Ether: Not Just For Huffing Anymore

Bitcoin, huh? It has been a nice little 6 weeks or so in the crypto market. Bitcoin has continued its steady but bouncy ride upwards, going from a local low of 48k on Feb 28th to its current price of just under 60k. It's up 15% the past month and 82% the past 3 months. It broke through 60k and hit an all time high of 61.2kish on March 13th before bottoming back out at 51k on March 23, and then groggily making its way from there to 58.3k at the time of this post. 

The total crypto market capitalization right now is $1.94 trillion, and the BTC market cap alone is sitting at a nice and comfy $1.11 trillion. The BTC market cap settling in over 1 trillion is a real good sign. Ethereum's market cap is $237 billion. After that is Binance Coin at $51.6 billion, Tether (which is a stablecoin always pegged at 1 USD) at $42 billion, then Polkadot at $40.5 billion to round out the top 5 coins right now. Just under that is Cardano, and Chainlink is 10th with a $12.8 billion market cap. (A point I'd like to make here, by the way, is that too much emphasis is put on a coins' price. The real metric you want to measure is market cap. What a coins current price is is irrelevant when comparing to other coins or the market as a whole.)

The 'BTC market cap dominance' is something I like to keep an eye on. It's currently just under 60% and has been slowly trending down since mid 2019 when it 69%. ETH market dominance is at 12.4% which is about average, albeit slowly climbing since end of 2018. I think market cap dominance is obviously a good metric to look at to see how BTC and any other coin is doing compared to the whole of the crypto market. Last post I was worried about an alt-coin surpassing BTC and becoming the go-to crypto currency. I'm a little less worried about that now since BTC has such a huge lead over anything else. The closest competitor in market cap is ETH but ETH and BTC can co-exist. I have been and will be buying ETH anyway so that doesn't really scare me. And the BTC dominance falling doesn't necessarily scare me either. There are currently 9108 crypto currencies listed on coinmarketcap.com and that number is constantly growing. So BTC can slowly lose its market cap dominance yet still be in first place by a mile. I suppose that is the real question though, isn't it? Where will the BTC market cap dominance sort of 'settle in'? 50-40% feels about right. If it fell through 40% I might start to get worried. 

With the markets being open 24/7 and the crazy volatility and maybe even the futuristic feel of it all, it seems like time speeds up in the crypto markets. A week feels like a month and a month feels like 6 months. And for a while it seemed every night at around 2-4 AM the price would fall off a cliff before slowly rebounding during the day. Everyday waking up and checking the price can be a wild ride. When you look back at charts it all seems so obvious and easy but being in it every day is a different story. I learned my lesson pretty early on trying to 'time' the market and sell tops and buy dips. I actually made a really nice little excel sheet that tracks everything I do with crypto. I'm up about 10% on my total investment on BTC and 15% on ETH (ethereum) but I own about 10x more BTC than ETH. My average entry on BTC is 51.6k and for ETH it's 1750. I've 'lost' money by selling BTC but have done better with ETH trading-wise and am up just on trading. I also have tiny bits of Chainlink and Cardano.

I think I got all of the n00b mistakes out of my system early on and feel great about how things are going. I got a little crazy when BTC and ETH were really pumping in the beginning and made every mistake possible. I made a couple BTC and ETH buys at literal tippy tops and made some BTC sells that look absolutely horrible in hindsight. I also FOMO'd my way into Cardano at its all time high and managed to pay a bunch of fees for the privilege. It was for a tiny amount though and I just look at it as the price of an education. The alt-coin market is crazy and honestly probably best to just avoid. I waited on a nice little dip on Chainlink and got in at 25.23 but I don't think I'll do much more alt-coin dabbling in the future. A little piece of advice I heard was that you should own at least one full bitcoin before you get into alt-coins and I think that'll largely be my strategy from here on out, except for adding in around 20-30% ETH. 

