Or you could be a curious nerd like me who bought coins on IRC at 3$ a pop trying to figure out what the hell this new thing is.
A problem for me now is what the hell to do with all these coins since I am fairly sure i would lose half in taxes (Capital gains, Ireland), and I doubt exchanges would accept "I bought them #bitcoin-otc back in the day" as a valid source of funds and not report me to authorities.
On bright side can go mad shopping on Amazon and holidaying via Expedia
I've wondered about just that. I bought $11,000 USD worth of BTC (in cash, at a local bar) when it was at $7. I thought I was extremely lucky when I sold them not too long after at $30. If only I had held onto them I would be dealing with the same issue you are (although, arguably, it's a nice problem to have).
Use them to start a business, then you can dump the coins into the business and not have to pay personal income tax. Otherwise all other schemes just lead to tax evasion unless you cash some out via localbitcoins.com while on holiday. In Thailand my friends "bank" is a service that converts his bitcoin wallet to ATM codes to withdraw without a card.
There is very little substance to this article. This is the core "strategy":
"This suggests my new Bitcoin trading strategy, which I admit I have only tried so far on paper. [...] Bitcoins go down in value when the demand for them as transaction instruments decreases. When that Russian oligarch sells his shiftload of Bitcoins for US dollars, Bitcoin value goes down. When that happens — when Bitcoin prices drop by 20 percent or more — BUY! The price will inevitably come back up, I assure you.
When Bitcoin prices rise by 20 percent or more — SELL! You just made 40 percent on your money.
Rinse, repeat, automate, get rich."
This is also known as gambling. I'm not judging gamblers, but if it were so easy, the author of this post would have implemented it in a few lines of code and actually gotten rich instead of writing a muddy, unclear piece of trivialities.
To be fair, there's just a bit more to it, as Duffie said at the end.
It can be proven that you can't make money trading martingales, no matter how sophisticated the "trading strategy". You can make money if the process is not a martingale, but exhibits momentum or the opposite, mean reversion. What the author of the article suggested (buy after drop) would make money if there is mean reversion.
In mature markets, we should not expect much of that.
The interesting part is that Bitcoin (or crypto in general) represents a limited supply commodity that will (eventually) start to decrease in available supply because it's also used as an active currency.
The users of it as an active currency (as opposed to the users of it as an investment) are price insensitive and don't care what they pay to borrow bitcoin for a few seconds. As long as volatility isn't crazy those few seconds, they are in and out of it as a store of value immediately.
That activity further limits supply. That's the thesis. Limited and dwindling supply along with having an active use that's price insensitive.
Hence his claim that apart from short-term volatility, as long as it increases it's use as a currency, it's long-term value must rise.
I found nothing helpful in this article. The OP talks a lot but then come up to you and say "Buy the Dip, Sell the peak". Yeah, sure. But is it really that simple if you don't pick the dates?
Let's say you started very lately on this game: You bought on Oct 08 at 588. You then sold after a 20% gain: That is, you sold at 708 around Nov 12. Now the price of bitcoin doesn't correct, it goes up full retard to 1160. Then correct to 850. You buy there and "Boom", bitcoin still dump again to 740. Now you are faced with a hard choice: Hold the trade until you make profit, or dump it and "get the fuck out".
My experience is: Stress and uncertainly will play a huge role and you'll make the mistake of dumping at 740 and only see the price rises later.
The OP's suggested trade is simply a retarded market making strategy. If you are down for some business, at least do it right.
I bought late, I'm wondering why watching it real time drop in rice by potentially hundreds, at least I consider it disposable income
edit: what I'm considering is selling if it goes up twice what I put into it, to at least get what I put in then keep what I have, and let it fluctuate. But I realize I'd miss out on the "compounding interest" by having more to increase than less.
IMO, also as an observer since it started, Bitcoin is media driven. Every time it reaches new peaks it gains attention in media/blogs/etc until it something bad happens like a hack/etc to trigger a sell off and it falls out of favor of media. Eventually it repeats. It may be getting to a point where it doesn't feel beta. It's a viable alternative when crazy economic things are going on in India/China/etc and it starts actually becoming the thing it's supposed to be: currency. Then, limited trading volume drives prices up.
