Crypto 2021

At Thanksgiving I wrote an article urging the adoption of some long term crypto strategy based on an asymmetric exponential probability of gain. Since Thanksgiving my BTC has increases 300%, and 900% for the year. I bought some Ethereum in April for for $100 and today it’s worth $1100. Th market cap of the crypto space has grown from just over 300B to just under 1T. I’ve had some 6 and 7 bagger investments in the past but they never grow this fast. Typically it’s a 5 to 10 year horizon. Early this morning there was a dip. Prices fell from $33,666 to $27,900 and have regained $32,327 in about 14hours. That tells you the demand is monstrous. A 17% correction was erased in a hand full of hours.

I recently saw a you tube video claiming if you own just 1 BTC you are in a group of 808,000 people in the world and if you own as little as 0.22 you will exists in the top 1% of BTC holders forever because the # of BTC is capped. 0.22 BTC is about $7260. If you want a 100K/yr retirement for 30 years you need about 15 BTC At todays prices that’s $495K. Pretty cheap retirement to purchase.

BTC and Ethereum constitute an efficient frontier. The least risk BTC:ETH portfolio is 74:26. I hold these roughly in the 75:25 proportion and have seen the fruit of diversification in my own portfolio. I keep seeing predictions based in 2SD regression lines that put BTC at 1M/coin in 5 years based on Flow models. It’s statistically possible but I think something like 20%/yr compounded is more realistic.

Here is a vid on some stats

8 Replies to “Crypto 2021”

  1. I really owe it all to you to make me break inertia and actually invest in both btc and eth (though right now it is more like a 98:2 ratio.

    I am curious how you came up with $100k/yr retirement off of 15 btc.

    Is there a btc price where you would stop adding? Like anything under 6 figures per coin is still worth investing in or perhaps a higher #?

    1. I’ve stopped adding, but I have to actively force myself to stay stopped. The “data” about retirement is simply the youtube video’s analysis projecting the growth series from halving to halving every 4 years. Each halving makes reimbursement for mining pay half as much so the price per coin mined has to go up to match the cost of mining. Only 808,000 people in the world own at least 1 BTC so if you own 1 you are in a rarefied group. If you bought 1 for 30K and it goes to 1M, you have 1M or 970K profit. If it goes to 100K you have 100K or 70K profit. I don’t know 1M or 0.1M, but I believe it to be dramatically undervalued as an asset class. Last spring its total market cap was about 300B, today it’s 618B. So the market cap doubled but the price went from 7K tp 33K or almost 5 times. (There was a halving in May)

      Above ground gold has a market cap of 10T. Lets say BTC attains 10T that means it has to under go a 16 fold increase in market cap. Let’s say it only attains 5T that’s a 8 fold increase. The amount of BTC is inelastic. It’s # is asymptotically fixed which means it’s price is the pressure valve to demand. This supply inelasticity is what makes it different from Tulips. So even if the price doesn’t explode in a linear way it will still explode. Let’s say the flow model predicts 500K/BTC. Let’s say it only makes 80% of that, that’s 400K/BTC if you pay 30K 500K is a 94% capital gain meaning out of every 100bp 94pb is capital gain. At 400K 92.5% is capital gain. The gain is so asymmetric I’ll gladly take either one and not think twice.

      BTC’s major risk is not owning any. It’s second major risk is from world governments. However BTC is the solution to much of what ails governments which is debt. If you can own an asset that appreciates 20x suddenly pension funds are flush, citizens are satisfied and governments stay in power. In addition if my BTC is 94% capital gain it is liable to being taxed a lot which is a ready source of future income to governments so there is strong incentive to not screw this up. Of course there is unknown risk but that remains unknown and is dealt with by not owning too much. In my opinion staking 5% in this bet is about right, so if you have 1M in assets 50K is 5%. 50K buys 1.13 BTC at 33K and 11.3 ETH in a 75:25 ratio. BTC plus ETH accounts for about 87% of the entire crypto space’s market cap so those 2 coins possess a large amount of the diversity in the space and 75:25 places you on the efficient frontier as far as greatest return for least risk. If you stake 5% if/when you take profits is up to you. I’m sure governments won’t let you lock up crypto in Roth type accounts. I’m sure they will force some kind of “ledgerability” which means some kind of 1099 will be generated upon transaction, which means an exchange or brokerage will be involved. To that I say good deal. Once I know the game I can optimize the results.

  2. Thanks for the awesome explanation. Yeah I have been trying to consume as much data on bitcoin as possible (Real Vision Crypto is my favorite source) and it just seems like this is the beginning of a huge uptick in price. Each step sounds like it is expensive (man, I can’t believe bitcoin is 9k, then it’s 14k, then 22k, and now low 30k) but if it does go to $500k/coin, I will look back and say what a buying opportunity this was.

    I know a lot of people are scared of government regulation, but if big institutional money comes in I would think the government would not do anything to jeopardize that wall of assets.

    ETH does seem like it too has a lot of upside, haven’t put in as much though because it is hard to not throw everything at BTC when I have the funds.

    1. At some point market cap parity will be achieved, in other words the correct market cap will be achieved and asymmetric growth will cease and growth will still happen but not wall of money growth. BTC is collateral. It’s an asset I can borrow against like my house. It’s a world wide asset I can borrow against. I can also lend it and get paid interest so it effectively takes the place of a bond or CD in a portfolio. ETH is a platform. Upon it work happens and the work generates profit according to predetermined contracts. Contracts can be insured and the ETH is tied up as collateral so one way or another the contract is made good. So ETH is more like owning a business where raw goods are converted into finished products and a profit ensues because the cost of inputs and processing is less than the payment paid for a finished product. Since the contracts are transparent collateralized permanent and immediately settled upon completion all the shenanigans associated with doing business (like rejections of payment for services rendered in medicine) is cut out of the process. Once you read an XRAY payment is made as per contract, it doesn’t go into some endless black hole where points are shaved off the payment in some half assed “process” while you haggle for 6 months over getting paid. ETH therefore from a business efficiency point will become a monster application. Since the contracts are effectively guaranteed your accounts receivable becomes something effective as good as cash when it comes to collateralization. I’ve seen flow models as high as 75K/coin for ETH. As such they are diversified in their business models which is why I own both. The diversity lowers the overall risk of the portfolio.

  3. Awesome discussion.
    I think I would have bought a lot sooner if it weren’t so difficult to buy. There seems to be a learning curve with exchanges, wallets, online security, etc.

    1. I use coinbase. It’s not the cheapest but I don’t trade. I have it linked to both an ancillary bank account and a brokerage so I have 2 sources to fund neither of which holds a lot of money. So if I want to trade I transfer to those accounts at the brokerage/bank and then I’m locked and loaded to trade. I did have to train them to get my allowable purchase up which I think was as much about available BTC as my credit worthiness but that was in 2015 before things really got rolling.. Now I just press a button and the transfers happen automatically. You can trade BTC with a Paypal account so the on-roads are becoming effortless. I’ve never used Paypal so don’t really know that story. On Monday the gov allowed certain chartered banks and thrifts to become nodes so soon enough you’ll be able to buy at your bank

        1. No they are 2 separate on ramps Coinbase has been around since 2012 as a crypto exchange. I think Paypal added crypto to their portfolio of services this past year. My point is if you have a bank linked paypal account you have immediate access to buying and selling several coins including BTC and ETH

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