic and social development from 2021 to 2025 will also be made public, which analysts expect to be a vision of a greener, more innovative economy that is less dependent on the wider world.

The document will set broad goals for growth, environmental protection, technological development, and living standards, to be fleshed out through more specific plans released later.

An average annual growth target of about 5% for the entire period is likely to be set, Reuters previously reported, down from “over 6.5%” for the previous five years.

Encouraging innovation will probably be a key part of the plan, in part to reduce vulnerabilities in China’s tech supply chains amid increasing tensions with the United States.

The government could also unveil reforms to spur domestic consumption and self-reliance under President Xi Jinping’s “dual circulation” strategy.

Another priority will be reducing emissions to move toward Xi’s goal of making China carbon neutral by 2060. Demographic challenges brought about by China’s rapidly aging population may also be addressed.

https://www.reuters.com/article/china-parliament/explainer-what-to-expect-from-chinas-annual-meeting-of-parliament-idUSL4N2KP29M

It is believed that the Chinese government will reduce steel making capacity and cut the rebate for exporting steel products out of China.

The reduction of steel making capacity has already been talked about and the government is forcing consolidation of manufacturers.

Beijing wants the top 10 steelmakers to account for 60% of China's steel output, before consolidating further into perhaps three or four steel groups producing more than 80 million mt/year each by 2025.

At the moment, the top 10 account for just 37%. There is still a long way to go.

Successful merger and acquisition activity has proved elusive due to different ownership structures and disputes around how profits and taxes should be divided up between impacted companies. In some cases, mergers have been in name only, with the respective mills continuing to operate autonomously, before quietly going back their own ways. Square pegs have been forced into round holes.

But last month's announcement that Baowu Group - itself the result of a coming together of Baosteel and Wuhan Iron & Steel Group in late 2016 - will take a 51% stake in Maanshan Steel (Magang) indicates that the pace of consolidation could finally be speeding up.

https://www.spglobal.com/platts/ko/market-insights/latest-news/metals/070219-feature-chinese-steel-consolidation-underway-with-baowu-in-drivers-seat

Everyone in the world knows that current supply chains are strained and steel prices are at levels we have not seen since 2008, without figuring in inflation.

With China’s foreign trade in steel steadily picking up after the Chinese New Year holiday lull while international steel prices keep soaring, speculation regarding possible cuts to Chinese export tax rebates on steel has become more intense both in and out of China.

The speculation that China may revise tax rebates on China’s certain steel products first arose last December and was sparked by comments that the Ministry of Industry and Information Technology wanted to see Chinese crude steel output decline this year – when steel consumption is forecast to increase, thanks to the recovering domestic economy. Chinese steel associations proposed that in order to supplement domestic steel supply, rebates should be cut or removed as a means to limit steel exports, as Mysteel Global reported.

To date, there has been no official word from Beijing on the proposal, yet market chatter on the subject has been getting louder recently. With global steel prices soaring, Chinese steel exporters are itching for more international sales and are concerned that any changes in rebates will negatively affect them at the time of signing contracts.

The talks about a rebate cut heavily relates to hot-rolled coil (HRC), as HRC exports are expected to double on-year this quarter due to the robust foreign demand, a Shanghai-based analyst estimated. China’s hot-rolled steel exports including hot-rolled coils and strips accounted for 12.5% or around 6.7 million tonnes of China’s total steel exports in 2020.

As of February 23, Chinese steel traders had raised their export offers of HRC to $700/tonne FOB, up by $40-50/t on week. Mills are generally offering at $720/t CFR Vietnam, sources said.

In contrast, as of February 17 the domestic HRC transaction price in the U.S. had reportedly surged to a 60-year high of $1,312/t for April delivery, as Mysteel Global reported.

Industry insiders in markets with close steel trade relations with China are asking around for any definite news of any rebate cuts. A Pakistani steel trader feared that any rebate reduction might send the already “sky-high prices” of Chinese products even higher, as Chinese sellers might add an extra margin to their sales prices to offset their loss of Beijing’s subsidies.

https://www.hellenicshippingnews.com/steel-traders-alert-for-china-steel-export-rebate-cuts-2/

As I've laid out here and in previous DD's - the table is set.

