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Trader Made 295% on Cryptocurrency Derivatives

28 points by mcone 9y ago

kaffeemitsahne 9y ago
Only 295% in a year? Not that spectacular in the current market.
- rurban 9y ago
  I got 500% in a few months. Clear sign of a bubble, high risk high reward
  - charlesdm 9y ago
    But no one knows when and if the music will stop. I'm not a huge crypto bull, but if you count Bitcoin + Ethereum, you're "only" looking at $90bn in market cap. There are at least several clear use cases now, unlike several years ago when it was all talk about revolution / anarchy / we're taking the power back to the people -- that nonsense. Let's assume the technology has some value and Bitcoin could become a store of value at some point. I don't know if it will, but let's make the assumption. Then $90bn is a pittance, in comparison to the value of the global equities and gold market. Apple is an $800bn company. Visa is a $250bn company. Mastercard $150bn. Facebook $480bn. And so on. Crypto could very well become a $1-3-5tn market (again, I have no idea whether this will happen, and most of these ICOs look like garbage, but if either Bitcoin managed to become a store of value or Ethereum achieves a fraction of what they're trying to do, both will be very valuable). And if institutional money at some point enters the space, that will be (very) positive for the value of these things. But even IF it's a bubble: the .com bubble wiped away $1.9tn in value. Crypto is at $100bn at the moment. The main currencies (Bitcoin + Ethereum, which account for 75% of crypto value) might very well go 10-20x again before any major breakdown occurs. I've been on the fence multiple times: it's a bubble, it's not a bubble, and frankly, I have no idea. But the potential might be there at least, so it's probably a good idea to at least own some. The potential downside is: you lose your money. But the upside is 10 to 20x, which seems pretty good.
    - simias 9y ago
      >There are at least several clear use cases now, unlike several years ago [...] What would you say are these use cases? From where I stand the use cases of bitcoins are pretty much the same they were a few years ago, only the volume increased. It's a lot of speculation, some black market purchases and some donations. A few shops accept bitcoin but it's still pretty niche, and most of them convert into fiat immediately anyway. Arguably there are even fewer use cases than a few years ago because of the prohibitive cost of the transactions, you can't move money around for cheap like you used to (that might change in the near future with segwit, we'll see). It's simply not cost-effective to use bitcoin for small transactions anymore, at least if you want to be reasonably sure it'll be confirmed in a short amount of time during the busy time of the week.
      - charlesdm 9y ago
        The only use case of Bitcoin (I think) will be store of value. Digital gold essentially. Ethereum seems more interesting and versatile. I'm not big on gold either, but like Bitcoin it has limited use cases aside from embedding tiny amounts into electronics and jewellery. Speculation, probably. Alternatively, the returns could be due to the uncertainty: will it or will it not become a store of value. You're essentially getting compensated for not knowing and for the risk you're taking. If you look at Microsoft, when it IPOed, it was worth $750M. Now it's worth $550bn. Companies IPO a lot later now, so unless you're seed investing, you can't get those returns by investing in the public markets. With Bitcoin, it essentially started from zero, hence the crazy returns. Having something that is safe “outside of the system" is also pretty good. I know for a fact, if the Bitcoin price would be relatively stable (or comparable to normal gold) and it would serve as a store of value, I would rather own Bitcoin because it is 1) more convenient to move around (in comparison to gold bars, or no fees in comparison to an ETF), and 2) more safe from confiscation. And I say that without trying to sound like a conspiracy nut.
  - jinfiesto 9y ago
    I'm inclined to agree, though for no particular rational reason. I've thought long and hard about it, and I can't think of any particular reason the bottom should fall out short of widespread state intervention.
  - 6nf 9y ago
    > Clear sign of a bubble, Was it also a bubble when Bitcoin went from $10 to $100 in 3 months back in 2013?
refrigerator 9y ago
> The price of bitcoin has increased sixfold in the past year Later, regarding the trader in question, > His portfolio is up 295 percent in the past 12 months. ...am I interpreting the numbers wrong, or has he done significantly worse than the market here?
- chrisabrams 9y ago
  If you don't trade cryptos it looks really nice, but if you trade cryptos, then yes it did not do that great compared to the overall market. I have done over 600% in the past year, but I know plenty of people who are in the negative because they bought high and sold low. In the end, anyone who can make 295% return and have 9000+ investors following them is going to be just fine.
  - lloyd-christmas 9y ago
    You're both in the business of making money. If buy and hold is more effective than trading, the trader is losing. Fairly relevant: https://www.aei.org/publication/warren-buffett-wins-1m-bet-made-a-decade-ago-that-the-sp-500-stock-index-would-outperform-hedge-funds/ https://www.aei.org/publication/warren-buffett-wins-1m-bet-m...
- lawn 9y ago
  Yes. The price of Bitcoin was ~$600 12 months ago, ~990$ Jan 1st and it's now ~4080$. Trading should be compared against simply holding, otherwise what's the point?
  - deleted 9y ago
    [deleted]
  - weavie 9y ago
    You want to compare it against holding through market fluctuations. Sure holding would have been better this year. Should bitcoin crash next year, it will be interesting to see if he is still in profit or not when the person holding is down. I assume this is why he is currently not up against holding, because he has spread his risk to accommodate any crashes.
searine 9y ago
Yeah, your portfolio is up now, but when the crash inevitably comes, how are you going to get that money out?
- gruez 9y ago
  any of the many exchanges where you can convert coins to fiat?
  - EGreg 9y ago
    Or to more solid coins. Or to buy actual assets like real estate with them.
  - atomical 9y ago
    During high volume in the past Coinbase has suspended withdrawals of Ether. Call it a glitch, scaling issue, or whatever but it's still a valid concern.
    - FireBeyond 9y ago
      "whatever" - market manipulation? I think on more than one occasion, Coinbase, and other exchanges have been guilty of having outages/ suspending withdrawals etc during crashes... never seems to happen during upswings, though...
      - atomical 9y ago
        That is a serious accusation. They have had outages during peak traffic.
    - devotedtoneu 9y ago
      I saw it happen during dips (but not spikes!) on Coinbase three times in two months. I'm not buying that it's a scaling issue personally.
      - atomical 9y ago
gthtjtkt 9y ago
> His portfolio is up 295 percent in the past 12 months. The coins on Coinbase alone (BTC, ETH, LTC) are up 600%, 2200%, and 1300%, respectively. Many altcoins have done several times better.
ignawin 9y ago
Is it an article? I think I just read a very lengthy eToro ad.
reacharavindh 9y ago
Probably a naive question, but I wonder if money in and out of bitcoin could be regulated by the governments in the future as “gambling” income or loss? Since I hardly hear anybody use bitcoin or *coin as cash rather than just speculating that the value will go up...
- charlesdm 9y ago
  Gains are generally seen as investment income, and taxed as capital gains (depends on the country however)
ajiang 9y ago
If you're comparing his returns with your own, take into consideration risk-adjusted returns. Traders try to avoid massive downside risk, and the best ones structure trades where they stand to lose very little in most outcomes.

