Yeahhhhhh this is the stuff I don’t love. While I’m one of the people who thinks saying bitcoin is pointless isn’t really true given the market has decided otherwise for a decade+, it’s way too...
Yeahhhhhh this is the stuff I don’t love. While I’m one of the people who thinks saying bitcoin is pointless isn’t really true given the market has decided otherwise for a decade+, it’s way too fucking volatile for something like a pension.
It’s not like you can stop the price from plummeting if something like tether blows up.
That's why it's a very small percentage, about 0.1%. Compare with buying a total stock market index fund or an international fund. All sorts of dubious stuff in there, but stock market returns are...
That's why it's a very small percentage, about 0.1%. Compare with buying a total stock market index fund or an international fund. All sorts of dubious stuff in there, but stock market returns are driven by the hits, so you don't want to miss them.
There’s no risk free assets. UK pension funds would have blown up without BoE intervention during the 2022 gilt crisis when bond yields ripped. Since then, Bitcoin has wildly outperformed bonds.
There’s no risk free assets. UK pension funds would have blown up without BoE intervention during the 2022 gilt crisis when bond yields ripped. Since then, Bitcoin has wildly outperformed bonds.
It may be volatile, but it also has been progressively rising over time. I wonder whats going to happen with it now that the hype has kind of peaked and crashed with NFTs. It might stagnate and...
It may be volatile, but it also has been progressively rising over time.
I wonder whats going to happen with it now that the hype has kind of peaked and crashed with NFTs. It might stagnate and eventually die off now that its not perpetually in the news as much, but it also might just settle into being a less profitable but more reliable investment as a result of having less attention.
There’s a basic economic principle that an inelastic supply will result in more price fluxuation based on varying demand, so I think the volatility is here to stay. There’s no real anchor for how...
There’s a basic economic principle that an inelastic supply will result in more price fluxuation based on varying demand, so I think the volatility is here to stay. There’s no real anchor for how much the price “should” be. No matter your price target, people will disagree based on vibes and trying to “smooth” demand with short-term speculation is a very risky strategy.
You basically have to try to predict media attention. It will probably go up when Musk mentions it. When would people sell? A market panic is the most obvious way, but the timing is unpredictable.
Compare with stablecoins that aggressively respond to demand to hold a price peg.
No because there are multiple points in time where this statement just wasn’t true. We happen to be back in a “the statement is true” scenario but that wasn’t the case multiple times in the assets...
It may be volatile, but it also has been progressively rising over time.
No because there are multiple points in time where this statement just wasn’t true. We happen to be back in a “the statement is true” scenario but that wasn’t the case multiple times in the assets history.
There is no guarantee it will keep rising and if I could time it I’d be heavily that tether is going to be the next major event, and it’s going to make the rest look small if what’s been claimed toned it out to be true (reserves held in btc, which then goes up, and buys more btc)
If crypto makes it past that I might seriously invest in it but for right now it’s only small amounts because there’s very much a portion of its value tied up in it not being regulated, and that will change
I think this is you conflating volatility with the point @Grayscail made about the value having risen over time, or that you consider shorter time periods. To analyze the historic price, trying to...
It may be volatile, but it also has been progressively rising over time.
No because there are multiple points in time where this statement just wasn’t true. We happen to be back in a “the statement is true” scenario but that wasn’t the case multiple times in the assets history.
I think this is you conflating volatility with the point @Grayscail made about the value having risen over time, or that you consider shorter time periods.
To analyze the historic price, trying to disregard volatility and instead focus on the longer trend, we can look at investments spread out over a long timespan.
For sake of argument, consider investment starting at the peak in late 2013 and buy bitcoin every day until the most recent long-term low in late 2022. We take this interval because it is possibly the worst long-term interval we can pick. It goes from a then all-time high of $1100, a price which wasn't seen again for about three years, and it goes until a recent low of $16500. which was the lowest valuation in about two years.
Buying bitcoin for a dollar every day during that approximately 9 year period, the investment cost would be approximately $3300 and would have bought about 3.2 BTC. The valuation at that most recent low would be approximately $53000, for a return on investment of about 1500%. If we assume we lock the entire dollar investment amount at the start of the interval, it would be an annualized yearly return of about 35% in nominal terms.
