The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: ChpBstrd on January 04, 2018, 09:45:45 AM
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I'd like to share/ask for ideas on how to profit from the end of the cryptocurrency bubble and discuss the difficulties/risks, such as timing, margin calls, etc. Here we'll assume with 100% certainty it's a bubble, rather than rehashing the arguments in other threads and all over the internet.
Please contribute your thoughts on the following or add new ideas:
1) Short sale the currency via Bitbond.com.
2) Short Nvidia, supplier of much of the "mining" equipment. (Any others with options markets?)
3) Purchase/sell bitcoin futures contracts, to the extent individual investors are allowed.
4) Online wagering sites.
5) ???? more ideas????
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Don't forget the classic quote - The market can remain irrational longer than you can remain solvent (https://quoteinvestigator.com/2011/08/09/remain-solvent/) - you could easily get burnt quite badly here.
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Here's an idea....
Until the spit hits the fan... And it will, we just don't know when. Open a bitcoin wallet. But not use it to purchase any bitcoins with actual money. Instead, get your bitcoin wallet address QR code. Then plaster it on the front and back of a few t-shirts and a hat, and go walk around the mall or some other crowded public place. Bonus points if you attend a ball game and get on the jumbotron. Underneath the code, just say "Bitcoin me, Man!" There is so much sloshing around right, now I'm sure you'll get some people who will throw some santoshi your way. Then immediately cash them all out. This will create selling pressure and will be a source of free money!
This thought has crossed my mind many times :)
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This thread may be the cryto version of the "TOP IS IN" thread
I'll check back in 2020.
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The eTop is in! Or iTop? TopCoin is in?
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I just don't get it! so no
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If you believe that crypto is a bubble, as I do, then the only way to profit off of it is by short selling.
There was no way to do this until the CBOT (?) opened futures trading a couple of weeks ago. Here's the thing about Bitcoin and short-selling. Short-selling is built in future demand. So, w/o short sellers, when the bubble crashes, it'll crash hard. No support at any level of short sellers cashing out by buying. Futures is a way to sell short in the future, but is it the same as naked short selling? Dunno. I've never worked in finance, so I can't say as to the mechanics.
But, market timing is very hard and as someone else posted "the markets can remain irrational longer than you can stay solvent." I believe that Bitcoin will keep going up until everyone that wants one has one. For me, I have all the Bitcoin I want (zero).
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Be careful shorting NVIDA or other graphics card guys. The gamers still love their high end gaming equipment, so if the mining boom ends, its not like their business disappears. They can still come up with new chips and better products ect.
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This leads to more of a philosophical discussion: Do bubbles collapse, or do they burst?
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The most interesting aspect to me is the way the whales milk it whenever there's a slight run. If you look at the median transactions, the big sellers are manipulating the price in a major way. They always cash out and trigger a selloff and then some FOMO people move in, or those thinking they are "buying cheap," and the price creeps back up (I suppose the whales could also be buying a little at the low to maintain the illusion of a "fair price"). And lots of HODLERS must be sitting there dreaming of the push to $100,000, or when the Fed collapses, or whatever the end goal is.
Because this market is nothing BUT speculation, emotion, and psychology, I want to learn all I can. If you watch the flows you might be able to nickel and dime some gains by riding in the wake of the whales, but that's a risky game. One of these times, it's not going to be pushed back up.
https://bitinfocharts.com/comparison/bitcoin-mediantransactionvalue.html#3m
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Look for "scam" public companies. Just like when everyone was falling over themselves to put a "e" in front of their name, companies are now declaring themselves blockchain companies. RIOT Blockchain is one of them. 6 months ago they were a biotech company.
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Be careful shorting NVIDA or other graphics card guys. The gamers still love their high end gaming equipment, so if the mining boom ends, its not like their business disappears. They can still come up with new chips and better products ect.
My guess is that NVIDIA's sky high share price (their price to earnings ratio is 54 at the moment, let that sink in) is being driven as much by people thinking their chips are going to end up in all sorts of deep learning and computer vision applications as the bitcoin/cryptocurrency mining angle. So I'm not sure a cryptocurrency collapse would move their shares enough to make a significant profit from short selling, and there is a risk that the price might even go up if the artificial intelligence hype is growing fast enough to cancel out the loss of the cryptocurrency hype.
If you can predict when the bubble will burst, selling CBOE and/or CME futures would be a way to make a lot of money, but see the quote repeated above about the market being able to stay irrational longer than you can remain solvent. Right now the CBOE contract with the farthest out settlement date is 3/14/18. CME has one listed for June of 2018, but the volume shows a zero. I believe there are lots of more complex options for puts/calls/short selling through bitcoin exchanges, but in the event of a big and permanent crypto-crash I'd be really worried about counter-party risk with those.
Plenty of people in the 1990s lost their shirts correctly predicting the dot.com crash, but being off about the timing.
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Don't forget the classic quote - The market can remain irrational longer than you can remain solvent (https://quoteinvestigator.com/2011/08/09/remain-solvent/) - you could easily get burnt quite badly here.
100%
be careful shorting. even more careful than buying. I do think it's a bubble also, but don't think it's over.
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This is like that ancient Greek Myth:
The Princess Cassandra was up in the tower watching the Trojan soldiers wheeling a giant Bitcoin in through the front gates of Troy.
"Don't bring in that Bitcoin! It's a bubble! It's going to collapse and destroy us all!"
But alas, Apollo had given her the gift of prophecy but cursed her so that none believed what she said.
Cassandra watched helplessly as the Trojans were financially slaughtered to the last man.
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Here's an idea....
Until the spit hits the fan... And it will, we just don't know when. Open a bitcoin wallet. But not use it to purchase any bitcoins with actual money. Instead, get your bitcoin wallet address QR code. Then plaster it on the front and back of a few t-shirts and a hat, and go walk around the mall or some other crowded public place. Bonus points if you attend a ball game and get on the jumbotron. Underneath the code, just say "Bitcoin me, Man!" There is so much sloshing around right, now I'm sure you'll get some people who will throw some santoshi your way. Then immediately cash them all out. This will create selling pressure and will be a source of free money!
Or buy a bitcoin and spend every night posting in forums why more people should put their money in.
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Don't forget the classic quote - The market can remain irrational longer than you can remain solvent (https://quoteinvestigator.com/2011/08/09/remain-solvent/) - you could easily get burnt quite badly here.
This is why the answer to the question is not obvious. Short selling or taking on futures obligations are too highly timing dependent. They hyperbolic price curve of bitcoin is a big clue that a pop is on the way, but that sounds like technical analysis voodoo. It would be nice if there was an options market so you could buy puts and accept a 100% downside risk in return for much greater upside potential.
To be clear, I would only consider shorting a company like Nvidia as part of a neutral pairs trade with its competitors.
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What about shorting a company that holds a lot of Bitcoin, such as Overstock Dot Com ($OSTK)?
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5) A new opportunity to short cryptomania arrived yesterday. Kodak, an old money-losing irrelevant company, announced a blockchain payment program for photographers and the stock nearly quadrupled. An options market exists through July.