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In this issue:  My trip to Nicaragua and Revisiting a savings strategy
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I have Bitcoin...  Wanna buy some?

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The Nicaraguan Jungle


It's a great place to think, especially if a band of anarcho-capitalists has built you a safe place to hang out and discuss whatever you want and feeds you for $10 a day.  I was there for about three weeks, as many of you know because my adept wife Kim took care of your bitcoin cravings while I was gone.  Give it time, and I expect that those trades will turn profitable.

The little help I had to give Kim while I was down there wasn't the only thing I did in Central America for three weeks.  I was at The Cacao Farm on which I own a room, sort of like a condo.  It's primitive right now, but improving fast, and I got to watch some of that improvement.  We are turning the place into an eco-tourism resort.

I used some of my bitcoin savings to pay for a swale on the mountainside at the back of the 40-acre property.  A swale is a mostly level ditch designed to trap rainwater and give it time to soak into the earth.  This seemed like one of the best ways to help rehabilitate land from which rain forest trees have been clear cut.
 

What's that about Savings?


I've mentioned before that I like to keep my savings evenly distributed between two precious metals and bitcoin.  This turns out to be a profitable strategy, especially on an exchange that pays "maker commissions."

I've recently signed up for an account at CoinMKT because they have negative commissions for market makers.  That means that if you offer to sell for more the current ask or to buy for less than the current ask, your trade will just sit there, waiting for someone to take it, and when someone does, part of the commission the "taker" pays will go to you, the "maker".

If I do the math, I can figure out how much bitcoin I need to buy given a price drop of a certain amount in order to keep the value of my bitcoin holdings roughly equal to the value of my precious metals.  I can also calculate how much to sell if the price goes up.  And here's the thing: the price goes up and down all the time.  So as long as I have the cash and bitcoin available on the exchange, I can take advantage of the volatility.

If everyone did this... well, ok, if everyone did it, no one would ever trade because no one would be willing to "take" a trade.  But if a lot of people did this, the "order book" on CoinMKT would be dense with trades, and there would be more supply and more demand clustered around the current market price, giving the price of bitcoin the stability for which many have been waiting.

You can do the same thing on an exchange that doesn't pay maker commissions, but you have to account for the commissions you'll pay on each trade.  It just changes the math a bit, and slows down the trading a bit because your prices will be slightly worse (for the taker) to account for the commissions.  There may be software programs, "trading bots" that do this for you.

An interesting point about such trading bots is that they do the opposite of the computers that crash the stock market when it has a large drop in prices.  Those programs are created under the assumption that the behavior of the market is predictive: "If everything is going down in price, it's because everything is worth a lot less, so we better sell!"  But the strategy I just described takes the other side of those trades, betting that things aren't ever and can't ever get too far out of whack without eventually returning to a baseline, so we buy on the dips and sell on the upswings, helping to even out the price rather than crash it.  Of course, if one of the underlying investments is headed to zero you will end up either putting all your money into that one failure, or you will own all of it and there won't be any more sellers.

Dave.
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