This clearly indicates that historically, while the very high volatility has made the price fluctuate heavily, the "progressive rise over time" i.e. the long term trend, has been of significant growth in terms of nominal dollars.
How the long-term valuation changes in the future is another question. An interesting aspect, to me, is how the relationship between volatility and long-term growth will evolve. That is, will it remain stable so that even similar worst-case investments over ~8 years remain solidly profitable, or will the long-term growth decline or regress faster than volatility, increasing the risk of non-profitable divestment at inopportune moments?
Anyone who invested in 2021 has been underwater from 22-23, likely by half. Long term doesn't matter if the fund gets wiped out waiting for the recovery. You've also got the 2017 peak until...
Anyone who invested in 2021 has been underwater from 22-23, likely by half. Long term doesn't matter if the fund gets wiped out waiting for the recovery. You've also got the 2017 peak until arguably 2020 if we take worse case.
Swings matter, and crypto swings are huge, often 50% or more of total value. If a pension fund is based on something that volatile, and substantially so, yes waiting the 1 or 3 years for it to recover may not be an option.
As it stands they're not allowed to get heavily invested in these things, but I think there's good odds we'll see another major dip in btc, and it very well could be 2+ years again, and we will plummet back to something like 10 or 20k a coin. I'm already not thrilled at how that might have chain reaction effects, and am even less thrilled to see the door being open to a pension investing in something like this.
Rather than no practical use, I'd say it has no unique practical use, other than as a Schelling point. Cryptocurrencies are easy to clone, and there are better ones. But you could say the same of...
Rather than no practical use, I'd say it has no unique practical use, other than as a Schelling point. Cryptocurrencies are easy to clone, and there are better ones. But you could say the same of Coca Cola. Apparently fame from being first counts for something, among fans anyway.
I was more getting at the concept of cryptocurrency as a "fiat currency replacement". Blockchain might have some interesting use-cases but crypto doesn't have enough upsides for the general public...
I was more getting at the concept of cryptocurrency as a "fiat currency replacement". Blockchain might have some interesting use-cases but crypto doesn't have enough upsides for the general public to switch. I have only seen use by scammers and some niche use-cases. I might be missing something here, but I understand blockchain and it is a cool technologie but I think the only reason crypto is still around is because investor types who don't understand it see that it increases in value, which just sounds like a bubble waiting to pop. That's why I believe that it will ultimately tank and only stay in use for niche use-cases.
I continue to hear things like "it will be exciting to see what problems blockchain can solve!" But nearly every other technology has been born with the intent to solve an existing problem. It...
I continue to hear things like "it will be exciting to see what problems blockchain can solve!" But nearly every other technology has been born with the intent to solve an existing problem.
It would be like selling goat hooves ground into a powder and saying "someone will find this useful one day!"
The people I know that are into blockchain will say things like this: “There are a few really interesting projects going on right now” “Oh? Which projects?” deflects and changes subject It’s very...
The people I know that are into blockchain will say things like this: “There are a few really interesting projects going on right now”
“Oh? Which projects?”
deflects and changes subject
It’s very similar to the way the crazy conservatives talk about Trump. “We all know he won in 2020. The evidence is overwhelming”
I have some examples, though I will say, once someone has made up their mind that there are no interesting projects, it's very difficult to convince them otherwise, because interesting is...
I have some examples, though I will say, once someone has made up their mind that there are no interesting projects, it's very difficult to convince them otherwise, because interesting is subjective.
Helium (crypto incentivized mesh-networking, helps backbone Helium Mobile cell network)
Dria (Decentralized Hugging Face (machine learning model sharing etc))
Cube (Centralized-Decentralized exchange hybrid. Trade order matching happens on centralized servers for speed, but users funds are always in accounts they have custody of onchain, the company can never steal your funds, and you can always verify your funds are there (they call this "being FTX proof")
TipLink (Send crypto to anyone, even if they don't have a wallet.)
