Bitcoin, and other tulips

General Gibberish Forums The Pool Room
1713

There’s so much fervent interest in it that surely it won’t fall to zero (btc and other major coins) unless there is a failing of the technology or if it’s made illegal somehow(and even then it would hard to stop - see Russians using it )

They aren’t completely negligible risks.

I mean some early adopters of Bitcoin would have to be the wealthiest people to ever exist if they could liquidate their holdings today.

Who’s selling everything up to be on the other end of those trades confidently?

I guess the US government now Trumps in control(so socialised….ie in the end everyone).

It could be how Trump and his cronies make themselves stupidly wealthy.

US Treasury buys anonymous assets they hold. Take your pick out of many crypto currencies that have been created in the past decade or so.

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1714

You guys are making this way less fun for me.

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1715

Sorry Wim

1716

It’s okay. Better than @Humble_Minion telling me I’m killing the planet. That’s even more of a downer.

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1717

Hes got stupid covered, and wealthy is open for debate

1718

I think if you’re just having fun it’s the electronic equivalent of buying I dunno stamps or footy cards.

1719

Who knows. But if I wanted to pick an untraceable way of funnelling money from the public purse to my bank account.(as a corrupt politician)

Well the simplest way would be for the public purse to buy cryptocurrency

No one knows who owns them beforehand.

1720

We are too dumb as a species to survive climate change. Enjoy your coins.

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1721

Hes been doing that, in clear view, and so far, nothing to show for it other than the keys to the kingdom. Crypto would be added to a long list of income streams for the great one (his words, not mine)

1722

Buy the dip?

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1723

Pretty much the expected pull back, the next step will be interesting.

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1724

Bit disappointed with the XRP dip and the market has been in freefall since. That’s why this is a long-term investment. Hang in there.

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1725

I mean…its price is where it was a week ago.

I guess I’m saying I don’t understand the disappointment. If you wanted to sell, you still can…

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1726

Nah. More excuse to buy more. Buy low. Sell high.

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1727

Pfft
Amateurs
I’ve got it figured out
Buy high
Sell low

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1728

Just to quote myself it is official today

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1729

Good day all around today. Still waiting for my Chill Guy tokens to have a decent pump, but I feel like the money could produce more elsewhere.

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1730

Some healthy resistance levels bounced all round for a month now, reckon around now is close to next level break out

1731

Matt Levine’s latest on Microstrategy. Good read thought some here might like.

MicroStrategy

Two big themes of this column are:

  1. If people really want to buy a company’s stock at irrational prices, it should sell it to them; and
  2. If people really want to buy a company’s stock at irrational prices, someone else should sell it to them.

On Theme 1, I have been amused and impressed by meme-stock companies — some of them in bankruptcy or close to it — that have addressed their financial problems by pounding out stock to retail investors. On Theme 2, we talked last week about the high demand for shares in hot private startups like SpaceX, and I suggested that the obvious move was for short sellers to satisfy that demand by promising shares of SpaceX for future delivery. In one sense, only SpaceX can create SpaceX shares, but in another sense anyone can create SpaceX shares, as long as they are willing to bear the financial risk that SpaceX will go up and they’ll have to pay a lot to buy the stock in the future.

It is approximately correct to say that MicroStrategy Inc. is a $47 billion pot of Bitcoins that the market values at $119 billion.[[3]](file:///private/var/containers/Bundle/Application/A633E87D-5186-412E-872D-D90ED389B6FE/Gmail.app/#m_-1706797617242460644_footnote-3) So MicroStrategy’s stock trades at roughly a 150% premium to the value of its underlying assets (Bitcoin). This is quite a weird situation, as we haverepeatedly discussed. If you take it literally, it means that MicroStrategy can sell $1 of stock, use the proceeds to buy $1 of Bitcoin, and increase its market capitalization by $2.5. Or sell $42 billion of stock, buy $42 billion of Bitcoin, and increase its market capitalization by $105 billion. Or any larger number you like. It looks like a financial perpetual motion machine.[[4]](file:///private/var/containers/Bundle/Application/A633E87D-5186-412E-872D-D90ED389B6FE/Gmail.app/#m_-1706797617242460644_footnote-4)

Given this, the most obvious trade in the world is for MicroStrategy to sell as much stock as possible (and use the proceeds to buy Bitcoin), and in fact that is what MicroStrategy is doing, with an announced $21 billion at-the-market stock offering that it has been executing rapidly.[[5]](file:///private/var/containers/Bundle/Application/A633E87D-5186-412E-872D-D90ED389B6FE/Gmail.app/#m_-1706797617242460644_footnote-5) Obviously! You keep selling stock and buying Bitcoin until the price of the stock converges on the price of Bitcoin. There is an obvious arbitrage — a pot of Bitcoin is trading for much more than the value of the Bitcoin in the pot — and MicroStrategy is in the best position to close it.

