25 Jan 2022

I am back after a couple of days break from writing Pathways, did I miss anything?

I seem to have some virus but it turns out to be a different strain to Rona, my wife says its the man flu but I think it is a lot more serious.


Yesterday was one of those hectic days in the market where looking at the daily column just doesn’t tell the full story. I woke up around 4am this morning Sydney time and checked the markets, at the time the S&P500 was down -3.99%.

S&P 500 high-low-close data began in 1977. At today’s low, the S&P was down 3.99% Recovering from an intraday loss of more than 3.98% three times, Jan 24, 2024 (yesterday for me) Oct 16, 2008 = down -4.63% and closed up 4.25% Oct 23, 2008 = down -4.28% and closed up 1.26%

This is one of the main reasons why I love to look at the Price Journey instead of just looking at the price movement print at 1 point in time. On the chart I highlighted the S&P 500 price reversal, if you saw the final print of the day you would have seen an up day but that doesn’t tell the drama that took place throughout the day. If you think that was a hectic daily reversal then checkout Bitcoin. It got down to -9% at one point in the day. You can see Bitcoin is currently down more than 21% for the month/year.

$SPY traded over $100b worth of shares for only second time ever (3/2/2020 was the other time), which is more than the top 4 stocks combined. And $QQQ smashed its record with $66b (set Fri). If you combine the two, they did $170b, which is all time record, here’s the chart:

You can see there has been significant increases on the short end of the VIX term structure, with some backwardation the futher out you go, and no I am not talking about backwashing like you do with your pool. That is just me having a little bit of a trader “flex”.


The Bitcoin price has tanked more than 51% since its highs in November last year.

The biggest maximalist alongside the Winkelvoss twins is probably Michael Saylor. Does this guy look happy?

I guess not if your share price is down 75% from its all time high. It wasn’t enough for this guy to take his free cashflow from his Business Intelligence business (a real business by the way) and buy Bitcoin. No he had to make it his companies central strategy and he in fact borrowed money to buy more Bitcoin.

The Microstrategy company owns 122,478 Bitcoin at around $29,861 as an average price. If you believe in Bitcoins future and Microstrategy’s ability to service all its debt obligations then this could be a cheap entry into Bitcoin. You can trade MSTR on the Ditto platform if you are interested.

However, I think there is another very interesting anomaly that has presented in the crazy world of Bitcoin that could also be a smart way of entering Bitcoin cheaply.

The biggest Bitcoin fund is the Grayscale Trust (GBTC) ~$ 25 billion which is a regulated way of owning Bitcoin in the US where you pay the manager of the fund 2% per annum and not have to worry about security i.e. losing your coins. The only problem is that for those who invested in the fund early the NAV of their shareholding is trading at a significant discount to the underlying price of Bitcoin.

The Grayscale Trustees are desperately trying to get the trust registered as an ETF which will allow any share holder to redeem their shares at par value. Things are moving slowly on this front but I think its an interesting trading opportunity to pick something up very cheap. Its worth looking at the disconnect in a little more detail:

Once again you can see how these things behave over a day and the arbitrage opportunities. The Market Price represents the Grayscale Trust and the Holdings is the price movement of Bitcoin. There is a ~20% discount to Bitcoin through the Trust. If you want to see how different the performance has been over the past 12 months see below. Final comment on this matter. I never like to buy products that I can simply create myself without the fees. However, when you see this kind of disconnect I believe there is either a fraud about to be announced or they lost the keys to 20% of their Bitcoin. If you believe the market has just overreacted there is 20% of free money waiting for you, don’t say I never shared with you.


Things are hotting up on the Ukraine / Russia border. Ok that is a poor choice of word as its currently minus 20 celsius. I am no politician but I think I have a fair read on people. Putin is not going to send more than 106,000 troops at considerable expense without getting something back in return. He ain’t going to flex for the sake of flexing this is one of the smartest, shrewdest politicians of the last many decades.

Europe does not have Ukraine’s back as much as one might think. Europe depends on Russia for oil and natural gas. Putin has threatened it will be a very cold winter for Europe if you think you can apply sanctions to Russian energy goods. The American’s are exporters of Natural Gas but I don’t think they can supply Europe adequately with the currently supply chain constraints.

My guess is that Putin has done a deal with China that they have each others back and that he walks away with something from his aggressive overtures.

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