Bitcoin

Jul 16 2020

Balance Portfolio Continues Its Run

We’ve probably said something to the tune of “set it and forget it” for the past four years now. Unless you’re a professional Bitcoin and cryptocurrency trader, you’re likely playing with fire if you try to time the market and get in and out and back in again with the various coins.

So, here’s at least a little evidence that an approach like this *could* potentially work for your portfolio.

Let’s, as they say, go to the videotape, which, as you’ll see, shows a real highlight in the Balance Portfolio…with one of the coins up 245%.

That’s a Spicy Meatball

How we…balanced…the portfolio on 1/1/2020

Background: as opposed to the BRED Portfolio, we created this one to take advantage of the potential for asymmetric gains with a couple of coins that have (in our opinion here at HQ) tremendous potential to pop.

Last month, as you can see in our most-recent post about this portfolio, we benefited from some nice price movement in Bitcoin itself; the largest holding in this hypothetical account. Bitcoin has been stagnant in the past month but OH WOW LOOK at $VET.

When ten percent of your portfolio triples…

The basic idea: have the bulk — in this case, 1/2 — of your holdings in the two biggest coins, Bitcoin and Ethereum, and have most of the rest in coins that could have a pop. (The exception: $PAXG, which is there as a hedge.)

VeChain: An Asymmetric Jump

We follow quite a few investment newsletters and people who tweet like they know what they’re talking about. One theme that pretty much all of them follow is that the best way to make a mint is to make “asymmetric” bets and, hopefully, one of them pays off big time.

It’s not uncommon in the venture capital world, too: VC firms will have 25 portfolio companies with the hope that 1 out of the 25 has a 100,000% rise to make up for the 15 that fail and the 9 that are just moderately successful.

VeChain has the signs of a coin that COULD have an asymmetric rise and reach insane heights. It has the backing of corporate types, or, in their words, the solution is “driven by enterprise adoption.” That means things like this…

…and it also means the application is potentially used in a variety of other ways, like helping track carbon emissions or driving autonomous cars.

This MAY explain this particular coin’s rise: people who are looking for the next Bitcoin or the next Ethereum and fear they may be too late to the party will often start looking for coins that fit certain criteria — call it, partially, the “Robinhood effect” — like a sub-$0.01 price, which is where VET was earlier this year. (One of the newsletters was specifically recommending a certain coin that had a sub-penny price and corporate relationships late last year; deduction brought us to VeChain as a result.)

How to Get Involved?

We need to stress that we don’t provide investment advice, you should only invest what you can afford to lose, and we’re not responsible for wins or losses. We hope you have plenty of wins, though.

Two ways we’ve recommended and we’ll provide CLEARLY MARKED AFFILIATE LINKS HERE:

Sign up for a Coinbase account. You can get a bonus with qualifying purchase and we’d get one, too. *Note that $VET is not available on Coinbase just yet. To get that one in particular, you’ll need to…
Sign up for a Crypto.com account. The bonus is potentially richer but the qualifying purchases are larger, too.

Happy Investing!

Jun 17 2020

Two Automatic Portfolios: Which One’s Better?

Ages ago, we created a crypto investment plan we called the “BRED Portfolio.” Then, this year, we added a different one that we called the “Balance Portfolio.” It’s time again to look at the tale of the tape: which one is performing better so far?

BRED: The OG of “Set it and forget it”

Here, as background, is what it looked like at the beginning of 2020:

Flash forward to this morning and here is the YTD scorecard:

Of note when looking at the above percentages: since we factored in the forks at the beginning of the year (with the value of each “class” including a percentage based on the January 1 price), the percentages for the BTC and ETH class on the whole is a little lower than the percentage growth for the “big guns” in the class. BTC is up 32.54% as a class; ETH up 79.50%.

This leads us to ask whether or not we should incorporate the forks next year. We’ll keep an eye on that.

The BRED Portfolio is designed to be a hedge, of sorts; if BTC and XRP don’t move in lockstep with each other, that’s a good thing for you. They haven’t so far this year.

