BTC Gains vs. USD Gains Finance Friday Series #7

3년 전

What's up everyone! Wow, sure alts and BTC are really dropping low! I really did do almost zero trades this week. Might go back being active once I'll put more on Binance. So, on the mean time, we'll just talk about other things that are still related to crypto finance and investments.

Now, even since I've started investing in crypto, there's a long debate ongoing. In this young market, we need to convert our local currencies into BTC or ETH first, before we could expose ourselves into the altcoin markets. Of course, there's Tether, and other "dollar-pegged" currencies, but we can't yet still find any exchange that offers USDT or any of these currencies that are really reliable that it will always be equal to the fiat counterpart. We have recently seen this week how the Binance listing of True USD had affected its price. The million dollar question today is: "How do we look at our gains: BTC or fiat values?"

The community is really divided into this one. Some believe that looking at the dollar increase of your portfolio is better than its increase in sats. Others believe the other way around. I am a true believer in BTC, but I still believe we are a really long way to go towards the real mass adoption of crypto, and these events currently taking today gets us one step at a time closer towards it.

Log vs. Linear: The Analogy

Currently, there is an ongoing bull and bear fight with the BTC and USD. Since the drop from $20,000, we haven't seen it recover yet, and is still showing signals that it will continue to go down. We have seen how the altcoin markets follow the rally when BTC goes up, and bleed more when it gets sharp drops. Saying so, we can safely say that BTC has a certain percentage of effect on the altcoins' price action. We have seen some of these alts have never recovered to their original satoshi values even getting new all time highs in terms of USD. Most of these are those who have been released before the November rally.


Bitcoin Chart: Linear Scale

We can analyze the topic similar to comparing the linear and logarithmic charts of BTC. We can see that they have different scales used in the USD values while the time remains linear. The linear scale, looks at the price increase/decrease dependent on the magnitude or value of the rise/fall of the price. The logarithmic looks at the price increase/decrease relative to the rate or percentage of the rise/fall.


Bitcoin Chart: Log Scale

In my own analogy, the linear chart shows you the price action relative to zero(or relative to the ICO price/initial price), which means that it will show you the actual gains you get per token/coin you own, when you bought at the ico price. The logarithmic chart otherwise, shows you the price action relative to the previous price in gain or loss per token/coin you own. This is why you see most traders use log scales instead of linear, because they want to see the price movement relative to the previous one, rather than the initial price it started trading.

BTC vs Fiat: The Analogy


EOS Chart: Linear Scale

Now, this will be a lot more complicated, but I'll try to explain it simply. Let's look at EOS. My little disclaimer is that I never had bought or sold any of this, ever since it was available in the market. Let's say you have $10,000. You converted all into BTC, Let's say, and you bought half of it with EOS back in August 4th. Now, you have 2.04428744 BTC(BTC at $2445.84) and close to 5319.148936 EOS(EOS at $0.94/0.00038433 BTC). Let's forget about the fees to make it simpler.


EOS Chart: Log Scale

At first, EOS spiked up in price, reacing $4.56(0.00178093 BTC), while BTC just got into $2560.46. This means, after you bought, your EOS had multiplied your about 2BTC or $5000 5 times! In this case, EOS had outperformed both BTC and USD. Notice that both its BTC and USD had increased.


Comparison of the scenarios given and relating it into the charts

After that massive spike, EOS' satoshi value started to drop. It continued to drop, and drop, but notice the USD value of EOS stabilized. This was when BTC started its rally. It dropped as low as $0.50(0.00008930 BTC). Here we can see that EOS was outperformed by both BTC and USD.

Let's say that you didn't sell, and held up until it goes back to $0.98(0.00013741 BTC). At this level, BTC was priced at $7132.03. This time, your BTC investment reached more than 3x. When you look at your EOS investment dollar-cost-wise, you didn't lose anything; but in terms of BTC, you're only left of about 1/3 of your initial investment. In this case, EOS was outperformed by BTC but not by USD.

