Čvn 05

Long Bitcoin, Short Duetsche Bank Has Been The Best Trade in 2019

Buying Bitcoin while shorting the stocks of multinational investment bank Deutsche Bank in 2019 might be the best trade you could have done in 2019. 

Long Bitcoin, Short The Bankers

“Long Bitcoin, Short The Bankers” has turned into a somewhat popular catchphrase commonly used by Morga Creek Capital’s Anthony ‘Pomp’ Pompliano.

Looking at hard data and crunching the numbers, however, tells us that this might be a lot more than just a concept – it can actually be a rather profitable trade – at least so far in 2019.

As Bitcoinist recently reported, the stocks of the multinational investment bank based in Frankfurt, Deutsche Bank, have been in steady decline for the past five years. Year-to-date, their price has dropped by about 17.5 percent to a fresh record low.

Bitcoin, on the other hand, is having a stellar year so far. Despite the latest correction, which has driven BTC price 00 below $8,000, the cryptocurrency is still marking incredible gains of around 112 percent.

In other words, if you decided to long BTC/USD, while also shorting Deutsche Bank stock at the beginning of 2019, you would have been around 130 percent in the profits.

This number goes up to 139 percent if you had decided to make the trade back in September 2018, as noted by the popular trader and common cryptocurrency commentator Alex Krüger.

The trade ‘long bitcoin, short the Deutsche bankers’ is up 139% since September 2018.

BTC Outperforming S&P 500

Another interesting trade, as pointed out by Twitter user planB (@100trillionUSD), is the combination of 5 percent Bitcoin and 95 percent cash. According to him, this position beats the performance of the S&P 500 index every year in the past nine years.

As it turns out, not only is this position more profitable, but it’s also less risky. The max yearly loss of the bitcoin and cash position stands at -5% while the S&P recorded a loss of 6 percent in 2018.

Even if we look at Bitcoin’s performance alone in the years of its existence, we can see that it’s borderline unreasonable to compare it to that of the S&P 500.

Of course, it’s also worth noting that trading Bitcoin and ‘hodling’ it are two completely different things. The cryptocurrency historically generates its yearly gains 10 days, according to Fundstrat’s chief analyst Tom Lee. This suggests that the chances of you missing out on them if you’re trading regularly are substantially higher than if you’re simply holding for the long-term.

What do you think of Bitcoin’s performance year-to-date? Don’t hesitate to let us know in the comments below!

Images courtesy of Shutterstock

The Rundown

Bře 27

Anti-Bitcoin Banks Paid Over $243 Billion in Fines Since the Financial Crisis

Banks are quick to label Bitcoin the money of criminals. But banks fines since the financial crisis have totaled over $243 billion. Bitcoin fines? Zero. Isn’t it time for society to open its eyes?

Banks Don’t Want to Work with Cryptocurrency Companies

I tried to make a small purchase from a well-known cryptocurrency exchange earlier this week. The action was immediately blocked and I had to call my bank over possible fraud. They kept me on hold for 11 minutes. By the time I had liberated my card, I no longer had time to carry out the transaction.

This is one story in countless others from small-time cryptocurrency users and individual Bitcoin HODLers. The plight of cryptocurrency companies trying to open bank accounts is much, much worse.

Take Lamassu, the world’s oldest manufacturer of Bitcoin ATMs. After one year of being unbanked, the company finally upped sticks and moved to Switzerland where they were at last granted access to a bank account. Again, their story is the tip of the iceberg.

Why won’t banks work with cryptocurrency companies? Most point to lack of regulation and lax AML controls. But with $243 billion in fines over questionable dirty money practices in just one decade, it would seem that banks, not cryptocurrency companies, are the enablers of illicit financial flows.

Bitcoin ‘Charlatans’ Over Corrupt Banks Any Day

Warren Buffett’s views on Bitcoin are well-known. It’s a scam, a ‘delusion’, a space packed with con-artists, ‘charlatans’, and money launderers. If ever there were a clearer case of the pot calling the kettle black, it would be the world’s most famous investor.