The earnings for and guidance for $CLF, $MT, $X, $VALE, $RIO, $BHP were all BULLISH.

I believe the 10-year mini "taper tantrum" and stronger dollar toward the end of last week caused broad sell-offs in equities across the board.

End of the day Friday was discount day and I know your response, "I've now bought the dip seven times!"

Look at the volume on $CLF on Friday - 100,863,039 shares traded.

Average 10 day volume now stands at 29.2 million.

Almost 4X daily volume on Friday.

My thought is the pullbacks on Thursday and Friday shook paper retail hands across the board, especially in commodities with the DOUBLE WHAMMY that accelerated the sell-off.

Prior to Thursday and Friday the prevailing talk was about the rotation out of tech into commodities and cyclicals on Monday, Tuesday and peaked on Wednesday.

Then the taper tantrum Thursday and Friday.

In my honest opinion, that is what has happened and I expect a strong bounce back over the next week.

There is too much momentum out there for the slide to continue:

Stimulus

Infrastructure

Vaccines - J&J now approved

Reopening of the US economy

Steel shortages

China, China, CHINA - potential steel capacity reductions and price increases due to removal of the export rebates.

I will have more information later this week on scrap and Chinese finished goods pricing.

Hang in there!

-Vito


[Altcoin Discussion] - Monday, March 01, 2021

**Thread topics include, but are not limited to:**

* Discussion related to recent events

* Technical analysis, trading ideas & strategies

* General questions about altcoins

**Thread guidelines:**

* **Be excellent to each other.**

* All regular rules for this subreddit apply, except for number 2. This, and only this, thread is exempt from the requirement that all discussion must relate to bitcoin trading.

* This is for high quality discussion of altcoins. **All shilling or obvious pumping/dumping behavior will result in an immediate one day ban. This is your only warning.**

* No discussion about specific ICOs. Established coins only.

If you're not sure what kind of discussion belongs in this thread, [here](https://www.reddit.com/r/BitcoinMarkets/comments/8ckuwb/daily_discussion_monday_april_16_2018/dxgcgdb/) [are](https://www.reddit.com/r/BitcoinMarkets/comments/4o936f/alt_cryptocurrencies_megathread_june_15_2016/d4fv61m/) [some](https://www.reddit.com/r/BitcoinMarkets/comments/4kmayw/alt_cryptocurrencies_megathread/d3g6gzs/) [example](https://www.reddit.com/r/BitcoinMarkets/comments/6xejto/what_does_your_crypto_porfolio_look_like_and_why/) [posts](https://www.reddit.com/r/BitcoinMarkets/comments/7m4pj6/do_you_think_ethereum_will_surpass_bitcoin_in_510/drrpw1t/). News, TA, and sentiment analysis are great, too.

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Black Swan & Crypto

I'm finally getting around to reading the Black Swan by Nassim Taleb. If you follow him on Twitter you'll find that he is not a fan of Bitcoin, but I get the feeling he is attacking a certain kind of devotion to Bitcoin and arrogance is blinding him to his own principles that reveal a lot of upside.

As Taleb says, history moves by jumps, not by crawling. I'm trying to discern how his now tried and true philosophy of skeptical empiricism applies to the world of cryptocurrency, and how to build those lessons into a strategy.

A few thoughts that I've had so far:

  • Assume I don't know anything more about future crypto prices than what my Dad knows from watching Fox News or any less than Elon Musk himself.

  • The least likely outcome is that Bitcoin/crypto just keeps growing at x%/year right now. That might happen when it's actually used as a primary currency but until then, speculation makes it entirely unpredictable.

  • There will be significant disruptions that can't be predicted by any "rational" person using conventional wisdom. If they could be predicted then they probably wouldn't happen. These disruptions could include market collapse, inflation, war, famine, pandemic, etc. These may have positive or negative impacts on crypto.

    • As an example of this, the idea that the United States dollar will be worth anything in 50 years seems to be taken entirely too much for granted, especially when you consider how many nuclear weapons exist, the last decade of monetary policy, and the general whims of populist and socialist politics.
  • Put myself in position to gain from positive outlier events and avoid risk of ruin from negative outlier events.

