Lots of people asking for my opinion right now... here's a quick and dirty thread π
First, think about what caused the rally since October 2020:
1) Low rates / low dollar
-- still very much in tact even though there are taper talks and inflationary data, rates and the dollar still have not reacted, which is still very bullish for risk assets
1) Low rates / low dollar
-- still very much in tact even though there are taper talks and inflationary data, rates and the dollar still have not reacted, which is still very bullish for risk assets
2) Inst money coming into the market
-- Inst money doesn't come faster or slower based on price moves. Those trying to deploy will still deploy, and they are. Though $GBTC & $COIN may have been leading indicators, as downward px moves show inst money was already slowing
-- Inst money doesn't come faster or slower based on price moves. Those trying to deploy will still deploy, and they are. Though $GBTC & $COIN may have been leading indicators, as downward px moves show inst money was already slowing
3) Elon Musk / Corporations -- The ESG narrative (which is just that, a narrative) is unlikely to ever go away at this point. Like a religion, no amount of science will change people's minds here, and this becomes more political theatre than substance.
So you have 1.5 / 3 factors that are still very bullish for risk assets, which probability-weighted, means there still should be buying power on the sidelines. The question is just when and how it gets deployed.
Let's look at 2008...
Let's look at 2008...
During 2008, the smarted buyers who had cash just kept buying even though every purchase was terrible. I personally sold Carl Icahn MGM bonds at 80, 70, 60, 50, 40, 30 and 20 cents on the dollar -- in the same week.
It takes conviction to buy that way, but it's usually right
It takes conviction to buy that way, but it's usually right
Same thing will happen here
If you have cash, you donβt worry about levels, you just keep deploying into assets you believe in. Every buy will be wrong the second you make it, but if your valuation is right, it won't matter. Buy a little at each level & don't try to time it.
If you have cash, you donβt worry about levels, you just keep deploying into assets you believe in. Every buy will be wrong the second you make it, but if your valuation is right, it won't matter. Buy a little at each level & don't try to time it.
Unfortunately, a few factors prevent this behavior in digital assets:
1) very few in this space have distressed experience
2) very few manage cash/leverage well so even if they did want to do this, they canβt
3) very few have enough conviction in their holdings to do this
1) very few in this space have distressed experience
2) very few manage cash/leverage well so even if they did want to do this, they canβt
3) very few have enough conviction in their holdings to do this
Three behaviors always get investors in trouble (particularly hedge funds):
1) Leverage (obviously)
2) Illiquid positions -- lots of traders suddenly became early-stage VCs this year b/c these are "hot deals"... less hot now
3) Shorting (working right now, but unwinds are hard)
1) Leverage (obviously)
2) Illiquid positions -- lots of traders suddenly became early-stage VCs this year b/c these are "hot deals"... less hot now
3) Shorting (working right now, but unwinds are hard)
For those that avoided 1, 2 and 3 above, you are still likely down a lot of money, but you are solvent. Most investors will sell their marginal positions and double/triple down on their best ideas -- when the dust settles, you'll know what they bought as these will go up fastest
In March 2020, $PTON & $ZM got crushed in the first 3 weeks of the crisis too, but the market soon realized that these were the types of companies that disproportionately benefit from stay-at-home.
For the next 9 months, these stocks thrived.
For the next 9 months, these stocks thrived.
So what disproportionately benefits from a coordinated government/regulatory attack on miners/exchanges?
- #DeFi, especially DEX's
- Miners in other jurisdictions
- Censorship resistance storage / archiving (i.e. Arweave)
- Self storage/wallets
- and of course $BTC
- #DeFi, especially DEX's
- Miners in other jurisdictions
- Censorship resistance storage / archiving (i.e. Arweave)
- Self storage/wallets
- and of course $BTC
Like 2008, you'll see a few heros emerge who crushed it during the past two weeks on the short-side... most will be one-trick ponies like Michael Burry, John Paulsen, Kyle Bass, etc -- guys who made fortunes on one trade and have done little exceptionally well since.
For everyone else: stay solvent, pick your spots, trust your analysis, & keep your emotions in check.
Digital assets aren't going away today any more than they were curing cancer 2 weeks ago.
The answer is usually in the middle. Fortunes are made when emotions are too high
Digital assets aren't going away today any more than they were curing cancer 2 weeks ago.
The answer is usually in the middle. Fortunes are made when emotions are too high
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