Bitcoin is still early

[The White Coat Investor]

if you DCAd weekly for 5 years you made 370%

That sounds like a pain. I don't do any investing weekly. But your point is correct due to the severe volatility.

Frankly, I never would have made 370% because I would have sold long before getting there. You've got to really believe not only to avoid selling out at lows but to avoid selling out at highs. I don't believe that much.

[jacoavlu]

That sounds like a pain. I don't do any investing weekly. But your point is correct due to the severe volatility.

Frankly, I never would have made 370% because I would have sold long before getting there. You've got to really believe not only to avoid selling out at lows but to avoid selling out at highs. I don't believe that much.

there are super easy set it and forget it DCA platforms. Monthly, weekly, daily, lol even hourly

Just approach same as equities. Long term buy and hold through ups and downs. Fully expect I’ll see a 50% drawdown of my equities position at some point. With bitcoin the number is obviously higher.

[burritos]

if you DCAd weekly for 5 years you made 370%

What would have the return been had you DCA'd hourly?

[jacoavlu]

What would have the return been had you DCA'd hourly?

About the same

[NapoleanDynamite]

That sounds like a pain. I don't do any investing weekly. But your point is correct due to the severe volatility.

Frankly, I never would have made 370% because I would have sold long before getting there. You've got to really believe not only to avoid selling out at lows but to avoid selling out at highs. I don't believe that much.

After I made my initial investments in the start of 2020 which was quite a substantial stack, I started DCA buying in 9/2020. I set up a weekly DCA schedule which over the last 21 months has invested approx 100K. My exact return on those DCA buys over the past 21 months is -42% in paper losses. Quite a poor return as of today. At one point this was up over 200%. Volatility is real.

Overall, I am still up in my returns for BTC and looking at about 150% return since my initial investment and my break even line is about 14K at this point. I'm happy to share the DCA numbers moving forward so others can learn along with me in regards to DCA buying. I have been preaching it since 9/2020, so we will see how it does over a 5-10 year time frame. My bet is that it does quite well, or I wouldn't continue to do it.

I looked at Daily, weekly, and monthly buys for my DCA and weekly/daily buys had the best returns based on prior data. Daily buys were too painful for tax purposes and not much difference in returns than weekly. Although weekly is more of a pain than monthly for taxes if you are selling (which I have not sold a single sat), there is now software to help ease the burden of doing your taxes.

[timtheenchanter]

there are super easy set it and forget it DCA platforms. Monthly, weekly, daily, lol even hourly

Just approach same as equities. Long term buy and hold through ups and downs. Fully expect I’ll see a 50% drawdown of my equities position at some point. With bitcoin the number is obviously higher.

Any recommendations on some of these DCA platforms? I haven't looked into this again for a while so not sure what's new out there - otherwise I'll just keep manually depositing to my exchange each month.

[jacoavlu]

Any recommendations on some of these DCA platforms? I haven't looked into this again for a while so not sure what's new out there - otherwise I'll just keep manually depositing to my exchange each month.

Swan is excellent but geared more toward beginners, 1% fee

Strike is super easy and “no fee” (spread is 0.1-0.3%) but at this time no statement or report functionality so tracking your basis is not easy

pretty sure several exchanges offer DCA now and would be where I would look. OKcoin I think was charging $1 per tx. Pretty sure Kraken has DCA. Maybe they all do.

[xraygoggles]

I would not really trust BlockFi, Celsius, Nexo etc.

They use dubious and opaque collateralization methodologies it seems like. In fact, I believe during the large correction earlier this year, BlockFi was on the verge of potential insolvency due to the liquidation cascades and margin calls that were ongoing by the speculators/borrowers of their crypto. Very shoddy risk management.

Nostradamus right here ngl

[burritos]

Doubling down! Or is this tripling down? Ok, it's only .001 percent of the portfolio, but why not?

https://www.thestreet.com/investing/cryptocurrency/billionaire-saylor-makes-new-bitcoin-bet-despite-heavy-losses

[Brains428]

Nostradamus right here ngl

What page was the original post.

Also, props on adding a gif. This forum would be more fun with gifs, but also filled with nonsense.

[xraygoggles]

What page was the original post.