Then, Bitcoin reached close to $16k continued, while EOS was at about $6.15(0.00036587 BTC). Notice that the dollar value had sixth-fold after you bought, yet its satoshi values are about the same. During this time, it could've been better if you just held BTC and didn't buy any EOS, because EOS had outperformed USD but not BTC.

After that, the bear market started, and we can see that EOS' value continued to increase dollar and bitcoin wise, outperforming both again. But what's the point of all of this analogy? We look at the charts again and I'll ask this question based on the $5000 worth of EOS bought at $0.94 (0.00038433 BTC):
"In which scenarios will I gain more? 1. Selling it back to BTC about a day later, at $4.56(0.00178093 BTC), then convert it to USD today when BTC is at $7467.24, or 2. HODLing that EOS for close to a year, selling it to BTC at $12.19(0.00163246), and then selling that BTC into fiat today?




A comparison in percentage growth of EOSUSD(thin blue), BTCUSD(thick red) and EOSBTC(orange)

Both

So, should one look at satoshi gains or dollar gains? If you'll ask me personally, I look at both. I even monitor my portfolio on BOTH its dollar and satoshi gains. But what really matters is at where and when do you use each one. It's like how the linear and log charts have been used. Each have different applications, and different relative comparisons. This time, looking at Sat values is looking your portfolio growth against BTC and looking at USD values , relative to its dollar growth.

During Bitcoin bull runs, I'm rather focused on the dollar gains on my altcoin portfolio. True, you lose some sats, but that only means, you've lost an opportunity to gain more. If you sell at a satoshi loss during this market phase, it just means you are losing potential gains, had you just held BTC and didn't buy alts. During the bear market, I'm rather focused on accumulating sats, even if the dollar value of my total portfolio tanks. I am just concerned that during the next bull run, these sat gains will be realized into dollar gains.

Another way to look at is the trader's time frame. For those who look for short-term gains, USD valuation is more important in comparison to Satoshi valuation. Because, if one depends on trading income, it's somewhat pointless to accumulate sats, specially when BTC is tanking faster than one can say moon lambo. Because you need to cash out into fiat every time. For the long-term investors, I think it's okay to hold for a while, even if its USD value tanks, as long as the your accumulation of sats increases. When Bitcoin recovers back to your average price cost, you'll be realizing those dollar gains.

Looking at each of them independently has advantages and disadvantages. But, the real point is how one would use them accordingly. It's not the tool, it's how to use it. as they say. Until the whole crypto markets has independent dollar pairs, pairing it in both USD and BTC is reasonable.


The Portfolio

As I've stated, I haven't traded today. My ADA stop-loss had just triggered, and I'm thinking of selling all these alts back into BTC and just wait for a while.

But now, my core strategy and my whole feelings for these past few weeks can be summarized into one gif:



Source

Here's my weekly progress in this series:
Initial investment = 0.01 BTC/$68 (estimate)
Previous week value = 0.01827214 BTC / $154.27
Current week value = 0.01609224 BTC / $119.48
Weekly Gains = -11.93% / -22.55%
Total Gains = 60.92% / 75.70%

Interested in trading and haven't traded yet? Try Binance. They trade STEEM too!
You can buy some altcoins not listed on Binance at Kucoin!(Please always check the url and don't get phished!)
Feeling ballsy and wanna do leverage? BitMEX allows up to 100x! Don't get burned though, or else the bot will quote your order.
Wanna try Options Trading? Spectre.ai offers options trading with traditional currencies using the Ethereum blockchain! You can try the demo too!


Disclaimer: All information found here, including any ideas, opinions, views, or cryptocurrency picks, expressed or implied herein, are for informational, entertainment or educational purposes only and should not be construed as an investment signal or a personal investment advice. I am not your financial advisor. Please don't sue me if you follow my picks, ideas and information. Just please.

Missed the previous weeks? Here's the list

Week 1 | Week 6
Week 2
Week 3
Week 4
Week 5

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