    • Make small/ medium bets on cryptos that appear to solve real problems
    • Hedge a traditional portfolio with crypto or hedge a crypto portfolio with something else.
    • Make bets on items where profit seems likely but avoid ruin. (Don't dump all available funds into a single Dapp)
    • don't over leverage
    • Don't get too emotionally attached to any currency or project. Continue to evaluate.

These are just a few thoughts, but I'd love to see discussion or other thoughts or musings from those who have read Taleb.


Coinbase Takes Crypto to Wall Street

Coinbase has built its business on the idea of transforming the financial system. It believes bitcoin and other cryptocurrencies can turn into legitimate alternatives to traditional money. And the company thinks its platform can turn into a sort of alternative to traditional stock markets, where the assets bought and sold in huge quantities are shares of digital tokens, rather than shares of companies.

Nine years after Coinbase was founded, it's all still a bit revolutionary. But there's a rather rich irony at play: To make the dream a reality, Coinbase first has to thrive in that old world of traditional money and the traditional stock market. Before it can create a new future, the company might have to beat the past at its own game. 

So far, so good. 

Coinbase filed for a direct listing this week on the Nasdaq, an enormous crossover event between the crypto market and the stock market that could value the company at more than $100 billion...

  1. Coin of the realm

Excuse me for the dorm-room philosophy on a Sunday morning, but money is a social construct. In a slightly different reality, no reasonable person would exchange a tasty hamburger and fries for a piece of strangely decorated paper with Alexander Hamilton's face on it. Fiat currency isn't intrinsically valuable. But because our society has agreed that strangely decorated piece of paper has a certain value, the trade works. Ever since the abandonment of the gold standard, that's been the bargain on which our whole economy rests. 

On the one hand, it seems kind of ridiculous to try to create that same grand bargain again from scratch, completely digitally, a whole system of payment and trade based on nothing but lines of ones and zeros on a screen. But on the other hand, why not? 

I can't sit here and explain the nitty-gritty details of cryptocurrencies and blockchains, just like I can't give a detailed breakdown of the many minute processes going on inside my laptop that allow me to push buttons on a keyboard and see these words appear on a screen. I'm not a technologist. But as with other technological breakthroughs, I can certainly see the appeal. The ideal vision of bitcoin and other cryptocurrencies could provide people around the world with a safe way to operate financially without regard to national borders or financial institutions, cutting out middlemen and bankers to create a new sort of economic freedom. 

When Coinbase was founded in 2012, that idea was still in its infancy. The overall market cap of all cryptocurrencies was less than $500 million. Slowly but surely, though, it caught on. The first real boom came in 2017 and 2018, when the price of a bitcoin, by far the most popular cryptocurrency, soared from less than $1,000 to more than $19,000. But the boom ended, and for the next two years or so, cryptocurrencies receded from mainstream consciousness.

Then, last year, during the first months of the pandemic, a new, bigger boom began. The price of a bitcoin crept up again past $10,000, past $20,000, past $30,000. The prices of other cryptocurrencies also skyrocketed. By the end of last year, the overall crypto market cap topped three-quarters of a trillion dollars. 

And by the time bitcoin rose above $50,000 for the first time earlier this month, a growing chorus of major institutional investors were thinking about cryptocurrencies as a legitimate asset class worthy of their long-term attention.

All of which has been very good for business at Coinbase, which has emerged as the most popular portal for those looking to cash in on the crypto gold rush. Between 2016 and 2018, the company's valuation grew from $500 million to $8 billion, according to PitchBook data. And earlier this month, Axios reported that private investors recently valued the company at more than $100 billion. That staggering sum could be a rough target valuation for the company's coming direct listing, which would make the move one of the largest stock-market debuts of all time by a VC-backed company. 

There are plenty of other metrics from Coinbase's new S-1 filing that demonstrate just how swift the company's recent growth has been. Median quarterly trading volume on its platform increased from $17 billion worth of assets in 2018 to $38 billion in 2020. The value of the assets stored on its platform, meanwhile, has grown from $7 billion to $90 billion over that same span. Total revenue in 2020 was nearly $1.3 billion, up nearly 140% year-over-year. 

After that banner year in 2020, the company was sitting on $1.1 billion in cash and equivalents at the end of December, likely a factor in its choice to go public through a direct listing that won't raise any new capital, rather than opting for an IPO. 

