Lean Fire target based on past 12 months of spending: $550,000 Personal target is closer to $650,000 to $700,000 to allow for some extra spending once I quit work to do fun things. I estimate I'll work another one or two years. Happy to answer questions or have discussions about my experience or what my plans are. Thanks for reading.
There is a constant war being fought between goldbugs, like Peter Schiff, and Bitcoin enthusiasts so I decided to make an outline, with links, comparing and contrasting gold and Bitcoin. I made this in November of 2019 (thus the information therein is based on figures from that time) but, being scatter brained, neglected to post this for the Bitcoin community to see. The yardsticks I used to compare the two assets included the following: shipping/transactions costs, storage costs, censorship factor, settlement time, stock to flow, blockchain vs clearing house, validation, etc. I will also touch on Roosevelt's gold confiscation executive order in 1933, transporting gold during the Spanish Civil War in 1936, and the hypothetical cost for Venezuela to repatriate its gold more recently. I will provide a brief summary first then follow that with the outline I made. This information can be used as a tool for the Bitcoin community to combat some of the silly rhetoric coming from goldbugs such as Peter Schiff and James Rickards. I would like to make it clear, however, that I am not against gold and think that it performed its role as money very well in a technologically inferior era, namely Victorian times but I think Bitcoin performs the functions of money better than gold does in the current environment. I have been looking to make a contribution to the Bitcoin community and I hope this is a useful and educational tool for everyone who reads this. Summary: Shipping/transaction costs: 100 ounces of gold could be shipped for 315 dollars; the comparable dollar value in Bitcoin could be sent for 35 dollars using a non-segwit address. Using historical precendent, it would cost an estimated $32,997,989 to transport $1 billion in gold using the 3.3% fee that the Soviets charged the Spaniards in 1936; a $1 billion Bitcoin transaction moved for $690 last year by comparison. Please note that the only historic example we can provide for moving enormous sums of gold was when the government of Spain transported gold to Moscow during the Spanish Civil War in 1936. More information on this topic will be found in the notes section. Storage costs: 100 ounces of gold would require $451 per year to custody while the equivalent value of Bitcoin in dollar terms could be stored for the cost of a Ledger Nano S, $59.99. $1 billion USD value of gold would cost $2,900,000 per year while an Armory set up that is more secure would run you the cost of a laptop, $200-300. Censorship factor: Gold must pass through a 3rd party whenever it is shipped, whether for a transaction or for personal transportation. Gold will typically have to be declared and a customs duty may be imposed when crossing international borders. The key take-away is gatekeepers (customs) can halt movement of gold thus making transactions difficult. $46,000 of gold was seized in India despite the smugglers hiding it in their rectums. Settlement time: Shipping gold based on 100 ounces takes anywhere from 3-10 days while Bitcoin transactions clear in roughly 10 minutes depending on network congestion and fee size. Historic confiscation: Franklin Roosevelt confiscated and debased the paper value of gold in 1933 with Executive Order 6102. Since gold is physical in nature and value dense, it is often stored in custodial vaults like banks and so forth which act as a honeypot for rapacious governments. Stock to flow: Plan B's stock to flow model has become a favorite on twitter. Stock to flow measures the relationship between the total stock of an asset against the amount that is produced in a given year. Currently gold still has the highest value at 62 while Bitcoin sits at 50 in 2nd place. Bitcoin will overtake gold in 2024 after the next halving. Blockchain vs clearing house: gold payments historically passed through a 3rd party (clearinghouse) in order to be validated while Bitcoin transactions can be self validated through the use of a node. Key Takeaway from above- Bitcoin is vastly superior to gold in terms of cost, speed, and censorship resistance. One could theoretically carry around an enormous sum of Bitcoin on a cold card while the equivalent dollar value of gold would require a wheelbarrow...and create an enormous target on the back of the transporter. With the exception of the stock to flow ratio (which will flip in Bitcoin's favor soon), Bitcoin is superior to gold by all metrics covered. Notes: Shipping/transaction costs Gold 100 oz = 155,500. 45 x 7 = $315 to ship 100 oz gold. https://seekingalpha.com/instablog/839735-katchum/2547831-how-much-does-it-cost-to-ship-silver-and-gold https://www.coininvest.com/en/shipping-prices/ 211 tonnes Venezuela; 3.3% of $10.5 billion = 346,478,880 or 32,997,989/billion usd http://blogs.reuters.com/felix-salmon/2011/08/23/how-to-get-12-billion-of-gold-to-venezuela/ (counter party risk; maduro; quotes from article) Bitcoin 18 bitcoin equivalent value; 35 USD with legacy address https://blockexplorer.com/ https://bitcoinfees.info/ 1 billion; $690 dollars https://arstechnica.com/tech-policy/2019/09/someone-moved-1-billion-in-a-single-bitcoin-transaction/ Storage costs Gold .29% annually; https://sdbullion.com/gold-silver-storage 100 oz – $451/year $1 billion USD value – $2,900,000/year Bitcoin Ledger Nano S - $59.00 (for less bitcoin) https://shop.ledger.com/products/ledger-nano-s/transparent?flow_country=USA&gclid=EAIaIQobChMI3ILV5O-Z5wIVTtbACh1zTAwqEAQYASABEgJ5SPD_BwE Armory - $200-300 cost of laptop for setup https://www.bitcoinarmory.com/ Censorship factor (must pass through 3rd party) Varies by country Gold will typically have to be declared and a customs duty may be imposed Key take-away is gatekeepers (customs) can halt movement of gold thus making transactions difficult $46,000 seized in India https://www.foxnews.com/travel/indian-airport-stops-29-passengers-smuggling-gold-in-their-rectums Settlement time Gold For 100 oz transaction by USPS 3-10 days (must pass through 3rd party) Bitcoin Roughly 10 minutes to be included in next block Historic confiscation-roosevelt 1933 Executive Order 6102 (forced spending, fed could ban cash, go through and get quotes) https://en.wikipedia.org/wiki/Executive_Order_6102 “The stated reason for the order was that hard times had caused "hoarding" of gold, stalling economic growth and making the depression worse” Stock to flow; https://medium.com/@100trillionUSD/modeling-bitcoins-value-with-scarcity-91fa0fc03e25 (explain what it is and use charts in article) Gold; SF of 62 Bitcoin; SF of 25 but will double to 50 after May (and to 100 in four years) Blockchain vs clearing house Transactions can be validated by running a full node vs. third party settlement Validation Gold; https://www.goldismoney2.com/threads/cost-to-assay.6732/ (Read some responses) Bitcoin Cost of electricity to run a full node Breaking down Venezuela conundrum; http://blogs.reuters.com/felix-salmon/2011/08/23/how-to-get-12-billion-of-gold-to-venezuela/ “The last (and only) known case of this kind of quantity of gold being transported across state lines took place almost exactly 75 years ago, in 1936, when the government of Spain removed 560 tons of gold from Madrid to Moscow as the armies of Francisco Franco approached. Most of the gold was exchanged for Russian weaponry, with the Soviet Union keeping 2.1% of the funds in the form of commissions and brokerage, and an additional 1.2% in the form of transport, deposit, melting, and refining expenses.” “Venezuela would need to transport the gold in several trips, traders said, since the high value of gold means it would be impossible to insure a single aircraft carrying 211 tonnes. It could take about 40 shipments to move the gold back to Caracas, traders estimated. “It’s going to be quite a task. Logistically, I’m not sure if the central bank realises the magnitude of the task ahead of them,” said one senior gold banker.” “So maybe Chávez intends to take matters into his own hands, and just sail the booty back to Venezuela on one of his own naval ships. Again, the theft risk is obvious — seamen can be greedy too — and this time there would be no insurance. Chávez is pretty crazy, but I don’t think he’d risk $12 billion that way.” “Which leaves one final alternative. Gold is fungible, and people are actually willing to pay a premium to buy gold which is sitting in the Bank of England’s ultra-secure vaults. So why bother transporting that gold at all? Venezuela could enter into an intercontinental repo transaction, where it sells its gold in the Bank of England to some counterparty, and then promises to buy it all back at a modest discount, on condition that it’s physically delivered to the Venezuelan central bank in Caracas. It would then be up to the counterparty to work out how to get 211 tons of gold to Caracas by a certain date. That gold could be sourced anywhere in the world, and transported in any conceivable manner — being much less predictable and transparent, those shipments would also be much harder to hijack. How much of a discount would a counterparty require to enter into this kind of transaction? Much more than 3.3%, is my guess. And again, it’s not entirely clear who would even be willing to entertain the idea. Glencore, perhaps?” “But here’s one last idea: why doesn’t Chávez crowdsource the problem? He could simply open a gold window at the Banco Central de Venezuela, where anybody at all could deliver standard gold bars. In return, the central bank would transfer to that person an equal number of gold bars in the custody of the Bank of England, plus a modest bounty of say 2% — that’s over $15,000 per 400-ounce bar, at current rates. It would take a little while, but eventually the gold would start trickling in: if you’re willing to pay a constant premium of 2% over the market price for a good, you can be sure that the good in question will ultimately find its way to your door. And the 2% cost of acquiring all that gold would surely be much lower than the cost of insuring and shipping it from England. It would be an elegant market-based solution to an artificial and ideologically-driven problem; I daresay Chávez might even chuckle at the irony of it. He’d just need to watch out for a rise in Andean banditry, as thieves tried to steal the bars on their disparate journeys into Venezuela.”
Lines of Navigation | Monthly Portfolio Update - July 202
Our little systems have their day; They have their day and cease to be - Tennyson, In Memoriam A.H.H. This is my forty-fourth portfolio update. I complete this update monthly to check my progress against my goal. Portfolio goal My objective is to reach a portfolio of $2 180 000 by 1 July 2021. This would produce a real annual income of about $87 000 (in 2020 dollars). This portfolio objective is based on an expected average real return of 3.99 per cent, or a nominal return of 6.49 per cent. Portfolio summary
Vanguard Lifestrategy High Growth Fund - $716 680
Vanguard Lifestrategy Growth Fund - $41 103
Vanguard Lifestrategy Balanced Fund - $77 788
Vanguard Diversified Bonds Fund - $111 667
Vanguard Australian Shares ETF (VAS) - $202 336
Vanguard International Shares ETF (VGS) - $54 872
Betashares Australia 200 ETF (A200) - $230 058
Telstra shares (TLS) -$1 785
Insurance Australia Group shares (IAG) - $6 449
NIB Holdings shares (NHF) - $5 316
Gold ETF (GOLD.ASX) - $124 756
Secured physical gold - $20 070
Ratesetter (P2P lending) - $9 881
Bitcoin - $173 010
Raiz app (Aggressive portfolio) - $17 258
Spaceship Voyager app (Index portfolio) -$2 619
BrickX (P2P rental real estate) - $4 471
Total portfolio value: $1 800 119 (+$34 376 or 1.9%) Asset allocation
Australian shares - 41.1%
Global shares- 22.2%
Emerging market shares - 2.2%
International small companies - 2.9%
Total international shares - 27.3%
Total shares - 68.4% (6.6% under)
Total property securities - 0.2% (0.2% over)
Australian bonds - 4.5%
International bonds - 9.1%
Total bonds - 13.6% (1.4% under)
Gold - 8.0%
Bitcoin - 9.6%
Gold and alternatives - 17.7% (7.7% over)
Presented visually, below is a high-level view of the current asset allocation of the portfolio. [Chart] Comments The portfolio has substantially increased this month, continuing the recovery in portfolio value since March. The strong portfolio growth of over $34 000, or 1.9 per cent, returns the value of the portfolio close to that achieved at the end of February this year. [Chart] This month there was minimal movement in the value of Australian and global equity holdings, There was, however, a significant lift of around 6 per cent in the value of gold exchange traded fund units, as well as a rise in the value of Bitcoin holdings. These movements have pushed the value of gold holdings to their highest level so far on the entire journey. Their total value has approximately doubled since the original major purchases across 2009 to 2015. For most of the past year gold has functioned as a portfolio stabiliser, having a negative correlation to movements in Australian equities (of around -0.3 to -0.4). As low and negative bond rates spread across the world, however, the opportunity cost of holding gold is reduced, and its potential diversification benefits loom larger. The fixed income holdings of the portfolio also continued to fall beneath the target allocation, making this question of what represents a defensive (or negatively correlated to equity) asset far from academic. This steady fall is a function of the slow maturing of Ratesetter loans, which were largely made between 2015 and 2017. Ratesetter has recently advised of important changes to its market operation, and placed a fixed maximum cap on new loan rates. By replacing market set rates with maximum rates, the peer-to-peer lending platform appears to be shifting to more of a 'intermediated' role in which higher past returns (of around 8 to 9 per cent) will now no longer be possible. [Chart] The expanding value of gold and Bitcoin holdings since January last year have actually had the practical effect of driving new investments into equities, since effectively for each dollar of appreciation, for example, my target allocation to equities rises by seven dollars. Consistent with this, investments this month have been in the Vanguard international shares exchange-traded fund (VGS) using Selfwealth. This has been directed to bring my actual asset allocation more closely in line with the target split between Australian and global shares. Fathoming out: franking credits and portfolio distributions Earlier last month I released a summary of portfolio income over the past half year. This, like all before it, noted that the summary was prepared on a purely 'cash' basis, reflecting dividends actually paid into a bank account, and excluding consideration of franking credits. Franking credits are credits for company tax paid at the company level, which can be passed to individual shareholders, reducing their personal tax liability. They are not cash, but for a personal investor with tax liabilities they can have equivalent value. This means that comparing equity returns to other investments without factoring these credits can produce a distorted picture of an investor's final after-tax return. In past portfolio summaries I have noted an estimate for franking credits in footnotes, but updating the value for this recently resulted in a curiosity about the overall significance of this neglected element of my equity returns. This neglect resulted from my perception earlier in the journey that they represented a marginal and abstract factor, which could effectively be assumed away for the sake of simplicity in reporting. This is not a wholly unfair view, in the sense that income physically received and able to be spent is something definably different in kind than a notional 'pre-payment' credit for future tax costs. Yet, as the saying goes, because the prospect of personal tax is as certain as extinction from this world, in some senses a credit of this kind can be as valuable as a cash distribution. Restoring the record: trends and drivers of franking credits To collect a more accurate picture of the trends and drivers of franking credits I relied on a few sources - tax statements, records and the automatic franking credit estimates that the portfolio tracking site Sharesight generates. The chart below sets out both the level and major different sources of franking credits received over the past eleven years. [Chart] From this chart some observations can be made.
