[Direct] BTC Growth - Forex Volatility Focus

[stripykitteh]

As some of you will probably be aware, the ICBIT exchange drastically altered its margin rules just days before the fund launched, and the effect has been to reduce many of the opportunities which had previously existed to capitalise on the relationship between contango^* in the longer-dated futures contracts and interest rates in the spot market.

Good on you for spotting it though; it would have been a nice lock-in return. I expect there will be other opportunities.

[hieroglyph]

Seems like and better things are in store for all involved.  Hope things work out for the best and maybe one day I can join.

[DrGregMulhauser]

December 2013 - January 2014 Results

NAV Update

For the month to 7 January 2014, the BTC Growth Forex Volatility Fund's net asset value rose marginally to .1005 BTC per unit, an increase of 0.5%, or approximately 6% on an annualised basis.

Due to my recovery from a back injury on the Monday preceding the fund's launch, for much of December the level of attention I was able to provide the fund was less than I would have liked. As a safety precaution, I therefore kept the fund's exposure to the market almost entirely hedged, meaning that while small gains continued to trickle in, the risk of loss due to sharp market movements was minimal.

As a result of my reduced availability during much of the month, I have discounted the fund management fee for the period by 50%.

Exchange Challenges and Moving Goalposts

The fund relies primarily on Bitfinex and ICBIT, but it has also had exposure to BTC.sx and indirect exposure to BTC-e.

During the period, Bitfinex rolled out a few changes which have impacted daily trading, most notably an altered interface for displaying available liquidity swap interest rates. While this generally improves margin borrowers' efficiency, it does not help the fund in any way, since it is inefficiencies which provide more opportunities for us.

ICBIT, however, has been far worse for the fund. In addition to widespread reports of trader defaults on 8 December and 19 December, which may have reduced our gains, and repeated problems with site responsiveness and reliability, the exchange also chose Sunday 5 January to introduce (quietly and without any official announcement, unless we count a comment in the troll box) it's most trader-unfriendly "improvement" yet: variation margin will no longer be assigned during twice-daily clearing and will simply float as unrealised profit or loss until the position is closed, via trade or settlement. A handful of participants who previously found it hard to track their cost basis under the normal (by futures standards) system of variation margin seem to like the change, but apart from those challenged by cost basis mathematics, it's not clear to me how this change could bring any benefit whatsoever to participants; for the exchange itself, by contrast, the value of indirectly levying steep new fees to realise gains is crystal clear.

Ironically, BTC.sx chose the same day to give just over three hours of notice that it was suspending trading for two days to perform platform upgrades. One potential benefit to the upgrades is the appearance in the trading interface of a mechanism for altering the stop level. The fund typically uses the site under only one scenario, specifically to make small delta adjustments to positions already established on other exchanges in response to expansion or contraction of contango in the futures market. (This is exactly analogous to adjustments traders make in ordinary stock markets to ensure that options positions move in the desired ratio relative to stock positions.) Because the site has stuck to narrow fixed stops -- and because it is insanely expensive to hold a position longer than 24 hours -- it has remained largely unsuitable for serious investment activity. In fact, the fund's NAV was negatively impacted twice during the month by the site's 8% stops, resulting in our being stopped out from a position that was otherwise profitable, and with knock-on effects that followed for the rest of our hedging strategy. The introduction of adjustable stops may reduce this problem and make the site more useful going forward.

Finally, the fund has been indirectly impacted by the recent change of BTC/USD exchange volume leadership first to Bitstamp and then to BTC-e, of all places. It remains to be seen whether the emergence of BTC-e as a volume leader will be sustainable, whether it is a temporary side effect of promotions connected with the site's introduction of MT4, or whether the availability of MT4 will actually keep what has long been regarded as a second-tier exchange at the top of the volume table. This matters to the fund because ICBIT's most liquid futures contract -- March 2014 -- is settled with reference to the BTC/USD exchange rate on the exchange with the highest volume. Since Mt. Gox, the former volume leader, trades around 14% higher than BTC-e and around 12% higher than Bitstamp, the current number two, the change from Gox for settlement has had a huge impact on the futures market. For the fund, this change has been negative.

Next Up

Barring any unforeseen major market events, we will plan to return with an update in approximately one month's time.