Perhaps I'm reading this wrong but he would have done better just sitting on the coins rather than trying to trade them.
He claims with his method he started with $100 and bought Bitcoins valued at .05 which means he could have bought 2,000 BTC at this time.
He claims his method netted a profit of roughly $20,000.00. BTC is trading at $1143.00 right now.
If he would have bought those 2,000 coins and sold them right now he would have proceeds of $2,286,000.00, essentially all profit as it started from a $100 investment. Plus he'd be paying a long term capital gains tax and not the many short term taxes he'd have paid by day trading BTC.
I suppose buy and hold would have been the better strategy.
> those poor sods who think it’s a store of value and the price will go up for unknown reasons
...followed by an entire article based on the unfounded premise that Bitcoin will continue to rise.
The only worthwhile advice in the whole article is nothing more than "buy low, sell high". Beyond that, you could effectively replace the word "Bitcoin" with "AAPL" or "AMZN" and it would be equally accurate. Any security which hasn't crumbled yet certainly looks like a good bet.
That said, as one of those "poor sods", perhaps I'm just being a tad defensive.
Buy and hold is only a good strategy if you have a diverse portfolio. The goal of the strategy is then to keep the value of your assets, and maybe make a nice percentage associated with growing economies.
If you are operating however with an edge on the market, that is to say you have knowledge you think some percentage of the market does not have. For example you profoundly believe that Bitcoin will increase in value, as the author of the article does.
In that case, buy and hold is only a mediocre strategy. At most you will make whatever the percentage is that the asset will grow.
If instead you make use of the idea that between now and the mystical future bitcoin value increase, it will go both up and down, you can come up with strategies that make you more money than that value increase.
I think it's possible to come up with a strategy that are guaranteed to make you more money, based solely off those two assumptions "Eventually it will increase" and "there will be fluctuations". Some simple ones I've come up with I think come close to it, but I've never dared to execute any of them. I wonder if there's people here who have.
It would appear that in this instance his strategy of trading the asset numerous times over the years has led to significantly less yield than if he would have bought and held.
If you have an edge on the market there's a good chance you're either breaking the law or deluding yourself. Not that some people haven't found legal edges and made vast fortunes from them - sophisticated mathematicians have for instance. But there's many more who confused dumb luck for alpha and ended up underperforming the market or broke over time.
You're right though - buy and hold is generally best applied to a diverse set of assets. If you're making direct plays on companies and have little ability to influence the board and leadership then that's a lot of unhedged risk. Warren Buffet's advice is often confused with making directional stock plays. He buys enough to get board seats and can influence the direction of the company and has a track record of doing this well. Regular people will never have enough of a bankroll to qualify for a board seat or have influence on the management.
And yes, many day traders and swing traders have some strategies based on short term changes in an asset but taxes are the killer. Short term capital gains are taxed the same as labor but with considerably more risk.
The strategy is always either flat or long bitcoin. If bitcoin is only going up in value it's hard not to make money. I'd be interested if his position oscillated between short and long if it would be profitable?
I find it sad that crypto currency with it's really useful interesting features is seen, almost exclusively, as a vehicle for investment thrill rides (ie get-rich-quick bullshit).
Wouldn't be nice to have crypto-currency where the focus is simply as a robust and secure medium in which to exchange goods and services? Am I missing something fundamental about currency in wishing this?
That's the view traditional financial market people have, and also the view that they have of apple.
Their perspective is not the only one, but definitely the sexy one that media can profit from.
As for the exchange of services, that is the basis of ethereum. Instead of computing Sha(Sha()) over and over again, the mining network is a global turing-complete computer designed around arbiterless smart-contracts.
Yes, I've been using digital currencies since early 2000s, and when cryptocurrencies first appeared the idea of a decentralized payment system was a godsend but even back then it was investment schemes that received the most attention sadly.
One great idea that never materialized was anonymous services could be insured finally, so you could bootstrap your hobby exchange with an insurance guarantee held by semi-trusted people in the scene. For example a small instant exchange requiring no sign up, with a $10k multi-sig insurance fund and since the blockchain is open you can at all times verify that said instant exchange is not exceeding their insurance.