The level of franking credits has grown substantially over the past ten years - from a total of under $1 000 per year to around $8 000 annually.
Recent years have seen a particularly high accrual of franking credits - such that by value, over half of the total value of franking credits has been received over the past three financial years.
These credits now constitute a significant element in total realised returns - in the last financial year the value of franking credits represented a 12 per cent boost to the total level of cash distributions, and over the past two years they have contributed around $8 000 each year to the total level of after-tax returns. This is the equivalent of the portfolio paying nearly $700 per month in tax liabilities.
The key reason for the rapid growth over the recent decade has been the increased investment holdings in Australian equities. As part of the deliberate rebalancing towards Australian shares across the past two years, these holdings have expanded. The chart below sets out the total value of Australian shares held over the comparable period. [Chart] As an example, at the beginning of this record Australian equities valued at around $276 000 were held. Three years later, the holding were nearly three times larger. The phase of consistently increasing the Australian equities holding to meet its allocated weighting is largely complete. This means that the period of rapid growth seen in the past few years is unlikely to repeat. Rather, growth will revert to be in proportion to total portfolio growth. Close to cross-over: the credit card records One of the most powerful initial motivators to reach financial independence was the concept of the 'cross over' point in Vicki Robins and Joe Dominguez's Your Money or Your Life. This was the point at which monthly expenses are exceeded by investment income. One of the metrics I have traced is this 'cross-over' point in relation to recorded credit card expenses. And this point is now close indeed. Expenditures on the credit card have continued their downward trajectory across the past month. The three year rolling average of monthly credit card spending remains at its lowest point over the period of the journey. Distributions on the same basis now meet over 99 per cent of card expenses - with the gap now the equivalent of less than $50 per month. [Chart] The period since April of the achievement of a notional and contingent form of financial independence has continued. The below chart illustrates this temporary state, setting out the the extent to which to which portfolio distributions (red) cover estimated total expenses (green), measured month to month. [Chart] An alternative way to view the same data is to examine the degree to which total expenses (i.e. fixed payments not made on credit card added to monthly credit card expenses) are met by distributions received. An updated version of this is seen in the chart below. [Chart] Interestingly, on a trend basis, this currently identifies a 'crossing over' point of trend distributions fully meeting total expenditure from around November 2019. This is not conclusive, however, as the trend curve is sensitive to the unusual COVID-19 related observations of the first half of this year, and could easily shift further downward if normal expense patterns resume. One issue this analysis raises is what to do with the 'credit card purchases' measure reported below. This measure is designed to provide a stylised benchmark of how close the current portfolio is to a target of generating the income required to meet an annual average credit card expenditure of $71 000. The problem with this is that continued falling credit card spending means that average credit card spending is lower than that benchmark for all time horizons - measured as three and four year averages, or in fact taken as a whole since 2013. So the set benchmark may, if anything, be understating actual progress compared the graphs and data above by not reflecting changing spending levels. In the past I have addressed this trend by reducing the benchmark. Over coming months, or perhaps at the end of the year, I will need to revisit both the meaning, and method, of setting this measure. Progress Progress against the objective, and the additional measures I have reached is set out below. Measure Portfolio All Assets Portfolio objective – $2 180 000 (or $87 000 pa) 82.6% 111.5% Credit card purchases – $71 000 pa 100.7% 136.0% Total expenses – $89 000 pa 80.7% 109.0% Summary One of the most challenging aspects of closing in on a fixed numerical target for financial independence with risk assets still in place is that the updrafts and downdrafts of market movements can push the goal further away, or surprisingly close. There have been long period of the journey where the total value of portfolio has barely grown, despite regular investments being made. As an example, the portfolio ended 2018 lower than it started the year. The past six months have been another such period. This can create a sense of treading water. Yet amidst the economic devastation affecting real lives and businesses, this is an extremely fortunate position to be in. Australia and the globe are set to experience an economic contraction far more severe than the Global Financial Crisis, with a lesser capacity than previously for interest rates to cushion the impact. Despite similar measures being adopted by governments to address the downturn, it is not clear whether these are fit for purpose. Asset allocation in this environment - of being almost suspended between two realities - is a difficult problem. The history of markets can tell us that just when assets seem most 'broken', they can produce outsized returns. Yet the problem remains that far from being surrounded by broken markets, the proliferation appears to be in bubble-like conditions. This recent podcast discussion with the founder of Grant's Interest Rate Observer provided a useful historical context to current financial conditions this month. One of the themes of the conversation was 'thinking the unthinkable', such as a return of inflation. Similar, this Hoover Institute video discussion, with a 'Back from the future' premise, provides some entertaining, informed and insightful views on the surprising and contingent nature of what we know to be true. Some of our little systems may well have had their day, but what could replace them remains obscured to any observer. The post, links and full charts can be seen here.
The Next Crypto Wave: The Rise of Stablecoins and its Entry to the U.S. Dollar Market
Author: Christian Hsieh, CEO of Tokenomy This paper examines some explanations for the continual global market demand for the U.S. dollar, the rise of stablecoins, and the utility and opportunities that crypto dollars can offer to both the cryptocurrency and traditional markets. The U.S. dollar, dominant in world trade since the establishment of the 1944 Bretton Woods System, is unequivocally the world’s most demanded reserve currency. Today, more than 61% of foreign bank reserves and nearly 40% of the entire world’s debt is denominated in U.S. dollars1. However, there is a massive supply and demand imbalance in the U.S. dollar market. On the supply side, central banks throughout the world have implemented more than a decade-long accommodative monetary policy since the 2008 global financial crisis. The COVID-19 pandemic further exacerbated the need for central banks to provide necessary liquidity and keep staggering economies moving. While the Federal Reserve leads the effort of “money printing” and stimulus programs, the current money supply still cannot meet the constant high demand for the U.S. dollar2. Let us review some of the reasons for this constant dollar demand from a few economic fundamentals.
Demand for U.S. Dollars
Firstly, most of the world’s trade is denominated in U.S. dollars. Chief Economist of the IMF, Gita Gopinath, has compiled data reflecting that the U.S. dollar’s share of invoicing was 4.7 times larger than America’s share of the value of imports, and 3.1 times its share of world exports3. The U.S. dollar is the dominant “invoicing currency” in most developing countries4. https://preview.redd.it/d4xalwdyz8p51.png?width=535&format=png&auto=webp&s=9f0556c6aa6b29016c9b135f3279e8337dfee2a6 https://preview.redd.it/wucg40kzz8p51.png?width=653&format=png&auto=webp&s=71257fec29b43e0fc0df1bf04363717e3b52478f This U.S. dollar preference also directly impacts the world’s debt. According to the Bank of International Settlements, there is over $67 trillion in U.S. dollar denominated debt globally, and borrowing outside of the U.S. accounted for $12.5 trillion in Q1 20205. There is an immense demand for U.S. dollars every year just to service these dollar debts. The annual U.S. dollar buying demand is easily over $1 trillion assuming the borrowing cost is at 1.5% (1 year LIBOR + 1%) per year, a conservative estimate. https://preview.redd.it/6956j6f109p51.png?width=487&format=png&auto=webp&s=ccea257a4e9524c11df25737cac961308b542b69 Secondly, since the U.S. has a much stronger economy compared to its global peers, a higher return on investments draws U.S. dollar demand from everywhere in the world, to invest in companies both in the public and private markets. The U.S. hosts the largest stock markets in the world with more than $33 trillion in public market capitalization (combined both NYSE and NASDAQ)6. For the private market, North America’s total share is well over 60% of the $6.5 trillion global assets under management across private equity, real assets, and private debt investments7. The demand for higher quality investments extends to the fixed income market as well. As countries like Japan and Switzerland currently have negative-yielding interest rates8, fixed income investors’ quest for yield in the developed economies leads them back to the U.S. debt market. As of July 2020, there are $15 trillion worth of negative-yielding debt securities globally (see chart). In comparison, the positive, low-yielding U.S. debt remains a sound fixed income strategy for conservative investors in uncertain market conditions. Source: Bloomberg Last, but not least, there are many developing economies experiencing failing monetary policies, where hyperinflation has become a real national disaster. A classic example is Venezuela, where the currency Bolivar became practically worthless as the inflation rate skyrocketed to 10,000,000% in 20199. The recent Beirut port explosion in Lebanon caused a sudden economic meltdown and compounded its already troubled financial market, where inflation has soared to over 112% year on year10. For citizens living in unstable regions such as these, the only reliable store of value is the U.S. dollar. According to the Chainalysis 2020 Geography of Cryptocurrency Report, Venezuela has become one of the most active cryptocurrency trading countries11. The demand for cryptocurrency surges as a flight to safety mentality drives Venezuelans to acquire U.S. dollars to preserve savings that they might otherwise lose. The growth for cryptocurrency activities in those regions is fueled by these desperate citizens using cryptocurrencies as rails to access the U.S. dollar, on top of acquiring actual Bitcoin or other underlying crypto assets.
The Rise of Crypto Dollars
Due to the highly volatile nature of cryptocurrencies, USD stablecoin, a crypto-powered blockchain token that pegs its value to the U.S. dollar, was introduced to provide stable dollar exposure in the crypto trading sphere. Tether is the first of its kind. Issued in 2014 on the bitcoin blockchain (Omni layer protocol), under the token symbol USDT, it attempts to provide crypto traders with a stable settlement currency while they trade in and out of various crypto assets. The reason behind the stablecoin creation was to address the inefficient and burdensome aspects of having to move fiat U.S. dollars between the legacy banking system and crypto exchanges. Because one USDT is theoretically backed by one U.S. dollar, traders can use USDT to trade and settle to fiat dollars. It was not until 2017 that the majority of traders seemed to realize Tether’s intended utility and started using it widely. As of April 2019, USDT trading volume started exceeding the trading volume of bitcoina12, and it now dominates the crypto trading sphere with over $50 billion average daily trading volume13. https://preview.redd.it/3vq7v1jg09p51.png?width=700&format=png&auto=webp&s=46f11b5f5245a8c335ccc60432873e9bad2eb1e1 An interesting aspect of USDT is that although the claimed 1:1 backing with U.S. dollar collateral is in question, and the Tether company is in reality running fractional reserves through a loose offshore corporate structure, Tether’s trading volume and adoption continues to grow rapidly14. Perhaps in comparison to fiat U.S. dollars, which is not really backed by anything, Tether still has cash equivalents in reserves and crypto traders favor its liquidity and convenience over its lack of legitimacy. For those who are concerned about Tether’s solvency, they can now purchase credit default swaps for downside protection15. On the other hand, USDC, the more compliant contender, takes a distant second spot with total coin circulation of $1.8 billion, versus USDT at $14.5 billion (at the time of publication). It is still too early to tell who is the ultimate leader in the stablecoin arena, as more and more stablecoins are launching to offer various functions and supporting mechanisms. There are three main categories of stablecoin: fiat-backed, crypto-collateralized, and non-collateralized algorithm based stablecoins. Most of these are still at an experimental phase, and readers can learn more about them here. With the continuous innovation of stablecoin development, the utility stablecoins provide in the overall crypto market will become more apparent.
In addition to trade settlement, stablecoins can be applied in many other areas. Cross-border payments and remittances is an inefficient market that desperately needs innovation. In 2020, the average cost of sending money across the world is around 7%16, and it takes days to settle. The World Bank aims to reduce remittance fees to 3% by 2030. With the implementation of blockchain technology, this cost could be further reduced close to zero. J.P. Morgan, the largest bank in the U.S., has created an Interbank Information Network (IIN) with 416 global Institutions to transform the speed of payment flows through its own JPM Coin, another type of crypto dollar17. Although people argue that JPM Coin is not considered a cryptocurrency as it cannot trade openly on a public blockchain, it is by far the largest scale experiment with all the institutional participants trading within the “permissioned” blockchain. It might be more accurate to refer to it as the use of distributed ledger technology (DLT) instead of “blockchain” in this context. Nevertheless, we should keep in mind that as J.P. Morgan currently moves $6 trillion U.S. dollars per day18, the scale of this experiment would create a considerable impact in the international payment and remittance market if it were successful. Potentially the day will come when regulated crypto exchanges become participants of IIN, and the link between public and private crypto assets can be instantly connected, unlocking greater possibilities in blockchain applications. Many central banks are also in talks about developing their own central bank digital currency (CBDC). Although this idea was not new, the discussion was brought to the forefront due to Facebook’s aggressive Libra project announcement in June 2019 and the public attention that followed. As of July 2020, at least 36 central banks have published some sort of CBDC framework. While each nation has a slightly different motivation behind its currency digitization initiative, ranging from payment safety, transaction efficiency, easy monetary implementation, or financial inclusion, these central banks are committed to deploying a new digital payment infrastructure. When it comes to the technical architectures, research from BIS indicates that most of the current proofs-of-concept tend to be based upon distributed ledger technology (permissioned blockchain)19. https://preview.redd.it/lgb1f2rw19p51.png?width=700&format=png&auto=webp&s=040bb0deed0499df6bf08a072fd7c4a442a826a0 These institutional experiments are laying an essential foundation for an improved global payment infrastructure, where instant and frictionless cross-border settlements can take place with minimal costs. Of course, the interoperability of private DLT tokens and public blockchain stablecoins has yet to be explored, but the innovation with both public and private blockchain efforts could eventually merge. This was highlighted recently by the Governor of the Bank of England who stated that “stablecoins and CBDC could sit alongside each other20”. One thing for certain is that crypto dollars (or other fiat-linked digital currencies) are going to play a significant role in our future economy.
