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Except if you believe, as the author does, that the entire market is just scams and insider manipulation there is no meaning to be gleaned from any of the numbe

Except if you believe, as the author does, that the entire market is just scams and insider manipulation there is no meaning to be gleaned from any of the numbers. If it's all a sham it will blow up at some point, it's just a question of when, but that will almost certainly be precipitated by some unpredictable external event.

AmericanChopper 5y ago
That’s a very bad thesis to trade options on. The author believes that BTC is overvalued, but if you look at their reasons for believing it’s overvalued, some of them could have applied to BTC at any point in time over the past several years, and the rest could have applied to BTC and any point in time since it’s creation. By buying puts on bitcoin (derivatives), they’re not only betting that they’re correct, but also that something will happen in the next 5-6 months that will catalyze the market to correct that valuation. They don’t have any thesis at all for what’s going to catalyze this correction over the next 5-6 months. Their entire investment thesis is that “[they’d] be astonished if we get through 2021 without an explosion”. The investment described in this blog post is just a crypto-bear yolo play, with less thought put into it than your average r/WSB post. Edit: looking at the options chain for the BTC ETF they’re shorting, NTM puts are trading at $2, so the underlying has to lose about 1/3rd of its value for that trade to break even. If it goes to $0, their maximum profit is ~$400 per ~$200 contract. That’s certainly not a cheap contract.
- midjji 5y ago
  Bitcoin, like tesla stock is better predicted by treating it as a religion than a rational investment. So how long are people going to believe a kid who said a god knocked her up to avoid getting stoned?
  - AmericanChopper 5y ago
    Would you be interested in placing a bet with me that the world gives up on religion before the end of the year? Bets are $200 each, and if there’s 0 religious people left by December 17, I’ll pay 3:1. Any takers?
  - deleted 5y ago
    [deleted]
  - ykevinator3 5y ago
    Tesla has a ton of ip, Bitcoin is pretty cloneable
    - atatatat 5y ago
      e.g. Dogecoin
    - abriosi 5y ago
      Being open source it is not a characteristic for value. There are multiple positive and negative examples of things that are open source and (un)valuable
    - cko 5y ago
      Though Bitcoin does have brand name recognition. And being listed on major exchanges. Is that what they refer to as network effects, btw? And if it's akin to religion or a well known brand, it could be easily cloneable but not easily adoptable. I can make a leather handbag or carbonated beverage right now, but unless I slap a Chanel or Coca Cola logo on it, it's not likely to be in demand. We have the tendency to approach this from a rational perspective - "it's not a currency or store of value", "what about Tether", etc. But I can think of plenty of examples where the name itself is powerful enough. I'm not willing to bet that Christianity (or any major religion) will collapse in the near future. Slow decline, maybe. Of course, maybe there's only like a tiny minority of true believers, a couple price manipulating whales, some smoke and mirror organizations, and everyone else is a Robin Hood speculator. I don't have the numbers on that.
  - wolfhumble 5y ago
    > So how long are people going to believe a kid who said a god knocked her up to avoid getting stoned? What you say does not make much sense. When Jesus came to Nazareth as a grown man, this is what His neighbours said about Him: “Isn’t this the carpenter’s son? Isn’t his mother’s name Mary, and aren’t his brothers James, Joseph, Simon and Judas?" (NIV Matthew 13:54). And a few verses later: "And they took offense at him. But Jesus said to them, “A prophet is not without honor except in his own town and in his own home.”" (NIV Matthew 13:57) So clearly, Mary – Jesus's mother – was not kept from being stoned because her neighbours believed Jesus was the Son of God, see Luke 1:26-38 for what Mary was foretold by the angel about her birth of Jesus as the Son of God. Before Jesus was born, Joseph married Mary: "When Joseph woke up, he did what the angel of the Lord had commanded him and took Mary home as his wife" (NIV Luke 1:24). Jesus became known as our Saviour because of His words, acts, death and resurrection, not because the neighbours thought He was so spectacular when He was born.