But the company's filing also suggests reasons for wariness. Coinbase readily acknowledges that another cryptocurrency crash could be bad for business, reducing both the value of the assets on its platform and trading volume among its users. And that volume is the key to Coinbase's model. In 2020, more than 96% of its net revenue came from transaction fees. 

In the prospectus, CEO Brian Armstrong says the current good times likely won't last. "We may earn a profit when revenues are high," he wrote, "and we may lose money when revenues are low, but our goal is to roughly operate the company at break even, smoothed out over time, for the time being." Even in an era when profitability is optional for massive startup IPOs, "break even" probably isn't what most investors are looking for in a $100 billion company. 

But then again, Coinbase is not most companies, and the crypto market is not most industries. The segment has its skeptics, to be sure. But it also has a significant population of true believers, people for whom investing in cryptocurrencies is nothing more or less than a bet on trying to create a new, more equitable financial system. It also has a significant population of pure speculators trying to make a quick buck on a highly risky investment with the potential for huge returns. In those two latter respects, some parallels could certainly be drawn to the GameStop saga. 

And the timing for the listing couldn't be better. Another operator of a cryptocurrency exchange, Kraken, is raising new funding that could come at a valuation of more than $10 billion, Bloomberg reported this week, another sign of surging investor interest in the space. 

For the past nine years, Coinbase's value has been determined solely by a relatively small group of venture capitalists. What will happen when the company's shares are at last available to a much broader base? We're about to find out.

https://pitchbook.com/news/articles/coinbase-direct-listing-bitcoin-wall-street


Clefting the Sea | Monthly FIRE Portfolio Update | February 2021

Just so the Seabeast cleft the sea,

Running for the home stretch, and just so

She glided, borne by her own impetus.

- Virgil, The Aeneid Book V.280-282

This is my fifty-first monthly portfolio update. I complete this regular update to check progress against my goal.

Portfolio goal

My objective is to reach a portfolio of $2,585,000 by 31 July 2022. This would produce a real annual income of about $90,500 (in 2021 dollars).

This portfolio objective is based on an assumed safe withdrawal rate of 3.5 per cent.

Portfolio summary

Vanguard Lifestrategy High Growth Fund $780,296

Vanguard Lifestrategy Growth Fund $43,020

Vanguard Lifestrategy Balanced Fund $79,084

Vanguard Diversified Bonds Fund $104,841

Vanguard Australian Shares ETF (VAS) $279,959

Vanguard International Shares ETF (VGS) $124,196

Betashares Australia 200 ETF (A200) $261,896

Telstra shares (TLS) $1,641

Insurance Australia Group shares (IAG) $6,322

NIB Holdings shares (NHF) $6,648

Gold ETF (GOLD.ASX) $102,453

Secured physical gold $16,462

Plenti (P2P lending) $4,954

Bitcoin $650,610

Raiz app (Aggressive portfolio) $19,779

Spaceship Voyager app (Index portfolio) $3,077

BrickX (P2P rental real estate) $4,454

Total portfolio value $2,489,692 (+$171,325)

Asset allocation

Australian shares 35.5%

Global shares 19.8%

Emerging market shares 1.7%

International small companies 2.2%

Total international shares 23.7%

Total shares 59.2% (-15.8%)

Total property securities 0.2% (+0.2%)

Australian bonds 3.1%

International bonds 6.6%

Total bonds 9.7% (-5.3%)

Gold 4.8%

Bitcoin 26.1%

Gold and alternatives 30.9% (+20.9%)

Presented visually, the chart below is a high-level view of the current asset allocation of the portfolio.

[Chart]

Comments

There are no real precedents for the events affecting the portfolio over the last several months.

This month, a sharp appreciation of the price of Bitcoin – by over 30 per cent – has delivered the third single largest monthly gain of the record. As a result the portfolio has grown by over 7 per cent in a single month, increasing by around $171,000.

This significant growth has come following a series of positive months since October, leading to the overall portfolio increasing by nearly 40 per cent over the past five months.

[Chart]

As occurred in January, changes in the value of Bitcoin dominated any other changes over the course of the month. In fact, Bitcoin appreciation represents over 90 per cent of the gains. By contrast, Australian equities were up around 2 per cent, and international equities, bonds, gold holdings all lost value.