There is never a dull moment in the crypto sector. The industry narratives constantly shift as innovation continues to evolve. Twelve years since its inception, Bitcoin has evolved from an abstract subject to a familiar concept. Its role as a secured, scarce, decentralized digital store of value has continued to gain acceptance, and it is well on its way to becoming an investable asset class as a portfolio hedge against asset price inflation and fiat currency depreciation.Stablecoins have proven to be useful as proxy dollars in the crypto world, similar to how dollars are essential in the traditional world. It is only a matter of time before stablecoins or private digital tokens dominate the cross-border payments and global remittances industry. There are no shortages of hypes and experiments that draw new participants into the crypto space, such as smart contracts, new blockchains, ICOs, tokenization of things, or the most recent trends on DeFi tokens. These projects highlight the possibilities for a much more robust digital future, but the market also needs time to test and adopt. A reliable digital payment infrastructure must be built first in order to allow these experiments to flourish. In this paper we examined the historical background and economic reasons for the U.S. dollar’s dominance in the world, and the probable conclusion is that the demand for U.S. dollars will likely continue, especially in the middle of a global pandemic, accompanied by a worldwide economic slowdown. The current monetary system is far from perfect, but there are no better alternatives for replacement at least in the near term. Incremental improvements are being made in both the public and private sectors, and stablecoins have a definite role to play in both the traditional and the new crypto world. Thank you. Reference:  How the US dollar became the world’s reserve currency, Investopedia  The dollar is in high demand, prone to dangerous appreciation, The Economist  Dollar dominance in trade and finance, Gita Gopinath  Global trades dependence on dollars, The Economist & IMF working papers  Total credit to non-bank borrowers by currency of denomination, BIS  Biggest stock exchanges in the world, Business Insider  McKinsey Global Private Market Review 2020, McKinsey & Company  Central banks current interest rates, Global Rates  Venezuela hyperinflation hits 10 million percent, CNBC  Lebanon inflation crisis, Reuters  Venezuela cryptocurrency market, Chainalysis  The most used cryptocurrency isn’t Bitcoin, Bloomberg  Trading volume of all crypto assets, coinmarketcap.com  Tether US dollar peg is no longer credible, Forbes  New crypto derivatives let you bet on (or against) Tether’s solvency, Coindesk  Remittance Price Worldwide, The World Bank  Interbank Information Network, J.P. Morgan  Jamie Dimon interview, CBS News  Rise of the central bank digital currency, BIS  Speech by Andrew Bailey, 3 September 2020, Bank of England
Testing the Tide | Monthly FIRE Portfolio Update - June 2020
We would rather be ruined than changed. -W H Auden, The Age of Anxiety This is my forty-third portfolio update. I complete this update monthly to check my progress against my goal. Portfolio goal My objective is to reach a portfolio of $2 180 000 by 1 July 2021. This would produce a real annual income of about $87 000 (in 2020 dollars). This portfolio objective is based on an expected average real return of 3.99 per cent, or a nominal return of 6.49 per cent. Portfolio summary Vanguard Lifestrategy High Growth Fund – $726 306 Vanguard Lifestrategy Growth Fund – $42 118 Vanguard Lifestrategy Balanced Fund – $78 730 Vanguard Diversified Bonds Fund – $111 691 Vanguard Australian Shares ETF (VAS) – $201 745 Vanguard International Shares ETF (VGS) – $39 357 Betashares Australia 200 ETF (A200) – $231 269 Telstra shares (TLS) – $1 668 Insurance Australia Group shares (IAG) – $7 310 NIB Holdings shares (NHF) – $5 532 Gold ETF (GOLD.ASX) – $117 757 Secured physical gold – $18 913 Ratesetter (P2P lending) – $10 479 Bitcoin – $148 990 Raiz app (Aggressive portfolio) – $16 841 Spaceship Voyager app (Index portfolio) – $2 553 BrickX (P2P rental real estate) – $4 484 Total portfolio value: $1 765 743 (+$8 485 or 0.5%) Asset allocation Australian shares – 42.2% (2.8% under) Global shares – 22.0% Emerging markets shares – 2.3% International small companies – 3.0% Total international shares – 27.3% (2.7% under) Total shares – 69.5% (5.5% under) Total property securities – 0.3% (0.3% over) Australian bonds – 4.7% International bonds – 9.4% Total bonds – 14.0% (1.0% under) Gold – 7.7% Bitcoin – 8.4% Gold and alternatives – 16.2% (6.2% over) Presented visually, below is a high-level view of the current asset allocation of the portfolio. [Chart] Comments The overall portfolio increased slightly over the month. This has continued to move the portfolio beyond the lows seen in late March. The modest portfolio growth of $8 000, or 0.5 per cent, maintains its value at around that achieved at the beginning of the year. [Chart] The limited growth this month largely reflects an increase in the value of my current equity holdings, in VAS and A200 and the Vanguard retail funds. This has outweighed a small decline in the value of Bitcoin and global shares. The value of the bond holdings also increased modestly, pushing them to their highest value since around early 2017. [Chart] There still appears to be an air of unreality around recent asset price increases and the broader economic context. Britain's Bank of England has on some indicators shown that the aftermath of the pandemic and lockdown represent the most challenging financial crisis in around 300 years. What is clear is that investor perceptions and fear around the coronavirus pandemic are a substantial ongoing force driving volatility in equity markets (pdf). A somewhat optimistic view is provided here that the recovery could look more like the recovery from a natural disaster, rather than a traditional recession. Yet there are few certainties on offer. Negative oil prices, and effective offers by US equity investors to bail out Hertz creditors at no cost appear to be signs of a financial system under significant strains. As this Reserve Bank article highlights, while some Australian households are well-placed to weather the storm ahead, the timing and severity of what lays ahead is an important unknown that will itself feed into changes in household wealth from here. Investments this month have been exclusively in the Australian shares exchange-traded fund (VAS) using Selfwealth.* This has been to bring my actual asset allocation more closely in line with the target split between Australian and global shares. A moving azimuth: falling spending continues Monthly expenses on the credit card have continued their downward trajectory across the past month. [Chart] The rolling average of monthly credit card spending is now at its lowest point over the period of the journey. This is despite the end of lockdown, and a slow resumption of some more normal aspects of spending. This has continued the brief period since April of the achievement of a notional and contingent kind of financial independence. The below chart illustrates this temporary state, setting out the degree to which portfolio distributions cover estimated total expenses, measured month to month. [Chart] There are two sources of volatility underlying its movement. The first is the level of expenses, which can vary, and the second is the fact that it is based on financial year distributions, which are themselves volatile. Importantly, the distributions over the last twelve months of this chart is only an estimate - and hence the next few weeks will affect the precision of this analysis across its last 12 observations. Estimating 2019-20 financial year portfolio distributions Since the beginning of the journey, this time of year usually has sense of waiting for events to unfold - in particular, finding out the level of half-year distributions to June. These represent the bulk of distributions, usually averaging 60-65 per cent of total distributions received. They are an important and tangible signpost of progress on the financial independence journey. This is no simple task, as distributions have varied in size considerably. A part of this variation has been the important role of sometimes large and lumpy capital distributions - which have made up between 30 to 48 per cent of total distributions in recent years, and an average of around 15 per cent across the last two decades. I have experimented with many different approaches, most of which have relied on averaging over multi-year periods to even out the 'peaks and troughs' of how market movements may have affected distributions. The main approaches have been:
An 'adjusted income' approach - stripping out the capital gains components of Vanguard funds to reach an estimate of underlying income generation, both across the entire investment period, and during the sharpest low of the Global Financial Crisis
A long-term asset class approach - relying on long-term historical data on averages of the income produced by various asset classes
A 'tax method' approach - this derives an income estimate as a percentage of the portfolio by drawing on taxable investment income totals from tax return records
Simple historical rolling average - this is a rolling three-year measure, based on the actual distributions record of the portfolio
Average distribution rate approach - this method uses a long-term average of annual distributions received as a percentage of the total portfolio since 1999
Each of these have their particular simplifications, advantages and drawbacks. Developing new navigation tools Over the past month I have also developed more fully an alternate 'model' for estimating returns. This simply derives a median value across a set of historical 'cents per unit' distribution data for June and December payouts for the Vanguard funds and exchange traded funds. These make up over 96 per cent of income producing portfolio assets. In other words, this model essentially assumes that each Vanguard fund and ETF owned pays out the 'average' level of distributions this half-year, with the average being based on distribution records that typically go back between 5 to 10 years. Mapping the distribution estimates The chart below sets out the estimate produced by each approach for the June distributions that are to come. [Chart] Some observations on these findings can be made. The lowest estimate is the 'adjusted GFC income' observation, which essentially assumes that the income for this period is as low as experienced by the equity and bond portfolio during the Global Financial Crisis. Just due to timing differences of the period observed, this seems to be a 'worst case' lower bound estimate, which I do not currently place significant weight on. Similarly, at the highest end, the 'average distribution rate' approach simply assumes June distributions deliver a distribution equal to the median that the entire portfolio has delivered since 1999. With higher interest rates, and larger fixed income holdings across much of that time, this seems an objectively unlikely outcome. Similarly, the delivery of exactly the income suggested by long-term averages measured across decades and even centuries would be a matter of chance, rather than the basis for rational expectations. Central estimates of the line of position This leaves the estimates towards the centre of the chart - estimates of between around $28 000 to $43 000 as representing the more likely range. I attach less weight to the historical three-year average due to the high contribution of distributed capital gains over that period of growth, where at least across equities some capital losses are likely to be in greater presence. My preferred central estimate is the model estimate (green) , as it is based in historical data directly from the investment vehicles rather than my own evolving portfolio. The data it is based on in some cases goes back to the Global Financial Crisis. This estimate is also quite close to the raw average of all the alternative approaches (red). It sits a little above the 'adjusted income' measure. None of these estimates, it should be noted, contain any explicit adjustment for the earnings and dividend reductions or delays arising from COVID-19. They may, therefore represent a modest over-estimate for likely June distributions, to the extent that these effects are more negative than those experienced on average across the period of the underlying data. These are difficult to estimate, but dividend reductions could easily be in the order of 20-30 per cent, plausibly lowering distributions to the $23 000 to $27 000 range. The recently announced forecast dividend for the Vanguard Australian Shares ETF (VAS) is, for example, the lowest in four years. As seen from chart above, there is a wide band of estimates, which grow wider still should capital gains be unexpectedly distributed from the Vanguard retail funds. These have represented a source of considerable volatility. Given this, it may seem fruitless to seek to estimate these forthcoming distributions, compared to just waiting for them to arrive. Yet this exercise helps by setting out reasoning and positions, before hindsight bias urgently arrives to inform me that I knew the right answer all along. It also potentially helps clearly 'reject' some models over time, if the predictions they make prove to be systematically incorrect. Progress Progress against the objective, and the additional measures I have reached is set out below. Measure Portfolio All Assets Portfolio objective – $2 180 000 (or $87 000 pa) 81.0% 109.4% Credit card purchases – $71 000 pa 98.8% 133.5% Total expenses – $89 000 pa 79.2% 106.9% Summary The current coronavirus conditions are affecting all aspects of the journey to financial independence - changing spending habits, leading to volatility in equity markets and sequencing risks, and perhaps dramatically altering the expected pattern of portfolio distributions. Although history can provide some guidance, there is simply no definitive way to know whether any or all of these changes will be fundamental and permanent alterations, or simply data points on a post-natural disaster path to a different post-pandemic set of conditions. There is the temptation to fit past crises imperfectly into the modern picture, as this Of Dollars and Data post illustrates well. Taking a longer 100 year view, this piece 'The Allegory of the Hawk and Serpent' is a reminder that our entire set of received truths about constructing a portfolio to survive for the long-term can be a product of a sample size of one - actual past history - and subject to recency bias. This month has felt like one of quiet routines, muted events compared to the past few months, and waiting to understand more fully the shape of the new. Nonetheless, with each new investment, or week of lower expenditure than implied in my FI target, the nature of the journey is incrementally changing - beneath the surface. Small milestones are being passed - such as over 40 per cent of my equity holdings being outside of the the Vanguard retail funds. Or these these retail funds - which once formed over 95 per cent of the portfolio - now making up less than half. With a significant part of the financial independence journey being about repeated small actions producing outsized results with time, the issue of maintaining good routines while exploring beneficial changes is real. Adding to the complexity is that embarking on the financial journey itself is likely to change who one is. This idea, of the difficulty or impossibility of knowing the preferences of a future self, is explored in a fascinating way in this Econtalk podcast episode with a philosophical thought experiment about vampires. It poses the question: perhaps we can never know ourselves at the destination? And yet, who would rationally choose ruin over any change? The post, links and full charts can be seen here.