Also, props on adding a gif. This forum would be more fun with gifs, but also filled with nonsense.

https://forum.whitecoatinvestor.com/general-investing/236645-bitcoin-is-still-early?p=303477#post303477

[jacoavlu]

Nostradamus right here ngl

are you going on record that you think customers of blockfi are going to lose coins / funds? It will sure be interesting to see if that comes to fruition. Much depends on btc price. Pumps cure many ailments. For sure I would not hold assets on any of these platforms now. But I still had USDC on blockfi up until a few weeks ago

celsius always seemed more sketch but ************************ if they weren’t just doing straight up degen stuff lol. Don’t know anything about the rest.

[CM]

Crypto universe collapsing for want of modern-day JP Morgan, from WSJ (paywall):

https://www.wsj.com/articles/cryptos-domino-effect-is-widening-threatening-more-pain-11656754202?mod=hp_lead_pos7

Turmoil in the digital-assets ecosystem has grown in recent weeks, with losses in cryptocurrencies blowing holes in balance sheets and pushing firms near bankruptcy.

After a pair of cryptocurrencies crashed, wiping out billions of dollars in value in May, a British Virgin Islands court this past week ordered a hedge fund that had survived several crypto downturns to liquidate. Another platform that counts the hedge fund as an investor capped withdrawals while evaluating how the hedge fund’s woes would affect its liquidity.

A handful of crypto players have established financial ties throughout the market and added to risk by borrowing and lending digital assets among themselves, with at least one lender, Celsius Network LLC, drawing on collateral to do its own borrowing.

“Everything is deeply, deeply intertwined; we didn’t have this in 2018,” said Chris Bendiksen, head of research at the London-based asset-management firm CoinShares, CS 1.32%▲ referring to a past crypto market downturn.

While new to crypto, such problems are well-known in the traditional financial realm. During the 2007-08 global financial crisis, bank-lending practices including rehypothecation of assets—using collateral to borrow more money—left banks short on liquidity. In the aftermath, regulators tightened oversight.

Digital asset prices have been falling dramatically along with other speculative bets in response to the Federal Reserve’s move to raise interest rates. Crypto’s headache intensified in May, when the stablecoin TerraUSD broke from its dollar peg and dragged the value of its sister cryptocurrency Luna down with it, eradicating $40 billion.

Investors got a taste of how the commingling of crypto investments would hit the market when a fire sale of assets backing the TerraUSD stablecoin pushed the price of bitcoin almost $10,000 lower to trade around $30,000.

Problems facing Three Arrows Capital Ltd., the hedge fund ordered to liquidate after being heavily invested in Luna, spilled over to the crypto brokerage Voyager Digital Ltd. this past week. On Friday, Voyager said it was temporarily suspending trading, deposits, withdrawals and loyalty rewards. It earlier issued a notice of default to Three Arrows for allegedly failing to make a loan repayment of 15,250 bitcoin and $350 million in USD Coin, a stablecoin. The loan is worth about $646 million based on bitcoin’s current price of around $19,400. Shares of Voyager, which are traded on the Toronto Stock Exchange, are down more than 96% this year.

Three Arrows’ financial troubles have affected the smaller firms in its orbit. The Hong Kong-based trading firm 8 Blocks Capital said Three Arrows has cut off communications after allegedly misappropriating $1 million of its capital. Kyber Network, a decentralized-finance project, said the firm has “a small portion of its Treasury” with the hedge fund, which it said hasn’t responded to any of its attempts to communicate.

Three Arrows didn’t respond to a request for comment.

Crypto still exists largely outside of regulation, with few federal laws specific to crypto and the Securities and Exchange Commission taking up cases against individual firms on an ad hoc basis. The growth of the industry—worth more than $3 trillion at its peak last year—has surpassed the ability of regulators to keep up, according to analysts. The blowup of TerraUSD prompted renewed calls for Congress to pass legislation covering crypto.

Without a central bank to swallow illiquid assets and curtail contagion, crypto has taken a page from the traditional financial playbook. The crypto exchange FTX, headed by Sam Bankman-Fried, has struck a deal with the crypto lender BlockFi Inc. including a $400 million credit facility and the option for FTX to buy the company for as much as $240 million. BlockFi Chief Executive Zac Prince said by Twitter on Friday that market events related to Celsius and Three Arrows had a negative impact on the company.

BlockFi said it experienced about $80 million in losses from its loan exposure to the hedge fund.

In June, Mr. Bankman-Fried’s other crypto company, the trading firm Alameda Research, extended two credit lines, one worth $200 million and another for 15,000 bitcoins, to Voyager. Alameda acquired a $35 million stake in Voyager in May.

The travails of the crypto market call to mind the actions of a pair of financiers during prior times of turmoil. J.P. Morgan twice stepped in to prevent economic collapse before the Federal Reserve system was created in 1913. More recently, in 2008, Warren Buffett helped to revive Goldman Sachs Group Inc. and General Electric Co.

