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babe ruth called shot

Bitcoinlandia Where Mythical Investment Grand Slams Are Reality

by Trace Mayer, J.D. on July 1, 2013 · 18 comments

Reading time: 9 – 14 minutes

And like Babe Ruth ‘calling the shot’ I am finding these investment grand slams are getting more common.

In early June 2013 I presented at the Bitcoin Conference 2013 and have since changed the legal discussion around Bitcoin to one of freedom of speech. One thing that made me particularly happy at the conference were all the people who went out of their way to come up and thank me for helping make them extremely rich.

You see, for an investor or speculator a 100x return is oftentimes the stuff of legends. Sure, you can get lucky once and maybe even twice. But with the arrival of Bitcoin four years ago a new category of currency was created. And like Babe Ruth ‘calling the shot’ I am finding these investment grand slams are getting more common. The rate at which capital is being created, generated and transferred is astounding.

While some people, like Chris Duane, whine about it the wise are knocking in runs to tally points on the scoreboard. So, roll the Q1 and Q2 2013 replays!

But keep in mind that you make money when you buy not when you sell.

INVESTMENT GRAND SLAM

What is an investment grand slam? I like to consider four particular elements: (1) ability to quickly settle into a non-seizable asset, (2) privacy, (3) moral or ethical and (4) a ROI in USD greater than 1,000% in less than 12 months.

Liquidity and censorship-resistance. Liquidity is extremely important so I am looking for assets that have market capitalizations in excess of $20m and weekly volumes greater than $1m. Unlike a bank or brokerage account so long as the private keys are protected it is almost impossible to seize or confiscate the assets. In an era of deposit confiscation for bail-ins like in Cyprus, rampant theft of customer segregated assets like MF Global and general financial pandemonium therefore I want investments and assets that can quickly and easily settle into something like Bitcoin which is held in personal possession and is neither seizable nor subject to counter-party risk.

Pseudo-anonymity. Privacy is increasingly becoming a rarer and rarer commodity. After all, it was on How To Vanish where I first recommended Bitcoin on 17 Jan 2011 and started seriously stirring the discussion in the blogosphere. Bitcoin is not anonymous but pseudo-anonymous. Additionally, there is no account like with a bank or brokerage. This means there are no form TD-F 90-22.1, an FBAR, FACTA reporting requirements, 1099s, AML/KYC compliance or any other pesky price floors, in terms of privacy, being placed on me or my assets. The bottom line is that although tax liability may still accure, I recommend everyone pay what they legally owe because there is really no reason to be looking over your shoulder for these costumed thugs, and the actual payment is more consensual.

Moral superiority through express voluntary and consensual relationships. Violence or coercion interferes with the pricing mechanism and economic calculation of market participants. This leads to misallocations of capital and wealth destruction. The State is great at introducing these types of annoyances into the otherwise peaceful associations of individuals. By contrast, Bitcoin is used by voluntary mutual consent by market participants. Unlike record or movie companies, pharmaceutical companies, patent holders, etc. there are no price floors that rely on the violence of the State. Consequently, wealth creation and generation can happen in a much more predictable environment.

1,000% ROI in less than 12 months using the USD as numeraire. This should be pretty self explanatory. In other words, it means you make a crap-ton of money really, really fast. But keep in mind that you make money when you buy not when you sell.

Bitcoin and the crypto-currency economy has, through sheer force of will, clawed out massive investment returns.

BITCOIN

Current market capitalization is around $1B with daily volumes around $5m.

bitcoin price chart Q2 2013

As already mentioned, I first publicly recommended Bitcoin around $0.25. Currently it is trading around $92. That makes the return about 36,800% in about three years.

But what about lately? Well, on 23 Feb 2013 I did an interview that was published 7 March 2013. Around 11:40, when Daniel wants to close the interview, I go out of my way to make a Bitcoin price prediction and talk about one of the investment grand-slams Satoshi Dice.

“This time we might see it run from $2 up to $300 and then it might crash down to $20.”

Sure, at the time of the interview Bitcoins were trading around $30 so there is only about a 300% return in three months. But on 31 December 2012 I wrote an article recommending buying bitcoins due to undervaluation and they were around $13.40. With plenty of opportunities to sell at $134 or higher making the 1,000% return in less than six months definitely possible.

And it is Bitcoin’s increasing use as a settlement currency that is deepening the crypto-currency capital pools.

LITECOIN

Current market capitalization is around $50m with daily volumes around $2m.

litecoin price chart Q2 2013

In the previous interview it showed the Bitcoin Special Report that could have been purchased by the Future Money Trends guys for $10. In that report they quoted me extensively and actually recommended Litecoins. At the time Litecoins were trading around $0.10. Today they are trading around $2.85. That makes the return about 2,850% in about three months.

