Empire

How to Analyze the ETH:BTC Trade | 1000x

Thu Jul 06 2023

TradingLessonsCrude OilCryptoNFTsMarket TrendsAcceptanceCrypto Market OutlookPredictionsBubble Potential

Description

The episode covers various trading strategies, lessons from past trades, comparisons between crude oil and crypto, market trends and NFTs, acceptance and potential of NFTs, crypto market outlook, and predictions on the bubble potential. Key insights include the importance of learning from bad trades, studying previous bubbles, and building intuition as a trader. The episode also discusses the similarities between crude oil and crypto, the expanding use cases of NFTs, and the potential for a future crypto bubble.

Insights

Learning from Bad Trades

Learning from bad trades is crucial for becoming a better trader. Traders should analyze whether an asset is at the brink of a new trend or at the peak of a hype cycle.

Importance of Studying History

Successful traders often study history to apply past lessons to current situations. Recommended books for understanding Wall Street scams, playing bubbles, and learning from successful traders are: 'The Great Game' by John Steel Gordon, 'The Alchemy of Finance' by George Soros, and the autobiography of Bernard Baruch.

Comparisons between Crude Oil and Crypto

Crude oil had a barbell debate similar to the one in crypto today. Crypto builders are compared to Yale scientists refining crude oil. Valid points brought up by naysayers are acknowledged but ultimately disagreed with.

Market Trends and NFTs

Bear market rallies are often just blips in a downtrend. BCH and LTC tend to follow the leader in price movements. Investing in the best artists and pieces is the best strategy for art investment. The speaker is bullish on NFTs because they believe it has potential in the crypto market.

Acceptance and Potential of NFTs

NFTs are becoming a way for people to display their wealth in the digital world. Traditional art galleries are starting to show NFTs, indicating acceptance from the art world. NFTs are expanding beyond art into other industries like sports and music.

Crypto Market Outlook

BTC and select altcoins have performed well since the last podcast. The best trade in crypto is long GBTC due to a fundamental mispricing in the market. Active trading is necessary during this time of panic and euphoria in the market.

Predictions and Bubble Potential

The speaker believes that Bitcoin and ETH are in a multi-decade uptrend and should not be sold. Other assets like NFTs and DeFi may be good buying opportunities. The speaker predicts an incoming bubble in crypto as it becomes institutionalized.

Summary

Transcript

Trading Strategies

00:00 - 07:27

It's really as simple as when everybody's panicking you buy, when everybody's euphoric you sell.
The price of Bitcoin in London is the same as in the US, but the pound is lower.
The UK housing market may face more pressure than the US housing market due to 10-year fixed mortgages and increasing rates.
Learning from bad trades is crucial for becoming a better trader.
In 2019, a trader experienced recency bias and took a beating by being exposed to upside calls at the top of Bitcoin's rally.
A short-term spike in volatility in crypto markets is usually a sell signal.
Trading to make money involves taking risks rather than focusing on not losing money.

Lessons from Past Trades

07:08 - 14:44

The speaker initially hesitated to invest and took time to think things through before getting involved.
They made successful investments in Facebook stock and crude oil, but missed out on significant gains because they took profits too early.
In 2018, the speaker had a bad year due to a wrong conviction long on crude oil. They failed to adapt to new information about Trump's policies and lost a lot of money.
The speaker learned from this experience that it is important to analyze whether an asset is at the brink of a new trend or at the peak of a hype cycle.
Studying previous bubbles and trends can provide valuable insights for traders.
Successful traders have built intuition through studying charts, information, balance sheets, and data.
History is often the most studied subject by successful traders as it helps them apply past lessons to current situations.
Recommended books for understanding Wall Street scams, playing bubbles, and learning from successful traders are: 'The Great Game' by John Steel Gordon, 'The Alchemy of Finance' by George Soros, and the autobiography of Bernard Baruch.
Patience and discipline are crucial characteristics for any good trader.

Comparisons to Crude Oil and Crypto

14:25 - 21:46

The book 'The Prize' by Daniel Jorkin is recommended as it provides a 150-year history of crude oil, which has similarities to crypto as a tradable technology.
Crude oil had a barbell debate similar to the one in crypto today, with some considering it useless waste while others saw its potential.
The inflation-adjusted price chart of crude oil shows wild swings, reaching high points in the late 1800s and then decreasing by 99%.
Crypto builders are compared to Yale scientists refining crude oil, with the belief that the world needs publicly owned spreadsheets like Ethereum.
Valid points brought up by naysayers are acknowledged but ultimately disagreed with, such as utility tokens being useful and DeFi being worse than traditional finance.
Recent pumps in DeFi assets are seen as short squeezes rather than fundamental changes, possibly influenced by speculation around SEC regulations or fire sales during the bear market.

Market Trends and NFTs

21:16 - 28:47

Bear market rallies are often just blips in a downtrend.
BCH and LTC tend to follow the leader in price movements.
Buying the laggard in crypto trading usually yields lower returns than buying the leader.
Top performers in DeFi today include GRT, BitDow, Blur, Frax, and Maker.
Blur is an interesting intersection of DeFi and NFTs.
The art market is similar to crypto in terms of leaders and laggards.
Investing in the best artists and pieces is the best strategy for art investment.
NFTs can be seen as rotating brands that come in and out of style.
Fedenzas and reviers have more lasting value compared to profile picture NFT projects.
The traditional art world is fascinating but not well-known by the speaker.
The speaker is bullish on NFTs because they believe it has potential in the crypto market.

Acceptance and Potential of NFTs

28:21 - 35:30

NFTs are becoming a way for people to display their wealth in the digital world.
Traditional art galleries are starting to show NFTs, indicating acceptance from the art world.
NFTs are expanding beyond art into other industries like sports and music.
While negative sentiment towards NFTs exists, activity and acceptance are increasing.
The speakers believe that NFTs have passed the trough of disillusionment and are entering the enlightenment phase.
They discuss the idea of using NFTs as certificates of authenticity for traditional art and secure storage for wealthy collectors.
The speakers express interest in a startup that offers on-chain certificates of authenticity and secure storage for NFTs bought at traditional art galleries.

Crypto Market Outlook

35:03 - 42:39

BTC and select altcoins have performed well since the last podcast.
The best trade in crypto is long GBTC due to a fundamental mispricing in the market.
Capital is struggling to get into crypto, creating an opportunity for those who can buy Bitcoin or GBTC.
An ETF approval from BlackRock would drive meaningful flows into BTC.
However, some funds that own GBTC outright may redeem and exit the trade when approved.
The future's ETF approval had a similar pattern where BTC topped on the day of approval, ETH ran after, and both popped together for a while before going sideways.
Active trading is necessary during this time of panic and euphoria in the market.
ETH sentiment was negative but price remained flat, indicating a potential buying opportunity.
Blur is capturing a larger portion of NFT volumes despite negative sentiment.

Predictions and Bubble Potential

42:16 - 46:10

NFT volumes are increasing, but sentiment towards NFTs is declining.
DeFi was expected to decline after the SEC's actions against Coinbase, but it has continued to rise.
The speaker believes that Bitcoin and ETH are in a multi-decade uptrend and should not be sold.
Other assets like NFTs and DeFi may be good buying opportunities.
The speaker predicts an incoming bubble in crypto as it becomes institutionalized.
The next few months will solidify the base for a potential crazy run in 2024.
Disclaimer: These are just opinions and not financial advice.