Gyroscopic Investing

Posted: **Sat Dec 26, 2020 11:56 am**

Hello!

I bought some BTC a few month ago and was thinking about running a BTC+cash variable portfolio.
Used some online tools to backtrack 50/50, 80/20 and 90/10 BTC/Cash portfolios and the higher ratio portfolios did better. Though I apparently didn't do the rebalancing bands correctly. Thus, asking the collective mind here. What would be the best rebalancing bands to stick to?
Curious if Tyler would run some models on his charts? Thank you!

Posted: **Sat Dec 26, 2020 1:03 pm**

I wouldn’t trust any back testing of bitcoin.

Any time one of the assets that you are including in your back testing has had crazy, unsustainable, exponential growth for years, It’s a suckers move to assume that it is any indication of the future.

Your portfolio idea may or may not be a good one, but don’t give any weight to the back testing performance.

Posted: **Sat Dec 26, 2020 3:22 pm**

Mark Leavy wrote: ↑Sat Dec 26, 2020 1:03 pm I wouldn’t trust any back testing of bitcoin.

Any time one of the assets that you are including in your back testing has had crazy, unsustainable, exponential growth for years, It’s a suckers move to assume that it is any indication of the future.

Your portfolio idea may or may not be a good one, but don’t give any weight to the back testing performance.

That's the whole idea. Take advantage of BTC skyrocketing and crashes. There should be possible to implement a strategy to milk that.

Posted: **Sat Dec 26, 2020 3:35 pm**

Good luck

Posted: **Sat Dec 26, 2020 8:17 pm**

Ugly_Bird wrote: ↑Sat Dec 26, 2020 11:56 am Curious if Tyler would run some models on his charts? Thank you!

As fascinating as Bitcoin is, there just isn't enough historical data to make it worthwhile for backtesting, IMO. But it'll be interesting to watch how it grows over time.

Posted: **Sat Dec 26, 2020 10:20 pm**

Tyler wrote: ↑Sat Dec 26, 2020 8:17 pm
Ugly_Bird wrote: ↑Sat Dec 26, 2020 11:56 am Curious if Tyler would run some models on his charts? Thank you!
As fascinating as Bitcoin is, there just isn't enough historical data to make it worthwhile for backtesting, IMO. But it'll be interesting to watch how it grows over time.

How far back you do you have data for? I have daily (mostly) data from late 2009 to present...there is a small gap from mid-June 2010 to early July 2010; thus for June 2010 and July 2010 I only have "monthy" in the sense of knowing the monthly return from 5-31-10 to 6-30-10 and from 6-30-2010 to 7--31-2010 (although I do fully have daily data starting from 7-16-2010 to 7-31-201 and then daily data from 7-31-2010 until today.

I do agree somewhat that the data don't go back far enough, though....we don't even have any data for the 2008 recession or the dot-com crash. What would you personally consider "enough" data.....20 years? 30? 40? 50? Personally I'd like to see at least 19 or 20 years (or maybe a little shorter if it included at least a full market cycle for other assets besides BTC...like stocks, bonds, gold, REITs, etc).

Posted: **Sat Dec 26, 2020 10:21 pm**

Ugly_Bird wrote: ↑Sat Dec 26, 2020 3:22 pm
Mark Leavy wrote: ↑Sat Dec 26, 2020 1:03 pm I wouldn’t trust any back testing of bitcoin.

Any time one of the assets that you are including in your back testing has had crazy, unsustainable, exponential growth for years, It’s a suckers move to assume that it is any indication of the future.

Your portfolio idea may or may not be a good one, but don’t give any weight to the back testing performance.
That's the whole idea. Take advantage of BTC skyrocketing and crashes. There should be possible to implement a strategy to milk that.

One quick question: Will this be done in a regular cash brokerage account or an IRA/401k? I might have an idea/suggestion that you may wish to consider.

Posted: **Sat Dec 26, 2020 10:24 pm**

I think crypto currencies are just too new.

We are just emerging from the big bang, genesis phase. Historical data won't be of any use whatsoever for many years.

