Is it too soon to talk about Crypto yet?

[1Mech]

“While you could be robbed, you'll get caught with it and they will confiscate it because they assume you're up to "no good."

Not true. If you cross borders cash has to be declared. Inside the US no such requirement.

I know of people who have been "robbed" of their cash by the LEOs, they were pulled over for some reason, and found to have a significant amount of cash on their person, (as I recall, around 60 to 70 thousand $) claimed they were enroute to buy a tree trimming truck. Anyway, right or wrong, they lost it all!

 

[Jstpssng]

I know of people who have been "robbed" of their cash by the LEOs, they were pulled over for some reason, and found to have a significant amount of cash on their person, (as I recall, around 60 to 70 thousand $) claimed they were enroute to buy a tree trimming truck. Anyway, right or wrong, they lost it all!

It's called "Civil Asset Forfeiture", and originally was used against drug dealers and other illegal activities. They can seize your assets without charging you with a crime if they believe they may be affiliated with criminal activity.

 

[MinnesotaEric]

The entire thing with bitcoin is to create scarcity. Scarcity is the thing they believe will drive higher prices long term.

Full disclosure, I own bitcoin.

With that said, I am fully aware there is zero underlying assets supporting bitcoin. It's all a belief in something.

One thing about a currency is it must be transferable in many different denominations. For example, $1,10, 100 etc. Currency must easy to scale to support buying anything from $1.00 to $1,000 conveniently. Will bitcoin have this, Nope. WIll someone really use bitcoin as the preferred money to buy my bike for sale for .6258 bitcoin? Nope. It's not a easily transferable currency, unless both parties have the technical ability to make it work, which is new for this world, a technical component to buy and sell. Also, the value changes so fast that one must look up what the value is constanly to figure out what they have. For these resons, it will never be a currency.

It's a speculative investment that has no intrinsic value. Never forget this.

I am hoping when I want to sell my bitcoins, I can. Just like with gold and silver, it's easy to buy, but trying to off load it at scale is next to impossible.

Each Bitcoin is made up by 100,000,000 satoshi. In fact, the only thing that is exchanged are satoshi but when somebody has 100M of them, we call it one Bitcoin. So we do have smaller numbers. More to the point, since Bitcoin is increasingly viewed as a store of wealth and its own "asset class," which is attracting more and more institutional attention and driving up the price, transferring Bitcoin from one address to another address is expected to become more and more expensive. As a result of this expectation, Bitcoin, through BitcoinOS' Grail is getting bridged to Cardano. From a Bitcoin user's perspective they will not even know the "work" was done off-chain on a Cardano-based network.

What we're seeing is the continuing transition from physical assets to digital assets. We use to possess music, movies, TV shows, retail sales, et cetra as physically held media. Now those things are largely stored electronically for faster transmission, better security and better long-term storage. Speaking as a real estate broker, with the rise of title scams, the industry is looking for a way to protect titles using blockchain technology.

Years ago, a white paper was written suggesting that (1) the USA create a new Space Force Armed Branch, and (2) that the USA start using blockchain to secure state secrets. With the incoming administration rumors are swirling (everybody involved has signed non disclosure agreements, but why did you guys go to X and meet with X?) that the Cardano network is being considered for securing public votes to state secrets.

Anyway, blockchain is an evolving tech and while there are teething problems and not every crypto token will survive, we are seeing the formation of what will happen in the future and Bitcoin will remain the apex token for storing wealth, or "digital gold," with less hassle for transferring, storing, maintaining security.

As I type here are the ten largest blockchain tokens by market cap.

 

[Snobdds]

I have my signal...the top is in.

 

[MinnesotaEric]

I have my signal...the top is in.

Michael Saylor, Chairman of Microstrategy, in an interview shared that he believes Bitcoin at $100K is trading at a 90% discount to its value. Microstrategy was at the apex of the best performing publicly traded companies for 2024. For his part, Saylor gave one of the best keynotes as to why Bitcoin is the best available investment on the planet.

 

[Snobdds]

Michael Saylor, Chairman of Microstrategy, in an interview shared that he believes Bitcoin at $100K is trading at a 90% discount to its value. Microstrategy was at the apex of the best performing publicly traded companies for 2024. For his part, Saylor gave one of the best keynotes as to why Bitcoin is the best available investment on the planet.

May I ask why does Microstrategy not buy long dated call options to ensure continued accretion in case BTC price skyrockets?

 

[MinnesotaEric]

May I ask why does Microstrategy not buy long dated call options to ensure continued accretion in case BTC price skyrockets?

