Share this page!

Trolly🐴 McTrollface 🌷🥀💩 Profile picture
Twitter logo
7 Mar, 11 tweets, 3 min read
Remember when Paul Tudor Jones invested in Bitcoin, in May 2020? In his letter to investors, he explained that Bitcoin would be a good "hedge against inflation and money printing", without going into much specifics.
But he did one very weird thing. He didn't buy Bitcoin.
Instead, he bought Bitcoin futures. That's very, very weird for one reason - Bitcoin futures have a very negative carry as their term structure is in contango. A Bitcoin future a few months out costs much more than Bitcoin spot, and PTJ was willing to give up that spread. Why?
Some said that it was "easier than buying Bitcoin", but come on - a multibillion dollar hedge fund can figure out how to buy Bitcoin and store it in a wallet.
I can tell you that in funds like those, an army of PhDs spends their days figuring out the best way to make every bet.
They study the market and the contracts and the specifications of the instruments inside out, and the way they place their bet is often more important than the bet itself.
So, why buy Bitcoin futures and not Bitcoin, and give up the spread?
Well, Bitcoin futures are cash settled.
This means that their payout is calculated following a formula - and if you have a day or two to spare, you can read CME's painstaking explanation of how they do it and why. Long story short, CME knows exchanges that trade Bitcoin can't be trusted, and they go to great lengths...
to select the less scammy ones, and to assign weights on Bitcoin prices on those exchanges before averaging them. The result is called the "Bitcoin Reference Rate" - which is used, at futures expiry, to compute what is due to the longs and the shorts.
cmegroup.com/trading/crypto…
Remember how, when MtGox went bust, Bitcoin's price shot up as people were trying to cash out of the platform? Same thing happened when Tether ran into trouble in October 2018. Basically, when exchanges run into trouble, the price of Bitcoin as quoted on those exchanges goes up.
So in the event that Tether actually goes bust, people who hold physical Bitcoin won't be able to cash out, despite Bitcoin's "price" as quoted by exchanges going to the moon - as the price will be completely meaningless.
Unless, of course, you're long Bitcoin futures.
Because of the futures terms sheet, you'd most probably benefit greatly from a failure of the ecosystem (and also would be able to cash out as futures are regulated and backed by margin calls).
So I'm calling PTJ's bullshit about Bitcoin being a hedge against inflation.
The guy is smarter than that - every asset is a hedge against inflation, so why buy Bitcoin? He didn't give any specific reasons for that. And above all, why pay the term premium?
Simple - he knew something. He knew about Tether's pump scheme, & decided to get a piece of the pie.
The letter to investors & the TV interviews were just a way to cover his ass the day Tether goes bust. "Oh wow I had no idea, how lucky of me not to hold physical Bitcoin"
His move to invest in crypto & risk being the butt of the joke in all hedge fund parties was just too weird.

• • •

Missing some Tweet in this thread? You can try to force a refresh
　

Keep Current with Trolly🐴 McTrollface 🌷🥀💩

Trolly🐴 McTrollface 🌷🥀💩 Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!