28 points by mcone 9y ago

kaffeemitsahne 9y ago

Only 295% in a year? Not that spectacular in the current market.

rurban 9y ago
I got 500% in a few months. Clear sign of a bubble, high risk high reward
- charlesdm 9y ago
  But no one knows when and if the music will stop. I'm not a huge crypto bull, but if you count Bitcoin + Ethereum, you're "only" looking at $90bn in market cap. There are at least several clear use cases now, unlike several years ago when it was all talk about revolution / anarchy / we're taking the power back to the people -- that nonsense. Let's assume the technology has some value and Bitcoin could become a store of value at some point. I don't know if it will, but let's make the assumption. Then $90bn is a pittance, in comparison to the value of the global equities and gold market. Apple is an $800bn company. Visa is a $250bn company. Mastercard $150bn. Facebook $480bn. And so on. Crypto could very well become a $1-3-5tn market (again, I have no idea whether this will happen, and most of these ICOs look like garbage, but if either Bitcoin managed to become a store of value or Ethereum achieves a fraction of what they're trying to do, both will be very valuable). And if institutional money at some point enters the space, that will be (very) positive for the value of these things. But even IF it's a bubble: the .com bubble wiped away $1.9tn in value. Crypto is at $100bn at the moment. The main currencies (Bitcoin + Ethereum, which account for 75% of crypto value) might very well go 10-20x again before any major breakdown occurs. I've been on the fence multiple times: it's a bubble, it's not a bubble, and frankly, I have no idea. But the potential might be there at least, so it's probably a good idea to at least own some. The potential downside is: you lose your money. But the upside is 10 to 20x, which seems pretty good.
  - simias 9y ago
    >There are at least several clear use cases now, unlike several years ago [...] What would you say are these use cases? From where I stand the use cases of bitcoins are pretty much the same they were a few years ago, only the volume increased. It's a lot of speculation, some black market purchases and some donations. A few shops accept bitcoin but it's still pretty niche, and most of them convert into fiat immediately anyway. Arguably there are even fewer use cases than a few years ago because of the prohibitive cost of the transactions, you can't move money around for cheap like you used to (that might change in the near future with segwit, we'll see). It's simply not cost-effective to use bitcoin for small transactions anymore, at least if you want to be reasonably sure it'll be confirmed in a short amount of time during the busy time of the week.
    - charlesdm 9y ago
      The only use case of Bitcoin (I think) will be store of value. Digital gold essentially. Ethereum seems more interesting and versatile. I'm not big on gold either, but like Bitcoin it has limited use cases aside from embedding tiny amounts into electronics and jewellery. Speculation, probably. Alternatively, the returns could be due to the uncertainty: will it or will it not become a store of value. You're essentially getting compensated for not knowing and for the risk you're taking. If you look at Microsoft, when it IPOed, it was worth $750M. Now it's worth $550bn. Companies IPO a lot later now, so unless you're seed investing, you can't get those returns by investing in the public markets. With Bitcoin, it essentially started from zero, hence the crazy returns. Having something that is safe “outside of the system" is also pretty good. I know for a fact, if the Bitcoin price would be relatively stable (or comparable to normal gold) and it would serve as a store of value, I would rather own Bitcoin because it is 1) more convenient to move around (in comparison to gold bars, or no fees in comparison to an ETF), and 2) more safe from confiscation. And I say that without trying to sound like a conspiracy nut.
- jinfiesto 9y ago
  I'm inclined to agree, though for no particular rational reason. I've thought long and hard about it, and I can't think of any particular reason the bottom should fall out short of widespread state intervention.
- 6nf 9y ago
  > Clear sign of a bubble, Was it also a bubble when Bitcoin went from $10 to $100 in 3 months back in 2013?

