Is it too soon to talk about Crypto yet?

[Oaktree]

There is a cultish aspect that people involved in it talk in riddles. Skeptics tend to speak in plain language. Make of that what you will.

Agree 100%. I have never seen an explanation on how it works that's in plain English. No offense Eric, but most of the posts you've made defending BC might as well have been written in Martian for all the sense it makes.

 

[MinnesotaEric]

Agree 100%. I have never seen an explanation on how it works that's in plain English. No offense Eric, but most of the posts you've made defending BC might as well have been written in Martian for all the sense it makes.

If you find crypto to be "creepy" (sorta like looking up your own FICO score?), then you're in luck as it is expected that both Android and Apple will soon start allowing people to use their phones as crypto wallets with a judgement against Apple who has forced all venders to pay a 30% "Apple tax" on "in APP" purchases. Apple had also barred crypto payments in their APP and that too was struck down. This opens developers up to be able to use crypto in their applications that are distributed through Android and Apple's applications stores including peer to peer transfers of money and crypto without paying a huge fee.

The excessive fees led Musk to try to negotiate with Apple a couple of years ago as Mr. Musk has asserted that he wanted to allow "X Payments" through his X application (formerly Twitter) and X, the company, has been busy gathering all the required state money transmitter licenses around the USA for some time now.

That said, every discipline has its own jargon and I've used as generic of terms as I can think of to convey my message in this thread.

 

[MinnesotaEric]

Meanwhile, with this morning’s Strategy announcement of purchasing 13,390 Bitcoin over the last week, it dawned on investors that Strategy alone, as in the single company, is buying more Bitcoin than all the miners in the world are producing and that this has been going on for a few months.

And every week more companies and nations are disclosing that they too are buying.

What this means is we are witnessing a slow motion supply shock that will at some point cause a squeeze in the options.

I’ll explain: if you sell out of the money short-term calls for a 30% premium and the underlying spot price remains relatively the same, then you’re aggregating a higher return than anything but the junkiest bonds (which are likely to go to zero and hassles). As a result selling out of the money calls based on time is pretty reliable way to earn money.

The trouble is if the spot price of the underlying exceeds the strike price of the calls and so to call buyer exercises the call to buy the underlying at the strike price of the call which is less than the spot price of the underlying.

In this case there is a bum-rush to purchase the underlying no matter the spot price which can cause an immediate and sudden supply shock that we call a short squeeze.

I realize I just shared more jargon but it’s the internet so look the terms.

In a few years everybody who read this thread will think to themselves, he was telling us the whole time and those who disagree with me, ask me how to short Bitcoin to make money if you think Bitcoin will collapse and become worth nothing.

 

[MinnesotaEric]

Oh, I forget to remind everybody that the third largest oil producer (behind the USA and Russia) who is in good terms with the West has begun accepting payment in Bitcoin rather than the traditional US “petrol” dollar. For their part, Russia has been trading oil with China (thereby bypassing western-block sanctions) since the beginning of the Ukraine War so as to avoid western sanctions.

[emoji[emoji6][emoji6]][emoji6]/[emoji[emoji6][emoji6]][emoji6]/[emoji[emoji6][emoji6]][emoji[emoji6]]/b-emarat-now-accepts-bitcoin-and-other-crypto-for-gas-payments/" class="link link--external" target="_blank" rel="nofollow ugc noopener" data-proxy-href=""> https://www.banklesstimes.com/articles/[emoji[emoji6][emoji6]][emoji6]/[emoji[emoji6][emoji6]][emoji6]/[emoji[emoji6][emoji6]][emoji[emoji6]]/b-emarat-now-accepts-bitcoin-and-other-crypto-for-gas-payments/

 

[quicksandfarmer]

Meanwhile, with this morning’s Strategy announcement of purchasing 13,390 Bitcoin over the last week, it dawned on investors that Strategy alone, as in the single company, is buying more Bitcoin than all the miners in the world are producing and that this has been going on for a few months.

And every week more companies and nations are disclosing that they too are buying.

What this means is we are witnessing a slow motion supply shock that will at some point cause a squeeze in the options.

I’ll explain: if you sell out of the money short-term calls for a 30% premium and the underlying spot price remains relatively the same, then you’re aggregating a higher return than anything but the junkiest bonds (which are likely to go to zero and hassles). As a result selling out of the money calls based on time is pretty reliable way to earn money.

The trouble is if the spot price of the underlying exceeds the strike price of the calls and so to call buyer exercises the call to buy the underlying at the strike price of the call which is less than the spot price of the underlying.

In this case there is a bum-rush to purchase the underlying no matter the spot price which can cause an immediate and sudden supply shock that we call a short squeeze.

I realize I just shared more jargon but it’s the internet so look the terms.

In a few years everybody who read this thread will think to themselves, he was telling us the whole time and those who disagree with me, ask me how to short Bitcoin to make money if you think Bitcoin will collapse and become worth nothing.

This is only true if you're selling calls without owning the underlying asset.

Let's say you own a house that's worth $100,000. Someone comes to you and says, a year from now I'm going to need to buy a house, I'm worried that prices are going to go up between now and then, so I'd like to pay you $1000 today for the right to buy your house for $130,000 in one year. If you accept that deal, you've just sold a call option.

If a year passes and the house is worth less than $130,000, the buyer won't execute his option, and you've just put $1000 in your pocket. If the house is worth more than $130,000 a year later the buyer will execute the option. You haven't made as much as you might have, but you've still made $30,000 on the appreciation of the house in the past year plus the $1000 for the option, so let's not get greedy.

Now, let's say you enter into that agreement, but don't actually own the house. If the price goes above $130,000, you need to buy the house at the new price so you can honor your end of the agreement. Your need to buy the house might drive the price higher than it otherwise would be. And if lots of people have entered into similar agreements you could really squeeze the local real estate market.

