BTC in the PP

[D1984]

I see recent Nexo quotes for lending PAXG (gold) at 7%, staking at 5% (similar to lending, but where you lend to the 'system' rather than a individual, as I understand it, so 'safer').

Idea :

Third 2x stock, two-thirds gold - via PAXG that's lent (at a 7% rate). 4.6% proportioned benefit.

Has the same broad reward expectancy as 50/50 stock/gold, but with a anticipated 1.5 times the volatility along the way. With the added bonus of +4.6% (gold lending).

PV data since 1998 indicates a 6.7% real, that if you could have added a consistent 4.6% via gold lending bolsters that to a 11.3% real. Or around 14% nominal (compared to 8% nominal/5.4% real for 100% TSM over the same period). Had similar volatility (standard deviation) as 100% stock over those years.

1. How does this account for the fact that gold lending rates might not always be as high as 7%? To the extent that they are somewhat correlated with/determined by risk-free rate (which may or may not be the case....I admit I am no expert on gold lending), there would have been long periods (most of modern financial history, actually) where risk-free rates were below--often far below--7%.

2 Why would someone borrow gold at 7% interest (heck, why would someone borrow in gold to begin with)? I can understand borrowing money at interest but unlike with borrowing in nominal dollars (or nominal Euros/Pounds/Yen/etc) with borrowing in gold you also have the risk of gold prices rising or falling and thus you having to repay the loan in a "currency" with a radically higher or lower value than it was when you took out the loan. Why would a borrower want to do this when they could just borrow in currency at between, oh 5 and 7% (the Moody's AAA yield is around 4.85% right now and the BAA yield is around 5.94%; 30-year mortgages are at 6.95 or 7%....these are all for USD-denominated debt) at current rates instead?

3. What is the guarantee that this isn't just another "putative paper or electronic gold that isn't really there as physical gold" scam/scheme....what kind of audit procedures are in place to assure that each token is in fact backed by one ounce of gold?

[seajay]

I see recent Nexo quotes for lending PAXG (gold) at 7%, staking at 5% (similar to lending, but where you lend to the 'system' rather than a individual, as I understand it, so 'safer').

Idea :

Third 2x stock, two-thirds gold - via PAXG that's lent (at a 7% rate). 4.6% proportioned benefit.

Has the same broad reward expectancy as 50/50 stock/gold, but with a anticipated 1.5 times the volatility along the way. With the added bonus of +4.6% (gold lending).

PV data since 1998 indicates a 6.7% real, that if you could have added a consistent 4.6% via gold lending bolsters that to a 11.3% real. Or around 14% nominal (compared to 8% nominal/5.4% real for 100% TSM over the same period). Had similar volatility (standard deviation) as 100% stock over those years.

1. How does this account for the fact that gold lending rates might not always be as high as 7%? To the extent that they are somewhat correlated with/determined by risk-free rate (which may or may not be the case....I admit I am no expert on gold lending), there would have been long periods (most of modern financial history, actually) where risk-free rates were below--often far below--7%.

2 Why would someone borrow gold at 7% interest (heck, why would someone borrow in gold to begin with)? I can understand borrowing money at interest but unlike with borrowing in nominal dollars (or nominal Euros/Pounds/Yen/etc) with borrowing in gold you also have the risk of gold prices rising or falling and thus you having to repay the loan in a "currency" with a radically higher or lower value than it was when you took out the loan. Why would a borrower want to do this when they could just borrow in currency at between, oh 5 and 7% (the Moody's AAA yield is around 4.85% right now and the BAA yield is around 5.94%; 30-year mortgages are at 6.95 or 7%....these are all for USD-denominated debt) at current rates instead?

3. What is the guarantee that this isn't just another "putative paper or electronic gold that isn't really there as physical gold" scam/scheme....what kind of audit procedures are in place to assure that each token is in fact backed by one ounce of gold?