Speaking of Ethereum, what in gods name is Ethereum? Well if you thought Bitcoin was hard to understand, take a dive into ethereum. I'm not going to go deep into ETH and what it is and what it does. I'm far from an expert and you can learn plenty for free online. But the broad strokes are that ETH is a smart contract platform and its network is 'proof of stake' instead of the btc-used 'proof of work' (or at least ETH is turning into a proof of stake network.) Proof of stake uses up less energy than proof of work, and the energy consumption problem is becoming one of bitcoin's biggest issues. There is no real 'coin' though with ethereum and what you own when you buy ethereum is honestly a little murky. You're basically buying a piece of the ETH network. There are 115 million "eth's" in circulation right now, but there isn't a max supply. That was one of my biggest pluses with bitcoin and that worries me about ETH. Another cool thing about ethereum is that it is actually able to host other crypto currencies. This has been the most common use of its platform so far (Link is on the ETH network).

However, the big thing right now with ETH is the fact that all the NFT (non-fungible tokens (fungible means tradable)) stuff is going on the ETH network. You can't talk about ethereum without talking about NFT's. NFT's are a huge thing going right now. If you don't know, it's basically like baseball cards but online. And instead of just baseball cards it's all kinds of stuff. Meme's, tweets, art, music...they all can be NFT's. Some of the stuff going on right now in the NFT market though is absolutely insane and honestly makes me a little nervous that we're at a top. A meme of a defeated Donald Trump sold for almost $70 million!A meme you can just, like, have for yourself, online... for free. I also saw Kings Of Leon released their whole new album as an NFT with NFT artwork. I went into the auction to check it out and everything was going for insane prices. People are even paying the huge fees that ETH is charging right now too to make these transactions. The NFT thing feels preposterous to me to be totally honest, but you really can't argue with the numbers. The amount of money going into NFT's is mind boggling. People love owning little things and anyone around my age can remember the hype of baseball cards when we were young. The biggest problem with memorabilia has always been the same; fakes. Some estimates say that 80% of all memorabilia is fake. NFT's solve this problem. Maybe even with 3D printers, people can make physical copies of their stuff, too. I'm just trying to keep an eye on everything, really, and am staying away from any hard and fast rules. You gotta keep your head on a swivel around here. This space is fast, it's bizarre, it's constantly changing and evolving and it sure is fun being a small little part of it. It really is an interesting time to be alive.

But anyway, back to ethereum. Its' price action has been frustrating since everyone seems to think ETH is way over due for a major breakthrough. And I have to agree somewhat. The BTC/ETH valuation seems out of whack to me. I don't see how BTC can be almost 5 times worth more than ethereum (in market cap). It leads me to think that either BTC is overvalued or ETH is undervalued (or both).

The negatives with ETH right now seem to be A) its network is clogged, slow and costly B) it's had some technical issues C) the miners 'show of force' threat D) it has a lot of competitors. 

The first point doesn't bother me at all really. It's like saying a bar is going to go out of business because it's too busy. The reason the network is slow and expensive is because everyone is using it. Now, the networks ability to deal with the increased traffic may be a problem in the future, but right now this isn't something I worry about too much. 

The technical issues centered around the fact that the ETH network was released probably too early and it came with glitches. The basic idea was we'll release it and fix as we go. This got them first mover advantage but it does have its drawbacks obviously. There is supposed to be some new fork or a 2.0 platform coming out, so we'll see about that. 

The miners show of force threat was basically ETH miners trying to band together and get control of 51% of the ETH network just to show that they could. This was in response to ETH miner rewards being decreased (to deal with the high fees). This was big news when it came out a few weeks ago but it seems to be a non issue now. I haven't heard or read anything about it in weeks and it was always dubious as to whether that was even possible.

Cardano is currently ETH biggest competitor. Actually, the guy who started Cardano initially was a co-founder of ETH and split off to make Cardano. I think if you're going to buy a large position of ETH, it wouldn't be crazy to buy some Cardano as a hedge (which was my thinking). I don't know enough about it to write anything, but I'll be watching Cardano closely. 

(Small disclaimer about everything I just wrote: I do not understand ethereum nearly as much as I do bitcoin and some of this stuff may not be 100% correct. If you have any corrections, feel free to comment).

It feels like ETH has been moving sideways forever but it's actually up 26% the past month, which is largely fueled by its 21.8% growth this past week. It finally broke though 2k, topped out at 2139 and has been falling a little bit since, currently at 2050. If its falls through 2k and back to 1850ish I'm going to be really confused, but I'll probably be buying.

