How to Create Bitcoins from Scratch for Hedge Funds
Most bitcoiners have heard of bitcoin mining, hash rates, ASIC cards and the like. They say that if bitcoin mining were a country, it’s electricity consumption would rank above many countries. In fact, the profitability of bitcoin mining versus altcoin mining is one of the drivers of bitcoin and altcoin price volatility.
Then there are exchanges that sell bitcoin for fiat, usually at a 10 percent premium plus any bank wire or credit card fees.
But there is another way to get bitcoins without mining them or buying them with fiat currency; trading.
Case in point; on December 11, 2017, the author went long bitcoin gold/short bitcoin for a client. BTG-BTC was trading around 0.1385
Nine days later, BTG-BTC is around 0.23, down from the 0.27 highs. Closing the trade at 0.25, the author managed to increase the client’s bitcoins by 78 percent.
This was achieved with no leverage.
Bitcoin cash is Roger Ver’s pet. A group of bitcoiners seek to slow bitcoin core down, increase transaction fees and get people to switch from bitcoin to bitcoin cash, a fork. This is called “the cashening.” There are also allegations of insider trading at Coinbase.
In fact, December 20’s bearish bitcoin price action was influenced by “the cashening,” which was a repeat of similar events in November that left many bitcoiners unsettled. Once hailed as “Bitcoin Jesus,” Roger Ver is now been dubbed “Bitcoin Judas.”
On December 10, 2017, the author went long bitcoin cash/short bitcoin for a client.
Trading around 0.08, a target of 0.14 was set. The initial gain was 75 percent, and the open profit is currently 275 percent more bitcoin on open positions. No leverage was used.
Opportunities like these abound in the cryptocurrency universe and hedge funds have taken notice. But good technical analysis is not enough. The ability to predict prices well does not translate into profitable trading. Risk management is key.