The end of the month brings into view a deeply peculiar and unlooked for landmark. Having reset to a higher portfolio goal just two months ago, with a target timeline of July 2022, this goal is already rather close to being achieved.

[Chart]

Against the background of such volatility, applying an asset allocation policy appears as a single unsteady breath against a forceful gale.

Even so, with the overall dollar exposure to Bitcoin growing this month, the only deliberate portfolio action was to counteract this with continued equity purchases. This meant purchasing units using Selfwealth* in each of the international shares (VGS) and Australian shares (VAS) funds.

Next month will see the finalisation of first quarter dividends and distributions from the major exchange traded fund holdings and the Vanguard diversified bond retail fund. Using an average of available past distributions, these might normally be expected to deliver a total of around $4,400. Whether that occurs in this environment of a partly recovering economy is an open question.

Blown to port – an unexpected journeys end?

I observed last month that chance had presented either the opportunity to write about the journey I expected to have, and omit any inconvenient parts, or write about the one I am actually experiencing. As is clear, it is no choice at all.

The continued rise of Bitcoin has created a position never anticipated in the original design of the portfolio, or when the small curiosity-fuelled purchases were originally made across 2015-16. At the final purchase date in early 2016 the total funds I had used to make these Bitcoin acquisitions represented just 0.5 per cent the portfolio. This was an amount I was comfortable losing in its entirety.

With no further investments since that time, Bitcoin holdings have unexpectedly grown to make up more than a quarter of the portfolio.

This magnitude of change means that necessarily my thoughts have continued to focused on what these developments actually mean for the FI journey, in the short and long-term.

The most common question posed by readers since October has been: having achieved previous portfolio goals, and with Bitcoin prices so high, is it time to take some gains, and sell part or all of the holdings?

The answer to this seems obvious, but this is deceptive. In reality, the answer comes surrounded by a host of imponderables, conditionalities and unknowables. It is small comfort that the passage of time alone will provide absolute and final certainty in its verdict.

Analysing some potential adjustment ‘rules’

One of the complexities that presents itself is: just what were or are the ‘right’ conditions for a re-balancing or sale?

A decision to fully or partially sell down the holdings could reasonably have been taken at many different points in the chart below.

[Chart]

Indeed, some other financial bloggers have made such a decision recently. Many of these different possible points for rebalancing or exit, however, would have left the portfolio dramatically undershooting its trajectory, and forgoing substantial gains.

This is a dilemma more commonly encountered in actively selected equity portfolios, where single small investments in emerging firms unexpectedly appreciate, than in portfolios made up of passive ETFs and funds.

Yet the issues remain the same.

To illustrate, using any fixed maximum percentage-based allocation to Bitcoin following the initial purchase would in general have resulted in early liquidation of a substantial proportion of the position.

The table below sets out the results of applying three different potential ‘exit’ triggers or rules, based on the Bitcoin holdings breaching set percentages of total portfolio holdings. The first column sets out three possible maximum asset allocation levels, following which exit from the position is assumed.

Table – Results of hypothetic maximum Bitcoin allocation (2016-2021)

Threshold Date triggered Gains secured Losses protected Gains foregone

Sell > 1% Oct 2016 $4,000 $9,000 $642,000

Sell > 5% August 2017 $52,000 $57,000 $594,000

Sell > 10% Nov 2017 $146,000 $150,000 $500,000

Looking at this, it can be observed that:

  • Hard triggers would have produced early exit – Given the initial Bitcoin purchase was around 0.5 per cent of the portfolio, even optimistic trigger points (a doubling of value, or the taking gains once the holding achieved a ten-fold increase) would have resulted in early sales, within 2 years of the original purchase.

  • The opportunity cost of early exit is high – The losses hedged or ‘protected against’ under all scenarios are a fraction of the gains foregone by the trigger.

  • And these costs are meaningful in portfolio progress terms – Selling as Bitcoin breached the maximum threshold would have resulted in foregone gains of fully 20 per cent of the total portfolio value today.

The clear rejoinder to this analysis is that any gains taken previously would be safe and certain, while the values in the ‘gains foregone’ column remain contingent on the current price.