Also in my last post I mentioned how youtube has been a great source for learning about crypto and I mentioned 'BitBoy' as my favorite guy to watch. He still is the best to watch for a general overview of the crypto world, but his trading advice and tutorials can be ignored. He's a little bit salesman-y so you really just gotta use him for news. Don't follow his (or anyones, really) trading advice. People complain that he and others are a little click baity with the 'O face thumbnails' and ridiculous price predictions. But he and others have addressed this and I can't say I disagree. They don't want look absurd in their thumbnails and call for a million dollar bitcoin, but it's the only thing that works! People don't click on boring thumbnails. So don't judge a youtuber by his thumbnails.

The best guy on crypto-youtube though is "ben crowen". Just search him and you'll see what I mean. I like bitboy for all around market news and ben crowen for market analysis. I also watch 'crypto zombie' who is almost like bitboy and ben combined. One of my biggest strengths in sports betting was always knowing who was smart about what and learning as much as possible from them, and right now all that stuff is mostly going on at youtube. 

That's about it for now. Haven't been doing much betting but I plan on getting back into hockey props soon. My model is great but as always I don't have many places to play, and the model takes forever to use. NBA was going ok until I had one horrible week and just sort of lost interest. You really need to be following the leagues if you want to bet props night in and out and popping in a couple days a week isn't cutting it. With players being out of the lineup all the time with covid it's especially tough, and I haven't found a good way to incorporate the fact that NHL teams are virtually playing the same opponent every night. At the very least, I'll be betting hockey props in the playoffs (and may even give out some picks!), which are always super high ROI. As far as the lack of posting, if you are a reader of this blog I  really do appreciate it. I always plan on writing more but one or two a month seems to be the norm. I'll never just abandon it though, and if I ever do decide to stop I'll make a post. So bookmark me and check back at least once a month and you should see something new. Until next time!

Political Wrap-Up, Year In Review And CRYPTO CURRENCY DEEP DIVE

Long-time no see, huh. I didn't mean to take such a long break, there just wasn't a whole lot to talk about really. Politics was bananas obviously but by the time I wrote my last post I was well passed tapped out credit-wise and was just waiting for all my bets to settle. The last political bet FINALLY settled a few weeks ago so I can say that the 2020 political betting season is officially in the rear-view.

So what can we take away from it? I've been thinking about this for a little while and to be totally honest...I don't think we can take away all that much. It was as simple as using PredictIt as the 'true line' and betting things that were far enough off to be +EV. The only real skill in this, I suppose, is having access to these accounts that have these ridiculous price discrepancies. As well as actually getting paid and staying at them/finding more. I could write forever about trying to time the market and mining comment sections and analyzing (the right) polls (the second they come out), and there are absolutely guys out there doing that and making a living, but honestly for the most part, I just looked for price differences and clicked the buttons (except for the VP race. I feel like I was pretty spot on there and made plenty of market price bets that were +EV imo).

Nuts and bolts wise, I made just under 26 units in about 10 months of political betting. I made most of my profits early by betting on states and nominations. From February to March I had only one losing week. Some of the early numbers I was getting were eye-popping, some of the biggest discrepancies I've seen in my entire life, and Ive been bashing PPH's for almost 15 years now. The wins weren't huge with the small limits and small amount of places to play, but they were consistent, easy and added up. I had another nice 10 unit jolt in August around the time of the VP announcement, and pretty much broke even after that in the overall presidential race. Even with having some bets deleted and losing a couple accounts, it was definitely worth it. My only regrets are being a little gun shy at the start (I literally couldn't believe what I was seeing at certain points) and probably over-hedging/spraying. Especially in the VP race. I would have liked to get way more volume down, too. My ROI was absurd but the unit count should be higher. Next time I'll be better prepared before it all starts.