And the sad thing is that Bitcoin is not even particularly good as a medium of exchange, as it is not anonymous, not particularly fast, and getting rather too expensive for small transactions.
I have yet to see a strategy that passes this simple test: does it also work if there are other people, most of them more knowledgeable about the market than you, applying similar strategies?
Dollars work fine as a transfer currency as well, given the short transaction time.
1. I order A Thing from ThingSupplier for $1000.
2. I direct MajorBank to transfer $1000 to ThingSupplier from my account.
3. Underpants gnomes at ThingSupplier coordinate with Shipper.
4. I receive A Thing (now, The Thing) from Shipper.
There's no need to waste money in conversion fees.
What am I missing here?
Unless you're into high-speed trading, etc., the volatility of a currency is not going to have an effect, because prices don't update that fast, because ThingSupplier is not going to tie their prices to fast-fluctuating currency value. Doing that would Not Be In The Interests of their Customers.
37 comments
[ 315 ms ] story [ 1222 ms ] threadInvesting is easy if you have a time machine or can predict the future.
A problem for me now is what the hell to do with all these coins since I am fairly sure i would lose half in taxes (Capital gains, Ireland), and I doubt exchanges would accept "I bought them #bitcoin-otc back in the day" as a valid source of funds and not report me to authorities.
On bright side can go mad shopping on Amazon and holidaying via Expedia
"This suggests my new Bitcoin trading strategy, which I admit I have only tried so far on paper. [...] Bitcoins go down in value when the demand for them as transaction instruments decreases. When that Russian oligarch sells his shiftload of Bitcoins for US dollars, Bitcoin value goes down. When that happens — when Bitcoin prices drop by 20 percent or more — BUY! The price will inevitably come back up, I assure you.
When Bitcoin prices rise by 20 percent or more — SELL! You just made 40 percent on your money.
Rinse, repeat, automate, get rich."
This is also known as gambling. I'm not judging gamblers, but if it were so easy, the author of this post would have implemented it in a few lines of code and actually gotten rich instead of writing a muddy, unclear piece of trivialities.
Buy low, sell high.
1. I have 0 bitcoins, price is $1250
2. Price drop 20% to $1000
3. I buy 1bitcoin for $1000
4. Price rise to $1200
5. I sell at $1200, earning 20%, not 40%
Am I missing something?
It can be proven that you can't make money trading martingales, no matter how sophisticated the "trading strategy". You can make money if the process is not a martingale, but exhibits momentum or the opposite, mean reversion. What the author of the article suggested (buy after drop) would make money if there is mean reversion.
In mature markets, we should not expect much of that.
I made some money doing that. I made more just sitting on coins.
The interesting part is that Bitcoin (or crypto in general) represents a limited supply commodity that will (eventually) start to decrease in available supply because it's also used as an active currency.
The users of it as an active currency (as opposed to the users of it as an investment) are price insensitive and don't care what they pay to borrow bitcoin for a few seconds. As long as volatility isn't crazy those few seconds, they are in and out of it as a store of value immediately.
That activity further limits supply. That's the thesis. Limited and dwindling supply along with having an active use that's price insensitive.
Hence his claim that apart from short-term volatility, as long as it increases it's use as a currency, it's long-term value must rise.
Let's say you started very lately on this game: You bought on Oct 08 at 588. You then sold after a 20% gain: That is, you sold at 708 around Nov 12. Now the price of bitcoin doesn't correct, it goes up full retard to 1160. Then correct to 850. You buy there and "Boom", bitcoin still dump again to 740. Now you are faced with a hard choice: Hold the trade until you make profit, or dump it and "get the fuck out".
My experience is: Stress and uncertainly will play a huge role and you'll make the mistake of dumping at 740 and only see the price rises later.
The OP's suggested trade is simply a retarded market making strategy. If you are down for some business, at least do it right.
haha
I bought late, I'm wondering why watching it real time drop in rice by potentially hundreds, at least I consider it disposable income
edit: what I'm considering is selling if it goes up twice what I put into it, to at least get what I put in then keep what I have, and let it fluctuate. But I realize I'd miss out on the "compounding interest" by having more to increase than less.