Coinbase - The reference platform for investing in cryptocurrencies: here is the complete guide. Coinbase is currently the most famous website or web platform for trading cryptocurrencies. This is not a classic Exchange but a real Broker that allows you to buy, sell and convert many of the main cryptocurrencies - Bitcoin and Ethereum among others - using traditional currency such as the Euro. In this complete guide to Coinbase we will try to explain all its features in detail. Founded in 2012 by Brian Armstrong and Fred Ehrsam, it was born as a simple online Bitcoin wallet. Over time it has transformed into a cryptocurrency trading site that now reaches over 33 countries. Being a broker, registering on the site requires all the necessary steps (KYC) to verify the user who holds the account. By signing up via the following secure link you can immediately earn 10 Dollars which will be credited to you by Coinbase. Complete Guide to CoinBase Coinbase as well as an intermediary for the purchase and sale of over 15 cryptocurrencies directly in Euro, also provides a real exchange (crypto exchange site) called Coinbase Pro (ex-GDax): The exchange behaves as a normal stock trading site with purchases and sales in real time with obviously much lower commissions when compared with those of classic trading platforms. What Coinbase Pro offers. Coinbase can receive crypto from other exchanges and specifically generates more permanent online wallets that will always remain at your disposal. To all intents and purposes, Coinbase's main task is to act as an archive for its cryptocurrencies for all those who do not want to try their hand at decentralized wallets. The transfer between Coinbase and Coinbase Pro, for example, will be quick and free (but this does not apply to other exchanges) thus allowing all those who wish to trade between the main cryptocurrencies to be able to avoid expensive passages on other exchanges. Coinbase Pro allows you to exchange a range of cryptocurrencies with each other higher than that of its brother site but at a much lower cost. While on Coinbase the exchange between cryptocurrencies involves the payment of a maximum commission of 2%, on Coinbase Pro the rates fluctuate between 0.15 and 0.25%. Values that will tend to decrease as the volumes traded increase. The Coinbase account will also allow you to operate on Coinbase Pro. However, an additional request for user verification via Webcam may occur. All these levels of security are obviously necessary to protect customers and comply with the stringent regulations of the various countries in which the company operates. Thanks to the guide, let's see what the interface shows us. In this complete guide to Coinbase we also want to clarify the visual aspect. Once inside the site you will find yourself in the Dashboard or Home Page which will show from top to bottom the value of your Portfolio with its historical graph, the list of cryptocurrencies that you decide to keep under observation, a box that shows the 5 heaviest cryptocurrencies in your Portfolio (a pie chart is also available) and a second box with the latest transactions. In the center of the page there is also the link to register with Coinbase Earn. By subscribing to the waiting list, you will have the opportunity to receive an invitation that will make you earn additional cryptocurrencies simply by following some very short video courses lasting a few minutes. In addition to the Home Page, there is the Prices page with the listing of all the cryptocurrencies available on Coinbase and a very long list of those not available. By selecting the star on the right you can decide which ones to always keep in the foreground on the home page. Clicking on one of them will open a new screen that will offer a large amount of technical and historical information on the crypto in question as well as a fair number of constantly updated news. Your funds are well organized. The Portfolio page will report the amount of the balance in Euro of all the cryptocurrencies deposited on Coinbase. Here you can send and receive crypto to external wallets. By clicking on Overview you will be sent back to the Prices page just described. The Safe item, on the other hand, allows you to set aside cryptocurrency at a higher level of security. Finally, a brief description of the "Make Transactions" item visible at the top right and present in almost all Coinbase pages. By clicking on it in any position you find it on the site, a small screen will open with the items "Buy, Sell, Convert". To purchase, you will first need to associate a payment method to your account. The Credit Card would be the most immediate choice due to its rapidity in crediting if it were not for the high commissions required by Coinbase. We therefore recommend that you be patient and use a normal Sepa standard bank transfer to credit the funds. Selling your cryptocurrencies on Coinbase, depositing them in your Euro account, is simple and immediate as well as foolproof thanks to the Preview that will always be shown before confirming the transaction. This will involve the payment of a commission between 0.99 and 2.99 Dollars. Rather high fees due to its wallet nature. For those who love trading, we obviously recommend moving to the Pro version. The site offers a complete and comprehensive technical support page: https://support.coinbase.com/ We conclude this complete guide to Coinbase with a note on the mobile versions. There are two versions of for smartphones: a standard one called Coinbase Bitcoin Wallet and a personal one called Coinbase Wallet. This second app allows you to transfer your cryptocurrencies from Coinbase Standard to an encrypted wallet on your smartphone (Coinbase Wallet). The substantial difference is the following: Coinbase Standard is an online wallet and therefore subject to the remote risk of an external cyber attack while Coinbase Wallet stores the encryption key locally on the phone. https://play.google.com/store/apps/details?id=com.coinbase.android https://play.google.com/store/apps/details?id=org.toshi We remind trading enthusiasts of the availability on our blog of the article dedicated to Exodus Wallet. If you liked this article and would like to contribute with a donation: Bitcoin: 1Ld9b165ZYHZcY9eUQmL9UjwzcphRE5S8Z Ethereum: 0x8D7E456A11f4D9bB9e6683A5ac52e7DB79DBbEE7 Litecoin: LamSRc1jmwgx5xwDgzZNoXYd6ENczUZViK Stellar: GBLDIRIQWRZCN5IXPIKYFQOE46OG2SI7AFVWFSLAHK52MVYDGVJ6IXGI Ripple: rUb8v4wbGWYrtXzUpj7TxCFfUWgfvym9xf By: cryptoall.it Telegram Channel: t.me/giulo75 Netbox Browser: https://netbox.global/PZn5A https://www.coinbase.com/join/rosa_fj https://coinbase.com/earn/eos/invite/6r5m2fwn https://coinbase.com/earn/oxt/invite/tkdjy946
﷽ The Federal Reserve and the United States government are pumping extreme amounts of money into the economy, already totaling over $484 billion. They are doing so because it already had a goal to inflate the United States Dollar (USD) so that the market can continue to all-time highs. It has always had this goal. They do not care how much inflation goes up by now as we are going into a depression with the potential to totally crash the US economy forever. They believe the only way to save the market from going to zero or negative values is to inflate it so much that it cannot possibly crash that low. Even if the market does not dip that low, inflation serves the interest of powerful people. The impending crash of the stock market has ramifications for Bitcoin, as, though there is no direct ongoing-correlation between the two, major movements in traditional markets will necessarily affect Bitcoin. According to the Blockchain Center’s Cryptocurrency Correlation Tool, Bitcoin is not correlated with the stock market. However, when major market movements occur, they send ripples throughout the financial ecosystem which necessary affect even ordinarily uncorrelated assets. Therefore, Bitcoin will reach X price on X date after crashing to a price of X by X date.
Stock Market Crash
The Federal Reserve has caused some serious consternation with their release of ridiculous amounts of money in an attempt to buoy the economy. At face value, it does not seem to have any rationale or logic behind it other than keeping the economy afloat long enough for individuals to profit financially and politically. However, there is an underlying basis to what is going on which is important to understand in order to profit financially. All markets are functionally price probing systems. They constantly undergo a price-discovery process. In a fiat system, money is an illusory and a fundamentally synthetic instrument with no intrinsic value – similar to Bitcoin. The primary difference between Bitcoin is the underlying technology which provides a slew of benefits that fiat does not. Fiat, however, has an advantage in being able to have the support of powerful nation-states which can use their might to insure the currency’s prosperity. Traditional stock markets are composed of indices (pl. of index). Indices are non-trading market instruments which are essentially summaries of business values which comprise them. They are continuously recalculated throughout a trading day, and sometimes reflected through tradable instruments such as Exchange Traded Funds or Futures. Indices are weighted by market capitalizations of various businesses. Price theory essentially states that when a market fails to take out a new low in a given range, it will have an objective to take out the high. When a market fails to take out a new high, it has an objective to make a new low. This is why price-time charts go up and down, as it does this on a second-by-second, minute-by-minute, day-by-day, and even century-by-century basis. Therefore, market indices will always return to some type of bull market as, once a true low is formed, the market will have a price objective to take out a new high outside of its’ given range – which is an all-time high. Instruments can only functionally fall to zero, whereas they can grow infinitely. So, why inflate the economy so much? Deflation is disastrous for central banks and markets as it raises the possibility of producing an overall price objective of zero or negative values. Therefore, under a fractional reserve system with a fiat currency managed by a central bank – the goal of the central bank is to depreciate the currency. The dollar is manipulated constantly with the intention of depreciating its’ value. Central banks have a goal of continued inflated fiat values. They tend to ordinarily contain it at less than ten percent (10%) per annum in order for the psyche of the general populace to slowly adjust price increases. As such, the markets are divorced from any other logic. Economic policy is the maintenance of human egos, not catering to fundamental analysis. Gross Domestic Product (GDP) growth is well-known not to be a measure of actual growth or output. It is a measure of increase in dollars processed. Banks seek to produce raising numbers which make society feel like it is growing economically, making people optimistic. To do so, the currency is inflated, though inflation itself does not actually increase growth. When society is optimistic, it spends and engages in business – resulting in actual growth. It also encourages people to take on credit and debts, creating more fictional fiat. Inflation is necessary for markets to continue to reach new heights, generating positive emotional responses from the populace, encouraging spending, encouraging debt intake, further inflating the currency, and increasing the sale of government bonds. The fiat system only survives by generating more imaginary money on a regular basis. Bitcoin investors may profit from this by realizing that stock investors as a whole always stand to profit from the market so long as it is managed by a central bank and does not collapse entirely. If those elements are filled, it has an unending price objective to raise to new heights. It also allows us to realize that this response indicates that the higher-ups believe that the economy could crash in entirety, and it may be wise for investors to have multiple well-thought-out exit strategies.
Economic Analysis of Bitcoin
The reason why the Fed is so aggressively inflating the economy is due to fears that it will collapse forever or never rebound. As such, coupled with a global depression, a huge demand will appear for a reserve currency which is fundamentally different than the previous system. Bitcoin, though a currency or asset, is also a market. It also undergoes a constant price-probing process. Unlike traditional markets, Bitcoin has the exact opposite goal. Bitcoin seeks to appreciate in value and not depreciate. This has a quite different affect in that Bitcoin could potentially become worthless and have a price objective of zero. Bitcoin was created in 2008 by a now famous mysterious figure known as Satoshi Nakamoto and its’ open source code was released in 2009. It was the first decentralized cryptocurrency to utilize a novel protocol known as the blockchain. Up to one megabyte of data may be sent with each transaction. It is decentralized, anonymous, transparent, easy to set-up, and provides myriad other benefits. Bitcoin is not backed up by anything other than its’ own technology. Bitcoin is can never be expected to collapse as a framework, even were it to become worthless. The stock market has the potential to collapse in entirety, whereas, as long as the internet exists, Bitcoin will be a functional system with a self-authenticating framework. That capacity to persist regardless of the actual price of Bitcoin and the deflationary nature of Bitcoin means that it has something which fiat does not – inherent value. Bitcoin is based on a distributed database known as the “blockchain.” Blockchains are essentially decentralized virtual ledger books, replete with pages known as “blocks.” Each page in a ledger is composed of paragraph entries, which are the actual transactions in the block. Blockchains store information in the form of numerical transactions, which are just numbers. We can consider these numbers digital assets, such as Bitcoin. The data in a blockchain is immutable and recorded only by consensus-based algorithms. Bitcoin is cryptographic and all transactions are direct, without intermediary, peer-to-peer. Bitcoin does not require trust in a central bank. It requires trust on the technology behind it, which is open-source and may be evaluated by anyone at any time. Furthermore, it is impossible to manipulate as doing so would require all of the nodes in the network to be hacked at once – unlike the stock market which is manipulated by the government and “Market Makers”. Bitcoin is also private in that, though the ledge is openly distributed, it is encrypted. Bitcoin’s blockchain has one of the greatest redundancy and information disaster recovery systems ever developed. Bitcoin has a distributed governance model in that it is controlled by its’ users. There is no need to trust a payment processor or bank, or even to pay fees to such entities. There are also no third-party fees for transaction processing. As the ledge is immutable and transparent it is never possible to change it – the data on the blockchain is permanent. The system is not easily susceptible to attacks as it is widely distributed. Furthermore, as users of Bitcoin have their private keys assigned to their transactions, they are virtually impossible to fake. No lengthy verification, reconciliation, nor clearing process exists with Bitcoin. Bitcoin is based on a proof-of-work algorithm. Every transaction on the network has an associated mathetical “puzzle”. Computers known as miners compete to solve the complex cryptographic hash algorithm that comprises that puzzle. The solution is proof that the miner engaged in sufficient work. The puzzle is known as a nonce, a number used only once. There is only one major nonce at a time and it issues 12.5 Bitcoin. Once it is solved, the fact that the nonce has been solved is made public. A block is mined on average of once every ten minutes. However, the blockchain checks every 2,016,000 minutes (approximately four years) if 201,600 blocks were mined. If it was faster, it increases difficulty by half, thereby deflating Bitcoin. If it was slower, it decreases, thereby inflating Bitcoin. It will continue to do this until zero Bitcoin are issued, projected at the year 2140. On the twelfth of May, 2020, the blockchain will halve the amount of Bitcoin issued when each nonce is guessed. When Bitcoin was first created, fifty were issued per block as a reward to miners. 6.25 BTC will be issued from that point on once each nonce is solved. Unlike fiat, Bitcoin is a deflationary currency. As BTC becomes scarcer, demand for it will increase, also raising the price. In this, BTC is similar to gold. It is predictable in its’ output, unlike the USD, as it is based on a programmed supply. We can predict BTC’s deflation and inflation almost exactly, if not exactly. Only 21 million BTC will ever be produced, unless the entire network concedes to change the protocol – which is highly unlikely. Some of the drawbacks to BTC include congestion. At peak congestion, it may take an entire day to process a Bitcoin transaction as only three to five transactions may be processed per second. Receiving priority on a payment may cost up to the equivalent of twenty dollars ($20). Bitcoin mining consumes enough energy in one day to power a single-family home for an entire week.
