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Comment by jt2190 | Hacker News Reader

This article is really well-reasoned.

I’ve been watching the BTC community recently, and there’s a widespread misunderstanding that all investors have the same goals, risk profile, and strategy.

This looks something like “$BIGFINTECH is buying $HUGEAMOUNT, buy everything you can get before it’s too late!”, without considering that $BIGFINTECH is playing a completely different game.

(Edit: Even this thread has comments that assume there’s only one way to make money with BTC — typically buy low, sell high.)

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> Even this thread has comments that assume there’s only one way to make money with BTC — typically buy low, sell high.

What other ways exist?

Same ways that exist with other securities: buy and hold, I would presume?

in order to actually make money, you'd still need a third step of "sell" (or you could spend the BTC directly, i guess)

As a bitcoiner myself, I like to think of dollars and BTC as just two currencies. Buying BTC is equivalent to selling dollars. If you think that BTC is the better money, it makes sense to move into it and stay there perpetually.

Isn't that the same as buy low, sell high?

Bitcoin doesn't pay a dividend.

How do you plan to make money while holding?

You can actually lend your btc at a pretty good rate. Over 5% on BlockFi. Rates are lower on defi exchanges because there is a risk premium as people figure it out and actually borrow.

5% per year? 5% per month? 5% per week?

Annual

Compounding too.

You could also buy USDC (no fees through coinbase) and BlockFi pays 8.6% apy.

Ally bank just emailed me that they are lowering the APY again. It is lowered almost monthly and is almost 0 now.

You can also have BlockFI interest automatically go into BTC. So, you can DCA automatically by just letting your cash sit there.

right, but where does that interest come from? so SPY dividend comes from the stocks making money and earning cashflows. Bitcoin lending interest comes from people borrowing it to trade, a somewhat circular arrangement.

Who cares what people who borrow do with it. 5% or whatever is all I care about as an investor + getting my money back.

Of course, just pointing out that this dividend doesn’t give bitcoin value, it exists when bitcoin has value. With stocks, the expected cash dividend is what gives them ultimate value.

Youre pointing out at this stage that btc is a non cash flow asset...yes most people know that. Same with oil and commodities and gold.

The 'interest' comes from lending your BTC to short-sellers.

As always, where there's a return, there's also a risk.

PayPal and Cash, for example, can charge fees for various BTC services, like USD to BTC conversion. To do this they need to hold some BTC. They might not care about whether the value of the BTC increases or decreases, as long as the fees generated make it worthwhile.

> need to hold some BTC

Do they? Why can’t they drop-ship it?

Not sure what you mean by drop-ship it, but when Paypal tries to sell what essentially boils down to a promissory BTC-denominated note to the unsuspecting masses, it's quite likely that the regulator (e.g. the SEC) may come at some point and inquire how much of the underlying they actually own.

If they are found to be below a certain ratio of the actual BTC denominated liability, they may run into quite a bit of trouble.

As a matter of fact, if they were playing it straight they could cryptographically demonstrate actual ownership of the underlying.

They will - of course - never do that. That'd be missing out on one hell of an opportunity to play bookie in the BTC sphere.

> If they are found to be below a certain ratio of the actual BTC denominated liability, they may run into quite a bit of trouble.

I highly doubt PayPal is playing that game. Bitcoin is highly volatile and can x10 its price easily. That could bankrupt PayPal overnight if people tried to sell in the short-squeeze.

I would prefer it if I didn't have to trust paypal word, and could cryptographically verify their fractional ratio - because in case of a boom, if everybody wanted to get their promises riches, that could also bankrupt paypal overnight.

Actually, the SEC may also want to check whether paypal promissory notes are actually backed by anything but thin air.

I don't know what markets exist for bitcoin, as I'm not that interested, but for other assets there are shorting, transaction fees, arbitrage, and a whole batch of derivatives.

These things exist for Bitcoin though many of them are a bit immature for obvious reasons.

LedgerX, for example, is a US based physically delivered options clearing house for Bitcoin that supports both retail and institutional customers. I've been a customer since 2017 and so far I'm pretty happy with them.

(They do futures too, but right now their futures aren't particularly interesting).

May I ask how you trade options? I've bought a bunch of call options with $25k strike for 12/2021, and I think it will pay out handsomely ($38k is my break-even point, accounting for the opportunity cost of just straight-buying the bare BTC). What's your strategy?

BTW: fan of your work, Greg.

Doesn't the article say they will buy low and sell high? Great safe plan.. as long as central banks don't start regulating it, realize they can't, then do everything in their power to tear it down.

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