However, I think also that USDC on Solana is the killer app. A nearly instant settlement of machine programmable money, that costs fractions of a penny to send. As someone who has spent time with ACH, wires, BaaS, etc... nothing comes close to writing a few lines of code and being able to manage dollars for effectively no cost, with zero wait.
More broadly, having a globally readable/writable state machine, that syncs as fast as physics allows (in the case of the Solana blockchain), with property enforced by cryptography, that operates 24/7 on open source, shared infrastructure is essentially a playground. Albeit, it is one that is scary to work in from a regulatory perspective. Ironically, you're less likely to get in trouble by being an anon launching a memecoin like HarryPotterObamaSonic10Inu or a jpeg of a monkey, than you are to be legitimate company building a real product. Right now it can cost millions of dollars to lawyer up as a seed stage company in crypto (not hyperbole, I've seen investment rounds in the millions, where the investors were told 100% of the funds are purely going towards legal), my hope is that as the regulatory environment shifts, more people will feel comfortable engaging with this tech in a professional manner. Until then, speculation will be the major usecase. And I think that is okay, every major market needs speculators. Speculation has turned Las Vegas into a hotbed of innovation that now hosts a plethora of tech conferences, entertainment, experiments like boring company and The Sphere, and even the airforce. The majority of Las Vegas casino revenue is non-gambling.
That’s a good list. The next step would be to go through the list and figure out which ones have interesting economic activity. How many customers do they really have, and how much of a benefit is...
That’s a good list. The next step would be to go through the list and figure out which ones have interesting economic activity. How many customers do they really have, and how much of a benefit is it to them?
These things require a deep dive that most of us won’t do, boosters and critics alike. (And I don’t want to give anyone homework.)
There’s also the issue that some needs are very specialized. Once we go below the surface of the goods and services that consumers use directly, there are complex supply chains that we all depend on. Evaluating the worth of supply chain components is often difficult.
Programmable money seems like one of those. I can see it being convenient and useful for builders of financial infrastructure, in theory, but since I don’t build that kind of thing, I find it hard to judge. My payment needs are pretty simple. Credit cards and Zelle pretty much cover it.
—-
Personally, I’m not sure if Las Vegas counts as economic activity that makes the world a better place. My instinct is to assume the opposite. Sure, lots of it is not actually gambling. I assume food, accommodations, and travel don’t count? These things are necessary for any major tourist destination. Hawaii needs them too, even when the beach itself is free.
The worth of glitzy entertainment is kind of dubious though. The Sphere is pretty neat, but in the end it’s a fancy, eye-catching event venue.
An argument could be made that, much like with business travel, many kinds of entertainment would be much cheaper to do either remotely or in a distributed way. And indeed we do that. There’s no need to travel to watch a movie or play a video game. For live music, musicians going on tour saves travel costs for everyone else.
But it’s all incredibly subjective. To avoid dealling with this, economists often assume that buyers know what they’re doing, at least until they change their minds about what to buy.
I've been toying with crypto since 2011. I made and sold my own NFT, got a little profit on BTC and ETH. Back in the day I was pretty hyped. It's good to see we're finally getting the...
I've been toying with crypto since 2011. I made and sold my own NFT, got a little profit on BTC and ETH. Back in the day I was pretty hyped. It's good to see we're finally getting the "programmable money" dream with Solana, although I have yet to see that come up before so I wouldn't personally use that instead of Stripe just yet.
There have been too many grifts over the years. I won't trust something just because it looks shiny and a lot of people are excited about it.
This article is somewhat problematic in the way it portrays this investment, presenting a number that seems large ($160m) in the subtitle and first paragraphs, and only briefly, later, noting that...
This article is somewhat problematic in the way it portrays this investment, presenting a number that seems large ($160m) in the subtitle and first paragraphs, and only briefly, later, noting that the fund manages $155b in assets.