I'm by far the least qualified to explain, with that in mind however my understanding is that PAXG is backed by physical gold bars https://paxos.com/paxgold/ For lending the scam/risk of defaults (less regulated) is part of the reasons for the higher yields, but mostly the high yields are driven by leverage/arbitrage elements. Short/long certain different crypto/exchanges where with high leverage/scaling slight/small arbitrage differences can yield sizeable rewards. Some lending rates extend to 100%+ ... which is 0.2%/day or so cost to borrow, relative to prices where volatility tends to be high and where arbitrage opportunities present - that 0.2% (100%/year) rate can be a acceptable cost, at 7% (0.02%/day) ... insignificant.

Unlike with lending, where you have pooled counter party risk, with staking, I believe you retain the 'coin' but that is added to the pool that is used as collateral within the network of validating and processing transactions, where there's a charge for each such transaction and there are many transactions. A share of those profits. Similar to FX desks where very small costs but large volumes ... add up.

Yes the rate is variable, and I've no idea of the average, may at times be near 0%, other times perhaps 100% or more, driven by market circumstances and largely arbitrage opportunities, which are more inclined to widen when volatility is high.

The conditions can include locking in for certain amounts of time, such as 30 days, in other cases you can enter/exit immediately, so can also include Option like elements.

There's also a reward for the risk of keeping the coins in a online mode, rather than in a safer offline mode, risk of the exchange/coin ...etc. And other factors that I'm likely not even aware of.

[Mike59]

Thinking of adding to my BTC position this week but the psychological part is always a hurdle, never fun adding to flat/losing positions or ones and seeing them go lower. Better part of me knows any serious green in my portfolios was bought during dips (I have a 2x on gold when it was $1000/oz).

The next run up has to put BTC over $100k, maybe ETH to $10k, will be triggered by more inflationary policy and QE when that time come (waiting by the punchbowl koolaid for a spike), what do you all think looking out to 2024-25?

The positive of the PP is it's mechanical and I don't have those same emotions as much

PS I'm in Canada and My VP is about 10% of my investments (other 90% PP) , and in the VP I have physical silver, BTC/ETH/Altcoins on Ledger stick/ETFs and Oil stocks ETF , divided in about equal parts.

[whatchamacallit]

I now think of bitcoin as a company like Visa or PayPal that you can buy directly.

Once the dust settles I don't see it being more valuable than the largest companies in the world based on the service it offers.

If something else comes along that can provide the service better then it may be reduced quite significantly.

Now if you say bitcoin is a company that could be added to a stock index, the market cap would put it at about one percent of your stock holdings or .25 % of a permanent portfolio.

[Jack Jones]

I now think of bitcoin as a company like Visa or PayPal that you can buy directly.

Once the dust settles I don't see it being more valuable than the largest companies in the world based on the service it offers.

If something else comes along that can provide the service better then it may be reduced quite significantly.

Now if you say bitcoin is a company that could be added to a stock index, the market cap would put it at about one percent of your stock holdings or .25 % of a permanent portfolio.

The US Federal government views all other cryptocurrencies as securities. Bitcoin is considered a commodity. There is no CEO.

[whatchamacallit]

I was not aware that the US Federal government treated bitcoin differently than other cryptocurrencies. I expect that would be a huge advantage for bitcoin. Is this something different than how the IRS treats it? I did a quick google and found the IRS site for digital assets which I don't see differentiating.

https://www.irs.gov/businesses/small-bu ... tal-assets

I know that there is no CEO of bitcoin and that it isn't treated as a stock by the IRS but when you put bitcoin into perspective of the service it is providing on the network of participants then I think it is acting more like a stock than a commodity.

The bitcoin price is based on the growth expectation of its service being adopted.

If another cryptocurrency was able to provide a better service then bitcoin would have lower growth expectations.

[bitcoininthevp]

Once the dust settles I don't see it being more valuable than the largest companies in the world based on the service it offers.

The service that Bitcoin is working to offer is money. Quite a potential market.

[bitcoininthevp]

Just added to my Bitcoin VP stash today.

[Smith1776]

Just added to my Bitcoin VP stash today.

You’ll be happy to know that it’s part of my main portfolio now: the All-Terrain Portfolio. (Essentially a variation of the PP.)