Trading or Investing?
The fundamental divide in trading revolves around the question of market structure. Many feel that the market operates totally randomly and its’ behavior cannot be predicted. For the purposes of this article, we will assume that the market has a structure, but that that structure is not perfect. That market structure naturally generates chart patterns as the market records prices in time. In order to determine when the stock market will crash, causing a major decline in BTC price, we will analyze an instrument, an exchange traded fund, which represents an index, as opposed to a particular stock. The price patterns of the various stocks in an index are effectively smoothed out. In doing so, a more technical picture arises. Perhaps the most popular of these is the SPDR S&P Standard and Poor 500 Exchange Traded Fund ($SPY). In trading, little to no concern is given about value of underlying asset. We are concerned primarily about liquidity and trading ranges, which are the amount of value fluctuating on a short-term basis, as measured by volatility-implied trading ranges. Fundamental analysis plays a role, however markets often do not react to real-world factors in a logical fashion. Therefore, fundamental analysis is more appropriate for long-term investing. The fundamental derivatives of a chart are time (x-axis) and price (y-axis). The primary technical indicator is price, as everything else is lagging in the past. Price represents current asking price and incorrectly implementing positions based on price is one of the biggest trading errors. Markets and currencies ordinarily have noise, their tendency to back-and-fill, which must be filtered out for true pattern recognition. That noise does have a utility, however, in allowing traders second chances to enter favorable positions at slightly less favorable entry points. When you have any market with enough liquidity for historical data to record a pattern, then a structure can be divined. The market probes prices as part of an ongoing price-discovery process. Market technicians must sometimes look outside of the technical realm and use visual inspection to ascertain the relevance of certain patterns, using a qualitative eye that recognizes the underlying quantitative nature Markets and instruments rise slower than they correct, however they rise much more than they fall. In the same vein, instruments can only fall to having no worth, whereas they could theoretically grow infinitely and have continued to grow over time. Money in a fiat system is illusory. It is a fundamentally synthetic instrument which has no intrinsic value. Hence, the recent seemingly illogical fluctuations in the market. According to trade theory, the unending purpose of a market or instrument is to create and break price ranges according to the laws of supply and demand. We must determine when to trade based on each market inflection point as defined in price and in time as opposed to abandoning the trend (as the contrarian trading in this sub often does). Time and Price symmetry must be used to be in accordance with the trend. When coupled with a favorable risk to reward ratio, the ability to stay in the market for most of the defined time period, and adherence to risk management rules; the trader has a solid methodology for achieving considerable gains. We will engage in a longer term market-oriented analysis to avoid any time-focused pressure. The Bitcoin market is open twenty-four-hours a day, so trading may be done when the individual is ready, without any pressing need to be constantly alert. Let alone, we can safely project months in advance with relatively high accuracy. Bitcoin is an asset which an individual can both trade and invest, however this article will be focused on trading due to the wide volatility in BTC prices over the short-term.
Technical Indicator Analysis of Bitcoin
Technical indicators are often considered self-fulfilling prophecies due to mass-market psychology gravitating towards certain common numbers yielded from them. They are also often discounted when it comes to BTC. That means a trader must be especially aware of these numbers as they can prognosticate market movements. Often, they are meaningless in the larger picture of things.
Volume – derived from the market itself, it is mostly irrelevant. The major problem with volume for stocks is that the US market open causes tremendous volume surges eradicating any intrinsic volume analysis. This does not occur with BTC, as it is open twenty-four-seven. At major highs and lows, the market is typically anemic. Most traders are not active at terminal discretes (peaks and troughs) because of levels of fear. Volume allows us confidence in time and price symmetry market inflection points, if we observe low volume at a foretold range of values. We can rationalize that an absolute discrete is usually only discovered and anticipated by very few traders. As the general market realizes it, a herd mentality will push the market in the direction favorable to defending it. Volume is also useful for swing trading, as chances for swing’s validity increases if an increase in volume is seen on and after the swing’s activation. Volume is steadily decreasing. Lows and highs are reached when volume is lower.
Therefore, due to the relatively high volume on the 12th of March, we can safely determine that a low for BTC was not reached.
VIX – Volatility Index, this technical indicator indicates level of fear by the amount of options-based “insurance” in portfolios. A low VIX environment, less than 20 for the S&P index, indicates a stable market with a possible uptrend. A high VIX, over 20, indicates a possible downtrend. VIX is essentially useless for BTC as BTC-based options do not exist. It allows us to predict the market low for $SPY, which will have an indirect impact on BTC in the short term, likely leading to the yearly low. However, it is equally important to see how VIX is changing over time, if it is decreasing or increasing, as that indicates increasing or decreasing fear. Low volatility allows high leverage without risk or rest. Occasionally, markets do rise with high VIX.
As VIX is unusually high, in the forties, we can be confident that a downtrend for the S&P 500 is imminent.
RSI (Relative Strength Index): The most important technical indicator, useful for determining highs and lows when time symmetry is not availing itself. Sometimes analysis of RSI can conflict in different time frames, easiest way to use it is when it is at extremes – either under 30 or over 70. Extremes can be used for filtering highs or lows based on time-and-price window calculations. Highly instructive as to major corrective clues and indicative of continued directional movement. Must determine if longer-term RSI values find support at same values as before. It is currently at 73.56.
Secondly, RSI may be used as a high or low filter, to observe the level that short-term RSI reaches in counter-trend corrections. Repetitions based on market movements based on RSI determine how long a trade should be held onto. Once a short term RSI reaches an extreme and stay there, the other RSI’s should gradually reach the same extremes. Once all RSI’s are at extreme highs, a trend confirmation should occur and RSI’s should drop to their midpoint.
Trend Definition Analysis of Bitcoin
Trend definition is highly powerful, cannot be understated. Knowledge of trend logic is enough to be a profitable trader, yet defining a trend is an arduous process. Multiple trends coexist across multiple time frames and across multiple market sectors. Like time structure, it makes the underlying price of the instrument irrelevant. Trend definitions cannot determine the validity of newly formed discretes. Trend becomes apparent when trades based in counter-trend inflection points continue to fail. Downtrends are defined as an instrument making lower lows and lower highs that are recurrent, additive, qualified swing setups. Downtrends for all instruments are similar, except forex. They are fast and complete much quicker than uptrends. An average downtrend is 18 months, something which we will return to. An uptrend inception occurs when an instrument reaches a point where it fails to make a new low, then that low will be tested. After that, the instrument will either have a deep range retracement or it may take out the low slightly, resulting in a double-bottom. A swing must eventually form. A simple way to roughly determine trend is to attempt to draw a line from three tops going upwards (uptrend) or a line from three bottoms going downwards (downtrend). It is not possible to correctly draw a downtrend line on the BTC chart, but it is possible to correctly draw an uptrend – indicating that the overall trend is downwards. The only mitigating factor is the impending stock market crash.
Time Symmetry Analysis of Bitcoin
Time is the movement from the past through the present into the future. It is a measurement in quantified intervals. In many ways, our perception of it is a human construct. It is more powerful than price as time may be utilized for a trade regardless of the market inflection point’s price. Were it possible to perfectly understand time, price would be totally irrelevant due to the predictive certainty time affords. Time structure is easier to learn than price, but much more difficult to apply with any accuracy. It is the hardest aspect of trading to learn, but also the most rewarding. Humans do not have the ability to recognize every time window, however the ability to define market inflection points in terms of time is the single most powerful trading edge. Regardless, price should not be abandoned for time alone. Time structure analysis It is inherently flawed, as such the markets have a fail-safe, which is Price Structure. Even though Time is much more powerful, Price Structure should never be completely ignored. Time is the qualifier for Price and vice versa. Time can fail by tricking traders into counter-trend trading. Time is a predestined trade quantifier, a filter to slow trades down, as it allows a trader to specifically focus on specific time windows and rest at others. It allows for quantitative measurements to reach deterministic values and is the primary qualifier for trends. Time structure should be utilized before price structure, and it is the primary trade criterion which requires support from price. We can see price structure on a chart, as areas of mathematical support or resistance, but we cannot see time structure. Time may be used to tell us an exact point in the future where the market will inflect, after Price Theory has been fulfilled. In the present, price objectives based on price theory added to possible future times for market inflection points give us the exact time of market inflection points and price. Time Structure is repetitions of time or inherent cycles of time, occurring in a methodical way to provide time windows which may be utilized for inflection points. They are not easily recognized and not easily defined by a price chart as measuring and observing time is very exact. Time structure is not a science, yet it does require precise measurements. Nothing is certain or definite. The critical question must be if a particular approach to time structure is currently lucrative or not. We will measure it in intervals of 180 bars. Our goal is to determine time windows, when the market will react and when we should pay the most attention. By using time repetitions, the fact that market inflection points occurred at some point in the past and should, therefore, reoccur at some point in the future, we should obtain confidence as to when SPY will reach a market inflection point. Time repetitions are essentially the market’s memory. However, simply measuring the time between two points then trying to extrapolate into the future does not work. Measuring time is not the same as defining time repetitions. We will evaluate past sessions for market inflection points, whether discretes, qualified swings, or intra-range. Then records the times that the market has made highs or lows in a comparable time period to the future one seeks to trade in. What follows is a time Histogram – A grouping of times which appear close together, then segregated based on that closeness. Time is aligned into combined histogram of repetitions and cycles, however cycles are irrelevant on a daily basis. If trading on an hourly basis, do not use hours.
Daily Lows Mode for those Months: 1, 1, 2, 4, 12, 17, 18, 24, 25, 28, 29, 30
Hourly Lows Mode for those Months (Military time): 0100, 0200, 0200, 0400, 0700, 0700, 0800, 1200, 1200, 1700, 2000, 2200
Minute Lows Mode for those Months: 00, 00, 00, 00, 00, 00, 09, 09, 59, 59, 59, 59
Day of the Week Lows (last twenty-six weeks):
Weighted Times are repetitions which appears multiple times within the same list, observed and accentuated once divided into relevant sections of the histogram. They are important in the presently defined trading time period and are similar to a mathematical mode with respect to a series. Phased times are essentially periodical patterns in histograms, though they do not guarantee inflection points Evaluating the yearly lows, we see that BTC tends to have its lows primarily at the beginning of every year, with a possibility of it being at the end of the year. Following the same methodology, we get the middle of the month as the likeliest day. However, evaluating the monthly lows for the past year, the beginning and end of the month are more likely for lows. Therefore, we have two primary dates from our histogram. 1/1/21, 1/15/21, and 1/29/21 2:00am, 8:00am, 12:00pm, or 10:00pm In fact, the high for this year was February the 14th, only thirty days off from our histogram calculations. The 8.6-Year Armstrong-Princeton Global Economic Confidence model states that 2.15 year intervals occur between corrections, relevant highs and lows. 2.15 years from the all-time peak discrete is February 9, 2020 – a reasonably accurate depiction of the low for this year (which was on 3/12/20). (Taking only the Armstrong model into account, the next high should be Saturday, April 23, 2022). Therefore, the Armstrong model indicates that we have actually bottomed out for the year! Bear markets cannot exist in perpetuity whereas bull markets can. Bear markets will eventually have price objectives of zero, whereas bull markets can increase to infinity. It can occur for individual market instruments, but not markets as a whole. Since bull markets are defined by low volatility, they also last longer. Once a bull market is indicated, the trader can remain in a long position until a new high is reached, then switch to shorts. The average bear market is eighteen months long, giving us a date of August 19th, 2021 for the end of this bear market – roughly speaking. They cannot be shorter than fifteen months for a central-bank controlled market, which does not apply to Bitcoin. (Otherwise, it would continue until Sunday, September 12, 2021.) However, we should expect Bitcoin to experience its’ exponential growth after the stock market re-enters a bull market. Terry Laundy’s T-Theory implemented by measuring the time of an indicator from peak to trough, then using that to define a future time window. It is similar to an head-and-shoulders pattern in that it is the process of forming the right side from a synthetic technical indicator. If the indicator is making continued lows, then time is recalculated for defining the right side of the T. The date of the market inflection point may be a price or indicator inflection date, so it is not always exactly useful. It is better to make us aware of possible market inflection points, clustered with other data. It gives us an RSI low of May, 9th 2020. The Bradley Cycle is coupled with volatility allows start dates for campaigns or put options as insurance in portfolios for stocks. However, it is also useful for predicting market moves instead of terminal dates for discretes. Using dates which correspond to discretes, we can see how those dates correspond with changes in VIX. Therefore, our timeline looks like:
2/14/20 – yearly high ($10372 USD)
3/12/20 – yearly low thus far ($3858 USD)
5/9/20 – T-Theory true yearly low (BTC between 4863 and 3569)
I judge books by their covers when it comes to futures platforms. Which ones should I take a deeper look at?