    - username90 5y ago
      > Jesus became known as our Saviour because of His (...) resurrection There is no evidence for this except what is told in the Bible. Which is the whole point, you are one of those irrational people who are holding onto an irrational asset (Religion). That asset has value to you since others are holding the same asset, if there were no others in the world who believed in the Bible then you wouldn't believe either. So shorting Bible belief could seem rational, it is bound to die sooner or later, but likely it wont die in the next 10 years. And just to illustrate, a rational belief is belief in something like newtons laws of physics. Although they aren't 100% correct they are still useful for solving many problems so they will likely survive as long as humanity exists. The main difference is that the laws of physics has value even if you are the only person believing in them. Similarly Amazon stock has value even if nobody else wants to buy them. But bitcoins just like the Bible has no value if others doesn't believe in them.
      - eternalban 5y ago
        Some great minds in 18th/19th century debated all this in context of rationality. Kant, et al. Some of the discussions were in fact about the "utility" of belief. As to "rational belief", isn't that an oxymoron? There is 'rational knowledge'. Belief is precisely regarding matters where reason remains mute. Your beliefs and your knowledge are the full content of your world reality. https://en.wikipedia.org/wiki/Friedrich_Schleiermacher https://en.wikipedia.org/wiki/Friedrich_Schleiermacher
- dustymcp 5y ago
  This was my exact thoughts well done
intev 5y ago
“the markets can remain irrational longer than you can remain solvent.”
mmahemoff 5y ago
"Markets can remain irrational longer than you can remain solvent." - John Maynard Keynes Speculating on options based only on irrational pricing is a risky game. You could be waiting years for the correction to occur and it might never occur if the fundamentals change to make the price more rational. You can increase your safety level with a known catalyst. In this case, it might be something like an SEC investigation into tether, but you'd have to decide on the timing, the probability that occurs, and how much it could ultimately decrease the related stock prices.
tasuki 5y ago
> it will blow up at some point, it's just a question of when The author's options expire around Christmas. A pretty clear deadline for the trade to be profitable.
codebolt 5y ago
One major caveat; You're not shorting BTC/USD, you're shorting BTC/USDT. As long as Tether is managed by a shady, unregulated corporation with zero transparency or oversight, that has full freedom to create as much artificial liquidity as they see fit, that seems like a very bad bet.
- puranjay 5y ago
  Most people don't know this but Tether and Bitfinex have the same parent company, iFinex. Bitfinex is easily the largest manipulator of BTC price and their wallet holds nearly 1% of the BTC supply. Together, they practically control the market. Even Bitcoin maxis agree that Tether's collateral is very risky. It's a house of cards waiting to collapse.
- bcrl 5y ago
  Why not short USDT directly then rather than throwing BTC into the mix?
  - codebolt 5y ago
    The more I think about it, the more I think that this is actually a pretty genius trade. The price of Tether is effectively capped at 1 USD, so it's not like a short position could blow up in your face. All you'd stand to lose is the interest.