[Smith1776]

Just rebalanced out of some of my Bitcoin position and collected the profits. The gains lately are just too insane.

[Jack Jones]

Daily supply gets cut in half in about a month.

[Matthew19]

The bitcoin etfs are already half the value of the gold etfs. It’s sucking up that market. Also bitcoin market cap is higher than meta/facebook now.

Anyone who added this to their vp is getting the inflation protection that gold didn’t bring over the last two years.

[whatchamacallit]

What percentage would you allocate to bitcoin in your portfolio? Would it be enough to matter?

Why not invest the same amount in a single stock like NVIDIA or MicroStrategy that would have had an even better return over the last year?

[Matthew19]

I'm like 15% right now. I don't want leveraged plays for the same reasons I don't want a 2 or 3x gold etc. Could be wrong and it minimizes other factors.

Saylor's last interview goes into why he prefers it over any other asset - https://youtu.be/qBPtUf50XVg?si=KNgCr4aHg1uxmCwj

[whatchamacallit]

Wow 15%. I am glad it paid off. That would scare me too much with its volatility. 1 or 2% is still about all I think I could stomach but it wouldn't really make any difference at that level so still not in it.


Michael Saylor is for sure a great salesman. He is so entertaining to watch.

[Jack Jones]

What percentage would you allocate to bitcoin in your portfolio? Would it be enough to matter?

The interesting thing about this, is that in the long run, it might not matter much how much you have, just as long as you have some. I personally don’t care about the difference between being a billionaire or a trillionaire.

If the thesis plays out, and it becomes the world money, the only place anyone would rationally store any monetary value, then it doesn’t matter if you have 1 or 0.1 or 0.01. Just have some amount that you can afford, and safeguard it.

Asymmetric bet. Going all in would be greedy.

Also, this kind of thinking is also part of why it may be inevitable. As we all individually realize we might as well get a piece of this new scarce valuable property, the price goes up, more people notice, start thinking about it. Human snowball.

[Matthew19]

The interesting thing about this, is that in the long run, it might not matter much how much you have, just as long as you have some. I personally don’t care about the difference between being a billionaire or a trillionaire.

This is exactly how I bought. Just threw some tiny cash into it and walked away. Like a seed, it’s grown to a larger size and my portfolio. But in the meantime I kept learning about bitcoin. The bitcoin standard book or audiobook is fantastic as it combines Austrian economics with the cryptography of BTC.

[Smith1776]

The interesting thing about this, is that in the long run, it might not matter much how much you have, just as long as you have some. I personally don’t care about the difference between being a billionaire or a trillionaire.

This is exactly how I bought. Just threw some tiny cash into it and walked away. Like a seed, it’s grown to a larger size and my portfolio. But in the meantime I kept learning about bitcoin. The bitcoin standard book or audiobook is fantastic as it combines Austrian economics with the cryptography of BTC.

I agree, the Bitcoin Standard is really the gold standard when it comes to Bitcoin books. Wait.. that sounded weird.

[ArthurPooh]

The interesting thing about this, is that in the long run, it might not matter much how much you have, just as long as you have some. I personally don’t care about the difference between being a billionaire or a trillionaire.

This is exactly how I bought. Just threw some tiny cash into it and walked away. Like a seed, it’s grown to a larger size and my portfolio. But in the meantime I kept learning about bitcoin. The bitcoin standard book or audiobook is fantastic as it combines Austrian economics with the cryptography of BTC.

I agree, the Bitcoin Standard is really the gold standard when it comes to Bitcoin books. Wait.. that sounded weird.

Does it contain anything that already wasn't included within Moldbug's article that started the whole "Bitcoin as a store of value" argument?

[Smith1776]

Does it contain anything that already wasn't included within Moldbug's article that started the whole "Bitcoin as a store of value" argument?

I didn't know the name Moldbug until you just mentioned it. Is it this article?

https://www.unqualified-reservations.or ... is-bubble/

[ArthurPooh]

Does it contain anything that already wasn't included within Moldbug's article that started the whole "Bitcoin as a store of value" argument?