I have experience with a few platforms from trials, but because of the limited nature and the options out there I don't put much time into learning each one of them. Here is my experience with what I've tried: Rithmic / R Trader (Pro) - Cheesy look and feel, can't do much customizing. At least it's stable Multicharts - Can be bulky and thus slow and slightly less stable, has a lot of features though and looks modern without getting overly "web 2.0" looking Sierracharts - a favorite so far because it is fast, stable, has a built in data server, looks fine, and is customizable, plus not very expensive. However they are starting to drop support for Rithmic, so I'm looking elsewhere. Investor RT - Only a few days of use, but felt clumsy to use: objects menu thingy to interact with anything, historical data needed to be redownloaded, DB got corrupted and I couldn't log in without reinstalling from scratch. Seems customizable though, maybe not the most stable. Bookmap - Looks kinda cool, but on the web 2.0 side of aesthetic. Seemed fast enough when I used it. Had a free version to check out bitcoin prices to get a feel. Seems to excel at depth of market history and thats about it TT - Online, and the desktop version is just a repackaged web UI. Not as much customization as I would want, felt a little laggy. Tradovate - Interesting platform, looks nice but like TT is web only. You need to use them as a broker too. After trial the market replay costs extra. Platform is free if you use them as a broker though Tradingview - Perhaps the most customizable/feature-rich, fast for a web platform, not too expensive if they work for you. With Rithmic another no-go though. My perfect platform would be stable and fast, customizable, and ideally have a data server so anything the platform doesn't do I could write code to extend it or generate my own reports, and maybe run on Linux if I switch back one day. I like the option for the historical data add on for Investor RT. Sierra chart ticks a lot of boxes, but if they are de-prioritizing Rithmic support that is an issue. I haven't spent a ton of time with any of these beyond maybe SC so some of my opinions might change if I spend more time with some. Which ones are worth investing my time into? Which ones have I missed completely? Are there any questions about any of these I can answer? I still have a few days left on some of the trials.
CryptoDiffer teamHello, everyone!We are glad to meet here:Max Freeman (@maxfreeman4), Project Lead at Epic CashYoga Dude (@Yogadude), PR&Marketing at Epic CashXenolink (@Xenolink), Advisor at Epic Cash Max Freeman Project Lead at Epic Cash Thanks Max, we are excited to be here! Yoga Dude PR&Marketing at Epic Cash Hello Everyone! Thank you for having us here! Xenolink Advisor at Epic Cash Thank you to the CryptoDiffer team and CryptoDiffer community for hosting us! CryptoDiffer teamLet`s start from the first introduction question:Q1: Can you introduce yourself to the community? What is your background and how did you join Epic Cash? Yoga Dude PR&Marketing at Epic Cash Hello! My background is Marketing and Business Development, I’ve been in crypto since 2011 started with Bitcoin, then Monero in 2014, Ethereum in 2015 and at some point Doge for fun and profit. I joined Epic Cash team in September 2019 handling PR and Marketing. I saw in Epic Cash what was missing in my previous cryptos — things that were missing in Bitcoin and Monero especially. Xenolink Advisor at Epic Cash Hello Cryptodiffer Community, I am not an original co-founder nor am I a developer for the Epic Cash project. I am however a community member that is involved in helping scale this project to higher levels. One of the many beauties of Epic Cash is that every single member in the community has the opportunity to be part of EPIC’s team, it can be from development all the way to content producing. Epic Cash is a community driven project. The true Core Team of Epic Cash is our community. I believe a community that is the Core Team is truly powerful. EPIC Cash has one of the freshest and strongest communities I have seen in quite a while. Which is one of the reasons why I became involved in this project. Epic displayed some of the most self community produced content I have seen in a project. I’m actually a doctor of medicine but in terms of my experience in crypto, I have been involved in the industry since 2012 beginning with mining Litecoin. Since then I have been doing deep dive analysis on different projects, investing, and building a network in crypto that I will utilize to help connect and scale Epic in every way I can. To give some credit to those people in my network that have been a part of helping give Epic exposure, I would like to give a special thanks to u/Tetsugan and u/Saurabhblr. Tetsugan has been doing a lot of work for the Japanese community to penetrate the Japanese market, and Japan has already developed a growing interest in Epic. Daku Sarabh the owner and creator of Crypto Daku Robinhooders, I would like to thank him and his community for giving us one of our first large AMA’s, which he has supported our project early and given us a free AMA. Many more to thank but can’t be disclosed. Also thank you to all the Epic Community leaders, developers, and Content producers! Max Freeman Project Lead at Epic Cash I’m Max Freeman, which stands for “Maximum Freedom for Mankind”. I started working on the ideas that would become Epic in 2018. I fell in love with Bitcoin in 2017 but realized that it needs privacy at the base layer, fungibility, better scalability in order to go to the next level. CryptoDiffer team Really interesting backgrounds I must admit, pleasure to see the team that clearly has one vision of the project by being completely decentralized:) Q2: Can you briefly describe what is Epic Cash in 3–5 sentences? What technology stands behind Epic Cash and why it’s better than the existing one? Max Freeman Project Lead at Epic Cash I’d like to highlight the differences between Epic and the two highest-valued privacy coin projects, Monero and Zcash. XMR has always-on privacy like Epic does, but at a cost: Its blockchain is over 20x more data intensive than Epic, which limits its possibilities for scalability. Epic’s blockchain is small and light enough to run a full node on cell phones, something that is in our product road map. ZEC by comparison can’t run on low end devices because of its zero knowledge based approach, and only 1% of transactions are fully private. Epic is simply newer, more advanced technology than prior networks thanks to Mimblewimble We will also add more algorithms to widen the range of hardware that can participate in mining. For example, cell phones and tablets based around ARM chips. Millions of people can mine Epic that can’t mine Bitcoin, and that will help grow the network rapidly. There are some great short videos on our YouTube channel https://www.youtube.com/channel/UCQBFfksJlM97rgrplLRwNUg/videos that explain why we believe we have created something truly special here. Our core architecture derives from Grin, so we are fortunate to benefit on an ongoing basis from their considerable development efforts. We are focused on making our currency truly usable and widely available, beyond a store of value and becoming a true medium of exchange. Yoga Dude PR&Marketing at Epic Cash Well we all have our views, but in a nutshell, we offer things that were missing in the previous cryptos. We have sound fiscal emission schedule matching Bitcoin, but we are vastly more private and faster. Our blockchain is lighter than Bitcoin or Monero and our tech is more scalable. Also, we are unique in that we are mineable with CPUs and GPUs as well as ASICs, giving the broadest population the ability to mine Epic Cash. Plus, you can’t forget FUNGIBILITY 🙂 we are big on that — since you can’t have true privacy without fungibility. Also, please understand, we have HUGE respect to all the cryptos that came before us, we learned a lot from them, and thanks to their mistakes we evolved. Xenolink Advisor at Epic Cash To add on, what also makes Epic Cash unique is the ability to decentralize the mining using a tri-algo model of Random X (CPU), Progpow (GPU), and Cuckoo (ASIC) for an ability to do hybrid mining. I believe this is an issue we can see today in Bitcoin having centralized mining and the average user has a costly barrier of entry. To follow up on this one in my opinion one of the things we adopted that we have seen success for , in example Bitcoin and Monero, is a strong community driven coin. I believe having a community driven coin will provide a more organic atmosphere especially when starting with No ICO, or Premine with a fair distribution model for everyone. CryptoDiffer team Q3: What are the major milestones Epic Cash has achieved so far? Maybe you can share with us some exciting plans for future weeks/months? Yoga Dude PR&Marketing at Epic Cash Since we went live in September of 2019, we attracted a very large community of users, miners, investors and contributors from across the world. Epic Cash is a very international project with white papers translated into over 30 languages. We are very much a community driven project; this is very evident from our content and the amount of translations in our white papers and in our social media content. We are constantly working on improving our usability, security and privacy, as well as getting our message and philosophy out into the world to achieve mass adoption. We have a lot of exciting plans for our project, the plan is to make Epic Cash into something that is More than Money. You can tell I am the Marketing guy since my message is less about the actual tech and more about the usability and use cases for Epic Cash, I think our Team and Community have a great mix of technical, practical, social and fiscal experiences. Since we opened our YouTube channels content for community submissions, we have seen our content translated into Spanish, French, German, Polish, Chinese, Japanese, Arabic, Russian, and other languages Max Freeman Project Lead at Epic Cash Our future development roadmap will be published soon and includes 4 tracks: Usability Mining Core Protocol Ecosystem Development Core Protocol Epic Server 2.9.0 — this release improves the difficulty adjustment and is aimed at making block emission closer to the target 60 seconds, particularly reducing the incidence of extremely short and long blocks — Status: In Development (Testing) Anticipated Release: June 2020 Epic Server 3.0.0 — this completes the rebase to Grin 3.0.0 and serves as the prerequisite to some important functional building blocks for the future of the ecosystem. Specifically, sending via Tor (which eliminates the need to open ports), proof of payment (useful for certain dex applications e.g. Bisq), and our native mobile app. Status: In Development (Testing) Anticipated Release: Fall 2020 Non-Interactive Transactions — this will enhance usability by enabling “fire and forget” send-to-address functionality that users are accustomed to from most cryptocurrencies. Status: Drawing Board Anticipated Release: n/a Scaling Options — when blocks start becoming full, how will we increase capacity? Two obvious options are increasing the block size, as well as a Lightning Network-style Layer 2 structure. Status: Drawing Board Anticipated Release: n/a Confidential Assets — Similar to Raven, Tari, and Beam, the ability to create independently tradable assets that ride on the Epic Blockchain. Status: Drawing Board Anticipated Release: n/a Usability GUI Wallet 2.0 — Restore from seed words and various usability enhancements — Status: Needs Assessment Anticipated Release: Fall 2020 Mobile App — Native mobile experience for iOS and Android. Status: In Development (Testing) Anticipated Release: Winter 2020 Telegram Integration — Anonymous payments over the Telegram network, bot functionality for groups. Status: Drawing Board Anticipated Release: n/a Mining RandomX on ARM — Our 4th PoW algorithm, this will enable tablets, cell phones, and low power devices such as Raspberry Pi to participate in mining. Status: Needs Assessment Anticipated Release: n/a The economics of mining Epic are extremely compelling for countries that have free or extremely cheap electricity, since anyone with an ordinary PC can mine. Individual people around the world can simply run the miner and earn meaningful money (imagine Venezuela for example), something that has not been possible since the very early days of Bitcoin. Ecosystem Development Atomic Swaps — Connecting Epic to other blockchains in a trustless way, starting with ETH so that Epic can trade on DeFi infrastructure such as Uniswap, Kyber, etc. Status: Drawing Board Anticipated Release: n/a Xenolink Advisor at Epic Cash From the Community aspect, we have been further developing our community international reach. We have been seeing an increase in interest from South America, China, Russia, Japan, Italy, and the Philippines. We are working on targeting more countries. We truly aim to be a decentralized project that is open to everyone worldwide. CryptoDiffer team Great, thank you for your answers, we now can move to community questions part! Cryptodiffer Community You have 3 mining algorithms, the question is: how do they not compete with each other? Is there any benefit of mining on the GPU and CPU if someone is mining on the ASIC? Max Freeman Project Lead at Epic Cash The block selection is deterministic, so that every 100 blocks, 60% are for RandomX (CPU), 38% for ProgPow (GPU), and 2% for Cuckoo (ASIC) — the policy is flexible so that we can have as many algorithms with any percentages we want. The goal is to make the most decentralized and resilient network possible, and with that in mind we are excited to work on enabling tablets and cell phones to mine, since that opens it up to millions of people that otherwise can’t take part. Cryptodiffer Community To Run a project smoothly, Funding is very important, From where does the Funding/revenue come from? Xenolink Advisor at Epic Cash Yes, early on this was realized and in order to scale a project funds are indeed needed. Epic Cash did not start with any funding and no ICO and was organically genesis mined with no pre-mine. Epic cash is also a nonprofit community driven project similar to Monero. There is no profit-driven entity in the picture. To overcome the revenue issue Epic Cash setup a development fund tax that decreases 1% every year until 2028 when Epic Cash reaches singularity with Bitcoin emissions. Currently it is at 7.77%. This will help support the scaling of the project. Cryptodiffer Community Hi! In your experience working also with MONERO can you please clarify which are those identified problems that EPIC CASH aims to develop and resolve? What’s the main advantage that EPIC CASH has over MONERO? Thank you! Yoga Dude PR&Marketing at Epic Cash First, I must admit that I am still a huge fan and HODLer of Monero. That said: ✅ our blockchain is MUCH lighter than Monero’s ✅ our transaction processing speed is much faster ✅ our address-less blockchain is more private ✅ Epic Cash can be mined with CPU (RandomX) GPU (ProgPow) and Cuckoo, whereas Monero migrated to RandomX and currently only mineable with CPU Cryptodiffer Community
the feature ‘Cut Through’ deletes old data, how is it decided which data will be deletes, and what are the consequences of it for the platform and therefore the users?
On your website I see links to download Epic wallet and mining software for Linux,Windows and MacOs, I am a user of android, is there a version for me, or does it have a release date?
Max Freeman Project Lead at Epic Cash
This is one of the most exciting features of Mimblewimble, which is its extraordinary ability to compress blockchain data. In Bitcoin, the entire history of a coin must be replayed every time it is spent, and comprehensive details are permanently stored in the blockchain. Epic discards spent transaction inputs and consolidates outputs, storing neither addresses or amounts, only a tiny kernel to allow sender and receiver to prove their transaction.
The Vitex mobile app is great for today, and we have a native mobile app for iOS and Android in the works as well.
