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A Message from Alexander Höptner, CEO of 100x Group


All of us as investors believe in the immutability of numbers and the sobering reality of cold-blooded analysis. But when the proverbial bullets are flying, we often allow our fears, doubts, and emotions to come into play. 

Market fluctuations of the kind we saw in the past week provide a test for crypto traders. Do we have conviction in our investment thesis? What underpins those convictions? And crucially - what evidence do we need to see to change our minds about an asset? 

In this edition of Crypto Trader Digest, Arthur urges us to zoom out and re-examine why, in his view, we should take a macro-view. It’s a journey that takes us from the monetary policy of the World War II era to what modern-day COVID recovery policies might mean for the Fed’s balance sheet. Number go up has multiple meanings in this case. Enjoy.

- Alex (@AlexHoeptner)

From the Desk of Arthur Hayes

FARB< L >AST OFF < GO >


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(Any views expressed in the below are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.)

For those of you who have a Bloomberg terminal, run FARBAST Index <GO>. This is the index that outputs the US Federal Reserve’s balance sheet in millions of USD updated weekly. I keep droning on about this, but this number and its trajectory is the only thing that matters. If you have confidence that the Fed’s balance sheet will rise exponentially from today’s levels, then short term wobbles in the crypto markets become immaterial.

To be clear, there are two things that matter to my overall bullishness on the macro cryptocurrency market cap. 
  1. The US Government will begin to engage in nominal GDP targeting financed by the Fed purchasing Treasury bills, notes, and bonds. Therefore the Fed’s balance sheet will be higher than today.
     
  2. Decentralised finance (DeFi) will aggressively disintermediate many rent-seeking activities performed by centralised financial services institutions. The savings due to cheaper fees and more inclusiveness will flow to the end user and those who hold the tokens.
     
  3. The hyper growth of point 1 provides the push to accelerate point 2.
Self-perpetuation and growth are the two universal constants when evaluating the potential actions of organisms or a civilisation which is a collection of humans. Most modern societies have an underlying assumption of infinite growth. Look no further than how we price a stock.

A stock’s value is the discounted stream of all future cash flows. The terminal value assumes the company continues to exist and grow forever. That is obviously empirically false, but we plug it into our fancy model anyway. Therefore, my overarching assumption is that growth is preferred and assumed. The question is cost. There are various ways to pay for growth, and one of the most effective on a national level is nominal GDP targeting paid for with borrowed money.

To fully understand why I am so confident that the Fed’s balance sheet might be 10x higher in short order, I will compare how America dealt with the aftermath of WW2 to how it will deal with the aftermath of the world war on COVID-19. The political and economic conundrum is always, "how does a nation continue to grow after a destructive crisis?".

This is the Crypto Trader Digest, but I spend a lot of time talking about American monetary policy instead of the fundamental merits of a decentralised monetary and financial system over the current parasitic centralised system that reigns supreme. We live in a USD world. It is plain to anyone who reads Satoshi’s whitepaper that the 2008 financial crisis and the response of all major central banks was one reason why Satoshi believed something better could be created. Therefore, an appreciation of and confidence in the trajectory of the most important financial institution globally, the US Federal Reserve, will allow any speculator to shrug off being down 30% to 50% on the day, because they know that in less than ten years the tsunami of money printing will take the crypto complex’s market cap to unimaginable levels.
 
Before we go back in time to 1939, check this. Due to the gargantuan US fiscal stimulus enacted to fight COVID, Federal net outlays represented 31% of 2020 GDP. That makes the US government as a stand-alone entity the 3rd largest economy as measured by 2020 GDP globally — just behind the US private sector and China. The great thing about any large centralised government is they collect a lot of statistics. You can’t manage what you don’t measure. Therefore, the richness of statistics during and after WW2 allows anyone with an internet connection to connect the dots.
 
Let me TL;DR this essay for the TikTok’ers; I know I probably lost you at my first sentence, but I hope by now your attention span can spare 2 minutes...

Click here to continue reading this edition of Crypto Trader Digest  

–  Arthur Hayes, Co-Founder of 100x Group (@CryptoHayes)

From BitMEX Research

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Faster Blockchain Validation with Ultreexo Accumulators 

In this piece, 100x Group grantee Calvin Kim announces the success in speeding up Bitcoin’s Initial Block Download (IBD) using the Utreexo client. While the speed improvement can vary depending on one’s local hardware and bottlenecks, the initial download and verification can be up to 62% faster compared to Bitcoin Core. Since many optimisations are yet to be implemented, the speedup is expected to increase.

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The Blocksize War - Chapters 9 and 10


The continuation of The Blocksize War have been released on the BitMEX blog. This book covers Bitcoin’s blocksize war, which was waged from August 2015 to November 2017. On the surface the battle was about the amount of data allowed in each Bitcoin block, however it exposed much deeper issues, such as who controls Bitcoin’s protocol rules.

The full book is available on Amazon. Half of any profits from physical book sales will be donated to Médecins Sans Frontières, a charity that provides medical assistance to people affected by conflict, epidemics, disasters, or exclusion from healthcare.

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Latest News from BitMEX


BitMEX Commits to Carbon Neutrality

We’re happy to confirm that BitMEX commits to becoming carbon neutral. The first step we’ll take immediately is to start carbon offsetting emissions caused by withdrawals from the platform through donating at least $0.0026 for every $1 of blockchain fees our clients pay out.

Summer of Listings Begins on BitMEX: The SOLUSDT Quanto Perpetual Contract

Tardis.dev, a provider of the most comprehensive and granular cryptocurrency market data products in the industry, has officially joined the BitMEX Partners Programme. Accurate, complete, historical market data are a trader’s best friend and are one of the most powerful resources in their toolkit. Collecting and parsing through exchange data is a time consuming and resource intensive process, not to mention the implementation costs of data collection, storage, and distribution services.

BitMEX x Stacked: Growing the Partner Programme Even Further

Stacked, a smart automated crypto investing platform and portfolio management tool that allows users to instantly access vetted trading strategies and investment portfolios, has officially joined the BitMEX Partners Programme.Stacked tech helps to simplify the automated crypto trading process with a clean user interface and UX that allows everyone to invest in crypto indices, access trading bots, and automate portfolio management, and therefore represents a great addition to the programme. Traders can access the comprehensive Bot Marketplace that allows users to subscribe to sophisticated trading algorithms and strategies. Once set up, there is no need to actively manage your trading account, as the bots take care of the entire process from end-to-end. 

Social Spotlight


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No articles in this email should be copied or reproduced in whole or in part. The information contained does not constitute research or a recommendation. 

Neither HDR Global Trading Limited nor any of its affiliates make any representation or warranty as to the accuracy or completeness of the statements or any information contained in these articles and any liability therefor (including in respect of direct, indirect or consequential loss or damage) is expressly disclaimed. This is not providing any financial, economic, legal, accounting or tax advice or recommendations. In addition, the receipt of this email is not to be taken as constituting the giving of investment advice nor to constitute such person a client of the BitMEX trading platform.






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