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ustonapc
Re: Bitcoin (PlanB : Stock-to-Flow model and Ben Cowen : Algorithmic Regression Rainbow)

Scott,

The max drawdown for bitcoin (GBTC) will always be more significant than stocks no matter how you try to manage it with technical indicators or more frequent re-balancing between GBTC/TLT. That is the reason why there is higher return and as long as there is a higher sharpe/sortino which is further improved by investing with a trend following indicator. There really is no point to continue look for ways to reduce the drawdown which increasingly lower the potential return.

My view is that one should not be investing in bitcoin unless he/she can stomach the volatility that is a little bit higher than stocks. As I have mentioned earlier, I use another trend following indicator, weekly Parabolic SAR (0.018,0.09) +7 week DMI (ADX above 35) to confirm the trend instead of simple moving average that is mentioned in the paper.

I believe in the saying "Fortune Favours the Brave" (to a certain extent) in taking calculated risk.

Regards
James

Nov 17, 2021 11:27:43 AM       
Edit 1 times, last edit by ustonapc at Nov 17, 2021 1:00:03 PM
ustonapc
Re: Bitcoin (PlanB : Stock-to-Flow model and Ben Cowen : Algorithmic Regression Rainbow)

Jim & Scott,

Scott,

Actually there is another way to play BITO and GBTC which is to long GBTC (basically trading at a 17% discount to NAV) and short BITO for an arbitrage play (to pocketing the contango roll BITO bleeds about 13% per year due to the futures roll ).

Jim,

There is also a tax benefit which I am not too familiar with since I don't live in US but you can check out this reddit link.

Short Bito in a taxed portfolio and long GBtc in Roth IRA giving a risk neutral 11% yield. If Bitcoin Runs you get a massive tax write off, you move value into your IRA, and you don’t have to pay taxes on the risk Neutral yield. And as a bonus you get an extra 17% or so when SEC allows GBTC to convert to an ETF in the next couple years.

https://www.reddit.com/r/investing/comments/q..._you_have_a_risk_neutral/

Regards
James

Nov 17, 2021 1:28:47 PM       
Edit 1 times, last edit by ustonapc at Nov 17, 2021 1:30:02 PM
Jrinne
Re: Bitcoin (PlanB : Stock-to-Flow model and Ben Cowen : Algorithmic Regression Rainbow)

Thank you James,

I really should do this or something similar. I think I could probably hedge occasionally in a taxable account and write off the losses for stocks and ETFs (including any short positions). Not limited to GBTC, perhaps.

My present accountant is still trying to figure out why we had to pay taxes on profits from a MLP in my SEP-IRA :-) But I think this is a fairly standard thing in the US that she could do, and that I should do. Excellent point, I believe.

The amount you can write off each year may not be huge: other members will know more than I do. The losses can be extended into future years however and is not trivial when considering this (again, if I understand this at all).

Jim

Great theory, "and yet it moves."
-Quote attributed to Galileo Galilei (1564-1642) gets my personal award for the best real-world use of an indirect proof or reductio ad absurdum.
`

Nov 17, 2021 2:00:04 PM       
Edit 2 times, last edit by Jrinne at Nov 17, 2021 2:22:11 PM
sgmd01
Re: Bitcoin (PlanB : Stock-to-Flow model and Ben Cowen : Algorithmic Regression Rainbow)

James,

Thank you for the arbitrage idea. I have been looking at options to test securities with some correlation to crypto on P123 until gbtc is enabled in sims. The closest, which aren't that close (similar to gold vs gold miners), are the ETF Blok and this list of stocks (coin,si,mstr,sq,pypl,riot,mara,ostk).

I agree with you regarding the volatility of Bitcoin works both ways (higher drawdowns & higher returns). It's like a stock ETF leveraged at 10x

Scott

Nov 17, 2021 11:01:34 PM       
ustonapc
Re: Bitcoin (PlanB : Stock-to-Flow model and Ben Cowen : Algorithmic Regression Rainbow)

Scott,

Try adding ema(2)>ema(3) as a buy rule in your sim for BLOK.

I also have BLOK together with QQQ and XLK during risk-on and GLD or EDV during risk -off.

Regards
James

Nov 19, 2021 2:59:04 AM       
ustonapc
Re: Bitcoin (PlanB : Stock-to-Flow model and Ben Cowen : Algorithmic Regression Rainbow)

Jim,

As mentioned in my email, FEAR is back in the market due to the new COVID mutant and VIX is currently up 40% in pre-market. I am not sure it is going to be a happy Thanksgiving for most investors.

Bitcoin is falling together with the overall market, I will take profit on my position if it drops below 52,000 (based on weekly parabolic SAR).

Regards
James

Nov 26, 2021 6:17:43 AM       
Edit 1 times, last edit by ustonapc at Nov 26, 2021 6:19:53 AM
Jrinne
Re: Bitcoin (PlanB : Stock-to-Flow model and Ben Cowen : Algorithmic Regression Rainbow)

James,

I can’t help much on Bitcoin. But you have excellent discretion with the stock market (which I do not).

We live in interesting times: from both a medical and economic perspective.

Best,

Jim

Great theory, "and yet it moves."
-Quote attributed to Galileo Galilei (1564-1642) gets my personal award for the best real-world use of an indirect proof or reductio ad absurdum.
`

Nov 26, 2021 9:57:44 AM       
Edit 1 times, last edit by Jrinne at Nov 26, 2021 9:59:37 AM
ustonapc
Re: Bitcoin (PlanB : Stock-to-Flow model and Ben Cowen : Algorithmic Regression Rainbow)

Jim,

I just bought some VIXY at market opening with this simple strategy based on VIX with just 2 buy rules daily rebalancing. (just buy VIXY when VIX rise more than 7.5% from previous close) Rather than losing money, I hope everyone can make some money out of the FEAR factor.

ticker("vixy")

open(-1,$vix)>1.075*close(0,$vix)

Regards
James

Nov 26, 2021 10:38:44 AM       
Edit 4 times, last edit by ustonapc at Nov 26, 2021 10:54:41 AM
test_user
Re: Bitcoin (PlanB : Stock-to-Flow model and Ben Cowen : Algorithmic Regression Rainbow)

Jim,

I just bought some VIXY at market opening with this simple strategy based on VIX with just 2 buy rules daily rebalancing. (just buy VIXY when VIX rise more than 7.5% from previous close) Rather than losing money, I hope everyone can make some money out of the FEAR factor.

ticker("vixy")

open(-1,$vix)>1.075*close(0,$vix)



Interesting! Do you have a sell rule?

Nov 26, 2021 11:20:21 AM       
Jrinne
Re: Bitcoin (PlanB : Stock-to-Flow model and Ben Cowen : Algorithmic Regression Rainbow)

X

Great theory, "and yet it moves."
-Quote attributed to Galileo Galilei (1564-1642) gets my personal award for the best real-world use of an indirect proof or reductio ad absurdum.
`

Nov 26, 2021 11:24:49 AM       
Edit 3 times, last edit by Jrinne at Nov 26, 2021 11:50:28 AM
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