SATOSHI DICE

Current market capitalization is around $20m with weekly volumes only around $50-500k. This is the weakest case of the four investment grand slams but it still adds materially to the scoreboard.

In the previous interview I recounted the Satoshi Dice example. On 4 January 2013 I wrote a brief financial analysis of Satoshi Dice which trades on the Bitcoin stock exchange MPEx.

satoshi dice price chart Q2 2013

At the time, it was trading at 0.0037 BTC per share which was about $0.0496. Shares bought then would have yielded about 0.00041730 BTC in dividends; just look at the little circles in the chart.

While it is currently trading around $0.187 the price has ranged from 0.0075 to .0020 bitcoins with plenty of opportunities to sell for at least $0.50. But the returns for people who did act on my brief financial analysis and have not recognized their gains is still about $0.235 or about 373% in about six months.

[NOTE: 17 days after publishing this article Satoshi Dice bought out for $12m or 0.0035 bitcoins per share or about $0.35 or about a 650% return in about six months.]

ASICMINER

Current market capitalization is around $160m with daily volume around at least $400k. I have not publicly recommended ASICMINER so I may just be a spectator.

asicminer price chart Q2 2013

ASICMINER is an interesting company with a fairly low profile and lacks an official website. Friedcat, the pseudo anonymous operator from China, just keeps throwing up points on the scoreboard. It is a leader in the ASIC mining technology and sells out massive amounts of hardware.

Some people bought their ASICMINER shares around $0.10 in mid-2012. But with the GLBSE nonsense and other issues we will just use the price from early March when it started trading on the passthroughs for about 0.65 BTC or $26. Each of those little circles represents a dividend, about 0.112 bitcoins in June or approximately $1m of dividends per week, which are paid on a weekly basis in bitcoins. Currently, it is trading for about $425 per share.

That makes for a return, not counting dividends, of about 1,500% in about three months.

On another note, an interesting phenomena is happening with Bitcoin as it is increasingly being used as a numeraire to perform economic calculation by market participants because of the rapid and substantial developments happening in the mining sector. This is revealing a more advanced evolution of crypto-currency which indicates a very promising portent to economic strength.

CONCLUSION

Bitcoinlandia is a place of mythical investment grand-slams that turn into reality. So a review of some of the runs recorded on the scoreboard during Q1 and Q2 of 2013.

INVESTMENT CURRENT MARKET CAP ROI TIME
BITCOIN $1.0B 1,000% Six Months
LITECOIN $50m 2,850% Three Months
SATOSHI DICE $20m 373% Six Months
SATOSHI DICE bought out $12m (significant premium paid to shareholders) 650% Six Months
ASICMINER $160m 1,500% Three Months

If you are new to Bitcoin then you may want to get a copy of my Free Bitcoin Guide. This is a market like none other that is creatively destroying the currency and financial markets.

Another interesting point is that reserve currencies force themselves onto the world stage by sheer economic power resulting from sound fundamentals and global reach. I have not really considered Bitcoin a contender for the world reserve currency. At best, perhaps in 20 years, it would sit alongside a Yuan, Yen, Dollar, Euro and South American currency.

But all of those competing fiat currencies have significant problems with stifling monetary innovation. Not only are the fiat currencies technologically inferior but they and service providers are trammeled with regulation. It is like a baseball game where one side can only use their arms instead of bats.

In spite of regulators threatening to use violence against innocent people engaged in freedom of speech; Bitcoin and the crypto-currency economy has, through sheer force of will, clawed out mythical investment returns.

We are only four years into this censorship resistant crypto-currency experiment. The types of investment returns being recorded on the scoreboard are legendary. This is how intergenerational wealth can be created. Where Bitcoin and the crypto-currency market and economy go from here is anyone’s guess. But I am willing to bet that a lot more runs are going to get recorded on the scoreboard!