Investing in Bitcoin at that scale is not problematic from a prudent investment management perspective, even if the fund managers think it very likely that Bitcoin is completely ridiculous. It's a risky, speculative investment, but it is very small: around 0.1% of the fund's assets. Even if the fund managers think Bitcoin is almost certainly doomed, it's still reasonable for the unlikely case that they're wrong. They may also intend it as a hedge against extremely unlikely events where it might increase significantly, for example, a US debt default. They could lose this entire investment, and it would be likely be significantly less than the amount the fund gains or loses in a day. It's likely significantly less than other hedge positions they have. The risk on this investment doesn't really matter.
By comparison, if you had $10,000 to invest, this would be like investing $10 in Bitcoin. But it goes beyond that, because the fund can't simply invest in the same ways an individual might. People are mentioning SPY: this fund has assets amounting to 30% of SPY's total assets under management.
I'd completely agree that there are problematic ESG aspects of a bitcoin investment of any size. But that's not connected to the question of risk and speculation here, and on that, this investment is completely reasonable.
From the article: ... Apparently this fund doesn't do ESG investing.
From the article:
“These are traded on stock exchanges,” Krause [] said. “So, they have liquidity just like shares of stock. They’re also regulated by the Securities and Exchange Commission. That gives investors some confidence that they’re not dealing with directly buying an asset.”
While $160 million is a lot of money, Krause said it’s a small fraction of Wisconsin’s overall pension fund. At the end of December, SWIB held more than $155 billion in assets, with the vast majority of that representing assets in the Wisconsin Retirement System.
“Like any good portfolio manager, you want to diversify,” Krause said. “And now that bitcoin has been around for well over a decade, we’re aware that not only does it offer pretty strong returns — sometimes over periods of time quite phenomenal returns — but it also has diversification capabilities. It doesn’t move directly, in tandem with stocks and bonds.”
...
“I can assure you that most institutional money managers took note of this,” Krause said. “Pensions magazine highlighted this just a couple of days ago that Wisconsin did this. So, I am pretty confident that just about everybody that runs large pension funds or institutional funds, is aware that SWIB took that action.”
This seems like an oddly technical way of saying that Bitcoin went up a lot more. Do people often compare investments that way? I would usually compare investments using a graph that uses US...
This seems like an oddly technical way of saying that Bitcoin went up a lot more. Do people often compare investments that way?
I would usually compare investments using a graph that uses US dollars in the denominator. SPY is up 12% and Bitcoin 56% since the start of the year.
I swap out USD for other quote assets all the time to get a feel for benchmarking. SPY/BTC, GLD/BTC, SPY/GLD, GLD/TLT, BTC/TLT, etc. I feel like by fixing my quote asset to the dollar, I miss a...
I swap out USD for other quote assets all the time to get a feel for benchmarking.
SPY/BTC, GLD/BTC, SPY/GLD, GLD/TLT, BTC/TLT, etc.
I feel like by fixing my quote asset to the dollar, I miss a bigger picture in how markets are viewing trades.
I guess my objection is that it's hard to understand volatility if you're using a volatile asset as your baseline measure of value. I'd rather do a three-way comparison with something that changes...
I guess my objection is that it's hard to understand volatility if you're using a volatile asset as your baseline measure of value. I'd rather do a three-way comparison with something that changes slowly in the denominator. Inflation-adjusted dollars is probably best, but dollars is okayish, at least from an American perspective.
Yup, though I already have a generalized view of where the vol spread is for these assets, for me knowing the IV/RV is only necessary for options, for spot it matters much less. however I do see...
Yup, though I already have a generalized view of where the vol spread is for these assets, for me knowing the IV/RV is only necessary for options, for spot it matters much less.
however I do see knowing where the market is pricing vol via VVIX as important, along with where VIX and MOVE are, and synthesizing multiple data points like global macro, geopolitics, monetary policy, liquidity, sentiment, flows, etc.
Another aspect is that if I already have a view that macro conditions are going to be favorable toward a certain asset class, such as gold, silver, copper, etc, I care less about how they are performing against the dollar (embedded in my thesis that these commodities would outperform the dollar already) and more about how these assets do against other assets I could have put my dollars in. Say my thesis is right about gold, and YTD GOLD is up 15% in dollar terms… well, if at the same time gold is down 50% in bitcoin terms… yes I might have been right in my gold thesis, but this trade is only a win if my frame of reference is dollars, and a massive loss if my frame of reference in bitcoin.
