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What If You Could Predict the Future Price of Bitcoin?

The Stock-to-Flow Scarcity Model for the BTC Price, India Explores a Digital Currency, A16Z-backed dYdX Exchange Raises Another $10M

The Coin Times: Bitcoin, Ethereum, DeFi, Blockchain, Web 3.0, and the future of moneyPublished 2-3x Per Week on Substack and TelegramWednesday, January 27, 2021 | Issue 6 | 520 SubscribersBTC: $31,210 ETH: $1,268

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What If You Could Predict the Future? The Stock to Flow (S2F) Model Has Predicted Bitcoin’s Price Direction Accurately For Years

Wednesday News Summary

One of the only State-recognized blockchain networks in China will now officially work with a major Ethereum development lab.

The Reserve Bank of India (RBI), the country's central bank, has said that it is exploring the need for digital currency. In a booklet on payment systems published Monday, the RBI said if there is a need for a digital rupee, it will explore how to operationalize it.

Bitcoin enthusiast Raoul Pal tweets the following, “Feels like BTC is getting ready to climb the wall of FUD fear. Positive seasonality and a nice wedge give it a good chance to hit $50k by March. Let’s see… I remain, as ever, #irresponsiblylong.”

We are particularly interested in DeFi companies that are backed by solid investors. dYdX is backed already by Series A leaders A16Z and Polychain capital. The new dYdX Series B round was $10M total and was led by Three Arrows Capital and DeFiance Capital. Other investors include Wintermute, Hashed, GSR, SCP, Scalar Capital, Spartan Group, and RockTree Capital. Why such a low amount of money raised? They simply don’t need the capital. In 2020 alone the exchange saw $1B in trading volume.

Graph: A Zoom In On The Stock to Flow BTC Price Model

Daily Podcast Summary

Michael Saylor, CEO and founder of Microstrategy, explains how he decided the publicly traded business data firm needed to put its excess cash in bitcoin and what happened afterward. In this episode, they discuss:

  • Why Microstrategy decided to buy Bitcoin, and how the pandemic spurred that

  • The reactions of the officers and board members to his suggestion to invest in bitcoin

  • Why they put all the excess cash into bitcoin as opposed to some percentage

  • What parts of the bitcoin industry could be improved to better serve corporate interests

  • Whether Microstrategy intends to take any money off the table at the top of any future bubbles and reinvest when the price hits a new low

  • Whether it hurts Microstrategy that GAAP rules require the company to mark Bitcoin down to the lowest price it traded at during the quarter

  • How his life has changed since Microstrategy bought bitcoin

  • What he thought of Citi downgrading Microstrategy stock

  • What he thinks of Renaissance Technology being the third-largest buyer of Microstrategy stock since the summer

  • What will happen to Microstrategy stock in a bitcoin bear market

  • Whether or not there was any further conversation after his tweets with Elon Musk

  • What types of companies, and how many, have been talking with him, expressing interest in buying bitcoin

  • What will happen at the Bitcoin for Companies conference

  • What type of bitcoin data products they are contemplating offering

  • What he thinks will happen to the USD’s global reserve currency status

  • What it would take for him to sell any bitcoin

  • Guy Swan reads aloud the article - The Cantillon Effect 2.0

  • A discussion of Bitcoin as a “fair money” due to the supply being stable

  • A discussion of Bitcoin’s supply being inflation-proof and fixed forever at 21 million coins and how Fiat’s supply just keeps going up, making it impossible for regular people around the world to save and not have their earnings continually decrease in value.

Five Crypto Recommendations

Here are my big picture recommendations for anyone getting started in crypto investing. We will keep publishing this for the next few days.

  1. Never invest an amount you can’t afford to lose.

  2. Be careful investing on borrowed money (margin). We don’t recommend it until you’re a professional.

  1. Best bet is to buy and hold for the long term (10-15 years) and not attempt to time the market. If you are going to attempt to time the market, be very familiar with the Stock to Flow model and the timing of BTC halvings.

  2. We recommend Coinbase for those investing small amounts (<$10K) and the lower fee Coinbase Pro, Gemini, Binance, or Kraken for those investing larger amounts ($10k+).

    1. Certain tokens don’t yet trade on Coinbase. Binance has most of them.

    2. Track market caps here.

    3. You can see which blockchain tech is getting the most transactions fees here.

  3. For maximum long-term capital preservation, we recommend keeping 80% of your holdings in BTC and ETH (“The Blue Chips”), and no more than 20% in alternative blockchain tokens (<$100B market cap). For the alternative asset exposure, here’s what we like:

    1. We like these blockchain techs: DOT, ADA, ATOM, COSMOS, HBAR, SOL

    2. We like these DEX Exchanges: UNI, SUSHI, 1INCH

    3. We like these DeFi protocols: AAVE, COMP, SNX, YEARN, CRV, BAL, REN

    4. We like these Oracles: LINK, BAND

    5. We like these Web 3 Tools: THETA, GRT, FIL

    6. We like these Insurance Tools: WNXM

    7. We like these Payment Platforms: EGLD, XLM, XRP (still big in Japan)

The People We’re Following Closely on Twitter

If You’re Just Getting Started With Crypto, Start Here

The Coin Times: Tracking the most important blockchain stories of the 2020s including a decentralized internet and the creation of a new open global monetary system that works for everyone. As always, published for informational purposes only. Just my opinions. Not intended as financial advice. Please do your own research. Published 2-3x per week. Published by Ryan Allis.

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