Bottom-lining this for ya: if you had put $10,000 into this portfolio at the beginning of the year, you’d have close to $15,000 today. So how does that compare to the “Balance” portfolio?

Balance 2020: Not too shabby, either

Before we look at the YTD performance here, let’s see how we set this up to start the year:

2020 Crypto Balance Portfolio — How we’d allocate a balanced portfolio in the new year.

With half with big guns BTC and ETH (no forks) and the other half in five different assets that provide an interesting variety, this portfolio is designed to be more of a hedge than the BRED portfolio.

And…how is it actually doing?

N.B. We’re in love with VET; we think VeChain is inking the right kinds of “Blockchain as a Service” deals and our own personal crypto holdings have a decent chunk in VET.

PAX Gold is another interesting one, in that it aims to mirror the price of gold. Gold isn’t having a moment, yet, but 15% YTD is, again, nothing to sneeze at.

Reminder: none of what you find here is meant to be investment advice. Do Your Own Research, consult with professionals and, especially with crypto, don’t invest more than you are prepared to lose.

AFFILIATE LINK: If you’re interested in getting started with crypto, one really compelling way right now is with Crypto.com. They’re offering cash back on a crypto-based debit card with certain qualifying purchases.

May 07 2020

The Blind Squirrel Crypto Portfolio

“In these uncertain times, count on Bitcoin. It’s there for you.”

Well, if Bitcoin could advertise during the pandemic, it would probably say something like that. It would also be total BS: nobody knows where the price of it, and its crypto brethren, will be tomorrow — when the unprecedented unemployment numbers send another jolt into the market –or a year from now, or at the end of 2021.

One of our goals here at Metacoin HQ is to at least introduce you to some of the coins that can potentially help diversify your portfolio. This is why we created something called the BRED portfolio in 2017, and why this year we came up with another idea: the Crypto Balance Portfolio.

Let’s Check in on the Balance Portfolio

If you’ve heard the phrase “every once in a while, a blind squirrel finds a nut,” you’ll see why we gave this blog post its name. A little dart throwing could have yielded similar results; as long as you have some Bitcoin in your portfolio, you’ll probably do okay.

When we launched this portfolio, it was weighted as follows:

30% Bitcoin
20% Ethereum
10% each of Ripple’s XRP, MCO, EOS, VeChain, and PAX Gold.

Turns out that this weighting helped us quite a bit, since half of the portfolio was invested in assets that appreciated almost 30% (Bitcoin) and 59% (Ethereum). And that helped make up for some of the “meh” performance, like that of VET (VeChain), which is the only loser so far in 2020.

What’s Next?

Every four years, Bitcoin does something called “halving:” cutting in half the reward given to miners. This is scheduled for May 11 — you can look at a nifty countdown clock here — and the block reward drops to 6.25 bitcoins.

So that means what? Good question: some people think the current price factors in that reward, while others think that the supply and demand equation can only mean that, with fewer bitcoins available over time, we’re strapping in for a rocket ride.

The answer is probably somewhere in the middle: volatility, followed by a bull market, followed by more volatility.

In other words, maybe a balanced portfolio can help you hedge your bets.

NOTE: This isn’t investment advice, do your own research, and we’re not responsible for your success or failure.

FINALLY…

Here’s a CLEARLY MARKED AFFILIATE LINK: if you want to pick up some coins, you can use our link at Crypto.com or Coinbase and we’ll both get compensated with a qualifying purchase.

Apr 26 2020

Checking in on the BRED Portfolio

If you want an answer to the volatility in the financial markets, is it possible that the BRED Portfolio — our 2017 combination of Bitcoin, (Ripple’s) XRP, Ethereum, and Dash — could be just the thing?

Well, maybe and maybe not. However, if you are looking for a hedge against a big chunk of other assets, maybe BRED is the answer to your questions. Let’s take a look at how it is faring in 2020, how a couple other things are faring, as well as how BRED would have fared if you had bought in 2017 and left it alone. (The Ultimate HODLer Portfolio.)

First, Here’s the 2020 BRED Portfolio This Morning

You would have a tough time to find a YTD asset class with a 42.67 percent growth so far this year. Right?

