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> Disclosure: I hold short positions in companies mentioned in this article. This is not financial advice. Hmm. Well, on the one hand, he is putting his money

by Gatsky 4y ago

> Disclosure: I hold short positions in companies mentioned in this article. This is not financial advice. Hmm. Well, on the one hand, he is putting his money where his mouth is. On the other hand, this could be prime evidence of motivated reasoning. The author has also submitted his own article to HN it seems. Reading the analysis, it makes sense, but I'm not experienced in analysing company financials. Other people I respect/trust who have a good track record don't feel this way about the companies in question. I think, in general, shorting volatile assets is a pretty fraught undertaking. There could be a Gamestop style short squeeze fueled by Crypto bros for example. There could be a purchase announcement that could spike the price. ARK could decide to buy a large stake. All these things could lose you a lot of money for 'no good reason'.

xmodem 4y ago
> On the other hand, this could be prime evidence of motivated reasoning. I find in cases like this it can be useful to go and check the primary sources. Of course, it's impossible to re-blind yourself having already read the analysis. > Last year, one MARA executive earned over $220 million in cash and stock-based compensation, in a year when the company’s total revenue was $150 million. The author helpfully links the SEC filing they've taken this number from, and it would appear to be accurate, though one detail the author glosses over is that this is 99% stock. I'm not sure how that affects your analysis. (I hold no position in this company)
Thorrez 4y ago
>I think, in general, shorting volatile assets is a pretty fraught undertaking. There could be a Gamestop style short squeeze fueled by Crypto bros for example. I think most of the risk could be mitigated by holding bitcoin while shorting the miners.
- polygamous_bat 4y ago
  I am curious, how would holding Bitcoin hedge the meme stock frenzy risk?
  - Thorrez 4y ago
    I don't think memers would focus on bitcoin mining funds. The memers focus on cryptocurrencies themselves, not on boring corporate miners. So I don't see how memers would affect the mining stock except to the extent that they affect bitcoin itself. So I don't expect much volatility from memers directly on the miners. OTOH, there is huge volatility in the miner stock price due to bitcoin price swings. I'm saying to counter that volatility risk by holding bitcoin.
    - polygamous_bat 4y ago
      I don't think I agree with your statement: > I don't think memers would focus on bitcoin mining funds. The memers focus on cryptocurrencies themselves, not on boring corporate miners. For example, here's a post on r/WallStreetBets [1] trying to hype up RIOT and MARA, and I could find a dozen more just by googling. If you think meme stock frenzy won't take something because it's boring/old school, I have some shorts in a brick and mortar overpriced video game store I would like to sell you. [1] https://www.reddit.com/r/wallstreetbets/comments/qp0vn8/riot_and_mara_dd_530026900_estimated_return/ https://www.reddit.com/r/wallstreetbets/comments/qp0vn8/riot...
      - Thorrez 4y ago
        You're right. Although it looks like they're hyping it purely on the idea the bitcoin will go up. So maybe buying bitcoin is still a good hedge. Gamestop is a bit different. Gamestop was hyped based on I don't know what, maybe hype alone. The point is there was nothing to hedge with. With RIOT and MARA, they're hyped based on the idea that bitcoin will go up, which gives an obvious hedge.
- _0w8t 4y ago
  Holding bitcoins to protect against unacceptable losses with shorts is a very bad idea. Such holding assumes that increase in stock price for mining companies may only come from bitcoin price increase. Yet the companies are exposed to many other externalities like local electricity prices or regulation changes that are independent in general from bitcoin prices. A proper insurance to limit the losses in case of huge increase in the asset price should be implemented with options or other financial instruments specially designed for this.
  - Thorrez 4y ago
    I don't see how electricity or regulation could make the price go up much. Electricity can only go to 0, it can't realistically go negative. It sounds like from the article, that hardware is a bigger cost than electricity. And if electricity goes significantly down, it'll go down for other miners as well, meaning they'll just get more competition over the same fixed amount of the bitcoin pie. The article points out that even if they mined all the unmined bitcoins at the same percent they're doing now, they still won't reach their market cap. So even if electricity is 0, they still can't make enough profit to hit their market cap. You're right though that this isn't a foolproof way to eliminate large risks. I'm very far from an expert in this area; I've never done any shorting or options trading.

by Gatsky 4y ago

xmodem 4y ago

> On the other hand, this could be prime evidence of motivated reasoning. I find in cases like this it can be useful to go and check the primary sources. Of course, it's impossible to re-blind yourself having already read the analysis. > Last year, one MARA executive earned over $220 million in cash and stock-based compensation, in a year when the company’s total revenue was $150 million. The author helpfully links the SEC filing they've taken this number from, and it would appear to be accurate, though one detail the author glosses over is that this is 99% stock. I'm not sure how that affects your analysis. (I hold no position in this company)

Thorrez 4y ago

>I think, in general, shorting volatile assets is a pretty fraught undertaking. There could be a Gamestop style short squeeze fueled by Crypto bros for example. I think most of the risk could be mitigated by holding bitcoin while shorting the miners.

polygamous_bat 4y ago
I am curious, how would holding Bitcoin hedge the meme stock frenzy risk?
- Thorrez 4y ago
  I don't think memers would focus on bitcoin mining funds. The memers focus on cryptocurrencies themselves, not on boring corporate miners. So I don't see how memers would affect the mining stock except to the extent that they affect bitcoin itself. So I don't expect much volatility from memers directly on the miners. OTOH, there is huge volatility in the miner stock price due to bitcoin price swings. I'm saying to counter that volatility risk by holding bitcoin.
  - polygamous_bat 4y ago
    I don't think I agree with your statement: > I don't think memers would focus on bitcoin mining funds. The memers focus on cryptocurrencies themselves, not on boring corporate miners. For example, here's a post on r/WallStreetBets [1] trying to hype up RIOT and MARA, and I could find a dozen more just by googling. If you think meme stock frenzy won't take something because it's boring/old school, I have some shorts in a brick and mortar overpriced video game store I would like to sell you. [1] https://www.reddit.com/r/wallstreetbets/comments/qp0vn8/riot_and_mara_dd_530026900_estimated_return/ https://www.reddit.com/r/wallstreetbets/comments/qp0vn8/riot...
    - Thorrez 4y ago
      You're right. Although it looks like they're hyping it purely on the idea the bitcoin will go up. So maybe buying bitcoin is still a good hedge. Gamestop is a bit different. Gamestop was hyped based on I don't know what, maybe hype alone. The point is there was nothing to hedge with. With RIOT and MARA, they're hyped based on the idea that bitcoin will go up, which gives an obvious hedge.
_0w8t 4y ago
Holding bitcoins to protect against unacceptable losses with shorts is a very bad idea. Such holding assumes that increase in stock price for mining companies may only come from bitcoin price increase. Yet the companies are exposed to many other externalities like local electricity prices or regulation changes that are independent in general from bitcoin prices. A proper insurance to limit the losses in case of huge increase in the asset price should be implemented with options or other financial instruments specially designed for this.
- Thorrez 4y ago
  I don't see how electricity or regulation could make the price go up much. Electricity can only go to 0, it can't realistically go negative. It sounds like from the article, that hardware is a bigger cost than electricity. And if electricity goes significantly down, it'll go down for other miners as well, meaning they'll just get more competition over the same fixed amount of the bitcoin pie. The article points out that even if they mined all the unmined bitcoins at the same percent they're doing now, they still won't reach their market cap. So even if electricity is 0, they still can't make enough profit to hit their market cap. You're right though that this isn't a foolproof way to eliminate large risks. I'm very far from an expert in this area; I've never done any shorting or options trading.