But all of MicroStrategy’s selling does not seem to work to compress the premium. I wrote last month:

My usual assumption with stuff like this is “arbitrages close.” Like, if MicroStrategy is a pot of Bitcoin trading at a premium to the value of its Bitcoin, then the natural arbitrage is to (1) sell MicroStrategy stock and (2) buy Bitcoin. This is a bet that eventually the gap will close, and also it should help cause the gap to close, because selling MicroStrategy tends to push down its price and buying Bitcoin tends to push up its price. I am not recommending that you do that — that’s super risky! nothing here is investment advice! — I am just saying that MicroStrategy can do that, and should, and does. Except that it doesn’t reduce the premium! What if, the more stock MicroStrategy sells to buy Bitcoin, the more the premium goes up? A real perpetual motion machine.

Since then, MicroStrategy has kept selling stock, and its stock and Bitcoin are both up about 15%, so I suppose the premium has closed a little bit, but not much.

So the weird result is that, selling as fast as it possibly can, MicroStrategy still can’t sell enough stock to close the premium. Could short sellers? I mean, sure, whatever; people do short MicroStrategy,[[6]](file:///private/var/containers/Bundle/Application/A633E87D-5186-412E-872D-D90ED389B6FE/Gmail.app/#m_-1706797617242460644_footnote-6) but it is notoriously risky and so far doesn’t really work. Is there a better, safer trade?

Yes! The key point to realize is that the phenomenon is not necessarily “people want to buy MicroStrategy for more than its net asset value” but rather “people want to buy a pot of Bitcoins in the form of a publicly traded corporation for more than its net asset value.”[[7]](file:///private/var/containers/Bundle/Application/A633E87D-5186-412E-872D-D90ED389B6FE/Gmail.app/#m_-1706797617242460644_footnote-7) So the trade is:

  1. You run another public company, ideally one that is fairly small and whose business you are not all that jazzed about.
  2. You buy Bitcoin.
  3. You sell more stock to buy more Bitcoin.
  4. You see if people are willing to pay $2.50 for $1 worth of Bitcoin in your public-company pot, the way they are with MicroStrategy.
  5. “If you like buying MicroStrategy at a premium to its pot of Bitcoin, you’ll love buying our company, which also has a pot of Bitcoin,” you tell them.

Worth a shot! Here’s this (via Byrne Hobart):

Semler Scientific, Inc. (Nasdaq: SMLR), a pioneer in developing and marketing technology products and services to healthcare providers to combat chronic diseases, today announced updates regarding its bitcoin (BTC) activity and holdings, capital markets activity, and BTC Yield, a key performance indicator.

Between December 5, 2024 and December 15, 2024, Semler Scientific acquired 211 bitcoins for $21.5 million with proceeds generated from its at-the-market (ATM) offering and operating cash flow at an average price of $101,890 per bitcoin, inclusive of fees and expenses. As of December 15, 2024, Semler Scientific held 2,084 bitcoins, which were acquired for an aggregate $168.6 million at an average purchase price of $80,916 per bitcoin, inclusive of fees and expenses.

Semler’s market capitalization as of noon today is about $650 million, versus about $220 million for its stash of Bitcoin, or almost a 200% premium, though again I suppose there is that medical technology company to consider too. It’s a popular trade:

MicroStrategy’s bet on bitcoin has fueled a wild rally in the shares of the business software company — and it’s driving more companies to copy the strategy.

MicroStrategy’s crypto playbook has catapulted its stock up 501% this year. Though its core business is software, piling up an enormous trove of bitcoin has become its guiding star.

Now, other firms are stocking up. Mimicking MicroStrategy’s approach, companies are issuing debt to buy bitcoin. Early adopters of the strategy include Marathon Holdings and Core Scientific—both crypto firms—and Japan’s Metaplanet.

Yes right if you can buy stuff for $1 and immediately turn it into $2.50 of market capitalization, then that’s pretty much a good trade for anyone. There are probably a lot of companies that have good long-term investing opportunities and would prefer to turn $1 of cash into some uncertain but possibly larger amount of long-term value. But there are other companies that would take the quick buck.

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1732

If someone is willing to pay $2.50 for $1 worth of Bitcoin then it ceases to be worth $1. It is worth $2.50.
That’s how trading works.
I understand the entry price but it also doesn’t matter, because the market sets the price.
Just like if I buy $1 of bitcoin now and it drops 80% it ceases to be worth $1 and it is worth 20c.
Yes, you take your profits along the way. Yes, you cash in at some point. Yes, you buy back in at some point.

I recall people saying bitcoin will drop back to $30k when it broke through $40k earlier this year. It hasn’t returned to that target yet. It didn’t even return to $40k. It’s the time of the cycle where corrections aren’t that deep and it’s more likely to push up more often than push down.

The value of whatever you are trading is live and current.
If you think it’s not worth it, then so be it. But I’m sure those that were saying it’ll drop back to $30k earlier this year would have no troubles getting in at the inflated price of $40k and watching it double by the end of the year. And likely triple by early next year (if not earlier).
In my opinion, the timing of when to buy is more important than the value at the time.

There’s a chance it drops back to $30k when it has its 1 year drop. Last cycle, it dropped back to 30%~ below the previous cycle high. So if that happens again, it’ll drop to $42k after this cycle. It may drop more and reach it, it may drop less and stay at those over inflated prices of years ago.

I do agree with one thing that is mentioned there though. When prices are irrational, that’s when you sell. That’s pretty much the buy low / sell high strategy.

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