If you want to make a play, it will have to be based on your assessment of the future. Abandon backtesting - and admit that you are rolling the dice on a hunch. That's not the worst thing.

I'm not putting any money there, but I wouldn't say you are wrong.

Posted: **Sat Dec 26, 2020 11:07 pm**

D1984 wrote: ↑Sat Dec 26, 2020 10:21 pm One quick question: Will this be done in a regular cash brokerage account or an IRA/401k? I might have an idea/suggestion that you may wish to consider.

Thank you for your reply. It is going to be in a brokerage. Not implementing that kind of VP through IRA/401k :-)

Posted: **Sat Dec 26, 2020 11:12 pm**

Mark Leavy wrote: ↑Sat Dec 26, 2020 10:24 pm I'm not putting any money there, but I wouldn't say you are wrong.

You made your point three times already. Somehow that wasn't the part of the subject.... :-)

Posted: **Sat Dec 26, 2020 11:17 pm**

Tyler wrote: ↑Sat Dec 26, 2020 8:17 pm
Ugly_Bird wrote: ↑Sat Dec 26, 2020 11:56 am Curious if Tyler would run some models on his charts? Thank you!
As fascinating as Bitcoin is, there just isn't enough historical data to make it worthwhile for backtesting, IMO. But it'll be interesting to watch how it grows over time.

Thank you for quick reply, Tyler. Absolutely right, not too much history but still could be enough to figure out the best ratio and the rebalancing bands in terms of efficiency/risk.

Posted: **Sat Dec 26, 2020 11:50 pm**

Ugly_Bird wrote: ↑Sat Dec 26, 2020 11:07 pm
D1984 wrote: ↑Sat Dec 26, 2020 10:21 pm One quick question: Will this be done in a regular cash brokerage account or an IRA/401k? I might have an idea/suggestion that you may wish to consider.
Thank you for your reply. It is going to be in a brokerage. Not implementing that kind of VP through IRA/401k :-)

In this case I would ask that you consider three things:

One, if this is in a taxable brokerage account rebalancing between wildly volatile assets (or one wildly volatile asset and one stable one like cash or a cash equivalent such as a money market fund or 6 month Treasuries) on a monthly, quarterly, or rebalancing bands basis (at least without very wide rebalancing bands) will most likely result in a bunch of short term capital gains (and short term capital gains taxes at one's ordinary income tax rate). Eww....yuck. Quite possibly more of your gains will be short term than long term. It might be wiser to simply go with annual rebalancing.

Two, I would strongly consider that you pick another non volatile non-correlated to BTC (or to cash) asset as well....something like UPRO, MPEGX, TQQQ, ARKK, FNGU, or even a 3X sector fund like CURE, for an equity investment, plus Bitcoin, plus a stable asset. That way if Bitcoin (or a good proxy for it like GBTC) goes to zero you haven't lost everything....or if Bitcoin has a truly crappy year like 2018 (lost 82%) or 2014 (lost around 63% IIRC) you still have some "dry powder" to rebalance with.

Three, you will generally get just as good (or better) Sharpe and Sortino ratios over the longer term if you substitute some of the cash (only a little bit of it though....too much would be overkill) with non-correlated volatile assets like TMF, UGL, BTAL, MOM, TAIL, etc.....these "flight to safety" instruments will--well, usually but not always--tend to zig when BTC (and for that matter, the volatile equity investments mentioned above) zag and do so in a far stronger manner than just plain cash will.

Posted: **Sat Dec 26, 2020 11:57 pm**

Ugly_Bird wrote: ↑Sat Dec 26, 2020 11:56 am Hello!

I bought some BTC a few month ago and was thinking about running a BTC+cash variable portfolio.
Used some online tools to backtrack 50/50, 80/20 and 90/10 BTC/Cash portfolios and the higher ratio portfolios did better. Though I apparently didn't do the rebalancing bands correctly. Thus, asking the collective mind here. What would be the best rebalancing bands to stick to?
...

Ciao!

Clearly you should invest at the highest ratio.
I would go with 10 and 90 percent bands.