Yeahhhhhh this is the stuff I don’t love. While I’m one of the people who thinks saying bitcoin is pointless isn’t really true given the market has decided otherwise for a decade+, it’s way too fucking volatile for something like a pension.
It’s not like you can stop the price from plummeting if something like tether blows up.
That's why it's a very small percentage, about 0.1%. Compare with buying a total stock market index fund or an international fund. All sorts of dubious stuff in there, but stock market returns are driven by the hits, so you don't want to miss them.
There’s no risk free assets. UK pension funds would have blown up without BoE intervention during the 2022 gilt crisis when bond yields ripped. Since then, Bitcoin has wildly outperformed bonds.
There are significantly less risky assets than bitcoin by a significant margin
It may be volatile, but it also has been progressively rising over time.
I wonder whats going to happen with it now that the hype has kind of peaked and crashed with NFTs. It might stagnate and eventually die off now that its not perpetually in the news as much, but it also might just settle into being a less profitable but more reliable investment as a result of having less attention.
There’s a basic economic principle that an inelastic supply will result in more price fluxuation based on varying demand, so I think the volatility is here to stay. There’s no real anchor for how much the price “should” be. No matter your price target, people will disagree based on vibes and trying to “smooth” demand with short-term speculation is a very risky strategy.
You basically have to try to predict media attention. It will probably go up when Musk mentions it. When would people sell? A market panic is the most obvious way, but the timing is unpredictable.
Compare with stablecoins that aggressively respond to demand to hold a price peg.
No because there are multiple points in time where this statement just wasn’t true. We happen to be back in a “the statement is true” scenario but that wasn’t the case multiple times in the assets history.
There is no guarantee it will keep rising and if I could time it I’d be heavily that tether is going to be the next major event, and it’s going to make the rest look small if what’s been claimed toned it out to be true (reserves held in btc, which then goes up, and buys more btc)
If crypto makes it past that I might seriously invest in it but for right now it’s only small amounts because there’s very much a portion of its value tied up in it not being regulated, and that will change
I think this is you conflating volatility with the point @Grayscail made about the value having risen over time, or that you consider shorter time periods.
To analyze the historic price, trying to disregard volatility and instead focus on the longer trend, we can look at investments spread out over a long timespan.
For sake of argument, consider investment starting at the peak in late 2013 and buy bitcoin every day until the most recent long-term low in late 2022. We take this interval because it is possibly the worst long-term interval we can pick. It goes from a then all-time high of $1100, a price which wasn't seen again for about three years, and it goes until a recent low of $16500. which was the lowest valuation in about two years.
Buying bitcoin for a dollar every day during that approximately 9 year period, the investment cost would be approximately $3300 and would have bought about 3.2 BTC. The valuation at that most recent low would be approximately $53000, for a return on investment of about 1500%. If we assume we lock the entire dollar investment amount at the start of the interval, it would be an annualized yearly return of about 35% in nominal terms.
This clearly indicates that historically, while the very high volatility has made the price fluctuate heavily, the "progressive rise over time" i.e. the long term trend, has been of significant growth in terms of nominal dollars.
How the long-term valuation changes in the future is another question. An interesting aspect, to me, is how the relationship between volatility and long-term growth will evolve. That is, will it remain stable so that even similar worst-case investments over ~8 years remain solidly profitable, or will the long-term growth decline or regress faster than volatility, increasing the risk of non-profitable divestment at inopportune moments?
Anyone who invested in 2021 has been underwater from 22-23, likely by half. Long term doesn't matter if the fund gets wiped out waiting for the recovery. You've also got the 2017 peak until arguably 2020 if we take worse case.
Swings matter, and crypto swings are huge, often 50% or more of total value. If a pension fund is based on something that volatile, and substantially so, yes waiting the 1 or 3 years for it to recover may not be an option.
As it stands they're not allowed to get heavily invested in these things, but I think there's good odds we'll see another major dip in btc, and it very well could be 2+ years again, and we will plummet back to something like 10 or 20k a coin. I'm already not thrilled at how that might have chain reaction effects, and am even less thrilled to see the door being open to a pension investing in something like this.
