Dec 21st:

Price - supply vs demand

As a student of the History of Philosophy I learned 

1 to identify that an argument was happening 

2 to recognise the different opinions in the argument

3 to understand their meaning

4 to identify which part of the argument is new - ie has not been heard before

5 if I choose, to take a side.

As an equity broker to the institutional market I recognised that a share price is a similar argument.  Bringing something new to the argument, if it was deemed significant, was what made the marginal buyer or seller transact and so disrupt the balance and move a price - ie taking a side.

The ‘known’ arguments in stocks are about an equity’s position in the market - by sector, market cap, growth rate, value proposition, geographic location, index participation, etc.  Most traded volume is a result of the application of ‘known’ arguments.  A new argument is presented when the company says or does something new or when a skilful investor comes to understand the known in a different light (ably assisted by his broker) and this tends to be what moves a price.  This is also when traders positioning can make a big difference.

Applying the same process to Bitcoin to identify where selling is to come from to match the now recognised argument that the institutional buyer is coming for BTC is an interesting exercise:

Sector Rotation:  Given the strength of view required to enter, I doubt many are exiting the crypto sector at this point in time.

Within the sector, as BTC dominates ($436bn vs $190bn fo the rest) there isn’t a lot of space to rotate out of BTC into.

Market Cap: BTC is the biggest and dominates

Growth Rate: ie Adoption  - other cryptos may grow faster from their smaller base, but its tough to argue that BTC is nearing any peak in adoption.  To switch out of BTC into an equity requires identifying the next Amazon as it was 20 years ago, and being confident that it will successfully grow faster.

Value proposition: Remains completely static, unlike an equity

Geographic Location: Doesn’t apply

Index participation: Doesn’t really apply (yet).

So that brings it down to trader’s positioning and a new argument arriving.  All the commentary I read suggests that its about the existing argument being heard by new ears. It would seem difficult for a new Crypto to replace BTC.  So my conclusion is that the price argument for BTC is much more simple than for an equity: as long as new money demand is greater than the supply from profit takers the marginal movement will be up.

New Years Day:

I broke every investing rule I've learned in 35 years of working in and then watching markets to buy an asset that had already risen 180% in 3 months, and on New Years Eve when markets are thin.  My only comfort was that it was an uncomfortable move, and many say that is an indicator of good results to follow!  I bought a Bitcoin.  Fortunately Im cushioned by having some earlier exposure.  So far so good. Caveat Emptor!