Overall 2020 was a strange year betting-wise. I had the highest ROI year of my life but the volume was way down. Other than NHL shots on goal and the 2020 super bowl, I didn't do much in the way of props this year. Politics and stock market bets covered some of the missed volume, but not all of it. I ended up down money on straight bets which is extremely confusing since all I do is bet off market stuff (and hedge teasers which I made money on so that kind of evens out). Every week during the NFL it seemed I was finding unreal numbers and setting up huge middles which just basically never hit (I remember hitting exactly one clean). I had an UNREAL position on the Superbowl. One of my books put up KC -1.5 even and ML -145 when the market was all 3 and 3.5. So I maxed out KC (for almost 5 figures - it wasn't a rinky dink little book) and bought most of it back on TB +3 and some 3.5 (and even a little bit of +4). So if KC won by exactly 2 or 3, which should happen between 10 and 15 percent of the time, I'd win both. Obviously that didn't happen but those are the exact kind of spots I was generating all year. I ended up having a great 2021 super bowl by absolutely crushing props, especially my all time favorite props to bet; cross sport props. Actually, making the cross sport bets got me to dust off my NBA player prop model which I re-discovered was actually quite good. I kinda forgot how good that model is. I've since updated it a little bit and have been using it with great success the past couple weeks on NBA. I'll probably have a post later on going into more detail about that specifically, but I really want to talk about something else.... Crypto currency.

'Yea yea' you might be saying...'bitcoin...we get it. You're about 6 years too late.' Yes, obviously it would have been better to get in when it was under 10k, but I think it still has a looooong way to go.

 I'm going to explain what I know about crypto, ask some questions that maybe people in the comments can answer, and lay out my theory on what it is and where it's going.

So first off let me just say that obviously I am no computer/crytpo expert. Far from it. But I have researched it quite extensively and can safely say now that I officially 'get it'. I get the problem that bitcoin/the blockchain solved and why it's such a big deal. The 'hows' are still a little murky to me but I think A) I will understand it all eventually and B) you don't really need to know all the tiny technicals to know why bitcoin is so special.

Bitcoin (aka BTC) was 'invented' by a person or more likely a group called Satoshi Nakamoto. He (I'm just gonna call them 'he' from now on) simply uploaded a 9 page pdf to a hacking forum and then disappeared forever. You can read the 'white paper' pdf here.

In short, 'a bitcoin' is really just a long string of unique characters on a public ledger, aka the blockchain. "Miners" (regular people with fancy computers) compete and are incentivized to verify transactions and add to the blockchain. They get paid in tiny amounts of BTC for this service and the amount they get per block is halved every 4 years (I think it's 4 years) so the supply trickles out (you may have heard of 'the halving' before - thats what that means.) As the blockchain grows and grows, it gets stronger and harder to hack. HOW the miners compete exactly and HOW the chain is impossible to hack is a little above my pay-grade. All I know is that really smart people/coders all agree that the code behind blockchain is basically perfect and it is essentially un-hackable. (Fun little bit of info I got from the white-paper, and this is up against the limits of my understanding and may not be completely accurate; but the blockchain is created in a way that it doesn't make sense to hack. If a bad actor tried to reverse engineer the chain and "catch up to it", he could in theory 'take back' any bitcoin he previously spent. However, he would actually make more money just keeping the legit chain going. Why/how, exactly, I don't really know. But I do know that hacking the blockchain is basically impossible/wouldn't make sense to do, which is really all you need to know about it. ...I'm pretty sure.)

That's some of the technical stuff. The economics behind it though are what really gets my attention and none of this stuff is over my head. If you accept that the technology behind BTC/blockchain is sound, as I do, then the rest is eye-popping stuff, honestly. Besides the code, the best and most interesting thing about bitcoin is that the supply is fixed. Permanently and forever. Let me repeat that. The supply is forever fixed. There will only ever be 21 million bitcoin in circulation (right now there's about 18 million and we'll get to 21 million in the year 2140ish). The importance of that simply cannot be overstated. Imagine how much one dollar would be worth today if the Fed stopped printing more money once there was 21 million in circulation. So bitcoin isn't only a hedge against inflation, it is literally inflation proof. (Oh and let's not forget about how many bitcoin are simply lost. So there will actually be less than 21 million in total supply.)

Bitcoin was initially invented as a currency to replace cash. And while I think that will eventually happen, it doesn't have to to have enormous upside. Have you ever seen a gold bar? I haven't. Have you ever paid for anything in gold? Besides buying it to store, have you ever even heard of a single transaction taking place that involved gold? I haven't. Gold isn't used as medium of exchange, it's used as a store of value. And yet we all agree that gold is worth a certain amount of money. So an asset can be valuable without becoming an actual, everyday tradable currency. If ALL bitcoin does is replace gold as a store of value, which I think it will, then the price per coin will be roughly 500k. (You can read a really in-depth piece by Tyler Winkelvoss here.) But the money shot is this: gold has a market cap right now of about 9 trillion. That means the total known supply of gold in the world right now is valued at 9 trillion USD. If you assume BTC is at least as good as gold, then the market will value BTC at 9 trillion. Right now the market cap of BTC is roughly 1 trillion with a 55k price per coin. If you assume the market cap gets to 9 trillion, then that means you 9x the current price per coin. That would put a roughly 500k price tag on one bitcoin. And again, I think that is the absolute floor.