refrigerator 9y ago

> The price of bitcoin has increased sixfold in the past year Later, regarding the trader in question, > His portfolio is up 295 percent in the past 12 months. ...am I interpreting the numbers wrong, or has he done significantly worse than the market here?

chrisabrams 9y ago
If you don't trade cryptos it looks really nice, but if you trade cryptos, then yes it did not do that great compared to the overall market. I have done over 600% in the past year, but I know plenty of people who are in the negative because they bought high and sold low. In the end, anyone who can make 295% return and have 9000+ investors following them is going to be just fine.
- lloyd-christmas 9y ago
  You're both in the business of making money. If buy and hold is more effective than trading, the trader is losing. Fairly relevant: https://www.aei.org/publication/warren-buffett-wins-1m-bet-made-a-decade-ago-that-the-sp-500-stock-index-would-outperform-hedge-funds/ https://www.aei.org/publication/warren-buffett-wins-1m-bet-m...
lawn 9y ago
Yes. The price of Bitcoin was ~$600 12 months ago, ~990$ Jan 1st and it's now ~4080$. Trading should be compared against simply holding, otherwise what's the point?
- deleted 9y ago
  [deleted]
- weavie 9y ago
  You want to compare it against holding through market fluctuations. Sure holding would have been better this year. Should bitcoin crash next year, it will be interesting to see if he is still in profit or not when the person holding is down. I assume this is why he is currently not up against holding, because he has spread his risk to accommodate any crashes.

searine 9y ago

Yeah, your portfolio is up now, but when the crash inevitably comes, how are you going to get that money out?

gruez 9y ago
any of the many exchanges where you can convert coins to fiat?
- EGreg 9y ago
  Or to more solid coins. Or to buy actual assets like real estate with them.
- atomical 9y ago
  During high volume in the past Coinbase has suspended withdrawals of Ether. Call it a glitch, scaling issue, or whatever but it's still a valid concern.
  - FireBeyond 9y ago
    "whatever" - market manipulation? I think on more than one occasion, Coinbase, and other exchanges have been guilty of having outages/ suspending withdrawals etc during crashes... never seems to happen during upswings, though...
    - atomical 9y ago
      That is a serious accusation. They have had outages during peak traffic.
  - devotedtoneu 9y ago
    I saw it happen during dips (but not spikes!) on Coinbase three times in two months. I'm not buying that it's a scaling issue personally.
    - atomical 9y ago

gthtjtkt 9y ago

> His portfolio is up 295 percent in the past 12 months. The coins on Coinbase alone (BTC, ETH, LTC) are up 600%, 2200%, and 1300%, respectively. Many altcoins have done several times better.

ignawin 9y ago

Is it an article? I think I just read a very lengthy eToro ad.

reacharavindh 9y ago

Probably a naive question, but I wonder if money in and out of bitcoin could be regulated by the governments in the future as “gambling” income or loss? Since I hardly hear anybody use bitcoin or *coin as cash rather than just speculating that the value will go up...

charlesdm 9y ago
Gains are generally seen as investment income, and taxed as capital gains (depends on the country however)

ajiang 9y ago

If you're comparing his returns with your own, take into consideration risk-adjusted returns. Traders try to avoid massive downside risk, and the best ones structure trades where they stand to lose very little in most outcomes.