Posted: **Sun Dec 27, 2020 12:03 am**

Ugly_Bird wrote: ↑Sat Dec 26, 2020 11:07 pm
D1984 wrote: ↑Sat Dec 26, 2020 10:21 pm One quick question: Will this be done in a regular cash brokerage account or an IRA/401k? I might have an idea/suggestion that you may wish to consider.
Thank you for your reply. It is going to be in a brokerage. Not implementing that kind of VP through IRA/401k :-)

I wonder what would happen if you timed Bitcoin (i.e. switching to cash when it went below its 180 day MA, 200 day MA, or 2010 day MA) either by :

A. Trading once per month (at the end of every month),

B. Trading whenever it went below its MA (i.e. trading every day if necessary),

C. Doing the trade in/out daily as needed as in B. above but adding a 0.5% or 1% filter so as not to get whipsawed so often (i.e. if it is only trading, say, some tiny pissant amount like 0.34% below the MA or the like then don't get out just quite yet....wait until it trades either 0.5% or 1% below its MA).

I'd imagine you'd at least miss most of the huge drop in 2018.

Posted: **Sun Dec 27, 2020 10:28 am**

I think bitcoin is pretty binary: or you lose it all or you'll make a huge profit. So my advice is: only use money you are prepared to lose and buy&hold, no cash rebalancing.

Posted: **Mon Dec 28, 2020 8:50 am**

senecaaa wrote: ↑Sun Dec 27, 2020 10:28 am I think bitcoin is pretty binary: or you lose it all or you'll make a huge profit. So my advice is: only use money you are prepared to lose and buy&hold, no cash rebalancing.

This is why it is in VP, right? :-)
It is binary if the portfolio 100 BTC. Diluted with cash and proper rebalance limits it is not. And this is exactly what I'm trying to accomplish and need an advice for.

Posted: **Mon Dec 28, 2020 9:33 am**

Look here for some buy / sell ideas

https://www.lookintobitcoin.com/charts/

As for me, when have been holding for 1 year, I'm going to yank my initial capital out net of taxes. Then I won't be concerned about it.

Posted: **Wed Dec 30, 2020 1:53 pm**

I think rebalancing on something like bitcoin shouldn't be done in the traditional way personally.

Bitcoin is bubbling on 4 year cycles so far (very limited data ofc). These cycles have to do with the halving that the emission rate goes through every 4 years.

We are currently towards the beginning of the latest halving cycle (bubble!?), which happened May 2020.

You can follow something like the stock to flow model which is based on these 4 year cycles. Or there are other charts here that could be useful to look at for cyclicality: https://digitalik.net/btc

If you plan on selling BTC, in a tax advantaged account would probably be best as its likely to have the most gains compared to your other assets (Im bitcoin bullish can you tell?). Buy and hold strategy could be either way, I suppose.

Posted: **Wed Jan 06, 2021 8:45 pm**

D1984 wrote: ↑Sat Dec 26, 2020 10:21 pm One quick question: Will this be done in a regular cash brokerage account or an IRA/401k? I might have an idea/suggestion that you may wish to consider.

Actually I was thinking about this question.
Even at this price I may buy some GBTC on my IRA and sell when BTC hits 100k or sell at about the same level when purchased.
Not really loosing anything but in case of good sell will not have to pay taxes on the gain.

Posted: **Wed Jan 06, 2021 8:47 pm**

D1984 wrote: ↑Sat Dec 26, 2020 11:50 pm
Ugly_Bird wrote: ↑Sat Dec 26, 2020 11:07 pm
D1984 wrote: ↑Sat Dec 26, 2020 10:21 pm One quick question: Will this be done in a regular cash brokerage account or an IRA/401k? I might have an idea/suggestion that you may wish to consider.
Thank you for your reply. It is going to be in a brokerage. Not implementing that kind of VP through IRA/401k :-)
In this case I would ask that you consider three things:

One, if this is in a taxable brokerage account rebalancing between wildly volatile assets (or one wildly volatile asset and one stable one like cash or a cash equivalent such as a money market fund or 6 month Treasuries) on a monthly, quarterly, or rebalancing bands basis (at least without very wide rebalancing bands) will most likely result in a bunch of short term capital gains (and short term capital gains taxes at one's ordinary income tax rate). Eww....yuck. Quite possibly more of your gains will be short term than long term. It might be wiser to simply go with annual rebalancing.

