The Cryptocurrency Thread 2

[Gumby]

MODERATOR NOTE: READ BEFORE POSTING:

This is the thread to discuss cryptocurrency, stablecoins, central bank digital currency, NFTs, other digital assets and associated blockchain technology. This is the only thread where those topics may be discussed. While the Community Rules apply to all threads, there are additional rules for this specific thread that result from prior problems:

1. The purpose of this thread is not to allow you to evangelize or proselytize about Bitcoin or any other cryptocurrency. We would not allow that for any other investment, and we're not allowing it here.

2. Thus, any post to the effect of "Crypto is great and we're all going to get rich and you old guys who just don't understand are all missing the boat" will be deleted by the moderators.

3. Similarly, there is no point in a post that says only "Bitcoin is stupid and you're all going to lose your shirts." Those will also be deleted.

4. In short, if you want to participate in crypto, do it. If you don't, then don't. You will not convince each other of the righteousness of your respective positions, so stop trying. It just annoys people.

5. If you are interested in crypto, you may post specific questions and give specific answers about crypto topics here, such as how to buy and sell, how best to hold, potential ETFs and such.

6. Do not post mind numbingly long videos or podcasts by unknown people extolling the virtues of crypto. If you post a video, identify who is on it and why they are qualified to speak about the topic. Identify specifically what point you wish to make by posting it. And, identify by time where in the video that specific point is made.

7. A similar rule exists for articles - identify and qualify your sources and explain specifically which point you hope to make by posting the link. If it is a long article, cite the specific page.

8. The normal rules of courteous behavior apply. You know what they are, so don't even come close to the line.

 

[Markola]

Great! A lot of us are fascinated by this new, transformational technology and are glad to have a dedicated spot on the ER Forum to explore and discuss it, similar to the threads for preferred stock enthusiasts, options traders and stock pickers.

 

[joesxm3]

Thanks.

These rules seem very sensible.

 

[emmaswan]

I don't own any crypto because I'm not aware of any passively managed index crypto funds. I almost bought some shares of Coinbase when it IPO'd but ultimately realized that I'd spend more time agonizing over that single stock vs the set-and-forget approach with index funds.

I'd love to get involved in the crypto/blockchain space (as I think there's definitely a use case or several use cases) but everything that I come across is actively managed. As soon as Fidelity/Vanguard has a passive index crypto/blockchain fund, I'd likely DCA into that.

My question: Everything I've read from Fido/VG indicates they don't have such a fund because it's too risky at the moment (if I'm incorrect there, please correct me). What factors need to be present (or alternatively, what factors need to be removed) in order for Fido/VG to open up such a passive fund?

(Gumby, thank you for creating a space to ask questions about crypto.)

 

[joesxm3]

Fidelity has a bitcoin ETF in Canada. The also have applied for one in the USA, but it has yet to be approved.

I am not sure if it is passively managed or not, but here is the link to it.

https://www.fidelity.ca/fidca/en/etfs/bitcoin-etf

Fidelity also has a bitcoin product in the USA, but it is only available to accredited investors and requires a $100,000 minimum investment.

But maybe you are not asking about bitcoin only and are looking for something that consists of the many smaller projects. Since 95% of these smaller projects will likely fail, it would be more of a venture capital fund. I suppose that would be considered to be risky.

 

[emmaswan]

Fidelity has a bitcoin ETF in Canada. The also have applied for one in the USA, but it has yet to be approved.

I am not sure if it is passively managed or not, but here is the link to it.

https://www.fidelity.ca/fidca/en/etfs/bitcoin-etf

Fidelity also has a bitcoin product in the USA, but it is only available to accredited investors and requires a $100,000 minimum investment.

But maybe you are not asking about bitcoin only and are looking for something that consists of the many smaller projects. Since 95% of these smaller projects will likely fail, it would be more of a venture capital fund. I suppose that would be considered to be risky.

Thank you for sharing that information.

I studied that ETF for a bit over the holidays and ultimately decided not to pull the trigger b/c of the currently unknown costs and its relatively high-ish ER.

That is, from its ETF Fact Sheet (https://www.fidelity.ca/cs/Satellite/doc/FF_FBTC_L_en.pdf), "[t]he ETF’s expenses are made up of the management fee, operating expenses and trading costs." The management fee is 0.4%, and "[a]s this ETF is new, operating expenses and trading costs are not yet available."

 

[oldie]

What would be the difference between "bitcoin ETF" vs actually having bitcoins?

 

[captain3d]

I don't own any crypto because I'm not aware of any passively managed index crypto funds.

crypto 20 is the only index fund I know of but not available to US citizens

https://invictuscapital.com/en/crypto20

 

[captain3d]

What would be the difference between "bitcoin ETF" vs actually having bitcoins?

Same as gold vs a gold ETF. You do not have personal control over your bitcoin and you pay a fee for someone else to look after it for you

 

[target2019]

Coin is here to stay. How long, I cannot say.

I'm glad there's a NEW coin thread, as I had put the other on ignore. Maybe this one will stay interesting. I hope that those who don't "believe" will just state the reason and let it go at that.

So, I was going to mention something in the other thread about correlation. I don't have a study to point to yet, but when I compared BTC to US Total Stock, the correlation was quite high. I don't have the exact number, but it surprised me. I've heard about this being a good hedge, but I don't see that. I do admit I'm not looking deeply, but maybe I was misinterpreting "it's a hedge."

