Bitcoin NVT, NVT Signal trending upwards

$BTC NVT is trending upwards after bottoming Feb 6. See chart from @coinmetrics. NVT Signal chart from @Woonomic shows similar pattern. #bitcoin

Bitcoin’s NVT (network value/transaction) has been moving in a general upward trend since bottoming on Feb 6th. Here’s a chart using the great charting tools at coinmetrics.io:

bitcoin nvt moving up

Likewise, Willy Woo’s NVT Signal chart shows a similar pattern:

 

Look longterm for crypto investments

There’s a possibility that some big winners come out of the crypto projects. Sure, most are junk but like the tech boom, a few big winners may emerge. There’s a lot debate about how to value crypto assets. Most of that pertains to assets that are being used as intended now.

With many projects either not yet active, or still in the very early stages, any valuation based on data or metrics seems unlikely to be accurate. Investments need to be longterm, as Jeremy Epstein writes in How do you value crypto-assets? at Never Stop Marketing

if you are serious about profiting from this long term trend towards blockchain-based ownership of assets that will have value within decentralized networks, then the smart move is to ignore the short-term crypto mania and use this time to go as deep as you can on the fundamentals.

Do what you can to understand HOW a crypto-network is put together and how it will work. If you are about to make an investment, find someone who has really done his or her homework.

As an example of someone that’s done their homework, he cites the Store of Value blog.

Split the deal to reach for bigger upside

Advice on investing and splitting the deal in order to share risk and reach for rewards that may otherwise be unattainable from Fred Wilson in Splitting The Deal at A VC.  His experience comes from venture capital, but these seems applicable in any type of private investing.

I am a firm believer in splitting the deal, even when the economics (another word for ownership) suggest that there is no room for others.

My personal track record tells me that splitting the deal works. It helps you step up to something that has a lot of risk but also a lot of upside and it brings other people who can add value into the situation early on.

At a time when we are seeing venture funds get bigger and bigger, I am convinced that the hallmarks of old school early stage investing; small fund sizes, small rounds, and syndicates remain best practices

Apple is well-positioned, less flashy

Apple isn’t the same company it once was, and that’s ok as they seem aware of their position as market leader, rather than the upstart they once were. While they may not be overwhelming critics and consumers with new devices, they are making appropriate moves for a company in their “middle age.”

This is by no means a condemnation of Apple. Every single move I’ve described above is justified by two circumstances in particular.

First, as a general rule, challengers pursue interoperability while incumbents strive for incompatibility. This is Strategy 101: seek to fight battles where you have the greatest advantage. When Apple was making the iPod, it’s advantage was a superior device; making that device interoperable with Windows let Apple fight the portable music player battle on its terms. Today, though, Apple already has dominant market share: better to make its devices exclusive to its ecosystem, preventing rivals from bringing their own advantage (superior voice assistants, in the case of Alexa and Google Assistant) to bear.

Secondly, the high-end smartphone market — that is, the iPhone market — is saturated. Apple still has the advantage in loyalty, which means switchers will on balance move from Android to iPhone, but that advantage is counter-weighted by clearly elongating upgrade cycles. To that end, if Apple wants growth, its existing customer base is by far the most obvious place to turn.

In short, it just doesn’t make much sense to act like a young person with nothing to lose: one gets older, one’s circumstances and priorities change, and one settles down. It’s all rather inevitable.

via Apple’s Middle Age at Stratechery by Ben Thompson

Build your own index fund using blockchains

Another tool (in beta) for better managing money on your own, Prism lets you setup an index on your own. From  the post How Blockchains Will Disrupt Mutual Funds…You Build Your Own at Never Stop Marketing:

Prism is the world’s first trustless platform for creating portfolios of assets.

Designed and built by ShapeShift, Prism uses smart contracts deployed on the Ethereum network to bring custom portfolio management to everyone.

You can create and rebalance your own portfolio, as well as browse the public portfolios of others and follow them.

So that is exactly what I did.

Now, my one issue with the site (at the moment) is the relative limited number of coins that it supports. I had hoped to create a broader index of coins, but there are only about 25 or so coins (if you have ever used ShapeShift, you will see the exact same coins).

How Amazon continues to grow

There’s no doubt that Amazon continues to grow their power in the world of ecommerce. Here’s an interesting look at how they continue to grow their role with each additional transaction.

