Musk Tweets and Margin Calls

It’s been a wild rollercoaster ride these days for Bitcoin investors. The cryptocurrency hit an all-time high of $64k in April only to plummet nearly 50% a month later. Last year, as the entire world shut down access to mountain peaks and surfing spots, people started to look for stay-at-home ways to supply their adrenaline fix – and speculative trading fit the bill.

June 11, 2021

It’s been a wild rollercoaster ride these days for Bitcoin investors. The cryptocurrency hits an all-time high of $64k in April only to plummet down nearly 50% a month later. Elon Musk says Tesla has bought $1.5B of Bitcoin and would start accepting it for payments, and then two months later changes his mind via Twitter. And just this past Saturday, El Salvador’s president proposes Bitcoin as legal tender which most likely will lead to another swing in price. When you add in the looming legal and regulatory battles, it may just be too much for the average investor to absorb in the middle of a global pandemic. But as it turns out, there are plenty of ways to be on the wrong side of volatility, and its not just average investors who get caught off guard.

Last year, as the entire world shut down access to mountain peaks and surfing spots, people started to look for  stay-at-home ways to supply their adrenaline fix – and speculative trading fit the bill. Is it any wonder that both Bitcoin (BTC) and GameStop (GME) charts resemble the shape of the COVID incremental US infections diagram from the CDC?

No surprises there…several years ago, we wrote that someone seeking to jazz up his/her life doesn’t need to climb Mount Everest or invest in Bitcoin. All they needed was a levered bet on an individual, already risky stock – trading options, for example. We showed that a 4.5 levered bet on Amazon would have created a distribution of outcomes that pretty much mimics Bitcoin’s. And all that free adrenaline would be backed by a diversified business, solid technology, AWS, warehouses, etc. without a similar threat from governments, regulators…or Twitter.

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