 

[Gumby]

MODERATOR NOTE: Only one day and we're off to a rough start, with a couple posts already deleted. Remember the rules set out in the first post. If you are a fan of bitcoin, this is not a thread to spread the news, convert others or cheerlead. It's a thread to talk about the nuts and bolts. If you are opposed to Bitcoin, this is not the place for you to snark or to throw water on those who are interested in it. Just skip this thread and go enjoy another.

 

[Markola]

Same as gold vs a gold ETF. You do not have personal control over your bitcoin and you pay a fee for someone else to look after it for you

And it will be appealing to a lot institutions and individuals who want a more traditional security vs. owning the digital property. “Custodianing” one’s crypto is not yet foolproof and comes with one set of risks and frictions involved in keeping and accessing it yourself on a device you own and another set of risks and frictions in using either the hot or cold wallets of an exchange. It will just be much simpler and convenient for broad adoption by more regular, non-accredited investors when there are Bitcoin and crypto ETFs in the U.S. as there are in Canada, offered by your existing regular brokerage vs. having to create a new account and relationship with an exchange.

 

[joesxm3]

Coin is here to stay. How long, I cannot say.

So, I was going to mention something in the other thread about correlation. I don't have a study to point to yet, but when I compared BTC to US Total Stock, the correlation was quite high. I don't have the exact number, but it surprised me. I've heard about this being a good hedge, but I don't see that. I do admit I'm not looking deeply, but maybe I was misinterpreting "it's a hedge."

You are correct that currently there is a strong correlation between BTC and the stock market. That contradicts the narrative of BTC being a non-correlated asset class.

The "pundits" explain it as being due to the BTC market cap being too small at this early stage and also as the result of the stock market players needing to liquidate assets to cover their shorts. Supposedly that means they liquidate anything they need to when they get a margin call.

There seems to be a similar, but smaller correlation between gold and the stock market, at least during crashes due to the liquidation effect.

There also is a strong inverse correlation between the DXY U.S. Dollar Index and BTC, in the same way there is with gold.

At this point it seems that BTC behaves more like a "risk on asset".

Whether that changes in the future, who knows?

It will be interesting to see if the stock and digital asset markets have overreacted to the FOMC news.

 

[Markola]

^^^^^ Also, I heard an expert comment that another dynamic might be all the new investors not really understanding the tax bills they racked up in 2021 with their active crypto trading, causing the need for liquidations between now and April 15. Personally, I’m buying and hodling long-term.

 

[target2019]

Year 2002 - He said, "Where are the keys to your car and can I borrow $20 from your wallet?"
Year 2022 - He said, "Maybe you can buy some coins and leave me the keys and password?"

The second statement is something I just experienced. So I go to coin360 to see the heatmap, and get a 1-month picture like below.

I do not understand why I'd want to have a wallet that shrinks just like the riskiest components of the stock market?

 

[Markola]

Cool site, thanks. It kind of reflects a 40/60 portfolio, no? [emoji41]

 

[donheff]

That is a cool site.

 

[donheff]

So maybe you crypto enthusiasts can help me rescue my $250 lost at Binance. I invested a tiny amount in bitcoin, Ethereum, and iota a few years back when I was just curious about the way the blockchains work. Then I lost interest and forgot about it. While I was sleeping some brouhaha occurred with Binance and US accounts were frozen. Now Binance has a US version. When this thread prompted me to look into it I discovered that I can log into Binance and see that I have $200+ but I am prompted to get it out since trading has been suspended for the US. Unfortunately I can't figure out how to get it out since trading is suspended with the US.

Have any of you experienced and solved this Catch 22?

 

[captain3d]

Re: Correlation to stocks.

I presume crypto will go down 85% if stocks drop 50%

I see Bitcoin more like a speculation that it will be a hedge In the future. Meaning today it is not working that way but no one knows at what point it will.

For other crypto like Ethereum, Solana etc these are speculations that they become the financial backbone of future business and will always be correlated to some degree.

 

[captain3d]

Is there any type of withdraw to wallet option?

 

[Taxman59]

I bought some Ether just on a whim. I am down about 16% in about 2 1/2 months. I'm glad it wasn't much! I expect that the volatility will be high, but in the long run it will rise. I just hope I am still around then!

 

[Markola]

I’d be interested in Ether, except I can’t get past the fact that its supply is not fixed, like Bitcoin. How do others resolve this for themselves? Also, there is a major transition in the Ethereum network coming up this year that I haven’t studied so don’t understand yet.

 

[Sand101]

I’d be interested in Ether, except I can’t get past the fact that its supply is not fixed, like Bitcoin. How do others resolve this for themselves? Also, there is a major transition in the Ethereum network coming up this year that I haven’t studied so don’t understand yet.

ETH is currently deflationary. Absent other market forces this is a good development.

 

[MichaelB]

ETH is currently deflationary. Absent other market forces this is a good development.

Would you please explain the link ..

 

[KCGeezer]

I was wondering about the ‘hard cap’ I kept hearing bitcoin has and the why or how that cap was created. I found that while it seems to be a fairly significant parameter in the system it actually could be changed if there was consensus to increase that cap.

The article is linked below and explained in the last segment of the piece.

It sounds like this is not a ‘hard cap’ but a ‘currently agreed up limit’. If so, doesn’t that somewhat diminish it’s correlation to a truly physical asset like gold?

https://river.com/learn/can-bitcoins-hard-cap-of-21-million-be-changed/