A quick Google search yields this result, where the US Long Treasury Index yields the best result. (There’s a feeble attempt at a yield pun in that sentence, since it’s an index that tracks the yield of US Treasurys.) 20-plus percent for that one.

From Vanguard.com

What about precious metals? Didn’t they do okay?

Remind me to further study the palladium market later.

TL;DR — Bitcoin and its Ilk Win So Far in 2020

Whether or not it’s the ultimate Ron Popeil portfolio — “Set It and Forget It” — remains to be seen. But you could have done a heck of a lot worse with other assets in 2020.

Which lead us to the question about the OGs, the ones who have HODLed their BTC (and ETH, XRP, and DASH) and are just kicking back. How would they have done?

Wow…

Well this is something to behold. (Not that you can find anyone who bought Bitcoin in early 2017 AND held it AND isn’t a public Bitcoin bull AND would actually tell you that they’ve bought and held.)

So there you have it…if you’re not a day trader and maybe an investor and have some cash to set aside, a portfolio that you pretty much ignore might do the trick.

Of course, we should tell you that you’re on your own and we aren’t responsible for your successes or failures.

Happy investing!

Apr 22 2020

Learning From Negative Oil

If you think you have witnessed a once-in-a-lifetime event when you saw oil prices turn negative on Monday, you’re wrong on two fronts. Oil prices didn’t turn negative — it was the underlying WTI May Contract, with an expiration date on April 21, that turned negative — and it is not a once-in-a-lifetime event: it will happen again in another month.

Oh, and it will be worse.

If there’s something to be learned from all this — for Bitcoin enthusiasts, for the common man, and for the people with a minivan sitting in the driveway that’s full of petrol and longing for the open road — it’s that a quick study of supply, demand, derivatives, ETFs, dollar-denominated assets, your 401(k), and, of course, Bitcoin and other cryptocurrencies is in order. Let’s begin, because the ramifications are going to impact just about everything.

What Happened?

It’s actually quite simple: the oil that was ordered by holders of the WTI May contract had nowhere to go. So what started as a fire sale — hey, buy this for a few cents a barrel! — turned into a situation where contract holders were actually paying people to take the oil off their hands.

Now, before you join the cacophony of “I’ll take that oil and put it in my garage and they can pay me $37 a barrel!” cries, you have to realize a few things about these contracts:

Only certain types of investors can actually hold these contracts: unlike other derivatives, futures contracts like the WTI ones that went nutso aren’t open to the average investor (more on what that means for ETFs below);
They are actual delivery contracts, and this is why they are not open to the average investor;
Yes, that means that holders have to take delivery of the physical product.

Tease this out for a half second and you’ll see why this is such a quagmire: the oil had nowhere to go.

Now you can see why this market went south in a big hurry; like a game of hot potato, nobody wanted to be left holding a worthless asset. (Not a worthless derivative that gives you the right to take delivery of a stock if you want it, but an actual tanker of oil that has nowhere to go.)

But Why?

When the Coronavirus crisis started, global oil production was somewhere in the neighborhood of 100 million barrels per day. Russia and Saudi Arabia agreed to cut production by 10 million barrels a day, which helped a little when the economic shutdown started.

But, as Danny Masters from CoinShares — a former energy trader, so he knows his stuff — shared on a video yesterday, demand for gasoline (which is one of the finished products that comes from a barrel of oil) dropped 55 percent in the month of March. “A 3 million barrel drop is overly bearish” for the market, said Masters. So imagine that the oil that had been refined into gasoline got stuck; it couldn’t leave the refinery for the corner station because the corner station wasn’t selling gasoline because your minivan is sitting in the driveway. This is an order of magnitude worse: if demand is around 45 million barrels worth a day, but supply has continued apace because orders have to be filled…you’d need a cut of 55 million barrels of production a day so that the supply doesn’t completely dwarf demand.

But that cut didn’t happen.

Where Could the Oil Go?

Cushing, Oklahoma is where most of the oil in the U.S.A. gets stored. CNBC reported that, as of April 17, Cushing was 77 percent filled.