Wells Fargo (a Buffett investment) has been fined a mind-boggling total of 93 times for fraudulent activities and other abuses since the turn of the century. How many fines has Bitcoin received? Zero.

Big Banks Are Often the Perpetrators of Criminal Activity

Not only have large banks found themselves in hot water over the years for their inadequate AML procedures. They’ve also been found guilty of laundering the money themselves.

According to calculations by Bloomberg, Deutsche Bank has paid out close to $18 billion in the last decade alone in AML fines. The bank also had its offices raided in November 2018 on suspicion of laundering a massive $200 billion of dirty money.

Yet, they won’t allow Bitcoin ATM makers and other genuine cryptocurrency companies to open accounts? Isn’t that a little hypocritical?

Just a little… Yet it also shows the size of the profit doesn’t outweigh the risk involved.

Bitcoin Isn’t Big Enough Yet

So if big bank fines topped $243 billion over 10 years, why do they keep acting this way?

Because the profits they make from these activities far outweigh the sting from the fines. AML fines are a mere fraction of the billions of dollars more made from enabling criminal transactions.

The same cannot be said for small cryptocurrency companies. As Dan Hedl pointed out, the entire cryptocurrency market cap is worth just $134 billion, dwarfed by AML fines alone. Most banks simply realize the risk isn’t worth the reward.

That’s one theory. Another is that banks are simply trying to crush innovation and suppress Bitcoin and other cryptocurrencies because they see them as a threat. Let’s not forget the very reason Bitcoin was born in the first place.

With numbers like this, it can’t be too long before society opens its eyes and realizes who the real charlatans are.

Can a more honest monetary system be established using Bitcoin? Share your thoughts below!

Images via Shutterstock

The Rundown

Led 22

Bitcoin’s Wall Street Combo Of Greed and Volatility

· January 22, 2018 · 7:30 am

The lack of volatility in global markets is leading investors to seek riskier investments with increased rewards. Cryptocurrencies, such as Bitcoin, are being used to feed this increased investor appetite. 

Financial Markets Bitcoin

Analysts at Deutsche Bank have asserted that there is a correlation between the price of Bitcoin and the volatility index (VIX). The analysts backed up their  argument saying that the first three weeks of 2018 so far show “correlation between Bitcoin and VIX has increased dramatically.”

The analysts go on to say:

The current ‘triple-low environment’ of low interest rates, low spreads, and low volatility has given birth to new asset classes like implied volatility (ETFs selling volatility), and cryptocurrencies.

Retail Investors Informing Institutional Investor’s Ideas Of Asset Sustainability

It appears to be a sign that investors’ risk appetites are growing as they veer away from the safer stocks and look to the large gains that are made in more volatile markets, such as those like Bitcoin and other more established cryptocurrencies.

CME Group to Launch Bitcoin Futures Trading

Masao Muraki,  Hiroshi Torii, and Tao Xu, Deutsche Bank global financial strategists, write:

Cryptocurrencies are closely watched by retail investors, affecting their risk preferences for stocks and other risk assets. Although institutional investors recognize that stocks and other asset valuations may have entered bubble territory (US equities’ average P/E is around 20x), they cannot help but continue their risk-taking. Now, a growing number of institutional investors are watching cryptocurrencies as the frontier of risk-taking to evaluate the sustainability of asset prices.

The correlation that the analysts highlight is that when volatility, as judged by the VIX, drops, then they are seeing the price of Bitcoin rise as investors seek potentially more lucrative investments.

The analysts conclude:

The result is that institutional investors, who are supposed to value assets using their sophisticated financial literacy, analysis, and information-gathering strengths, are actually seeking feedback about the market from cryptocurrency prices (which are mainly formed by retail investors).

Greed Is Good

Bitcoin Price markets

Steve Chiavarone of Federated Investors told CNBC’s Trading Nation that:

It’s the first sign of greed since the Great Recession, It’s indicative of rising risk appetites which will drive equity markets higher almost regardless of what happens with bitcoin.