Bitcoin still hasn't proven it has any practical use outside of being a speculative asset. It's one crash away from being pretty much worthless imo.
Rather than no practical use, I'd say it has no unique practical use, other than as a Schelling point. Cryptocurrencies are easy to clone, and there are better ones. But you could say the same of Coca Cola. Apparently fame from being first counts for something, among fans anyway.
I was more getting at the concept of cryptocurrency as a "fiat currency replacement". Blockchain might have some interesting use-cases but crypto doesn't have enough upsides for the general public to switch. I have only seen use by scammers and some niche use-cases. I might be missing something here, but I understand blockchain and it is a cool technologie but I think the only reason crypto is still around is because investor types who don't understand it see that it increases in value, which just sounds like a bubble waiting to pop. That's why I believe that it will ultimately tank and only stay in use for niche use-cases.
I continue to hear things like "it will be exciting to see what problems blockchain can solve!" But nearly every other technology has been born with the intent to solve an existing problem.
It would be like selling goat hooves ground into a powder and saying "someone will find this useful one day!"
The people I know that are into blockchain will say things like this: “There are a few really interesting projects going on right now”
“Oh? Which projects?”
deflects and changes subject
It’s very similar to the way the crazy conservatives talk about Trump. “We all know he won in 2020. The evidence is overwhelming”
“What evidence?”
turns to friends “You guys have any examples? …”
I have some examples, though I will say, once someone has made up their mind that there are no interesting projects, it's very difficult to convince them otherwise, because interesting is subjective.
But anyways, here is a list:
Some recent auxiliary material:
However, I think also that USDC on Solana is the killer app. A nearly instant settlement of machine programmable money, that costs fractions of a penny to send. As someone who has spent time with ACH, wires, BaaS, etc... nothing comes close to writing a few lines of code and being able to manage dollars for effectively no cost, with zero wait.
More broadly, having a globally readable/writable state machine, that syncs as fast as physics allows (in the case of the Solana blockchain), with property enforced by cryptography, that operates 24/7 on open source, shared infrastructure is essentially a playground. Albeit, it is one that is scary to work in from a regulatory perspective. Ironically, you're less likely to get in trouble by being an anon launching a memecoin like HarryPotterObamaSonic10Inu or a jpeg of a monkey, than you are to be legitimate company building a real product. Right now it can cost millions of dollars to lawyer up as a seed stage company in crypto (not hyperbole, I've seen investment rounds in the millions, where the investors were told 100% of the funds are purely going towards legal), my hope is that as the regulatory environment shifts, more people will feel comfortable engaging with this tech in a professional manner. Until then, speculation will be the major usecase. And I think that is okay, every major market needs speculators. Speculation has turned Las Vegas into a hotbed of innovation that now hosts a plethora of tech conferences, entertainment, experiments like boring company and The Sphere, and even the airforce. The majority of Las Vegas casino revenue is non-gambling.
That’s a good list. The next step would be to go through the list and figure out which ones have interesting economic activity. How many customers do they really have, and how much of a benefit is it to them?
These things require a deep dive that most of us won’t do, boosters and critics alike. (And I don’t want to give anyone homework.)
There’s also the issue that some needs are very specialized. Once we go below the surface of the goods and services that consumers use directly, there are complex supply chains that we all depend on. Evaluating the worth of supply chain components is often difficult.
Programmable money seems like one of those. I can see it being convenient and useful for builders of financial infrastructure, in theory, but since I don’t build that kind of thing, I find it hard to judge. My payment needs are pretty simple. Credit cards and Zelle pretty much cover it.
—-
Personally, I’m not sure if Las Vegas counts as economic activity that makes the world a better place. My instinct is to assume the opposite. Sure, lots of it is not actually gambling. I assume food, accommodations, and travel don’t count? These things are necessary for any major tourist destination. Hawaii needs them too, even when the beach itself is free.
The worth of glitzy entertainment is kind of dubious though. The Sphere is pretty neat, but in the end it’s a fancy, eye-catching event venue.