This is true, but notice that attributing much decision-making weight to this point also implicitly suggests that the current price is incorrect, and will fall. On average, such a forecast has been wrong over the 12 years of Bitcoin’s existence.

An alternative less drastic rule to apply would be selling down the holding to a fixed maximum percentage. The results of this strategy are more complicated to model, and are less adverse, but essentially they share some broad similarities with the analysis above.

Under almost any reasonable cap, significant sales would have been triggered early, capturing some gains, but leading to relatively high opportunity costs as time progresses.

This arises because significant holdings are sold at prices which are rapidly exceeded. Once again, if it is assumed the future price falls on a sustained basis, such a strategy looks reasonable. Yet that assumption remains just that – an assumption.

Harnessing time – an alternate approach

Amidst the volatility, my views on Bitcoin remain fundamentally the same as when I wrote about my approach to its portfolio role in mid-2019. I do not recommend it as part of a financial independence portfolio.

I personally view it as an intriguing financial technology and a potential emerging store of value with some option-like characteristics. It also may have some uncertain but potentially useful diversifying characteristics as part of my specific existing portfolio, noting that extrapolating from past relationships is always subject to the caveat that these relationships can change.

This all means that the answer to the reasonable question of under what conditions would some gains be realised is still nascent.

One approach with some risk and regret minimising features is to gradually draw down on an even ‘unit’ basis over regular time periods. For example, selling 10 per cent of the total current holdings each 5 years.

This would have the benefit of a sort of ‘reverse dollar cost averaging’ effect, and harness time to potentially reduce both the opportunity cost of selling too early, or too late. But it would have other disadvantages. For the moment, I have not decided to move to that approach.

Trends in average distributions and expenses

Credit card expenses across the last two months have been significantly higher than average.

Despite this, examined as a longer-term average, monthly expenditure on credit cards has continued to track well below previous years.

[Chart]

There has been some reductions in the three-year average of distributions, from the average now including a month of (lower) estimated half year distributions than actually experienced in 2020. It remains to be seen whether this will continue and result in the two lines converging again.

The record of distributions compared to total expenses provides a broader picture of progress against total monthly spending.

Distributions and Total Expenses - 2017-2021

The chart above shows that the capacity of the portfolio to support average spending over the past three years is still close to 90 per cent, with a small downward movement this month, but a longer term upward trend.

Progress

Measure Portfolio All Assets

Portfolio objective – $2,585,000 (or $90,500 pa) 96.3% 123.7%

Total average expenses (2013-) – $85,700 pa 101.7% 130.6%

Summary

Vladimir Ilyich Lenin is credited with the sentiment that there are decades where nothing happen, and weeks in which decades happen. In the sixteen weeks since the end of October, the portfolio has grown in nominal dollars by approximately the same amount as the decade from 2007 to 2016.

There is no doubt Lenin would not have been an adherent of decentralised cryptocurrencies (pdf). Nonetheless, Bitcoin’s impact on the portfolio progress has been revolutionary. The question remaining is – does it represent a ‘permanent revolution’, or will there come reversals and counter-revolution?

One of the features of the past month has been volatility and change – with at times the new portfolio target being achieved, and then lost again. The portfolio has traded in a range of $180,000 within some weeks. To my surprise, this volatility has not been overly disturbing.

Instead, it has seemed like an object lesson in a broader learning from the journey – stoical detachment and humility around the expectations for the future, including desires for certainties. Looking at the portfolio through the month what has felt most striking is the relative lack of volatility of equity assets by comparison.

This too may change. One of the most interesting developments of this month has been signs of emerging upward pressures around government bond yields and inflation expectations.

Like similar pressures in September 2019, these potentially represent a signal that market-driven bond buyers will demand higher yields than have been apparent since 2018. Any such sustained movement has the potential to challenge equity valuations, and as this paper (pdf) shows, broad equities are not always a reliable hedge against higher inflation.

Though the least of my expectations in early January was approaching the revised portfolio goal within two months, developments such as these could impact on further progress. This would be particularly significant, as the equity segment of the FIRE portfolio remains around $470,000 below its ultimate target.