PDF

Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @Tr0llyTr0llFace

Trolly🐴 McTrollface 🌷🥀💩 Profile picture
9 Mar
I woke up early this morning & stumbled upon Seetee's "letter to shareholders" and oh boy is it an alphabet soup of nonsensical Bitcoin memes.
To quote Wolfgang Pauli, "it's not even wrong"
I guess Nic Carter must have had a strong influence over whoever wrote it.
Let's dive in.
TL;DR: "I've watched Bitcoin go up tenfold in a year and that gave me confidence that it's very valuable so I jumped in".
Of the 19 advisors that were consulted, only one, Mike Green, is a critic, and also the only one who understands finance and doesn't have a vested interest. Image
Let's start with the "Bitcoin is like the early Internet" meme. The letter references Tim Berners Lee - maybe they should have talked to him. Since Tim said 6 years ago that Bitcoin was getting ahead of itself, the number of daily transactions has barely gone up threefold. Image
Read 20 tweets
Trolly🐴 McTrollface 🌷🥀💩 Profile picture
8 Mar
The meme of Bitcoin as a hedge against inflation and central bank money printing is stupid and perfectly tailored to stick in the brains of financially illiterate bagholders.
First, it seems intuitive that inflation should push Bitcoin up, as everything goes up with inflation.
Except Bitcoin isn't bacon or milk, it's a financial construct. Not all assets go up with inflation. Bonds go down with inflation as interest rates rise. Stocks can go down with inflation if input costs exceed the company's pricing power.
Bitcoin's input costs would rise.
Bitcoin costs money to exist - it needs ASICs and electricity, and those will definitely go up with inflation. Of course miners are free to reduce the hash power to counter-balance that, but then the security of the network will decline, so how is that good for the price?
Read 8 tweets
Trolly🐴 McTrollface 🌷🥀💩 Profile picture
6 Mar
Nic Carter still tries to spin Bitcoin's mind-numbingly stupid energy and cash burn as a "debate". It's not a debate: Bitcoin's energy energy and cash burn is mind-numbingly stupid.
Let's dissect the desperation of a hypocrite who's backed into a corner.
coindesk.com/frustrating-ma…
The opening salvo sets the tone.
Nobody's debating if it's worth to spend "any" energy on Bitcoin. Sane people are simply saying that it's stupid to spend 100+ TWh/year because it's an insanely large amount and much more efficient systems could be set up to the same effect.
Then there's the assumption that Bitcoin is, or enables, "a non-state monetary system" and "sound money". It's not, and it doesn't. Bitcoin, in itself, is just a database - a distributed ledger, like tens of thousands of other databases, only much slower and more expensive.
Read 16 tweets
Trolly🐴 McTrollface 🌷🥀💩 Profile picture
5 Mar
Michael Saylor's stated strategy to load up $MSTR with debt to buy Bitcoin is a mathematical guarantee of bankruptcy.
Remember $XIV, the "short volatility" ETF that went bust when the VIX jumped 100%? HSBC had written in the prospectus of the fund that was going to happen.
In the case of $XIV, you knew that an event where the VIX goes up by 100% in a single day is very unlikely, however, over a very long period of time, it's a certainty. Let's say the probability of that happening on any given day was only 0.1%. This means that the probability...
of it NOT happening is 99.9%, on any single day. But if you intend to hold your ETF for longer periods, the probability of the ETF not going bust over 10 days is down to 99% (99.9% ^ 10), over 100 days - down to 90.5% (99.9% ^ 100), and over 1000 days - down to 37%.
Read 5 tweets
Trolly🐴 McTrollface 🌷🥀💩 Profile picture
5 Mar
I've been ranting about this for almost 2 months now.
To answer all those who are asking "how can I arbitrage this", the answer is, you can't.
Because the SEC doesn't want a Bitcoin ETF, it only allowed $GBTC to exist with one huge caveat: it's a closed-end fund.
A consequence of that is that $GBTC can't redeem shares. They never got that "exemptive relief" from the SEC (excerpt from their IPO prospectus below). Which means that you can buy $GBTC at a discount to NAV feeling smug, but what are you going to do if the discount goes to -30%?
The only way to milk a discount is to buy a very large stake in $GBTC, and then vote to liquidate the trust in the next shareholder GA - you'll then get your bags of Bitcoin. But then the market will know that you got a crapload of Bitcoin that you probably intend to sell.
Read 5 tweets
Trolly🐴 McTrollface 🌷🥀💩 Profile picture
3 Mar
Grayscale Bitcoin Trust premium cratering, now trading over 4% below net asset value. Tens of billions of $$$ are trapped and can’t get out. No buyers.
You can manipulate prices on unregulated exchanges with scam stablecoins. On real markets where you need real USD, not so much.
Grayscale Bitcoin Trust premium -5.2%.
Getting uglier every day.
FYI Grayscale stands for half of all "institutional money" in Bitcoin, as per Goldman's research. And now those institutions are getting buttrekt. How will this attract more bagholders? It won't.
Now the $GBTC premium is -7%. Barry Silbert managed to leverage mild retail buying into a “smart money” stampede by selling them the idea of arbitrage - buy at NAV, sell to retail suckers at a premium. It worked well until people tried to cash out - a recurrent theme in crypto.
Read 5 tweets

Did Thread Reader help you today?

Support us! We are indie developers!

This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal Become our Patreon

Thank you for your support!

Follow Us on Twitter!

Like this author's thread?

Get emails when @Tr0llyTr0llFace has new unrolls!

Check out other threads from @Tr0llyTr0llFace!

Read all threads by @Tr0llyTr0llFace