Cryptodiffer Community $EPIC Have total Supply of 21,000,000 EPIC , is there any burning plan? Or Buyback program to maintain $EPIC price in the future? Who is Epic Biggest competitors? And what’s makes epic better than competitors? Xenolink Advisor at Epic Cash We respect the older generation coins like Bitcoin. But we have learned that the supply economics of Bitcoin is very sound. Until today we can witness how the Bitcoin is being adopted institutionally and by retail. We match the 21 million BTC supply economics because it is an inelastic fixed model which makes the long-term economics very sound. To have an elastic model of burning tokens or printing tokens will not have a solid economic future. Take for example the USD which is an inflating supply. In terms of competitors we look at everyone in crypto with respect and also learn from everyone. If we had to compare to other Mimblewimble tech coins, Grin is an inelastic forever inflating supply which in the long term is not sound economics. Beam however is an inelastic model but is formed as a corporation. The fair distribution is not there because of the permanent revenue model setup for them. Epic Cash a non-profit development tax fund model for scaling purposes that will disappear by 2028’s singularity. Cryptodiffer Community What your plans in place for global expansion, are you focusing on only market at this time? Or focus on building and developing or getting customers and users, or partnerships? Yoga Dude PR&Marketing at Epic Cash Since we are a community project, we have many developers, in addition to the core team. Our plans for Global expansion are simple — we have advocates in different regions addressing their audiences in their native languages. We are growing organically, by explaining our ideology and usability. The idea is to grow beyond needing a fiat bridge for crypto use, but to rather replace fiat with our borderless, private and fungible crypto so people can use it to get goods and services without using banks. We are not limiting ourselves to one particular demographic — Epic Cash is a valid solution for the gamers, investors, techie and non techie people, and the unbanked. Cryptodiffer Community EPIC confidential coin! Did you have any problems with the regulators? And there will be no problems with listing on centralized exchanges? Xenolink Advisor at Epic Cash In terms of structure, we are carefully set up to minimize these concerns. Without a company or investors in the picture, and having raised no funds, there is little scope to attack in terms of securities laws. Bitcoin and Ethereum are widely acknowledged as acceptable, and we follow in their well-established footprints in that respect. Centralized exchanges already trade other privacy coins, so we don’t see this as much of an issue either. In general, decentralized p2p exchange options are more interesting than today’s centralized platforms. They are more censorship resistant, secure, and privacy-protecting. As the technology gets better, they should continue to gain market share and that’s why we’re proud to be partnered with Vitex, whose exchange and mobile app work very well. Cryptodiffer Community What are the main utility and real-life usage of the #EPIC As an investor, why should we invest in the #EPIC project as a long-term investment? Max Freeman Project Lead at Epic Cash Because our blockchain is so light (only 1.16gb currently, and grows very slowly) it is naturally well suited to become a decentralized mobile money standard because people can run a full node on their phone, guaranteeing the security of their funds. Scalability in Bitcoin requires complicated and compromised workarounds such as Lightning Network and light clients, and these problems are solved in Epic. With our forthcoming Mobile Mining app, hundreds of millions of cell phones and tablets will be able to easily join the network. People can quickly and cheaply send money to one another, fulfilling the long-envisioned promise of P2P electronic cash. As an investor, it’s important to ask a few key questions. Bitcoin Standard tokenomics of disinflation and a fixed supply are well proven over a decade now. We follow this model exactly, with a permanently synchronized supply from 2028, and 4 emission halvings from now until then, with our first one in about two weeks. Beyond that, we can apply some simple logical tests. What is more valuable, money that can only be used in some cases (censorable Bitcoin based on a lack of fungibility) or money that can be used universally? (fungible Epic based on always-on privacy by default). Epic is also poised to be a more decentralized and therefore resilient network because of wider participation in mining. Epic is designed to be Bitcoin++ Privacy, Fungibility, Scalability Cryptodiffer Community Q1. What are advantages for choosing three mining algorithms RandomX+, ProgPow and CuckAToo31+ ? Q2. Beam and Grin use MimbleWimble protocol, so what are difference for Epic? All of you will be friends for partners or competitors? Max Freeman Project Lead at Epic Cash RandomX and ProgPow are designed to use the entirety of a CPU / GPU’s unique processing capabilities in a way that other types of hardware don’t work as well. You can run RandomX on a GPU but it doesn’t work nearly as well as a much cheaper CPU, for example. Cuckoo is a “memory hard” algorithm that widens the range of companies that can produce the hardware. Grin and Beam are great projects and we’ve learned a lot from them. We inherited our first codebase from Grin’s excellent Rust design, which is a better language for community participation than C++ that Beam currently uses. Functionally, Mimblewimble is similar across the 3 coins, with standard Confidential Transactions, CoinJoin, Dandelion++, Schnorr Signatures and other advanced features. Grin is primarily ASIC-targeted, Beam is GPU-targeted, and Epic is multi-hardware. The biggest differences though are in tokenomics and project structure. Grin has permanent inflation of 60 coins per block with no halvings, which means steady erosion of value over time due to new supply pressure. It also lacks a steady funding model, making future development in jeopardy, particularly as the per coin price falls. Beam has a for-profit model with heavy early inflation and a high developer tax. Epic builds on the strengths of these earlier mimblewimble projects and addresses the parts that could be improved. Cryptodiffer Community Some privacy coin has scalability issues! How Epic cash will solve scalability issues? Why you choose randomX consensus algorithem? Xenolink Advisor at Epic Cash Fungibility means that you can’t distinguish one unit of currency from another, in example Gold. Fungibility has recently become a hot issue as people have been noticing Bitcoins being locked up by exchanges which may of had a nefarious history which are called Tainted Coins. In example coins that have been involved in a hack, darknet market transactions, or even processing coin through a mixer. Today we can already see freshly mined Bitcoins being sold at a premium price to avoid the fungibility problem Bitcoin carries today. Bitcoin can be tracked by chainalysis and is not a fungible cryptocurrency. One of the features that Epic has is privacy with added fungibility, because of Mimblewimble technology, Epic has no addresses recorded and therefore nothing can be tracked by chainalysis. Below I provide a link of an example of what the lack of fungibility is resulting in today with Bitcoin. One of the reasons why we chose the Random X algo. is because of the easy barrier of entry and also to further decentralize the mining. Random X algo can be mined on old computers or laptops. We also have 2 other algos Progpow (GPU), and Cuckoo (ASIC) to create a wider decentralization of mining methods for Epic. Cryptodiffer Community I’m a newbie in crypto and blockchain so how will Epic Cash team target and educate people who don’t know about blockchain and crypto? What is the uniqueness of Epic Cash that cannot be found in other project that´s been released so far ? Yoga Dude Pr&Marketing at Epic Cash Actually, while we have our white paper translated into over 30 languages, we are more focused on explaining our uses and advantages rather than cold specs. Our tech is solid, but we not get hung up on pure tech talk which most casual users do not need to or care to understand. As long as our fundamentals and tech are secure and user friendly our primary goal is to educate about use cases and market potential. The uniqueness of Epic Cash is its amalgamation of “whats good” in other cryptos. We use Mimblewimble for privacy and anonymity. Our blockchain is much lighter than our competitors. We are the only Mimblewimble crypto to use a unique cocktail of mining algorithms allowing to be mined by casual miners with gaming rigs and laptops, while remaining friendly to GPU and CPU farmers. The “uniqueness” is learning from the mistakes of those who came before us, we evolved and learned, which is why our privacy is better, we are faster, we are fungible, we offer diverse mining and so on. We are the best blend — thats powerful and unique Cryptodiffer Community Can you share EPIC’s vision for decentralized finance (DEFI)? What features do EPIC have to support DEFI? Yoga Dude PR&Marketing at Epic Cash We view Epic as ideally suited to be the decentralized digital reserve asset of the new Private Internet of Money that’s emerging. At a technology level, atomic swaps can be created to build liquidity bridges so that wrapped Epic tokens (like WBTC, WETH) can trade on other networks as ERC20, BEP2, NEP5, VIP180, Algorand and so on. There is more Bitcoin value locked on Ethereum than in Lightning Network, so we will similarly integrate Epic so that it can trade on networks such as Uniswap, Kyber, and so on. Longer term, if there is market demand for it, thanks to Scriptless Script functionality our blockchain has, we can build “Confidential Assets” (which Raven, Tari, and Beam are all also working on) that enable people to create tokenized assets in a private way. Cryptodiffer Community If you could choose one celebrity to promote Epic-cash, who that would be? Max Freeman Project Lead at Epic Cash I am a firm believer that the strength of the project lies in allowing community members to become their own celebrities, if their content is good enough the community will propel them to celebrity status. Organic celebrities with small but loyal following are vastly more beneficial than big name professional shills with inflated but non caring audiences. I remember the early days of Apple when an enthusiastic dude named Guy Kawasaki became Apple Evangelist, he was literally going around stores that sold Apple and visited user groups and Evangelized his belief in Apple. This guy became a Legend and helped Apple become what it is today. Epic Cash will have its OWN Celebrities Cryptodiffer Community How does $EPIC solve scalability of transactions? Current blockchains face issues with scalability a lot, how does $EPIC creates a solution to it? Xenolink Advisor at Epic Cash Epic Cash is utilizing Mimblewimble technology. Besides the privacy & fungibility aspect of the tech. There is the scalability features of it. It is implemented into Epic by transaction cut-through. Which means it allows nodes to remove all intermediate transactions, thus significantly reducing the blockchain size without affecting its validation. Mimblewimble also does not use addresses like a BTC address, and amount of transactions are also not recorded. One problem Monero and Bitcoin are facing now is scalability. It is evident today that data is getting more expensive and that will be a problem in the long run for those coins. Epic is 90% lighter and more scalable compared to Monero and Bitcoin. Cryptodiffer Community what are the ways that Epic Cash generates profits/revenue to maintain your project and what is its revenue model ? How can it make benefit win-win to both invester and your project ? Max Freeman Project Lead at Epic Cash There is a block subsidy of 7.77% that declines 1.11% per year until 0, where it stays after that. As a nonprofit community effort, this extremely modest amount goes much further than in other projects, which often take 20, 30, even 50+ % of the coin supply. We believe that this ongoing funding model best aligns the long term incentives for all participants and balances the compromises between the ends of the centralized/decentralized spectrum of choices that any project must make. Cryptodiffer Community Q1 : What are your major goals to archive in the next 3–4 years? Q2 : What are your plans to expand and gain more adoption? Yoga Dude Pr&Marketing at Epic Cash Max already talked about our technical plans and goals in his roadmap. Allow me to talk more about the non technical 😁 We are aiming for broader reach in the non technical more mainstream community — this is a big challenge but we believe it is doable. By offering simpler ways to mine Epic Cash (with smart phones for example), and by doing more education we will achieve the holy grail of crypto — moving past the fiat bridges and getting Epic Cash to be accepted as means of payment for goods and services. We will accomplish this by working with regional advocacy groups, community interaction, off-line promotional activities and diverse social media targeting. Cryptodiffer Community It seems to me that EpicCash will have its first Halving, right? Why a halving so soon? Is a mobile version feasible? Max Freeman Project Lead at Epic Cash Our supply emission catches up to that of Bitcoin’s first 19 years after 8 years in Epic, so that requires more frequent halvings. Today’s block emission is 16, next up are 8, 4, 2, and then finally 0.15625. After that, the supply of Epic and that of BTC stay synchronized until maxing out at 21m coins in 2140. Today we have a mobile wallet through the Vitex app, a native mobile wallet coming, and are working on mobile mining. Cryptodiffer Community What markets will you add after that? Yoga Dude PR&Marketing at Epic Cash Well, we are aiming to have ALL markets Epic Cash in its final iteration will be usable by everyone everywhere regardless of their technical expertise. We are not limiting ourselves to the technocrats, one of our main goals is to help the billions of unbanked. We want everyone to be able to mine, buy, and most of all USE Epic Cash — gamers, farmers, soccer moms, students, retirees, everyone really — even bankers (well once we defeat the banking industry) We will continue building on the multilingual diversity of our global community adding support and advocacy groups in more countries in more languages. Epic Cash is More than Money and its for Everyone. Cryptodiffer Community Almost, all cryptocurrencies are decentralized & no-one knows who owns that cryptocurrencies ! then also, why Privacy is needed? hats the advantages of Private coins? Max Freeman Project Lead at Epic Cash With a public transparent blockchain such as Bitcoin, you are permanently posting a detailed history of your money movements open for anyone to see (not just legitimate authorities, either!) — It would be considered crazy to post your credit card or bank statements to Twitter, but that’s what is happening every time you send a transaction that is not private. This excellent video from community contributor Spencer Lambert https://www.youtube.com/watch?v=0blbfmvCq\_4 explains better than I can. Privacy is not just for criminals, it’s for everyone. Do you want your landlord to increase the rent when he sees that you get a raise? Your insurance company to raise your healthcare costs because they see you buying too much ice cream? If you’re a business, do you want your employees to see how much money their coworkers make? Do you want your competitors to trace your supplier and customer relationships? Of course not. By privacy being default for everyone, cryptocurrency can be used in a much wider range of situations without unacceptable compromises. Cryptodiffer Community What are the main utility and real-life usage of the #EPIC As an investor, why should we invest in the #EPIC project as a long-term investment? Xenolink Advisor at Epic Cash Epic Cash can be used as a Private and Fungible store of value, medium of exchange, and unit of account. As Epic Cash grows and becomes adopted it can be compared to how Bitcoin and Monero is used and adopted as well. As Epic is adopted by the masses, it can be accepted as a medium of exchange for store owners and as fungible payments without the worry of having money that is tainted. Epic Cash as a store of value may be a good long term aspect of investment to consider. Epic Cash carries an inelastic fixed supply economic model of 21 million coins. There will be 5 halvings which this month of June will be our first halving of epic. From a block reward of 16 Epic reduced to 8. If we look at BTC’s price action and history of their halvings it has been proven and show that there has been an increase in value due to the scarcity and from halvings a reduction of # of BTC’s mined per block. An inelastic supply model like Bitcoin provides proof of the circulating supply compared to the total supply by the history of it’s Price action which is evident in long term charts since the birth of Bitcoin. EPIC Plans to have 5 halvings before the year 2028 to match the emissions of Bitcoin which we call the singularity event. Below is a chart displaying our halvings model approaching singularity. Once bitcoin and cryptocurrency becomes adopted mainstream, the fungibility problem will be more noticed by the general public. Privacy coins and the features of fungibility/scalability will most likely be sought over. Right now a majority of people believe that all cryptocurrency is fungible. However, that is not true. We can already see Chainalysis confirming that they can trace and track and even for other well-known privacy coins today such as Z-Cash. Cryptodiffer Community
You aim to reach support from a global community, what are your plans to get spanish speakers involved into Epic Cash? And emerging markets like the african
How am I secure I won’t be affected by receiving tainted money?