This month I enjoyed Aussie Firebug’s interview with fellow blogger Aussie HiFIRE, and this honest and thoughtful reflection on the issue of income sustainability from Chasing FIRE Down Under.

By definition, the financial independence journey demands careful consideration about the permanence and limitations of any employment income. All the more so, as the journey – clefting the waves seemingly under its own impetus – appears at risk of completing itself.

The post, links and full charts can be seen here.


I originally wrote this for BCH community, and it would be interesting to get your thoughts too: BCH Strengths, Weaknesses, Opportunities and Threats

This is known as the SWOT analysis. Here's what Investopedia says about it:

SWOT (strengths, weaknesses, opportunities, and threats) analysis is a framework used to evaluate a company's competitive position and to develop strategic planning. SWOT analysis assesses internal and external factors, as well as current and future potential.

So let's try it, in a light-hearted manner, shall we?

Strengths

Bitcoin Cash is an instance of Bitcoin, the invention. With that we inherited a technology that has worked without fail since 2009, a technology which first solved the double-spend problem without requiring central authority and made magical internet money possible. This peer-to-peer electronic cash system achieved it by using proof-of-work system which enables anyone too freely, without an enrollment process, participate in securing the network and get rewarded for it. Many other cryptocurrencies have popped up since 2009, but I believe none of them can promise the same security model. This is a major strength of Bitcoin Cash.

Over time mining competition resulted in arms race for specialized hardware, also known as mining ASICs (Application-specific integrated circuit) so while anyone is free to mine, they need to make capital investments to be competitive. I see this as a great thing for our security -- because they make miners committed, they can't run off and do something else with their computing power. Once they buy the equipment they must mine with it to get a return on that capital investment.

Technology is just an enabler, though. People build, and we have a lot of devoted people, all around the World, who speak diverse languages and are coming from diverse cultures and background. Isn't that something special? I think it is. You built this! Yes, you!

  • You, node builders, 6 distinct teams! You're busy building node implementations, thinking about how to improve on what can be done with Bitcoin Cash while being extra careful to keep the security promise. What are nodes? Computer programs which operate directly on our blockchain, they are our backbone. Like e-mail servers and the complex network between them.
  • You, miners! You're running one of those node software, and are busy building and securing the blockchain, block by block, every 10 minutes or so. You never stop, how could you? There's a great reward hiding in every block!
  • You, wallet developers, too many to count! You're busy building wallets, thinking about the how to do what can be done, to serve the user the best. You build our financial e-mail clients. We use whichever one we like, and it connects us to a server and enables us to send financial messages, also known as money.
  • You, the user! You get to enjoy all that, you get to send these financial messages! You are also building, without even knowing it! You see, in a free market environment, financial messages i.e. choosing who to send money to plays a very important role. It creates a complex network, where fellow humans are rewarded with these money messages for goods and services they produce, and it really is a message. Message saying: I like your product/service, please make more!
  • You, another user! You are on the other end, receiving them. You are the one building a product/service for your fellow humans and you are getting these financial messages as encouragement for further work! You are building businesses, big and small. Keep building!
  • You, the influencer! I'm not just talking about you stars. I'm talking about everyone who writes anything in public. You, yes you! Everything you write, someone will read. Think about that. When you're talking with someone on a forum, you're not only talking with that someone, you're talking with everyone who may be looking! There's a responsibility in that. You never know how it may affect those who observe, because they won't jump in to tell you but they will observe and make judgement. So be smart about it, think about good conduct!
  • You, holders and speculators! You support the growth of our market value! Even if you hold other assets, that's cool, get your "tendies" wherever you can, but don't forget to bring some back home :)

I see people as our main strength! Let's celebrate it!

Humans of Bitcoin Cash! You will grow Bitcoin Cash into a peer-to-peer electronic cash system for planet Earth! Who knows, maybe even beyond!