I didn't know the name Moldbug until you just mentioned it. Is it this article?

https://www.unqualified-reservations.or ... is-bubble/

Yes. I think it was him who introduced that argument first; and it has become a dominant case for Bitcoin as soon at it was realized it it not performing well as a payment system. Of course Moldbug, as he does many times, apparently fails to realize that he has refuted his argument in the process of making it - Bitcoin is extremely un-storable. Thus I wondered if that gold standard book contains any more argument beyond the "bubble theory of money".

[425]

Thanks for sharing this article.

I agree with a lot of it, especially on the point about storing energy or past "work done" in units of a monetary system.

For bitcoin to work as a store of value, bitcoin has to increase in adoption meaning that there has to be a number of miners who will show up to buy bitcoin whenever the market price falls below the cost of mining. For the miners, it is as if they can purchase other people's "past work done" at a discounted price.

For me, it's the mentality that I've stored the value of my past work done in bitcoin units which makes me not want to lose value when I go to exchange it for goods and services. Of course, if you paid a premium for your bitcoin over the cost of mining bitcoin then that's on you because you chose to pay that premium for someone else to do the actual mining.

One thing I disagree with in the article is that a bitcoin doesn't have intrinsic utility. The main utility of a bitcoin or a satoshi is that it is used to record transactions on the bitcoin ledger and that has utility because of its security. It's the security of the network measured by the cost of obtaining the hash rate to attack it, that goes up when the price of bitcoin goes up and more people want to mine bitcoin.

A ledger with increasing security can be used to secure increasingly valuable transactions. The ownership of a house can be recorded on the bitcoin ledger using a single satoshi but the price of bitcoin needs to be high enough so that the entire ledger is secure enough that people can trust it to record that transaction. Someone who is interested in making that transaction will be incentivized to add hash rate by mining bitcoin.

In the same way if someone chooses to store their past "work done" in bitcoin, they would also have the incentive to mine bitcoin if ever the security of the ledger is threatened for the purpose of making future transactions. The ledger is the monetary system or accounting system and the bitcoins are just the units of accounting which derive its value from the total value of the ledger.

[Jack Jones]

Interesting property of Bitcoin is that, like other commodities, as the price rises, more miners come online because it is now profitable where it wasn’t before. Likewise, hard to access gold becomes more worthwhile to dig up.

However, with Bitcoin, the miners are competing for their share of daily supply. More miners coming online doesn’t lead to more Bitcoin on the market.

In contrast, when more gold miners come online, the supply of gold increases.

I believe this is a unique property of this commodity. The price is all about the demand.

[425]

The price is all about the demand.

This would only be true if the liquid supply was only provided by the miners. One could argue that below a certain price the newly mined bitcoin could become insignificant relative to net inflows.

Price is set on the margins so I think as price goes higher there will be more sellers. We will see if the halving produces any kind of "supply shock" which I do not expect to see.

If we zoom out, I think what you might have been trying to say is that on the long term adoption curve, what would be a price floor is essentially determined by increase in network adoption.

[Jack Jones]

The price is all about the demand.

This would only be true if the liquid supply was only provided by the miners. One could argue that below a certain price the newly mined bitcoin could become insignificant relative to net inflows.

Price is set on the margins so I think as price goes higher there will be more sellers. We will see if the halving produces any kind of "supply shock" which I do not expect to see.

If we zoom out, I think what you might have been trying to say is that on the long term adoption curve, what would be a price floor is essentially determined by increase in network adoption.

True, however, non-mining sellers only have so much supply to sell. I think your point also applies to gold. As the price rises, non mining gold holders will also sell their gold.

The difference I was trying to get at, is that if I'm mining gold on my land, and you're mining gold on your land, we both add to the total gold supply.

However, if we're both mining bitcoin, we're fighting for our share of the limited amount produced per day (900 now, 450 shortly).

I just thought it was interesting that the supply can't ramp up to meet demand as it can in other commodities.