As crowds build on either side of the platform, the middleman becomes ever more indispensable. Oh, sure, a new platform can enter the market—but until it gets access to the 480 million items Amazon sells (often at deep discounts), why should the median consumer defect to it? If I want garbage bags, do I really want to go over to Target.com to re-enter all my credit card details, create a new log-in, read the small print about shipping, and hope that this retailer can negotiate a better deal with Glad? Or do I, ala Sunstein, want a predictive shopping purveyor that intimately knows my past purchase habits, with satisfaction just a click away?

Similarly, the more online buyers and sellers are relying on Amazon to do their bidding or settle their disputes, the less power they have relative to Amazon itself. They are less like arms-length transactors with the company, than they are like subjects of a despot, whose many roles include consumer and anti-fraud protection.

While this may be an argument against the practice, there doesn’t appear to be any change coming. Until there is, there’s no reason to believe Amazon won’t continue to grow.

See the full post From territorial to functional sovereignty: the case of Amazon at openDemocracy.

Disclosure: Long AMZN

Look outside public markets for true diversification

From a post on diversifying from The Humbe Dollar, based on Harry Markowitz’s 1952 research paper on the subject.

For instance, he explained that the number of stocks you hold is far less important than the number of types of stocks you own. A portfolio of 60 stocks might appear to be diversified. But if all 60 are technology stocks, there is still quite a bit of risk. Today, this might seem like commonsense, but at the time it was a major revelation.

Markowitz ultimately won a Nobel Prize for his work, and there’s no question it was brilliant. Today, however, there’s even more you can do to manage risk in your financial life. Here are five ideas to help you think more comprehensively about diversification:

Diversify your tax rates
Diversify your investment products
Diversify your financial relationships
Diversify the timing of your purchases.
Diversify the timing of your sales.

While this post at the Humble Dollar focuses on public market investments, diversifying can be taken much further. With easier access to alternative investments, it’s easier than ever to diversify among a large number of investment products. The trick is doing so feasibly and with proper risk management.

via Five Ways to Diversify – HumbleDollar at HumbleDollar

Thinking of investing as a game

Graham Duncan on thinking about investing as playing a game:

One of the most important things I’ve learned in that process is what separates the great investors from the rest. The great ones view investing as a game, and they know exactly what game they’re playing. It brings to mind an observation from the philosopher Kwame Anthony Appiah: “In life the challenge is not so much to figure out how best to play the game; the challenge is to figure out what game you’re playing.”

One way to relocate your locus of control is to frame investing (and even life more generally) as a game. This allows you to experience luck as luck, to separate the hand you drew from the playing of that hand.

He describes five levels of the game for investors, though it seems more generally applicable:

1. Apprentice — learning the game

2. Expert — mastering the game you were taught

3. Professional — making the game you were taught fit your own strengths and weaknesses

4. Master — changing the game you play as part of your own self-expression and operating at scale

5. Steward — becoming part of the playing field itself and mentoring the next generation

 

Read the full post at The Playing Field on Medium.

Dollar cost averaging with stop loss orders?

More on stop loss orders, which are called The Most Important Trading Tactic in this article from The Balance. The idea of stop-losses is great. In practice, I’m less convinced.

The optimal degree of the stop-loss price is different for every investor, and sometimes may be as low as a few percent. For others the level could be as great as 30 percent, sometimes even larger. For example, some investors may set their stop-loss price at 70 cents for shares which were bought at $1. Whatever level each person chooses represents their total downside risk.

An effective strategy to protect against downside, and preserve potential gains, is to use multiple stop-loss prices.  For example, you may commit to selling a portion of the shares at one price, then another part at an even lower level.  Using our example once more, when the shares hit $2.85, you may have established a mental stop-loss at $2.50 for one-third of the shares, then another at $2.00 for the remaining two-thirds.

Tips for successfully using stop loss orders

A few highlights from the post 10 Great Tips For Using Stop Loss Orders Successfully at StockTrader.com.

1. Never use stop loss orders for active trading. For investors that watch their screens all day and are involved in day trading a stop loss order serves little purpose.

4. For the original placement always give the stock atleast 5% of space to avoid market maker abuse. If the stock is trading at $100, a stop loss should be no higher than $95 initially as intraday price swings may cause the order to trigger prematurely

9. Set the trigger price at common price increments. Prices like $100 or $60.50 are far more common to be traded at than $123.47. By placing the trigger price at a common increment there is a smaller chance of the stock “trading through” the order trigger.

Stop limits kicked in on nearly my entire portfolio this week as the market has dropped relatively significantly across the board. A few stocks have popped back above my selling positions, though overall it’s saved me from a lot of losses. I’m still unsure if this is the best practice moving forward, since some gains were lost and some items sold at “flash crash” type prices, possibly engineered by Wall Street in some way.