Earlier this year MSTR announced a $42B Bitcoin acquisition of Bitcoin. Half was to be raised through share dilution and the other half through convertible bonds. Even though dilution and MSTR trading around 2.5x its net asset value, Microstrategy performed exceptionally well. The convertible Bonds are effectively an interest free loan because piles of bond managers want Bitcoin exposure, but their disciple doesn't permit owning Bitcoin.

That said, rather than buying options, a more reliable method to lock in profits is by selling options against your position until called.

What I can guarantee is that Michael Saylor's strategy will be taught in business school for decades to come.

 

[Tpondel]

In other CEO news from 2002 …

Enron Chairman Kenneth L. Lay exhorted employees in September to buy more Enron shares and reassured them that the company’s upcoming quarterly financial report was “looking great” only weeks before the energy trader disclosed the worst results in its history and a billion-dollar write-down that destroyed its public credibility.

“Talk up the stock and talk positively about Enron to your family and friends,” Lay told employees via an electronic forum Sept. 26 with Enron offices around the world. A transcript of the forum was obtained Friday by The Times. “The company is fundamentally sound. At current stock prices . . . this seems to be an incredibly cheap stock.”

 

[FullMetalBucket]

I don’t know anything about bitcoins, but I wish I invested in nVidia stock for all the miners .

 

[MinnesotaEric]

In other CEO news from 2002 …

Enron Chairman Kenneth L. Lay exhorted employees in September to buy more Enron shares and reassured them that the company’s upcoming quarterly financial report was “looking great” only weeks before the energy trader disclosed the worst results in its history and a billion-dollar write-down that destroyed its public credibility.

“Talk up the stock and talk positively about Enron to your family and friends,” Lay told employees via an electronic forum Sept. 26 with Enron offices around the world. A transcript of the forum was obtained Friday by The Times. “The company is fundamentally sound. At current stock prices . . . this seems to be an incredibly cheap stock.”

You're making a category error. Saylor's strategy is accretive and generally well understood (Ben Gram wrote about arbitraging bonds and stocks in his seminal book, The Intelligent Investor in 1947). But if you don't believe MSTR is on the right track, buy puts and short the common.

CNBC interviewed Saylor on the news that Microstrategy was being shorted by a hedge fund. Saylor responded.

 

[Snobdds]

Earlier this year MSTR announced a $42B Bitcoin acquisition of Bitcoin. Half was to be raised through share dilution and the other half through convertible bonds. Even though dilution and MSTR trading around 2.5x its net asset value, Microstrategy performed exceptionally well. The convertible Bonds are effectively an interest free loan because piles of bond managers want Bitcoin exposure, but their disciple doesn't permit owning Bitcoin.

That said, rather than buying options, a more reliable method to lock in profits is by selling options against your position until called.

What I can guarantee is that Michael Saylor's strategy will be taught in business school for decades to come.

Saylor is so leveraged that if bitcoin goes down 20%, MTSR will go down 50%.

People do not understand leverage.

 

[MinnesotaEric]

Saylor is so leveraged that if bitcoin goes down 20%, MTSR will go down 50%.

People do not understand leverage.

The people buying the 2x and 3x versions of MSTR don't understand slippage and leverage, but again, MSTR's method is pretty well understood.

When Microstrategy sells equity to raise money to buy Bitcoin, that dilutes the shareholder's value only if Bitcoin pulls back significantly, then shareholders are losing net asset value. But where the problem happens is the new buyers of the equity through convertible bonds.

Specifically the video below does a very good presentation of the risks of the math. I pick it up right where the people coming in last are losing net asset value.

There are three very good observations in the comment section of this video, which I'll simply quote:

Very clever, especially the part where you built the pyramid shape.Two points:
1. convertible bonus desks love this product since it has the volatility there looking for; so far they’re performing better than BTC.
2. Pyramid schemes historically have hidden from buyers what they’re really all about. These guys are sophisticated buyers, fully know what they’re doing, and don’t end up holding shares in the end anyways. They’re most likely to cash out after the conversion threshold and buy new round of MSTR convertible bonds. No bad deal, no buyers remorse, just an unending appetite for more …

The "loser" in Meldrum's thesis is the next buyer of convertible debt, however, that buyer has an incentive to purchase the debt as a hedge to other market actions they want to take on the stock. For the spot buyer/holder of the stock, the opportunity cost is just buying spot bitcoin, but they choose to buy Microstrategy stock because of its unique business position and business strategy and perhaps also as a bet on a future increased mNAV. So both the convertible debt buyer and the spot buyer are assuming risk, but they see unique benefit in the instrument they are purchasing, and in some sense their risk tolerance is a reflection on what position they believe Bitcoin is at in its adoption curve and how they can best capitalize on that position.