The crypto market’s problems could be the tip of the iceberg. Three Arrows, a big borrower in the system, has seen its levered positions liquidated by exchanges including BitMEX and Deribit after failing to meet margin calls. Margin calls, which are demands from lenders for more collateral from borrowers to back their loans, have swept across the crypto trading industry as the value of major cryptocurrencies fell in the midst of a broad market selloff.

The crypto investor Mike Novogratz, who bet heavily on Luna before its spiral, drew parallels between the current leverage-fueled carnage in crypto and the 1998 blowup of Long-Term Capital Management, a heavily leveraged hedge fund whose collapse sparked concern of contagion in the financial system.

The ascent of leverage in crypto has been growing for years, bursting with the downfall of TerraUSD and a pseudo crypto bank tied to it that offered holders of the stablecoin nearly 20% for putting their deposits in, said Caitlin Long, chief executive of Custodia Bank, which aims to provide custody and other digital asset banking services for institutional investors.

Crypto firms began taking on more leverage after the approval of Grayscale Bitcoin Trust in 2013. The trust for years was one of the few bitcoin investments that average investors could access in brokerage or retirement accounts. Because of that, its value often traded many times higher than that of spot bitcoin, letting investors profit from the difference. Three Arrows held 6.1% of the trust’s shares at the end of 2020, according to a filing with the SEC.

That trade was so successful that investors viewed it as risk-free, Ms. Long said. When it became less profitable as more products became available, investors began trading in bitcoin-futures markets, speculating that the price would go higher yet. And when that dried up, they turned to yield-generating platforms.

“All this leverage flocked from the sure thing to the less sure thing,” Ms. Long said. “With each one of these big trends it got riskier for traders to play them.”

Crypto investors are bracing for more pain yet. Celsius froze client accounts in June, and the crypto lender Babel Finance and the futures exchange CoinFLEX halted customer withdrawals. Babel Finance said it has reached preliminary agreements on the repayment period of some debts, but it hasn’t resumed withdrawals. CoinFLEX is issuing $47 million of another token in the hope of resuming customer withdrawals after a major customer went into “negative equity.”

Faced with uncertainty, some crypto lenders have begun recalling loans to large borrowers to check for their financial health, while others have tightened access to their loan products.

“There is a shortage of supply as companies like Celsius have now turned off withdrawals and have a smaller amount of assets to lend out,” said Adam Reeds, chief executive of the crypto lender Ledn. “Many market makers who used to borrow from platforms like that are now looking at alternatives.”

For now, executives in the industry are hoping the current crisis is a repeat of the “crypto winter” in 2018, during which the bad actors who orchestrated the boom and bust of initial coin offerings were flushed out, making the system stronger as a result.

[CM]

The collapse of leveraged firms will drive down the price of bitcoin due to liquidation, but also loss of confidence/belief and outright fear. That would create an investment opportunity for an asset with intrinsic value. However, I don't see any in bitcoin.

I wonder though, if there is an investment opportunity somewhere in the rubble of the crypto universe.

I recognized the housing bubble from 2003-2007, but didn't know how to profit from that idea. Later, I learned that it was possible to create derivative contracts on mortgage securities through investment banks, as several hedge fund managers did (though that option was probably not available to individual investors). There is probably an opportunity here (in crypto) somewhere.

[jacoavlu]

The collapse of leveraged firms will drive down the price of bitcoin due to liquidation, but also loss of confidence/belief and outright fear. That would create an investment opportunity for an asset with intrinsic value. However, I don't see any in bitcoin.

I wonder though, if there is an investment opportunity somewhere in the rubble of the crypto universe.

I recognized the housing bubble from 2003-2007, but didn't know how to profit from that idea. Later, I learned that it was possible to create derivative contracts on mortgage securities through investment banks, as several hedge fund managers did (though that option may was probably not available to individual investors). There is probably an opportunity here (in crypto) somewhere.

most or even all of the financial stuff that works in traditional finance doesn’t work in bitcoin because there is no bailout mechanism, there is no money printing or backstop or lender of last resort. Hence you see people getting destroyed that tried to do fiat type stuff like rehypothecation and leverage and fractional reserve. So if you do ever come around to bitcoin the only thing that makes sense to me is buy and hold and hold your own keys

crypto, sure there are always opportunities. But I have no advice that’s an arena I never plan to enter. Stay away would be my advice