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18 comments

ABOUT THE AUTHOR: Trace Mayer, J.D., author of The Great Credit Contraction holds a degree in Accounting, a law degree from California Western School of Law and studies the Austrian school of economics. He works as an entrepreneur, investor, journalist and monetary scientist. He is a strong advocate of the freedom of speech, a member of the Society of Professional Journalists and the San Diego County Bar Association. He has appeared on ABC, NBC, BNN, radio shows and presented at many investment conferences throughout the world. This is merely one article of 240 by .
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{ 18 comments… read them below or add one }

1 Steve Merrill July 5, 2013 at 10:29 am

hey Trace, no posts, what gives? I sent you a note a few weeks back about a BTC exchange that would accommodate bids from bullion investors via our gram-denominated Sovereign tender. The platform would allows BTC and Bullion investors to find the sound properties of the other without the aid of a financial intermediary. No client would ever need to liquidate their holdings for fiat. We believe there are many other appealing reasons this exchange would find favor among sound-money advocates including the very best pricing pricing on bullion and guaranteed supply (our Treasury bullion is sourced from private investors and not from wholesalers). I would love to talk to you directly about it, perhaps on the tel, or skype. Maybe you can send me a note with a convenient time? Steve

2 Trace Mayer, J.D. July 5, 2013 at 4:09 pm

Hi Steve,

Been pretty busy with a lot of business. I like the idea of a bullion:BTC exchange. I doubt the US is a good jurisdiction though; perhaps somewhere like Singapore or Hong Kong.

3 Steve Merrill July 6, 2013 at 9:07 am

Thanks Trace, perhaps an exchange that never accepts or delivers fiat dollars, nor maintains any banking relationships, could make a case for exemption from the various MSB regulations? Steve

4 Trace Mayer, J.D. July 7, 2013 at 11:41 pm

Steve, Perhaps. I think the argument could be most easily made if it were an exchange of other crypto-currencies like Bitcoins and Litecoins. The next easiest would probably be between Bitcoins and something like World of Warcraft gold or some other virtual game currency. Another interesting case would be selling digital items like Amazon with their Kindle books or Apple and iTunes. After all, from a technical standpoint how is Bitcoin different from an ebook or mp3?

There will be all kinds of issues for lawyers to argue over for a long time. And jurisdictions that try to stifle Bitcoin use and adoption will find that the entrepreneurs and wealth generators go to jurisdictions that do not. For example, I know several Bitcoin entrepreneurs that have already left the US to build businesses in Panama, Singapore and Hong Kong. There go the jobs!

And the regulation is too burdensome then the economic activity will just route around and skirt it anyway using tools like the Local Bitcoins. which is now the 3rd largest Bitcoin exchange, or the Lamassu ATM. I find Local Bitcoins a very interesting example because the problem for centralized exchanges and regulation has driven a lot of Bitcoin exchange volume into cash on the barrelhead at Starbucks making it even more difficult to get any type of picture of what is going on. For example, the cost of the ATMs will get so low that it will likely make its entire cost back in one month so they could seized pretty regularly and it not be an issue from an economic and financial ROI perspective.

5 Gene Foss July 26, 2013 at 2:39 am

Dear Mr. Mayer,
I have always liked your web sites and the concepts of BitCoin. Unfortunately, it appears BitCoin is turning to shit! Mt. Gox has closed their accounts to Okpay and Dwolla. I have accounts with both. The only means available to withdraw USD from my Mt. Gox account is an International bank transfer. I made such a request with Mt. Gox back on 6/19/13. I have received nothing but BS from them and am still waiting for my $1000 USD as of 7/25/13. Have a good day. GF

6 Gene Foss July 26, 2013 at 2:47 am

ps. There (Mt. Gox) web site is also “temporally not available”, yeah right!

7 Trace Mayer, J.D. July 28, 2013 at 11:17 pm

GF, You should keep in mind that Bitcoin is not MtGox or any other service provider in the Bitcoin economy. Personally, I do not use MtGox at all. You may try having multiple accounts with various exchanges and also developing person-to-person relationships locally through Local Bitcoins or the Meetup groups. Works much better than MtGox which is very problematic.

8 Mitchell D August 15, 2013 at 8:28 pm

Hi Trace,

I was involved in a few of the deals you mentioned in this article and have enjoyed some great returns! I have been watching for more opportunities but nothing has caught my eye. Are there any new ‘investment grand slams’ you have your eye on?

Thanks

9 Teva October 7, 2013 at 9:20 am

Trace, what is the best way to invest in litecoins and satoshi dice? I have already taken your advice on bitcoin and want to know what to do with these other recommendations.

10 Trace Mayer, J.D. October 8, 2013 at 1:10 pm

Teva,

For Litecoins (LTC) I have found the mcxNOW exchange to be fairly reliable. I am not sure that LTC is a very good value currently. Satoshi Dice was taken private so it is no longer an investment option. However, there is a similar site called Just-Dice where you can invest. Of course, do your own due diligence since this is a highly speculative space and check any relavant laws for your particular situation.

11 Teva October 8, 2013 at 2:09 pm

How do I check the local laws and do you know how to find out the laws for bitcoin because I have already invested in it on your recommendations.