But, with the real possibility that Cushing becomes filled up — especially with deliveries slated to Cushing to satisfy May contracts AND few refineries sending tankers out with gasoline because there’s less demand for gasoline — it’s highly possible that the oil will continue to be stuck in limbo.

Reuters is reporting that Oklahoma is relaxing production rules; this will help, but won’t solve the underlying supply/demand issue. Bringing us to the June WTI contracts…

Are June Contracts Doomed?

In a word: yes.

In another few words: it’s going to get really bad again.

Tease out the above realities: Cushing was three-quarters full before all the favors were getting called in. “Can you take some oil off my hands? Can I pay you to do that? Can I pay you MORE to do that?”

While the price of the June WTI contract is hovering in the low teens right now, the guess is that no more favors will be left to call in. The Strategic Petroleum Reserves are pretty much at capacity. It will be no surprise to see the June futures turn negative again — perhaps well before the expiry date of May 19 — and, without steep cuts in drilling, this could be a monthly occurrence.

What’s the Next Domino to Fall?

USO. If you’re wondering whether or not this ETF is in trouble, consider these facts:

This ETF is down 80 percent this year.
Rules governing the fund’s investments needed to be changed as a result of the WTI May Contract Freefall. The fund was slated to invest just in the next month’s contract and attempt to replicate its gains or losses; once the WTI went negative, then dramatically so, the fear was that continuing to track against a negative balance would be untenable at best and cataclysmic in a worst-case scenario.

We’d stop short of saying this is “the perfect short,” but a crazy-volatile investment that goes negative can only lead to borderline insanity. Beyond that, with “Stay at Home” orders continuing, demand in the month of April — remember, people didn’t start facing these quarantine conditions until March 11 at the earliest — will likely fall below the demand for the month of March. The glut will not be solved without turning the oil pumps off completely. It’s a shock to the system — only the large oil companies will be able to weather the storm.

We could be wrong — the rules to change the calculation of the ETF’s investment is a good step — and the fund could bounce back. But we’d stay far away.

And…What — If ANYTHING — Does This Have to Do with Bitcoin?

Back to the Danny Masters CoinShares interview, as it uncovered a couple of interesting ideas. In part one, Masters tells host and CoinShares colleague Meltem Demirors about the underlying conditions leading to the negative oil. Demirors counters with an interesting concept:

“People thought they were buying an asset, but instead they were buying a liability.”
Metltem Demirors, CoinShares

Here’s the first part of the interview:

So if you think about Bitcoin — and other cryptos — within the concept of buying an asset vs. a liability, there is a near-zero chance that someone will ever pay you to take their BTC off of their hands. Crypto is an asset, not a liability. And the need for an asset AND a digital currency — especially in a “contactless” community that we’re all in the process of joining whether we like it or not — will only grow in the months to come.

But that’s not the most telling piece of this interview; that comes in part two, which you can watch here:

Demand for oil is low.

Demand for Bitcoin is steady; with the upcoming “halving,” when the rewards for mining a block are cut in half, fewer Bitcoins will be released into the wild. Masters, in the interview, thinks that “HODLers” (like him) won’t get rid of their BTC until it’s closer to $10,000.

And large funds lock up people’s BTC — Greyscale’s fund, for instance, has a lockup that lasts about a year — so people aren’t going anywhere anyway.

Finally, Volatility and the Brrrrrrr Factor

Oil will be volatile for sure. Bitcoin already is volatile, has been volatile for some time, and should continue its volatility for the foreseeable future. Oil traders are not used to what they’ve seen this week; Bitcoin traders yawn (and aren’t going to see negative Bitcoin ever).

But the Fed’s role in all this can’t help oil supply — only an economic rebound that gets people driving again will do that — and is more than likely to seriously help the Bitcoin market considerably. The Fed’s ability to print money and do some sort of quantitative easing at the drop of a hat can only mean that the long-term prognosis for some sort of anti-dollar is nothing but strong.

Our advice: buy whatever you can, within reason. Good luck.

IF YOU WANT to get started, you can use our AFFILIATE LINK to buy either from Coinbase or from Crypto.com. With a qualifying purchase, we can both be compensated.