'But poogs' you might be saying, 'how are strings of numbers on something called a blockchain possibly worth more than gold? Shiny gold, with its forever-track-record and that people use in electronics and that I can hold?' Well good question. First off, the supply of gold is unknown. People are always finding more gold, there's a ton of gold in the ocean and on the ocean floor, and oh by the way, theres a TON of gold in space. It isn't out of the realm of possibility that Elon Musk or someone else will be mining asteroids for gold in our lifetime. Possibly huge amounts of it, too. That would cause a huge upward shock to the supply of gold which would plummet its value (instantly). Secondly, gold costs money to store and moving it is extremely costly, AND depends on several rent-seeking middlemen. Conversely, bitcoin isn't physical so it only costs server space to hold on to. It's extremely easy to move around and is peer to peer. If I want to send you btc, I click a button and it goes directly from me to you. Not from my bank (who we just have to trust), to a 3rd party (who we just have to trust), to your bank (you get it now). It isn't tied to a country or an economy, it can't be stopped and can't be hacked. 

Completely on its own, I think BTC is an absolute game changer and most likely the currency of the future. But when you add on the other stuff going on right now, it makes it even better. Do you know how much dollar printing the United States is doing right now? It's absurd. Because of the pandemic, TRILLIONS of dollars are being printed out of thin air and pumped into the economy. This might help in the short run, but it's a very dangerous game. Every time a new dollar gets introduced to the system, the value of every dollar goes down (you have less a percent of the total amount in circulation). It's why a million dollars was a lot more money 10 years ago than it is now (and a million today will be worth less than that in 10 years). So normally this would be a good time to buy gold, but it just happens that the New Gold is out there now, only it's selling at about a 90% discount.

Also, there's a nice little generational gap right now that I think affords even more value. For the most part, older people just simply do not get this. Like, at all. The range of attitudes seems to be on one end you have Olds who are threatened by it, call it a scam or a bubble, say it won't work, etc. Basically what Bill Gates and Warren Buffet were all saying up to about a month ago. Then on the other end of the range you have Olds who know that they don't get it but see how other people talk about it and say 'well I don't get it but the smart people that do seem to love it so I'm not against it.' You don't really see any huge acceptance of BTC by the big, old school institutions and fund managers just yet, and I think that as time goes on and some Olds in power die off and get replaced by younger guys who grew up online, you'll see institutions start to come on slowly at first, then super fast because no one wants to be left behind. (I think that's actually a little bit of what's going on right now with these huge spikes in price. I think lots of firms are finally realizing that this is a race and they can't get left behind, so they're buying up in bulk before announcing anything. Once they all start to announce the price could go up even faster).

You can learn all you need to know about BTC and crypto online for free. This has been far from everything I understand about it, and everything I understand about it is far from everything there is to understand. I learn more about it every day and I find youtube to be a great source. There are a bunch of academic papers on it too, which are fun to read. The econ and computer guys absolutely love it and you can learn a lot from their papers. I've read one or two academic papers by people who just clearly don't get it though, and you can still learn from them. It's useful to know HOW people are misunderstanding something. My favorite guy right now for this stuff is "bitboy crytpo" who you can find on youtube. Don't worry if you think you don't quite understand it yet...I've found that most people don't and they're still making plenty of money. Even (especially) the stock people who fell into crypto. I'm only really scratching the surface of the whole thing so far but I at least know what I don't know which is important.

The downside: Now one of my all time favorite truisms has always been that you don't fully understand something until you can intelligently argue against it. So let's play devils advocate and look at potential risks of BTC and investing in it:

1) The government eventually won't like competition against its currency and will 'ban' it. I am not worried about this whatsoever anymore. Just this week, Nigeria 'banned' bitcoin and guess which country leads the way in BTC use percentage wise right now? Nigeria. BTC is basically immune to restrictions. Short of turning off the internet, you can't turn off crypto currency. Which brings me to my next point...