An argument could be made that, much like with business travel, many kinds of entertainment would be much cheaper to do either remotely or in a distributed way. And indeed we do that. There’s no need to travel to watch a movie or play a video game. For live music, musicians going on tour saves travel costs for everyone else.
But it’s all incredibly subjective. To avoid dealling with this, economists often assume that buyers know what they’re doing, at least until they change their minds about what to buy.
I've been toying with crypto since 2011. I made and sold my own NFT, got a little profit on BTC and ETH. Back in the day I was pretty hyped. It's good to see we're finally getting the "programmable money" dream with Solana, although I have yet to see that come up before so I wouldn't personally use that instead of Stripe just yet.
There have been too many grifts over the years. I won't trust something just because it looks shiny and a lot of people are excited about it.
What is the heuristic you use to trust something?
No clue
That's pretty much my thoughts on it, great wording.
lol just like string theory
This article is somewhat problematic in the way it portrays this investment, presenting a number that seems large ($160m) in the subtitle and first paragraphs, and only briefly, later, noting that the fund manages $155b in assets.
Investing in Bitcoin at that scale is not problematic from a prudent investment management perspective, even if the fund managers think it very likely that Bitcoin is completely ridiculous. It's a risky, speculative investment, but it is very small: around 0.1% of the fund's assets. Even if the fund managers think Bitcoin is almost certainly doomed, it's still reasonable for the unlikely case that they're wrong. They may also intend it as a hedge against extremely unlikely events where it might increase significantly, for example, a US debt default. They could lose this entire investment, and it would be likely be significantly less than the amount the fund gains or loses in a day. It's likely significantly less than other hedge positions they have. The risk on this investment doesn't really matter.
By comparison, if you had $10,000 to invest, this would be like investing $10 in Bitcoin. But it goes beyond that, because the fund can't simply invest in the same ways an individual might. People are mentioning SPY: this fund has assets amounting to 30% of SPY's total assets under management.
I'd completely agree that there are problematic ESG aspects of a bitcoin investment of any size. But that's not connected to the question of risk and speculation here, and on that, this investment is completely reasonable.
From the article:
...
Apparently this fund doesn't do ESG investing.
woah woah woah, i wouldn't want to be involved with bitcoin at all! just do the SPY investment
SPY/BTC is down 50% in the last year, down 86% in the last 5 years. SPY is fine, but SPY alone has been an underperforming portfolio in BTC terms.
This seems like an oddly technical way of saying that Bitcoin went up a lot more. Do people often compare investments that way?
I would usually compare investments using a graph that uses US dollars in the denominator. SPY is up 12% and Bitcoin 56% since the start of the year.
I swap out USD for other quote assets all the time to get a feel for benchmarking.
SPY/BTC, GLD/BTC, SPY/GLD, GLD/TLT, BTC/TLT, etc.
I feel like by fixing my quote asset to the dollar, I miss a bigger picture in how markets are viewing trades.
I guess my objection is that it's hard to understand volatility if you're using a volatile asset as your baseline measure of value. I'd rather do a three-way comparison with something that changes slowly in the denominator. Inflation-adjusted dollars is probably best, but dollars is okayish, at least from an American perspective.
Yup, though I already have a generalized view of where the vol spread is for these assets, for me knowing the IV/RV is only necessary for options, for spot it matters much less.
however I do see knowing where the market is pricing vol via VVIX as important, along with where VIX and MOVE are, and synthesizing multiple data points like global macro, geopolitics, monetary policy, liquidity, sentiment, flows, etc.
Another aspect is that if I already have a view that macro conditions are going to be favorable toward a certain asset class, such as gold, silver, copper, etc, I care less about how they are performing against the dollar (embedded in my thesis that these commodities would outperform the dollar already) and more about how these assets do against other assets I could have put my dollars in. Say my thesis is right about gold, and YTD GOLD is up 15% in dollar terms… well, if at the same time gold is down 50% in bitcoin terms… yes I might have been right in my gold thesis, but this trade is only a win if my frame of reference is dollars, and a massive loss if my frame of reference in bitcoin.