Two, I would strongly consider that you pick another non volatile non-correlated to BTC (or to cash) asset as well....something like UPRO, MPEGX, TQQQ, ARKK, FNGU, or even a 3X sector fund like CURE, for an equity investment, plus Bitcoin, plus a stable asset. That way if Bitcoin (or a good proxy for it like GBTC) goes to zero you haven't lost everything....or if Bitcoin has a truly crappy year like 2018 (lost 82%) or 2014 (lost around 63% IIRC) you still have some "dry powder" to rebalance with.

Three, you will generally get just as good (or better) Sharpe and Sortino ratios over the longer term if you substitute some of the cash (only a little bit of it though....too much would be overkill) with non-correlated volatile assets like TMF, UGL, BTAL, MOM, TAIL, etc.....these "flight to safety" instruments will--well, usually but not always--tend to zig when BTC (and for that matter, the volatile equity investments mentioned above) zag and do so in a far stronger manner than just plain cash will.

Thank you for such thorough reply. This might be a little too complicated for me to implement :-)

Posted: **Thu Jan 07, 2021 9:22 am**

Ugly_Bird wrote: ↑Wed Jan 06, 2021 8:45 pm
D1984 wrote: ↑Sat Dec 26, 2020 10:21 pm One quick question: Will this be done in a regular cash brokerage account or an IRA/401k? I might have an idea/suggestion that you may wish to consider.
Actually I was thinking about this question.
Even at this price I may buy some GBTC on my IRA and sell when BTC hits 100k or sell at about the same level when purchased.
Not really loosing anything but in case of good sell will not have to pay taxes on the gain.

So, I went ahead and bought GBTC on my Traditional IRA with Fidelity. :-)
Now the question is what kind of orders I need too place there to sell at certain points?
That would be two scenarios:
1) Hits the same price I bought at (to prevent loss)
2) Doubles the price I bought at
Would it be some kind of LIMIT order or two?
This is relatively new for me.
Thanks!

Posted: **Thu Jan 07, 2021 9:44 am**

Why would you buy GBTC with a 2% annual fee if you can buy the real thing?

Posted: **Thu Jan 07, 2021 10:01 am**

Ugly_Bird wrote: ↑Thu Jan 07, 2021 9:22 am So, I went ahead and bought GBTC on my Traditional IRA with Fidelity. :-)
Now the question is what kind of orders I need too place there to sell at certain points?
That would be two scenarios:
1) Hits the same price I bought at (to prevent loss)
2) Doubles the price I bought at
Would it be some kind of LIMIT order or two?
This is relatively new for me.
Thanks!

1. Stop-market sell order
2. Limit sell order

Not sure all brokers have these features for all of their users.

Posted: **Thu Jan 07, 2021 10:06 am**

pors wrote: ↑Thu Jan 07, 2021 9:44 am Why would you buy GBTC with a 2% annual fee if you can buy the real thing?

A few reasons.

1. You dont need to worry about bitcoin technical stuff like storing it, they custody
2. The GBTC premium (currently ~25%) can actually increase during bull markets so you could profit even more that way
3. You can hold GBTC in tax advantaged accounts, so buying and selling on highs/lows saves a lot of $ vs doing the same yourself

If course there are risks too:

1. You buy at 25% premium and premium goes to 0% or negative
2. They lose all of the coins via a hack or whatnot
3. In flat market for many years, the annual fee eats away at principal

Posted: **Thu Jan 07, 2021 10:10 am**

pors wrote: ↑Thu Jan 07, 2021 9:44 am Why would you buy GBTC with a 2% annual fee if you can buy the real thing?

Because there is no real thing for the tax deferred account.
2% fee is much better than paying tax for XXX% profit :-)

I do have the real thing in another account

Gyroscopic Investing

Bitcoin+Cash portfolio?

Bitcoin+Cash portfolio?

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