Weaknesses

We have to be honest with ourselves about this, we can't run from the truth. We must know and own our weakness, and then we can grow from it! Some of us went through war, not just one. They left a lot of battle scars, some have healed, some have not. Let's revisit our past wars and battles:

  • The scaling war. This was the war that went on when Bitcoin was still one. It was a war between people. So you see, people can also be a weakness. It lasted for years. Some didn't want Bitcoin to grow to its full potential of becoming a peer-to-peer electronic cash system for planet Earth! Those of us who were there remember it. We tried to reason, it was no use. So a split was unavoidable. Who won? Nobody. Everyone lost.
  • The battle for Bitcoin title. We lost this one. This left big scars. We have to accept we lost the battle for the title, and only then can we heal and turn it into a strength. We all know the truth, that Bitcoin Cash is Bitcoin. Sometimes, though, we can't straight say it to those not ready to hear it. We can whisper it, and amongst ourselves we can sometimes even shout it! It all depends on the circumstance, and that's why it could be both a weakness and a strength. Notice I said battle, not war. This was our first battle as Bitcoin Cash, and it will be our last - the final boss battle. We must first grow big for that one!
  • The war with Craig "Satoshi" Wright. This wasted a lot of energy. We won, and we thought we're free to grow from there, but we lowered our guard too soon.
  • The war with Bitcoin ABC. This wasted a lot of time because they used to be our leaders and we trusted them but Bitcoin Cash development was stuck, and the market didn't like that, and at the end they even wanted to take our money for it!

Some of you were there during all of those, some of you were not - lucky you! :)

You noticing something? I'm again talking about people. They can be our greatest weakness. Some of you don't care about these battles, you're here to make money and just be users. That's great, happy to have you, just stay alert, ok?

All these battles eliminated people from our community. They made us stronger by eliminating bad actors and making us more cautious, but they also made us weaker by making us smaller and by leaving unhealed scars. Why are unhealed scars a weakness? Because whomever wants to hurt you will try to use them against you by putting salt on them, and it can burn like hell, making you lose your nerve and discipline. Only when they heal they become strong tissue and can be a source of strength.

The battle for Bitcoin title left another weakness. Our public image in "established" crypto circles. When BTC won the title, they didn't stop there, they wanted to and still want to punish Bitcoin Cash for daring to dream big, they wanted to destroy the opponent after they won the battle. They failed in that but they hurt us, a lot. We're working around it by growing where their word has no reach and I hope we grow more. We're also working to improve our public image, step by step, person by person.

I like to tell people that BTC is now a store of value / digital gold, and that it is fine -- make your money wherever you can, but know what it is that you're buying. BTC was supposed to become more than just that, and that's why Bitcoin Cash exists: to deliver that more, the promise of a peer-to-peer cash system, for planet Earth!

Opportunities

If people are builders, and they are our main strength, then we need to find ways to amplify that strength! Give it levers! Give it more strength! We do this by inviting people to join us, and by giving people the tools to build. And good news, there's a lot of development going on, focused on giving people the tools to build! This is what technology is, an enabler of opportunity!

The Wallstreet Bets event has shown that people are waking up to the reality of central bank policy, that it's preventing them from enjoying the world of abundance that the free market creates when it's actually free! It will hopefully make more people think about what is the meaning of money, and it could bring them to us.

Mining creates some interesting opportunities. It is the first time in history where the power producer and power users can be right next to each other, that means you can, for example, have solar power facilities in the middle of a desert without having to think who to sell the energy to and run cables all the way to them. Mining creates the incentive to increase renewables capacity in places where there would otherwise not be a market for energy. This capacity can then create an oasis and invite others who need a depenedable energy source.

Threats

Threats from those who see us as threat. Could be governments, could be other companies wanting to build their payment systems or business models which success of Bitcoin Cash might impede. We don't like anti-competitive behavior, we like us a free market. Stay alert!

On this point, there's already a deterrent to actually using cryptocurrencies. Every purchase using a cryptocurrency is treated as a trade in most of the western world, which may result in taxable capital gains. For small transactions I think many can stay below radar, but if you ever make any serious money and want to buy something with it, you'll be burdened with accounting for it and potentially a tax bill. This is more of a threat for those living in the western world, and less so in underdeveloped world where grey markets are way bigger and actually do good for people's livelihood.

Another threat is mining. We share the same PoW algorithm with BTC so the proportion of mining power on BCH chain is almost directly related to the BCHBTC price. Good news is that we have many miners who like BCH, and are mining both BTC and BCH to optimize their income because it's good for their business. In the past they have shown that they're willing to sacrifice some earnings and step in to protect BCH should the need arise.