Selling an option on an asset when you don't own the underlying asset is called a "naked" option. It's gambling on the price of the asset. Some traditional securities markets ban the practice, but ones that allow it regulate it heavily. If you sell a naked option there is no limit to how much money you can lose, and it's really bad for markets to allow some market participants to make bets that they might not be able to pay off if they lose.

I don't know if crypto markets allow the sale of naked options. Would I be surprised if they do? Not at all.

 

[MinnesotaEric]

Quicksand, there are all kinds of ways to be net short. For example the most basic way is if you're managing a generally diversified portfolio, then not having any Bitcoin exposure right now in that portfolio means that you're net short without even having a position. You've got to think like a money manager. That said, in the USA we cannot sell naked options, but you can set up options strategies that (again) make you net short. Generally speaking to make money in options, you're selling the Greeks (see below) and covering when it makes sense to do so. Selling time is the easiest way to make money in options if the underlying is relatively stable.

Moving forward, for those who missed it from from a couple of months ago, we remain in a largely do-nothing period until we get stablecoin legislation which we hope will happen in August at the earliest which means this is an accumulation period for longs and the "never sell your Bitcoin" crowd.

https://twitter.com/x/status/1923531084635177354

 

[California]

I read something about selling federal land to buy crypto for a government Sovereign Wealth Fund. Didn't understand how that works. What's this all about?

 

[MinnesotaEric]

I read something about selling federal land to buy crypto for a government Sovereign Wealth Fund. Didn't understand how that works. What's this all about?

Insofar as I know nothing has been decided or implemented and so I asked Grok3 (X.com's AI) to aggregate by asking, "How will the USA raise money for a sovereign wealth fund?"

Grok then spit out a lengthy summary. I then asked Grok to do a deeper search and it surveyed 26 sources including government sites and produced the following highlights (bolding, mine).

Key Points​

• It seems likely the USA will raise money for a sovereign wealth fund by selling federal assets like gold and land, and possibly using tariff revenue, but plans are not finalized.
• Monetizing assets, such as $762.5 billion in gold and over $20 billion in bitcoin, is a key proposed method, though controversial due to potential legal and environmental challenges.
• Tariff revenue, estimated at $20 billion in 2025, may also contribute, but this is debated due to economic impacts.
• The plan, due May 3, 2025, has been submitted but not made public, with ongoing debates and no final decisions as of May 17, 2025.

Funding Approach​

The U.S. is exploring ways to fund a sovereign wealth fund (SWF) following President Donald Trump's Executive Order on February 3, 2025. The main approach seems to be monetizing federal assets, such as selling or leasing government-owned properties, gold reserves, and bitcoin. For example, the U.S. holds 261.5 million troy ounces of gold, valued at about $762.5 billion, and 207,000 bitcoin worth over $20 billion . Another potential source is revenue from tariffs, with estimates suggesting $20 billion could be raised in 2025, though this is uncertain due to potential trade impacts.​

​

Current Status​

The Treasury and Commerce Departments submitted a plan by May 3, 2025, but as of May 17, 2025, it remains under review, with no final decisions made. This means the exact funding methods are still being debated, and details are not public.​

​

Challenges and Controversy​

Selling federal assets is controversial, as it could affect public access to lands and raise legal challenges. Tariffs might increase consumer prices and invite trade retaliation, adding to the debate. The lack of a budget surplus, with national debt at $36 trillion, complicates funding, making these methods complex and debated.​

I then asked Grok, "What is the goal of USA's sovereign wealth fund?"

Link to all of the Grok source material: https://x.com/i/grok/share/aQVyuDg7lI79lGOeOSnZQaFTE

Goals​

​

The fund aims to:​

• Promote fiscal sustainability by managing national wealth effectively.
• Lessen the tax burden on American families and small businesses.
• Establish economic security for future generations through long-term investments.
• Enhance US economic and strategic leadership internationally by investing in key industries and infrastructure.

 

[quicksandfarmer]

I read something about selling federal land to buy crypto for a government Sovereign Wealth Fund. Didn't understand how that works. What's this all about?

Typically, countries have a sovereign wealth fund if:
1. Government revenues exceed expenses and they have persistent surpluses.
2. The revenue comes from sources other than taxes, such as oil and gas revenue.
3. The revenue is expected to run out in the future.

The idea is to sock money away now for the future when the income runs out. If #1 isn't true the money is better applied to the current deficit. If #2 isn't true the money is better applied to lowering taxes. If #3 isn't true the money should be spent or distributed, there's no point in building up an always-increasing pile of money.

Most countries with sovereign wealth funds are big oil producers.

None of the three conditions are true for the US.

I'll repeat what I said back in post #263: "With purely speculative investment, your entire upside is finding someone willing to pay more for the asset than you paid, a 'greater fool' in the parlance of investing. Crypto is a purely speculative investment, there are no underlying assets or income streams. When you hear people talking about a national or state bitcoin reserve, or a crypto reserve, what they are really talking about is making the federal or state government the greater fool."

 

[California]

Typically, countries have a sovereign wealth fund if:
1. Government revenues exceed expenses and they have persistent surpluses.
2. The revenue comes from sources other than taxes, such as oil and gas revenue.
3. The revenue is expected to run out in the future.

The idea is to sock money away now for the future when the income runs out. If #1 isn't true the money is better applied to the current deficit. If #2 isn't true the money is better applied to lowering taxes. If #3 isn't true the money should be spent or distributed, there's no point in building up an always-increasing pile of money.

1, 2, 3 don't apply here. So in this case there must be a goal #4. Maybe to benefit the proponents? In particular if the proceeds from selling off national assets are then 'invested' in a Ponzi scheme.