Time To Be Buying BTC and ETH

Money is to be made from BTC and ETH. These will soon enough be adopted by the financial industry because: THERE IS MONEY TO BE MADE FROM BTC AND ETH. Crypto is disruptive technology. Crypto is like moving from riding a horse to driving a car. Crypto is not going to zero. Crypto going to zero is like smart phones going back to landlines. Here is the picture of what is going to happen:

We are just below the little circle half way up the linear growth. There is something called the network effect:

In a fractal sense the picture of the smoke is just a pic of the network upside down. The utility of the network is so revolutionary, so much energy is released, it becomes impossible to go back to the previous state except for major destruction of the infrastructure. This is called creative destruction.

BTC and ETH are different creatures. BTC is an effective store of wealth. It’s highly volatile but it’s volatility has reduced dramatically as it’s become a harder “currency”. When I first bought it in 2015 it had a vol of +- 95% but it NEVER went to zero. Options were created in 2019 and the ability to hedge has dramatically reduced the risk range. In addition BTC banks have been created where BTC can be borrowed and interest paid in BTC. Gold is the closest equivalent. BTC was plentiful at its inception but it is capped at 21M coins. After 21M no more coins will be mined. The rate of return for mining a coin keeps halfing every 5 years. The cost of mining a coin is the energy it takes to do the computation. The cost of mining gold is the cost of extracting an ounce. That is golds bottom line. Also gold is pretty scarce, and so it also is “hard” plus gold doesn’t oxidize so it is stable as a wealth store over millennia. It does have a cost of storage where BTC does not and is more portable. BTC and gold today have similar hardness. After the next halfing BTC will be harder and the base cost of mining will increase because the profit margin in mining will decrease. So the value in BTC is intrinsically biased to growth for a very long time. BTC is yet to be adopted widely but since money can be made a market exists and since BTC is infinitely divisible there is no barrier to ownership. As the price increases you will simply own a smaller % of the 21M total and your stake will be a converted multiple of the currency you wish to convert into. You can invest in Dollars and redeem in Yen. Because the coins are fixed in amount the price per coin is the market variable. Once BTC starts to penetrate as a financial instrument it’s scarcity will force a rise in price. The last coin is slated to be mined in 2140 and today there are 18.6M in circulation, so as time goes on BTC becomes less compliant, scarcer, harder and will grow in value. I consider BTC an energy function equivalent to potential energy (the integral of work) measured in KWH

ETH on the other hand is uncapped in number. ETH is a technology tied to work not potential energy. ETH has a software layer which allows contracts to be executed for pay. Let’s assume you have a computation to do and I have a computer that fits your need. We write a contract where I do the computation and you get the result and I get some ETH which pays for my computation cost plus some profit. Once the contract is executed at the completion of my work, the transfer is transparent, immediate and permanent. You get the data and I get the ETH. That’s the concept. So ETH provides a basis for transparent contractual commerce peer to peer, and so provides a different function in an economy compared to BTC. Both are traded on a market but what drives price are based on different market variables including the ability/inability of purchasers to correctly value its utility but it’s utility will normalize over time. Since ETH is not capped it doesn’t have the kind of hardness BTC does but its utility and value lays in the efficiency in the work it can do. Both are loaded for growth IMHO. I own both so I don’t need an opinion on “which is better”. Both are disruptive technologies. This year ETH has seen explosive growth, in the past BTC was the killer. I own them in a ratio but the ratio is variable not fixed. Since they are completely divisible you can easily DCA or pay a lump sum. Will they pull back? I have no idea. When Fidelity etc starts retailing crypto, investment advisors can put crypto into client accounts, and demand for peer to peer worldwide commerce expands, I don’t see the price going down.

So what is BTC volatility?

BTC 13.77%

GZV (gold) 20.09%

VXAP (apple) 34.49%

VXAZ (amazon) 32.76%

GDX (goldminers) 41.15%

OVX (oil) 42.84%

VXN (QQQ) 25.99%

VIX (SPX) 21.64%

10 Replies to “Time To Be Buying BTC and ETH”

  1. There is no limit on how many BTC clones can be created.

    ETH has value as a technology (not as a currency).

    These are purely speculative.

    Good luck!