How to end up with $5 million trading X:
Start with $20 million
He claims with his method he started with $100 and bought Bitcoins valued at .05 which means he could have bought 2,000 BTC at this time.
He claims his method netted a profit of roughly $20,000.00. BTC is trading at $1143.00 right now.
If he would have bought those 2,000 coins and sold them right now he would have proceeds of $2,286,000.00, essentially all profit as it started from a $100 investment. Plus he'd be paying a long term capital gains tax and not the many short term taxes he'd have paid by day trading BTC.
I suppose buy and hold would have been the better strategy.
> those poor sods who think it’s a store of value and the price will go up for unknown reasons
...followed by an entire article based on the unfounded premise that Bitcoin will continue to rise.
The only worthwhile advice in the whole article is nothing more than "buy low, sell high". Beyond that, you could effectively replace the word "Bitcoin" with "AAPL" or "AMZN" and it would be equally accurate. Any security which hasn't crumbled yet certainly looks like a good bet.
That said, as one of those "poor sods", perhaps I'm just being a tad defensive.
If you are operating however with an edge on the market, that is to say you have knowledge you think some percentage of the market does not have. For example you profoundly believe that Bitcoin will increase in value, as the author of the article does.
In that case, buy and hold is only a mediocre strategy. At most you will make whatever the percentage is that the asset will grow.
If instead you make use of the idea that between now and the mystical future bitcoin value increase, it will go both up and down, you can come up with strategies that make you more money than that value increase.
I think it's possible to come up with a strategy that are guaranteed to make you more money, based solely off those two assumptions "Eventually it will increase" and "there will be fluctuations". Some simple ones I've come up with I think come close to it, but I've never dared to execute any of them. I wonder if there's people here who have.
If you have an edge on the market there's a good chance you're either breaking the law or deluding yourself. Not that some people haven't found legal edges and made vast fortunes from them - sophisticated mathematicians have for instance. But there's many more who confused dumb luck for alpha and ended up underperforming the market or broke over time.
You're right though - buy and hold is generally best applied to a diverse set of assets. If you're making direct plays on companies and have little ability to influence the board and leadership then that's a lot of unhedged risk. Warren Buffet's advice is often confused with making directional stock plays. He buys enough to get board seats and can influence the direction of the company and has a track record of doing this well. Regular people will never have enough of a bankroll to qualify for a board seat or have influence on the management.
And yes, many day traders and swing traders have some strategies based on short term changes in an asset but taxes are the killer. Short term capital gains are taxed the same as labor but with considerably more risk.
Wouldn't be nice to have crypto-currency where the focus is simply as a robust and secure medium in which to exchange goods and services? Am I missing something fundamental about currency in wishing this?
Their perspective is not the only one, but definitely the sexy one that media can profit from.
As for the exchange of services, that is the basis of ethereum. Instead of computing Sha(Sha()) over and over again, the mining network is a global turing-complete computer designed around arbiterless smart-contracts.
Regardless, the smart contract computing is still removed from the consensus mechanism.
One great idea that never materialized was anonymous services could be insured finally, so you could bootstrap your hobby exchange with an insurance guarantee held by semi-trusted people in the scene. For example a small instant exchange requiring no sign up, with a $10k multi-sig insurance fund and since the blockchain is open you can at all times verify that said instant exchange is not exceeding their insurance.
Also, "Why I don't trade stocks and neither should you": https://news.ycombinator.com/item?id=6831461
If he had just bought bitcoin and held it, its value (20000 BTC) would be currently worth north of 20 mil. usd.
1. I order A Thing from ThingSupplier for $1000.
2. I direct MajorBank to transfer $1000 to ThingSupplier from my account.
3. Underpants gnomes at ThingSupplier coordinate with Shipper.
4. I receive A Thing (now, The Thing) from Shipper.
There's no need to waste money in conversion fees.
What am I missing here?
Unless you're into high-speed trading, etc., the volatility of a currency is not going to have an effect, because prices don't update that fast, because ThingSupplier is not going to tie their prices to fast-fluctuating currency value. Doing that would Not Be In The Interests of their Customers.
(Capped words because why not.)