Enjoyed the video thank you for the analysis. Two things I notice about this: 1 you didn’t discuss that bitcoin over time has continued to appreciate so it’s not just the btc per share that’s increasing but also the value of the btc per share. 2 the institutions buying this convertible debt are going through MSTR because they cannot purchase btc directly. And since there is a lot of demand MSTR is able to set generous terms for itself.

 

[Tpondel]

The four most expensive words in investing … “This time it’s different.”

 

[MinnesotaEric]

The four most expensive words in investing … “This time it’s different.”

About two hours ago X got wind through an SEC notice that Microstrategy is asking shareholders to vote on allowing the company to raised the cap on the number of shares to 10B, thereby allowing Microstrategy to ATM for more Bitcoin well into the future. This will further accelerate the global adoption of Bitcoin as a reserve currency in a digital gold rush. Meanwhile, for their part Microstrategy has been upfront about their goals.

 

[rumwrks]

Saylor is playing an elaborate shell game where he is trading stock shares of his otherwise mostly worthless company for dirty fiat and BTC. He's pocketing the fiat and using the BTC buys to pump the value of MSTR and BTC.

The liquidity of BTC is low enough that a couple of whales can move the value quickly plus there's a ton of front running and other schemes that are illegal in actually regulated markets that artificially inflate the price. So basically by buying BTC he's increasing the entirely made up "market cap" of an asset that does nothing and serves no useful non-criminal purpose which increases the value of his shares which he then issues more of and then uses that to buy more BTC (skim off some fiat..) which increases the value of BTC which... It's not a pyramid scheme, no clearly not because there's no pyramid.. its a room with one whale and a bunch of suckers, it's to flat to be a pyramid.

Look around the room.. do you see the sucker? Check for a mirror.

The whole premise is "line go up", but I don't think he actually even believes that, he's just pumping the coin and fleecing the rubes along the way (or at least didn't originally maybe he's delusional as well now as well).

As to why I'm not shorting one of the BTC vehicles or MSTR I'll just say that the market can remain irrational longer than I can stay solvent and there are very clearly criminal purposes and people with a lot of power who enjoy leveraging those criminal purposes who can keep this grift going for quite a while. How and when it implodes? No idea.. it'll be fun when it does though.

Did you also invest heavily in AMC in June of '21?

 

[Jstpssng]

I am not a financial wizard but this discussion is giving me flashbacks to the junk boom crash and burn in the late 1980s, the dot com boom/fall of the 1990s, and the overall banking failure of 2008.
Then again looking at those numbers, we're way overdue for another massive adjustment.

 

[rumwrks]

I am not a financial wizard but this discussion is giving me flashbacks to the junk boom crash and burn in the late 1980s, the dot com boom/fall of the 1990s, and the overall banking failure of 2008.

If you want a closer correlation look up the Wildcat banks from the mid 1800's.

Very brief intro: Wildcat banking - Wikipedia

Another favorite most folks in the west probably don't know of is the MMM scam MMM (Ponzi scheme company) - Wikipedia

 

[MinnesotaEric]

Saylor is playing an elaborate shell game where he is trading stock shares of his otherwise mostly worthless company for dirty fiat and BTC. He's pocketing the fiat and using the BTC buys to pump the value of MSTR and BTC.

The liquidity of BTC is low enough that a couple of whales can move the value quickly plus there's a ton of front running and other schemes that are illegal in actually regulated markets that artificially inflate the price. So basically by buying BTC he's increasing the entirely made up "market cap" of an asset that does nothing and serves no useful non-criminal purpose which increases the value of his shares which he then issues more of and then uses that to buy more BTC (skim off some fiat..) which increases the value of BTC which... It's not a pyramid scheme, no clearly not because there's no pyramid.. its a room with one whale and a bunch of suckers, it's to flat to be a pyramid.

Look around the room.. do you see the sucker? Check for a mirror.

The whole premise is "line go up", but I don't think he actually even believes that, he's just pumping the coin and fleecing the rubes along the way (or at least didn't originally maybe he's delusional as well now as well).

As to why I'm not shorting one of the BTC vehicles or MSTR I'll just say that the market can remain irrational longer than I can stay solvent and there are very clearly criminal purposes and people with a lot of power who enjoy leveraging those criminal purposes who can keep this grift going for quite a while. How and when it implodes? No idea.. it'll be fun when it does though.