AmericanChopper 5y ago

That’s a very bad thesis to trade options on. The author believes that BTC is overvalued, but if you look at their reasons for believing it’s overvalued, some of them could have applied to BTC at any point in time over the past several years, and the rest could have applied to BTC and any point in time since it’s creation. By buying puts on bitcoin (derivatives), they’re not only betting that they’re correct, but also that something will happen in the next 5-6 months that will catalyze the market to correct that valuation. They don’t have any thesis at all for what’s going to catalyze this correction over the next 5-6 months. Their entire investment thesis is that “[they’d] be astonished if we get through 2021 without an explosion”. The investment described in this blog post is just a crypto-bear yolo play, with less thought put into it than your average r/WSB post. Edit: looking at the options chain for the BTC ETF they’re shorting, NTM puts are trading at $2, so the underlying has to lose about 1/3rd of its value for that trade to break even. If it goes to $0, their maximum profit is ~$400 per ~$200 contract. That’s certainly not a cheap contract.

midjji 5y ago
Bitcoin, like tesla stock is better predicted by treating it as a religion than a rational investment. So how long are people going to believe a kid who said a god knocked her up to avoid getting stoned?
- AmericanChopper 5y ago
  Would you be interested in placing a bet with me that the world gives up on religion before the end of the year? Bets are $200 each, and if there’s 0 religious people left by December 17, I’ll pay 3:1. Any takers?
- deleted 5y ago
  [deleted]
- ykevinator3 5y ago
  Tesla has a ton of ip, Bitcoin is pretty cloneable
  - atatatat 5y ago
    e.g. Dogecoin
  - abriosi 5y ago
    Being open source it is not a characteristic for value. There are multiple positive and negative examples of things that are open source and (un)valuable
  - cko 5y ago
    Though Bitcoin does have brand name recognition. And being listed on major exchanges. Is that what they refer to as network effects, btw? And if it's akin to religion or a well known brand, it could be easily cloneable but not easily adoptable. I can make a leather handbag or carbonated beverage right now, but unless I slap a Chanel or Coca Cola logo on it, it's not likely to be in demand. We have the tendency to approach this from a rational perspective - "it's not a currency or store of value", "what about Tether", etc. But I can think of plenty of examples where the name itself is powerful enough. I'm not willing to bet that Christianity (or any major religion) will collapse in the near future. Slow decline, maybe. Of course, maybe there's only like a tiny minority of true believers, a couple price manipulating whales, some smoke and mirror organizations, and everyone else is a Robin Hood speculator. I don't have the numbers on that.
- wolfhumble 5y ago
  > So how long are people going to believe a kid who said a god knocked her up to avoid getting stoned? What you say does not make much sense. When Jesus came to Nazareth as a grown man, this is what His neighbours said about Him: “Isn’t this the carpenter’s son? Isn’t his mother’s name Mary, and aren’t his brothers James, Joseph, Simon and Judas?" (NIV Matthew 13:54). And a few verses later: "And they took offense at him. But Jesus said to them, “A prophet is not without honor except in his own town and in his own home.”" (NIV Matthew 13:57) So clearly, Mary – Jesus's mother – was not kept from being stoned because her neighbours believed Jesus was the Son of God, see Luke 1:26-38 for what Mary was foretold by the angel about her birth of Jesus as the Son of God. Before Jesus was born, Joseph married Mary: "When Joseph woke up, he did what the angel of the Lord had commanded him and took Mary home as his wife" (NIV Luke 1:24). Jesus became known as our Saviour because of His words, acts, death and resurrection, not because the neighbours thought He was so spectacular when He was born.
  - username90 5y ago
    > Jesus became known as our Saviour because of His (...) resurrection There is no evidence for this except what is told in the Bible. Which is the whole point, you are one of those irrational people who are holding onto an irrational asset (Religion). That asset has value to you since others are holding the same asset, if there were no others in the world who believed in the Bible then you wouldn't believe either. So shorting Bible belief could seem rational, it is bound to die sooner or later, but likely it wont die in the next 10 years. And just to illustrate, a rational belief is belief in something like newtons laws of physics. Although they aren't 100% correct they are still useful for solving many problems so they will likely survive as long as humanity exists. The main difference is that the laws of physics has value even if you are the only person believing in them. Similarly Amazon stock has value even if nobody else wants to buy them. But bitcoins just like the Bible has no value if others doesn't believe in them.
    - eternalban 5y ago
      Some great minds in 18th/19th century debated all this in context of rationality. Kant, et al. Some of the discussions were in fact about the "utility" of belief. As to "rational belief", isn't that an oxymoron? There is 'rational knowledge'. Belief is precisely regarding matters where reason remains mute. Your beliefs and your knowledge are the full content of your world reality. https://en.wikipedia.org/wiki/Friedrich_Schleiermacher https://en.wikipedia.org/wiki/Friedrich_Schleiermacher
dustymcp 5y ago
This was my exact thoughts well done

intev 5y ago

“the markets can remain irrational longer than you can remain solvent.”

mmahemoff 5y ago

"Markets can remain irrational longer than you can remain solvent." - John Maynard Keynes Speculating on options based only on irrational pricing is a risky game. You could be waiting years for the correction to occur and it might never occur if the fundamentals change to make the price more rational. You can increase your safety level with a known catalyst. In this case, it might be something like an SEC investigation into tether, but you'd have to decide on the timing, the probability that occurs, and how much it could ultimately decrease the related stock prices.

tasuki 5y ago

> it will blow up at some point, it's just a question of when The author's options expire around Christmas. A pretty clear deadline for the trade to be profitable.

codebolt 5y ago

One major caveat; You're not shorting BTC/USD, you're shorting BTC/USDT. As long as Tether is managed by a shady, unregulated corporation with zero transparency or oversight, that has full freedom to create as much artificial liquidity as they see fit, that seems like a very bad bet.

puranjay 5y ago
Most people don't know this but Tether and Bitfinex have the same parent company, iFinex. Bitfinex is easily the largest manipulator of BTC price and their wallet holds nearly 1% of the BTC supply. Together, they practically control the market. Even Bitcoin maxis agree that Tether's collateral is very risky. It's a house of cards waiting to collapse.
bcrl 5y ago
Why not short USDT directly then rather than throwing BTC into the mix?
- codebolt 5y ago
  The more I think about it, the more I think that this is actually a pretty genius trade. The price of Tether is effectively capped at 1 USD, so it's not like a short position could blow up in your face. All you'd stand to lose is the interest.