12 runtobitcoin October 8, 2013 at 9:38 pm

Hey Trace,
No one I’ve read has pointed this out yet about the 600,000 bitcoins “confiscated” from DPR’s personal wallet in the Silk Road bust. I put the word in quotes because they can’t break the encryption :-) It’s my understanding that if that wallet was backed up, then the Feds have nothing if they can’t decrypt it. DPR can move the funds to another wallet and then into a tumbler so his BTC could return to anonymity. I’d be surprised if he didn’t have several wallet copies and some kind of dead man’s switch set up. Though if what I have read is true, I’ve been surprised by a lot of stuff he slopped up. Am I right about the bitcoins if the wallet’s backed up?
Thanks.

13 Charli November 7, 2013 at 8:34 am

Trace Hi

Been following you for a few years, and first heard of the Bitcoin concept in fact via your site way back in ’09/’10 I think. The next chapter in its evolution is going to be very interesting. (IMHO) it will either go mainstream and the fiat / BTC price go vertical then establish a new floating norm as a currency alongside $, Yen, £, Ren, CHF.

Or it will be totally crushed as a threat by central banks. What exactly is to stop governments either using warehouses full of super-computers to mine most of the remaining bitcoins rapidly so they have stolen this alternative “real money” just like they have with gold and silver (for now) via electronic fraud, or simply out-lawing Bitcoin altogether?

On a related note, what the hell happened to gold? – particularly this last year and the April+ smack-downs! – Is that it now for the next 20 odd years, just like post 1980-2000? – The fundamentals may still be intact, but that’s not what drives markets, sentiment is. And the sentiment is terrible. The propaganda war against precious metals seems to have been won (in the short to medium term).

No-one, and I mean NO-ONE seemed to call this one, other than sheer negative guessing / talk down of gold by the fiat shills..

Cheers

Charli

14 Trace Mayer, J.D. November 12, 2013 at 12:15 pm

Charli,

I actually called this recent upleg quite a bit just not publicly. Mostly to people I have been running into in the Bitcoin space. And this upleg going to 1oz of gold per bitcoin would not surprise me.

15 Charli November 14, 2013 at 12:23 pm

Agree re BTC, wouldn’t be surprised about anything now. Any you were calling BitCoin 3 years ago.

What I meant was no-one in the precious metals space called the massive smack-down/s in gold and silver from April onwards this year – (can’t call 25-30% cliff drop normal PM “volatility”).

Whether that is pure sentiment driven; hot money running into frothy equities for a quick buck; naked shorts / paper gold manipulation, or any mix of the above. It just blind sided the whole gold-bug community (pros and retail investors) and now NO-ONE has any credible answers for the near future other than pure guess work and “keep the faith”.

Hence my comment, the Fed / Wall St propaganda machine seems to have won re PMs for now, irrespective of the fact the Ponzi game is even more inflated than it was in Sept ’11 at peak Au & Ag.

Your thoughts?

Cheers, Charli

16 Miroslav November 18, 2013 at 12:09 am

Charli> Haven’t you noticed that Indian government cut off the biggest consumer from gold market? Now Indians pay 20 % premium to get gold while their government can continue printing a little longer..

One may assume their gov just follows orders from Wall Street.. Let’s wait until the dam gets broken.

17 Steve November 28, 2013 at 11:49 am

Trace,

What is the impact on the future of BTC with respect to competing crypto currencies? There are at least 37 and most are making big moves on a percentage basis. Will it be survival of the fittest? If so, what makes BTC better than the others besides first-mover advantage?

Thanks

18 Trace Mayer, J.D. December 4, 2013 at 1:22 pm

Steve,

I like the alt-coins because that is where experimentation can take place. For example, I recommended Litecoin in Janaury in a Future Money Trends special Bitcoin report when it was around $0.07. Now Litecoin trades for over $40.00. So there is a lot of potential speculation opportunities in these highly volatile markets.

Longer term I think the opportunity arises where Bitcoin will be unable or unwilling to serve a market need. For example, Mastercoin and Zerocoin are mutually exclusive but both provide a useful service to the market. Bitcoin will likely choose Mastercoin over Zerocoin. Consequently, an alt-coin like ANC (https://anoncoin.net/ which trades on Cryptsy) could fill that market niche by integrating Zerocoin like they plan to.

So it comes down to division of labor and specialization for the alt-coins and they will be able to fulfill certain market needs better and outcompete. This also adds a lot of entrepreneurial opportunity for people to create the own alt-coins and maintain and enhance them.

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