    1. True, but Goldman Sachs, JP Morgan and Primary broker/dealers and the California teachers fund aren’t going to buy crap coins. No demand no capital appreciation. 18.6M/21M MEANS the supply-demand curve is demand driven because 18.6M of the supply is owned and will become more demand driven as time goes on. A crap coin is entirely supply driven. A crap coin has no futures market so no mechanism to hedge. There will be no crap coin ETF. People like to buy ETF’s. When inflation hits now and exacerbated when Yellen pulls the MMT trigger your dollar bill will be a crap coin. The only reason that green piece of paper has “value” is because you believe it has value. What does 27.5 Trillion in debt mean to you? BTC is negatively correlated to the dollar. That means as the dollar goes down BTC goes up. It’s worthwhile to have a granular understanding of a market before you throw money at it, also before you don’t throw money at it.

      RE: luck, I manage my risk. BTC is an asymmetric trade. ETH is an asymmetric trade. It has a huge potential upside and a limited downside. In March I bought ETH for $100. Today it’s worth $613. Could it have gone to $50? Yes. Could it have gone to zero? No. So I placed a $50 bet that’s paid me 12:1 and the year isn’t over. The BTC bet I made in 2015 has paid me 70:1. ETH is not a currency. ETH is a work function like a job is a work function. In a job, you offer your productivity for sale, and get paid for that. With ETH you offer your productivity for sale and get paid for that. ETH is commerce. BTC is like owning a house in a market that has scarcity and desirability. You buy the house and it appreciates based on desirability and scarcity. BTC is property. If you sell BTC it generates capital gains. There will come a time when BTC will have seen it’s better day. By then I’ll be dead and my children will be dead.

    1. I buy and sell on Coinbase which is linked to some other accounts to transfer cash in and out as needed.. Think I’ll decline to say how I store it. I don’t really do any trading, just accumulation at market lows. Probably something like a 20% correction would provoke a purchase in either asset.

  2. $27T. Goodness, you are right. It was $22T last time I looked up the U.S. Debt.
    I wish I bought BTC when you first started writing about it.
    Or when my buddy in finance recommended it at $100. Or when he again recommended it at $1,000.
    Maybe it isn’t too late still.

  3. $27T. Goodness, you are right. It was $22T last time I looked up the U.S. Debt.
    I wish I bought BTC when you first started writing about it.
    Or when my buddy in finance recommended it at $100. Or when he again recommended it at $1,000.
    Maybe it isn’t too late still.

    1. Hey WD

      Most of that debt came this year. That’s why stocks are looking so rosy. The Gov borrowed 5T and pumped it into the market. AAPL is up 300% in 5 years BTC is up 1746% in 5 years. The probability of BTC going up another 300% far exceeds the probability of AAPL going up 300%. AAPL is widely penetrated BTC is not. It’s an asymmetric bet. The point of entry as of today is 17,500 but that value is dynamic. There is a correction happening right now which will probably lower the point of entry tomorrow, but when it dings and makes a higher low, I’m adding more to my stake.

  4. IRS is beginning to ask all taxpayers if they bought or sold any cryptocurrency during the year. They treat it like an asset rather than a currency. They want their “fair share” of any capital gains.
    Does this concern you? I hate detailed record-keeping and tracking my basis of investments. I also wonder it this limits the utility of BTC as a form of money rather than as an investment? Thoughts?

    1. It’s taxed like a post tax brokerage account. My transactions are listed on my brokerage so not too hard to figure be cap gains. if I make 10x I’ll endure the pain. BTC isn’t cash. It’s collateral like your house. It’s a market based store of wealth that is liquid and portable. You can borrow against it and lend it if you want. I think if the profit is paid in BTC it remains cap gains and not ordinary income so you don’t get taxed till you cash out nc, but I would have to check that. If you exchange coins cap gains apply.

      My tax policy is if I owe em I pay em and include the that on the PL. I never get cute. Getting cute is the real headache.

      1. I checked interest is taxed as fair market value as ordinary income. If paid as crypto gain or loss on my sale is taxed as cap gain so if u got 1000 interest in btc that equivalent would be taxed as income and become the basis of of that transaction for the future.

Leave a Reply

Your email address will not be published.