Max Freeman Project Lead at Epic Cash Native speakers from our community are working to raise awareness in key markets such as mining in Argentina and Venezuela for Spanish (Roberto Navarro called Epic “the holy grail of cryptocurrency” and Ethiopia and certain North African countries that have the lowest electricity costs in the world. Remittances between USA and Latin American countries are expensive and slow, so Epic is also perfect for people to send money back home as well. Cryptodiffer Community Do EPICs in 2020 focus more on research and coding, or on sales and implementation? Yoga Dude PR&Marketing at Epic Cash We will definitely continue to work on research and coding, with emphasis on improved accessibility (especially via smartphones) usability, security and privacy. In terms of financial infrastructure will continuing to add exchanges both KYC and non KYC. Big part of our plans is in ongoing Marketing and PR outreach. The idea is to make Epic Cash a viral sensation of sorts. If we can get Epic Cash adopters to spread the word and tell their family, coworkers and friends about Epic Cash — there will be no stopping us and to help that happen we have a growing army of content creators, and supporters. Everyone with skin in the game gets the benefit of advancing the cause. Folks also, this isn’t an answer to the question but an example of a real-world Epic Cash content — https://www.youtube.com/watch?v=XtAVEqKGgqY a challenge from one of our content creators to beat his 21 pull ups and get 100 epics! This has not been claimed yet — people need to step up 🙂 and to help that I will match another 100 Epic Cash to the first person to beat this Cryptodiffer Community I was watching some videos explaining how to send and receive transactions in EpicCash, which consists of ports and sending links, my question is why this is so, which, for now, looks complex? Let’s talk about the economic model, can EpicCash comply with the concept of value reserve? Max Freeman Project Lead at Epic Cash In V3, which is coming later this summer, Epic can be sent over Tor, which eliminates this issue of port opening, even though using tools like ngrok.io, it’s not necessarily as painful as directly configuring the router ports. Early Lightning Network had this issue as well and it’s something we have a plan to address via research into non-interactive transactions. “Fire and Forget” payments to an address, as people are used to in Bitcoin, is coming to Epic and we’re excited to develop functionality that other advanced mimblewimble coins don’t yet have. We are committed to constant improvement in usability and utility, to make our money system the ease of use leader. We are involved in the project (anyone can join the Freeman Family) because we believe that simply by choosing to use a form of money that better aligns with our ideals, that we can make a positive change in the world. Some of my thoughts about how I got involved are here: https://medium.com/epic-cash/the-freeman-family-e3b9c3b3f166 Max Freeman Project Lead at Epic Cash Huge thanks to our friends Maks and Vladyslav, we welcome everyone to come say hi at one of our friendly communities. It is extremely early in this journey, our market cap is only 0.5m right now, whereas the 3 other mimblewimble coins are at $20m, $30m and $100m respectively. Epic is a historic opportunity to follow in the footsteps of legends such as Bitcoin and Monero, and we hope to become the first Top 5 privacy coin project. Xenolink Advisor at Epic Cash Would like to Thank the Cryptodiffer Team and the Cryptodiffer community for hosting us and also engaging with us to learn more about Epic. If anyone else has more questions and wants to know more about EPIC , can find us at our telegram channel at https://t.me/EpicCash . Yoga Dude Pr&Marketing at Epic Cash Thank you, CryptoDiffer Team, and this wonderful Community!!! Cryptodiffer TEAM Thank you everyone for taking your time and asking great questions Thank you for your time, it was an insightful session Spread the love
The Day Advances | Monthly FIRE Portfolio Update - January 2020
The day advanced as if to light some work of mine Thoreau, Walden This is my thirty-eighth portfolio update. I complete this update monthly to check my progress against my goal. Portfolio goal My objective is to reach a portfolio of $2 180 000 by 1 July 2021. This would produce a real annual income of about $87 000 (in 2020 dollars). This portfolio objective is based on an expected average real return of 3.99 per cent, or a nominal return of 6.49 per cent. Portfolio summary Vanguard Lifestrategy High Growth Fund – $813 282 Vanguard Lifestrategy Growth Fund – $45 802 Vanguard Lifestrategy Balanced Fund – $83 162 Vanguard Diversified Bonds Fund – $110 472 Vanguard Australian Shares ETF (VAS) – $178 121 Vanguard International Shares ETF (VGS) – $34 965 Betashares Australia 200 ETF (A200) – $272 399 Telstra shares (TLS) – $2 046 Insurance Australia Group shares (IAG) – $8 970 NIB Holdings shares (NHF) – $6 492 Gold ETF (GOLD.ASX) – $106 701 Secured physical gold – $17 252 Ratesetter (P2P lending) – $14 755 Bitcoin – $153 530 Raiz app (Aggressive portfolio) – $18 365 Spaceship Voyager app (Index portfolio) – $2 534 BrickX (P2P rental real estate) – $4 477 Total portfolio value: $1 873 325 (+$94 067) Asset allocation Australian shares – 42.8% (2.2% under) Global shares – 22.6% Emerging markets shares – 2.4% International small companies – 3.1% Total international shares – 28.1% (1.9% under) Total shares – 70.9% (4.1% under) Total property securities – 0.2% (0.2% over) Australian bonds – 4.5% International bonds – 9.5% Total bonds – 14.0% (1.0% under) Gold – 6.6% Bitcoin – 8.2% Gold and alternatives – 14.8% (4.8% over) Presented visually, below is a high-level view of the current asset allocation of the portfolio. Comments This month saw exceptional growth in the portfolio, with a net increase of $94 000 after a small fall last month. [Chart] This is the fastest growth in the past half year. It is also the second largest absolute increase in over three years of measurement. [Chart] As the histogram below - which counts the frequency of occurrences in a specified range of monthly value changes (with red denoting losses) - makes clear, this is one of the most positive outcomes in the three year record. [Chart] The sources of portfolio growth were generally buoyant global and Australian share markets. Just under half of the growth was also due to an increase in the price of both gold securities and Bitcoin. In addition, even bond holdings increased in value over the period. Distribution payments from the Vanguard retail funds, as well as the exchange-traded funds VAS, VGS and A200 were made through this month. These totalled around $14 000 and have begun to be gradually fed back into the portfolio. This is a process which will occur through to June - with new investments twice per month. So far this has led to additional purchases in Vanguard's Australian shares exchange-traded fund (VAS) to maintain the target allocation of Australian equities making up 60 per cent of all equity holdings. The bond allocation of the portfolio continues to be notionally under its target, but has not yet reached a position where further balancing investments are warranted. Fully excluding the value of Bitcoin, for example, it still sits on its target allocation of 15 per cent of the portfolio. If the same calculation is done for equities, they sit just above their target, at 77 per cent, and have drifted higher since early last year. Over the past months my position has been to take no portfolio balancing actions based purely on the volatile value of Bitcoin over time, and this remains my approach. There is no perfect answer to this issue - assigning no value to Bitcoin and ignoring it for asset allocation purposes is inconsistent with its role in the portfolio. Pushing either equity or bond allocations sharply out of target boundaries merely due to short-term Bitcoin movements is also not warranted. Taking a backcast 'moving average' approach might be one statistical solution, but I am not yet convinced it would do more than moderate the appearance of the issue. While expenditure has been higher over the holiday period, on average the gap between the rolling three-year average of distributions and credit card expenditure continues to close, and sits at just over a $300 per month gap at present. Flags of convenience - estimating hedging in the portfolio This month, out of a curiosity carried over from my recent review of my bond holdings, I have found the time to review of the overall currency hedging position of the portfolio. There are some excellent online research papers (pdf) and blog pieces, such as this one from Passive Investing Australia, for those interested in learning more about some of the associated issues. Currency risks have never previously been an object of much detailed thought on the journey. Rather, I had tracked a basic measure of broader exposure to foreign assets (including foreign equities, property securities, gold and more recently Bitcoin). The additional issue of whether my exposure to these assets was unhedged (meaning exposure to gains and losses from the relative movement in the Australian dollar and the foreign currencies) or hedged was not really front of mind. I suppose I had a dim awareness that some elements of the Vanguard retail funds that have until recently dominated the portfolio were hedged (for example, around 30 per cent of the Vanguard High Growth Diversified funds equity position is currency hedged), and judged that there was likely a well-considered rationale behind the amount of this hedging. The first step to understanding where any exposures exist is to understand and measure the current state of affairs. As of today, this is broadly as set out below:
Around 35 per cent of all portfolio assets are effectively unhedged - This includes Bitcoin, unhedged gold holdings, and unhedged international equities and bonds. All other things being equal, if the Australian dollar falls, the value of this part of the portfolio rises in relative terms.
The remaining 65 per cent of assets are either hedged or Australian-held assets - This includes Australian equities, Australian bonds, as well as international equities and bonds hedged back to the Australian dollar.
International equities are partially hedged - The portfolio has around $525 000 in international equities currently. Of this, around $140 000 is hedged back into Australian dollars - a hedging position of 27 per cent.
International bonds are nearly fully hedged - consistent with their portfolio role and discussed here.
The decision to invest in Vanguard's International Shares ETF (VGS), which is unhedged, is a significant event in this regard. The chart below shows the overall level of currency hedging in the international equity portfolio. Investments in VGS commenced from July 2019, and have started to affect the level of hedging. [Chart] As future contributions flow into VGS - absent any other action - a historically quite stable level of hedging will continue to fall. So far this is just a trend I am monitoring, until I have completed more research and thinking on the best approach in this area. There are many complicated, and some unknowable, issues to consider and balance in hedging decisions, such as the likely denomination of future costs, and the historical and future relationships between domestic currencies and equity markets. None avail themselves of short or easy answers. Until I have thought my way through them more fully, I remain hesitant to make any definitive decisions. Progress Progress against the objective, and the additional measures I have reached is set out below. Measure Portfolio All Assets Portfolio Objective – $2 180 000 (or $87 000 pa) 85.2% 115.9% Credit card purchases – $71 000 pa 103.9% 141.4% Total expenses – $89 000 pa 83.3% 113.3% Summary This month has seen rapid progress, propelling the portfolio closer to both old and new goals. The portfolio gains this month have already closed nearly half of the additional distance created by increasing my portfolio target at the beginning of the year. The psychological forward push from distributions performance across 2019 (including, pleasingly, seeing it recognised here) has added to this sense of momentum. Additionally, this month I have also crossed the threshold to the target portfolio size needed to achieve 'credit card FI', a long-standing measure I have tracked. The long summer break that has just ended in some ways seemed like a foretaste of what some versions of financial independence could feel like. With the minimum of planning there was time to read, rest, exercise and write largely as I pleased. Returning to work following this has been infused with an unusual sense of being a temporary visitor in a new workplace. There is a greater philosophical detachment, in observing its rituals and rhythms, and less of a desire to seek to shape or resist its minutiae. Rather, what I have focused on is seeking to more deliberately make use of the freedoms it does not constrain, and pursue the best and most interesting use of the time that is outside of work hours. Through these recent strong Australian and US equity markets, this article has been a useful reminder of the 'survivorship' risks of focusing a FI target too narrowly on past performance. This excellent recent piece from Aussie HIFIRE has also, from another direction, usefully focused on separating out the decisions that do, and do not, materially matter in planning and executing on a passive indexing strategy over the long-term. For a challenging and entirely heterodox view on the potential long-term movement of equity markets upwards from here, this article has been thought-provoking. Finally, this month I have been discovering the Jolly Swagman podcast, which has long and fascinating interviews with the ex-head of the Reserve Bank of Australia, and Nobel Prize winning US economist Robert Shiller speaking on bubbles and narrative economics. During the long restful hours of summer break, the day has advanced. Though clouds may come in time, as the year starts - at least - the way forward looks bright. The post, links and full charts can be seen here.
Analyst PlanB writes. According to his estimates, the correlation between the S&P 500 index and bitcoin is 95% and the cryptocurrency is underestimated today. With the current index, BTC should cost $18,000, the analyst points out. PlanB also notes that the charts of both equities fit into the S2F model — according to the forecast, the next peak of bitcoin will occur at the level of $288,000 and S&P 500 will rise up to $4,300 in this case.
The BTC price will continue to fall
Popular trader CryptoCapo posted a series of tweets where he compared the current bitcoin chart with historical data. The detected "fractals" presuppose that the bitcoin exchange rate will continue to go down. According to the analyst, the price is ready to break through the support trend line. If the rate goes below $9,200, the next goal will be the level of $8,550, the breakthrough of which will definitely confirm the bear trend. CryptoCapo earlier posted the Wyckoff method estimate according to which the current accumulation would trigger the price movement to the point of $1,600.
Bitcoin will go down to $6,900 towards autumn
Crypto analyst Dave the Wave points out. According to his conclusions, the bitcoin exchange rate should drop down to the lower side of the global triangle where there is also the Fibonacci correction level of 0.382. The analyst points out that indicators confirm the bearish attitude and "the last but one chance" to buy at a low price will be near the level of $6,900.
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