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  1. biodieselchris

    crypto 2018 musings and ramblings:

    On a slow Friday when everything is going up, including UNG for crying out loud ;) I thought I'd post some crypto thoughts. BA came into the year at 296 and its at 335. Uh, yeah. Something's going on.

    Biggest caveat of all time: People have been calling crypto "tulip bulb mania for idiots" going back to 2011 when bitcoin was $5. Just because they have not been right yet doesn't mean they won't be. I know no one wants to hear this, but it is the simple truth.

    In previous comments I had described a theory that the nature of money is changing for a third time in world history (from barter/gold, to fiat / real estate backed nation state currency, to crypto). Each one represents a 30X increase in total money supply. No currency system can support a change in the economy paradigm which forces the deprecation. This is because the currency mechanism is incapable of valuing the newer economic system. For example, in 1929 when the stock market crashed worldwide, gold (a peer-to-peer trust system) became incapable of handling a new manufacturing and real estate economic mechanism based around laws (centralized nation/state governments) that are better served by fiat/gov't-debt based fractional reserve currency mechanisms. Agrarian activities that accounted for 50%+ of the aggregate labor of the population became 3% (with the rise of manufacturing), and with the rise of the Knowledge Economy, the exact same thing, manufacturing dropping from 50%+ for the workforce to 20% or less.

    The nature of everything is changing (unfortunately, including nature). Robust manufacturing cities of yesteryear are have become the ghost towns and heroin infused sad stories of a time long since gone by, and very importantly, irreversibly. Energy production is a race to the bottom as robots produce windmills and solar panels that harvest energy that is free (wind, sun). Jobs are becoming (and accelerating) into knowledge economy focii which are no longer niche, but now mainstream: programming, web development, knowledge transfer, AI, databases, self-driving cars, home cleaning robots, robots that clean robots, and somewhat surprisingly, leisure time management. We have more free time as we work less, and were bored! 

    Crypto, which on 1/1/17 was worth ~$20B is currently worth about ~$0.7T. It is still only ~0.3% of the valuation of gov't fiat currency worldwide ($210T). Even so I think the effects of crypto valuation (hence adoption) is rippling through valuations of the system it will ultimately replace: KODK from 4 to 12, boeing from 296 to 335 (+13%) in 2 weeks?? Obviously these are completely different, KODK is simply getting a crypto-craze pop but with Boeing the effect is much more nuanced. We're bored, we're at peace, we have the world's biggest idiot nightmare of a president and, we really don't care. Trump better get a nobel peace prize because a strong international economy is a peaceful one and right now we have just that. Crypto's the crazy glue that hasn't been applied yet. It's the micro-blogger from argentina that gives self-gardening advice to the free timers that grow food for pleasure (not to be confused with agrarian economy that HAVE to grow food to pay the bills), and receives distributed, micro-income as a result. It's the self-driving car that pays the self-driving gas station (that dishes out electrons as "gas") that gets the free-timer from A to B so they can deliver a powerpoint on how to integrate AI into their hairdressing business. It's Zimbabwe that capitulates to decades of unsuccessful attempts to outfox their own recursive corruption in replicating a gov't run fiat system, and replaces it with an Ethereum gov't smart contract and currency system that cannot be gamed by mafiaso insiders.

    There's no philosophers any more. Everyone wants to know "What exact price will X asset be on Y date." Yeah right. The future is all emotions, no facts. Just deal with it. NOBODY KNOWS WHAT THE PRICE WILL BE. But what could the price be and why? OK, so that's interesting. The value of the Knowledge Economy has no valuation because it has no construct for being valued in a nation-state, gov't-fiat system (or a collection thereof, which is our immediate world case scenario). You could look to the derivatives market which I've suggested before. Is that 600T, 1.5Q, 3,4, maybe $5Q. It could be. The above ground gold composition (coincidentally[non?] equal to the physical currency base) is $8-9T. The manufacturing/real-estate economy is $210T (30X). Another 30X is ~$6Q. It's the derivatives that spike up demand for Boeing which pays now all of 2% yield in dividends. Robots don't need to eat, they don't need to get paid 4% on an annuity.

    That means 3-4 orders of magnitude more for crypto from here. You know, with that big caveat of course. There's winners, there's losers, there's big price swings, there's newcomers, there's decades to go. But there it is.

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Phil's Favorites

"People have said that I am a tool of some nameless adult"


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I caught some of the marches going on around the country on the news channels and on social media. I’m really proud to live in a country like this, where people can come out and stand up for themselves.

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This may be the dumbest move they could possibly make.


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yangzuming7777 / Pixabay

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Courtesy of Anwar Halari, The Open University

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This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

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Join our webinar, free, it's open to all. 

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Click here for the full report.

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