Did you also invest heavily in AMC in June of '21?

We did have the four years to set the regulation, but nope, nada. With the incoming Admin we are going to have rules and regulations suggested for the crypto industry, but it will be up to Congress and the Senate to pass them and for the President to sign it into law.

That said, make a pretend trade and we'll circle back in two years and check the result.

As for myself, in 2020 March I was heavy into REITs, and suddenly all my REITs were setting record lows. At the time I thought a hedge fund in the REIT sector was blowing up and getting margin-called so I was buying preferred with a coupon of 21%. Later in the week, I found out the very company I was buying was the company that was blowing up but they got a lifeline through low interest note against their leverage. I collected better than 21% for about a year and sold with a with a gain.

I never touched AMC as by that time my reoccurring thought process was we were getting too far into debt and that got me scar't out of equity markets. That said, I am a member of the original Wall Street Bets. Back when I was an active trader, I used to make insufferable videos aimed at my buddies. Little did I know that a few years after that a guy could build a career doing that same. But for me there wasn't any monetization back then it was just for grins and giggles.

 

[MinnesotaEric]

I am not a financial wizard but this discussion is giving me flashbacks to the junk boom crash and burn in the late 1980s, the dot com boom/fall of the 1990s, and the overall banking failure of 2008.
Then again looking at those numbers, we're way overdue for another massive adjustment.

I tend to agree on the broader market. Back during the Great Recession central banks were trading gold slips to each other and we hypothesized that at some point a crash would happen that was so big that the central bankers would need a central bank to bail them out. Roll the global debt bubble forward 18 years and it is Bitcoin.

Oh is it annoying to watch people get rewarded for outlandish risks without suffering any pain. Made a video about that back in the day.... When everything in my investment portfolio keeps going up, I increasingly become scared.

A bubble is a bull market in which you don't have a position

Bubbles arise when the price exceeds the assets value, to the point where no plausible future scenario can justify the price.

In every bulble, there are people trying to burst it by declaring assets have become overvalued.

At first, such skeptic receive respectful attention. But eventually investors turn on them with anger and ridicule.

This is because bubbles don't grow out of thin air, but through misconceptions as to how long growth can continue without decline.

If experts were expert, then they would make a living trading equities and bonds and not by selling advice.

Demographics is the most powerful indicator that allows investors to see around corners.

Inflation rises when more people are entering the workforce than leaving the workforce.

Deflation sets in when there are more people leaving the workforce than entering the workforce.

Right now there are more people entering the workforce than are leaving the workforce.

Investor money always goes where it is considered safe and treated best.

The rest of the world faces political and financial risk leading to increased foreign investment in domestic markets.

Yet as the bull market continues, people increasingly take greater risks for greater rewards seemingly without punishment.

And this speculation continues until enough people blink and the market crashes.

And the fools and their money part ways. If you cannot tell who the fool in the room is, then you're it.

 

[rumwrks]

Investor money always goes where it is considered safe and treated best.

This isn't strictly true, investor money is largely irrational. There are also semi-rational sections that go where it sees a potential for high returns (otherwise people would only buy blue chips which is clearly not the case). Investor money WILL flee from higher risk when things get dicy, and probably both later and earlier than it should.

I believe that the low interest rates directly drove a lot of the initial adoption of speculative assets like crypto because the more traditional investment vehicles had low gains. Plus you could leverage out effectively free money at near zero interest into potentially high roi but highly speculative stuff.

Now that interest rates are up a lot of the people who invested in that are looking for a exit so they're pumping the bags and trying to dump them, which is hard because there's low incoming liquidity. Some folks have ofc become or always were true believers (if you say something often enough it becomes true) and will hold to zero.

Again how long that will take .. no idea..

We did have the four years to set the regulation, but nope, nada.

Ah yes, back to the "this is all so new that no one could have known things that are illegal in every other market might just be illegal here as well". I would caution that a lot of people have gone to jail believing that line.

The incoming admin is posting a lot of pro-crypto people(and I could speculate as to why but will forbear). I think that's likely to mean lowering interest rates again to enable more "easy money" which will give the bubble another large pump making the eventual pop even more spectacular. Sooo I wouldn't strictly bet against you in the four year timeline, but I also wouldn't put any money on that line either because it's a high risk market and I don't have the time to spend recovering.

As for the nominally egalitarian nature of crypto I would suggest folks look up "gini coefficient", you might be surprised (or not.. the rich do indeed get richer and the smaller and griftier the market the richer they get).