These risk appetites are currently not being exercised in the world of traditional stocks but rather in the world of cryptocurrencies. However, Chiavarone is confident that whatever happens to Bitcoin and crypto in 2018,  investor appetites have nonetheless grown from their exposure to cryptocurrencies. As 2018 unfolds, we will see if money moves back to traditional stocks or remains with Bitcoin and other virtual currencies.

Is the correlation a sign of causation? Are retail investors’ risk profiles increasing and what will this mean for traditional markets? Let us know what you think in the comments below.

Images Courtesy of Bitcoinist archives and Pxhere.

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Pro 11

Deutsche Bank Economist Believes a Bitcoin Crash Endangers Global Markets

· December 11, 2017 · 3:00 am

The continuing frenzy surrounding Bitcoin has a number of analysts and economists worried even as global financial institutions are starting to actively participate in the crypto world.

2017 has been a banner year for Bitcoin and other cryptocurrencies. Last week saw Bitcoin race from $14,000 to over $18,000 in a few hours before coming back down to earth at just over $15,000. While many financial experts are predicting that Bitcoin will soar even higher in 2018, there are a number who are a little more gloomy. The latest member of the Gloom Club is Torsten Slok, an economist with Deutsche Bank, who believes that a Bitcoin crash could endanger global markets.

Bitcoin Making the List … of Market Risks

Bitcoin has been riding high this year, and the launch of futures trading is driving interest to a fever pitch. The CBOE website actually crashed yesterday as it couldn’t handle the massive influx of traffic. One wonders if CME will beef up their site when they launch their own Bitcoin futures exchange next week.

Of course, not everyone is tickled pink by the increasing influence of Bitcoin and cryptocurrency. Torsten Slok of Deutsche Bank has issued a warning about the ramifications of a Bitcoin crash in 2018. Slok released a list of 30 market risks that could impact global markets, and a Bitcoin crash came in at lucky number 13. This places Bitcoin behind German wages and inflation but ahead of Brexit developments and the Russian presidential election.

How Bad Would a Bitcoin Crash Be?

A total Bitcoin crash would be devastating to a lot of people, but it may not have the global impact that Torsten Slok envisions. One such reason not to fret is that of scale. The total market cap for all cryptocurrencies is $436 billion at the time of this article’s writing. While a tremendous amount of money, it does pale in comparison to other economic factors. The housing market in the United States alone was estimated to be almost $30 trillion back in 2016. Another example of scale is that the value of all Japanese stocks hit a high of $5.49 trillion back in September.

Another reason why not to panic is that Bitcoin is spread across the world and not concentrated in a single economic block, such as Europe. A lot of people would lose a great deal of money in the event of a Bitcoin crash, but it should not throw a wrecking ball at a single country’s economy. However, if a Bitcoin crash was part and parcel of a greater financial breakdown across multiple markets, then the overall global market would be impacted.

That being said, a Bitcoin crash would hurt a lot of individuals, but I wonder if a lot of national governments would welcome such an occurrence. There’s no denying that many governments are not too keen on cryptocurrency as it is currency that lies outside their control, and governments are not thrilled with a lack of control.

As for Deutsche Bank, they’re calling for greater regulation and security on cryptocurrency in order to make it a viable asset class. The bank believes that the imbalance between supply and demand, as well as the volatility of crypto prices, make investing in digital currencies risky. Deutsche Bank says:

If cryptocurrencies are to replace money, then they have to fulfill money’s three core functions: as medium of exchange, a measure of value and a store of value. To do this, cryptocurrencies must be more trusted. Problems here include high volatility and possible price manipulation as well as data loss or data theft.

In the image below are the 30 global market risks as selected by Torsten Slok of Deutsche Bank.

What is your opinion of Slok listing a Bitcoin crash on his list? Do you think the cryptocurrency will crash in 2018? Let us know in the comments below.

Images courtesy of Bloomberg, Flickr, Pixabay, and LinkedIn.