2) You're reliant on the internet. This is (I think) actually a legit risk and something I haven't seen mentioned a lot. The internet is reliant on satellites, which rely on governments and companies. (I know there are actual hard wires backing a lot of stuff up, but if all satellites went down we would be in deep trouble). I am far from an expert in this field so maybe I'm wrong, but it does seem like a dangerous problem that you could knock the whole thing down by disabling satellites, or our ability to communicate with them. I'll look into this more for next time.

3) Crypto currency takes off but bitcoin gets left behind. This is probably my biggest concern and the thing I've been trying to learn most about recently. The only technical problem that people seem to agree that bitcoin has is that it's actually a little bit dated. The computations per second aren't as impressive anymore as they were in 2009. My fear is that crypto currency takes off, bitcoin does all the leg work of introducing itself to the public, and then some other random, newer coin takes off and becomes the new accepted currency. Honestly, I'm not even sure if this is possible? Bitcoin refers to actual bitcoin currency, but it also refers to the blockchain behind it. So is even possible for BTC to get left in the dust? Could crypto take off and bitcoin be worth nothing? I don't know for sure but I promise I will have that answer next post.

4) Its a bubble/ponzi scheme. If you hear anyone call bitcoin a 'ponzi scheme', just know that you're talking to someone who not only doesn't understand bitcoin (or ponzi schemes) at all, but doesn't understand that they don't understand, which is doubly worse. A ponzi scheme has levels of sellers all kicking the empty can down the road. Bitcoin is basically technology that allows users to create trustworthy 'smart contracts', as well as trade actual currency. They're not even close to the same thing, and anyone saying that is just repeating cool, smart sounding words to try to poo poo something they don't understand. Now, is it a 'bubble'? Is the housing market a bubble? Is the US dollar a bubble? There are bull and bear phases in any market and wild swings in price are not unusual for an emerging asset during price discovery. Is the whole thing a bubble that will pop and see the price go to zero? Sure, it's possible. But I don't think it'll happen. Elon Musk is betting 1.5 billion dollars against that, as is Blackrock (the biggest asset holding firm in the world who, by the way, just released that they're 'dabbling' in it. And you can see the interview with their boss who does this weird little coy smile twice when he says 'dabbling' which I took to mean they're doing a lot more than dabbling).

5) It isn't an income producing asset/you can't hold it in your hand. This was Warren Buffet's line, and again, just shows how early we still are. Is an internet domain name worth anything? Can you do anything with a dollar bill besides spend it? (spending it on an investment is still spending). Things are worth what we all decide they're worth. This is probably the flimsiest argument against btc that Ive seen and I've seen it a lot which, like I said, is a good thing.

6) You're too late. This is the big one. People see its price skyrocketing price and think 'damn I missed it, if I got in at 20k it would be great but the price is too high now.' Well, I (read: Tyler Winklevoss) laid out the clear path to 500k per coin, and that's if bitcoin ONLY becomes a store of value. If BTC becomes the currency of the internet or the world, you're looking at each coin being worth well over 10 million each.

For me personally, I got in at 39k a couple weeks ago for a small amount and have been adding on pretty much as much as possible every week. I was selling some at the 'tops' but I don't think I'll ever sell it again, honestly. Not for a long time at least.  I was a little gun shy to jump in as the trader in me absolutely hates buying into anything at the literal highest its been ever. But it was at an all-time high at 20k, then 30k, then 40k, etc. All I really do now is look for dips and buy as much as I can afford. I'm breaking my own rules by not being SUPER price sensitive because I just keep thinking, if this thing does reach 500k or more, is it really going to matter if I got in at 54k or 55k? Not really. And I'm not fomo-ing in at the top because everyone is and it's fun, I legitimately think BTC is going to 500k eventually at the very VERY least and probably a lot higher. I also think BTC will prove to be the most valuable asset in the history of mankind. Yea I know that's hyperbolic but that's truly how I feel about it. The future is de-centralization, and what better asset to de-centralize than money?

I'm also buying some Ethereum (ETH) which is a whole other thing. I'll probably get into ETH next post. 

Till next time!