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Preston Pysh

@PrestonPysh

18 Feb

Typically when a commodity goes into Gloria Estiphon level contango, it's because there's been a supply-demand shift and the cost of scarce storage is getting bid into the future price. This is why the Bitcoin contango is confusing a lot of people. The cost of storage 1/

is near meaningless and the Bitcoin are getting minted based on a governed supply schedule. So why is someone willing to pay more for Bitcoin delivered in the future as opposed to just buying the spot? Well, it appears the buyers of these premium future contracts might be 2/

limited by charter for what they are allowed to own. Think about it, if by regulation I'm not allowed to own Bitcoin, but I am allowed to own a future's contract (which is re-sold at a net gain) before having to take physical custody of the Bitcoin, then no regulatory breaches 3/

Read 5 tweets

Preston Pysh

@PrestonPysh

13 Feb

Here’s my thoughts with BTC lending as this cycle heats up. During the previous cycle we saw BTC prices jump from 10,000 to 20,000 in 16 days. This means that if the borrower overcollateralized with an LTV of 50%, their escrow will be liquidated (unless margin is met)...1/

within half a month. Now, what happens if this cycle produces growth that keeps running at double the price action in another 16 days from there? Well, it means those that just met the previous margin calls, now only have 4 days to respond to the next. So what does 2/

this mean for spreads? It means borrowers start to disappear from the market...which also means the spreads in the derivative market don’t get market makers to service the short-side of the trade. For lending/borrowing platforms that are completely overcollateralized, there 3/

Read 11 tweets

Preston Pysh

@PrestonPysh

8 Feb

I think a lot of people are underestimating the power that a mature derivatives market is going to bring to #Bitcoin during this cycle. As the price goes higher and volatility continues to grow, it incentivizes more and more long-short funds to capture the massive ... post/1

spreads which are near risk free. These spreads are huge and nothing compared to any other asset class in the world. Here's where it gets really interesting - to implement this strategy, one has to HAVE bitcoin to sell it short. So what are they doing? Well they are... post/2

borrowing Bitcoin. But to borrow Bitcoin, the borrower needs to over-collateralize their escrow! This means they need to lock-up more Bitcoin (because their fiat colleterial is immediately turned into BTC once the loan is written). So what's this all mean? It means ... post/3

Read 5 tweets

Preston Pysh

@PrestonPysh

5 Jan

As things in the economy go from manipulated to ultra-manipulated, make sure you're ready for totally extreme changes. Although only a few companies are driving the stock indexes, they are heavily dependent on policy decisions and the aggressive addition of more fiat units into..

the collective global system. COVID policies, drastic changes in spending habits, lack of earnings power for the masses, are all likely to have a shocking liquidity experience to the system in the coming year. The amount of breadth at which the impairment will occur is nearly..

impossible to predict or forecast. The first chart I posted is simply demonstrating my opinion that the system is becoming increasingly unstable and the aperture for potential outcomes is widening. As policymakers respond to growing volatility (on a global level), their...

Read 8 tweets

Preston Pysh

@PrestonPysh

2 Jan

At what point in 1923 German did it become evident that all trust in the Mark was lost?

The years leading up to 1923 were an aggressive devaluation where the paper Mark was debased 1 : 10,000 over a five year period of time. But once the debasement exceeded 10,000, it. ran.

The headlines in Germany during OCT 1922 were of particular note, according to the Frankfurter Zeitung: "German economic life is dominated by a struggle over the survival of the Mark: Is it to remain the German currency, or is it doomed to extinction? During the past few months

foreign currencies have replaced it as units of account in domestic transactions to a wholly unforeseen extent. The habit of reckoning in dollars, especially, has established itself, not only in firms internal accounting practice but above all as the method of price quotation

Read 7 tweets

Preston Pysh

@PrestonPysh

28 Nov 20

I hear a lot of people say that S2F is an invalid model because it doesn’t account for demand. Here’s what I’m thinking.

As long as hashing keeps going up over time, that means there’s a minimum threshold of demand being applied to the #Bitcoin eco-system where miners ... 1/

Are acting as agents (among other roles) for swapping electrical bills denominated in fiat for Bitcoin. In essence, the Labor Theory of Value (LToV) is....Valid...but only in this unique situation. This is a very unpopular opinion because most people believe Adam Smith’s ..2/

antiquated economic model for determining value is invalid in almost all modern instances (which I agree with). In this particular situation though, you’re measuring the work being performed at one of the most raw levels: energy expenses for computations conducted. 3/

Read 14 tweets

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