Please note that by default, participants' capital will be returned to them when the fund finishes in March. Participants who would prefer that their capital be retained for rollover into a second fund, should we elect to offer one, will need to indicate this preference in their account interface at least two weeks prior to the fund's closure. To date, most participants have indicated they would prefer to roll over their capital, but this preference can be changed up until two weeks prior to closure. The next report will include a note of the specific date on which we'll take a snapshot of participant preferences so as to manage the winding down of the fund.

[DrGregMulhauser]

3 February 2014 - Unexpected Server Downtime

This is just a quick note to let everyone involved with our fund know that the BTCGrowth.com site as well as several other of our sites are currently down due to what appears to be a network outage at the server's data centre. In addition to the disappearing sites, this also means that I will not, for the time being, receive emails sent to any of my usual addresses.

No Bitcoins are stored on the server.

Many thanks for your patience, and we hope to be up and running again soon.

[DrGregMulhauser]

January - February 2014 Results and the Fund's Second Round

NAV Update

For the month to 7 February 2014, the BTC Growth Forex Volatility Fund's net asset value rose to .1013 BTC per unit, an increase of 0.837%, or approximately 10.5% on an annualised basis.

Trade in BTC versus the dollar and other currencies during the last month has been largely lethargic and directionless, presenting the fund with few strong opportunities. The fund is currently positioned cautiously, with a bias that is slightly long on a net basis.

Arrangements for Fund Rollover and the Fund's Second Round

This first round of the Forex Volatility Fund will wind down on 7 March, and by default all capital will be returned to participants at the address they specified when registering for the fund.

A second round of the fund will be offered, to commence in March, subject to sufficient participation. Current participants who would like their existing positions to be rolled over into the second round must specify their preference to do so by Friday 21 February 2014 at 12 noon GMT. All participants are urged to review and confirm the rollover setting in their account interface prior to that date.

Should the fund's second round go ahead, it will proceed under the same terms as the first round, as outlined on the BTC Growth website, including the initial net asset value for calculation purposes of 0.1 BTC per unit. New units in the fund's second round will therefore be allocated to participants rolling over from the first round according to the value of their position in the first round. Fractional balances below 0.1 BTC will be held separately and returned or rolled over at the conclusion of the second round. For example, if a participant holds 50 units in the first round, which at the conclusion of the first round are worth 5.15 BTC, they will hold 51 units in the second round, with the additional 0.05 BTC returned when the second fund finishes operation.

No subscription fee will be charged for fund rollovers.

New Participants in Round Two of the Forex Volatility Fund

The second round of the fund will open shortly for new participant registration, under the same terms as the first round, which are available here:

BTC Growth - Forex Volatility Focus

A separate announcement will provide further details when new registrations open for round two.

Market Environment and Exchange Challenges

For much of the month, the fund has maintained a bias that is slightly long on a net basis, partly with the view that widespread concerns about the impact of changes in Chinese regulations taking effect at the end of January were both overblown and already priced in. But while no meltdown has occurred, neither has any resumption of an uptrend in Bitcoin versus the dollar or other currencies.

The fund has no direct exposure to Mt. Gox and thus was impacted only indirectly by the broader market's negative reaction to the exchange's abrupt announcement on 7 February that it was "temporarily" and immediately halting BTC withdrawals.

Next Up

Barring any unforeseen major market events, we will plan to return with an update at or shortly after the conclusion of this first round of the fund.

[DrGregMulhauser]

Interim Update, 10 February 2014

Problems With BTC.sx Order Execution

Here's an urgent warning to anyone who might be considering using BTC.sx today, 10 February 2014, as part of any multi-part/hedged position: don't. I've just waited over 10 minutes staring at an order status message saying "Awaiting Fill...", during which time no option was provided for cancelling the order. Finally, after around 11 minutes and under completely different market conditions, the order -- which was by that time worse than worthless to the fund -- finally executed.

As anyone who has been observing the markets in the wake of Mt Gox's announcement about the "transaction malleability" flaw in the underlying Bitcoin protocol will be aware, 10 minutes is one heckuva long time, especially when it comes to multi-part/hedged positions which you might expect to be able to enter and exit in a matter of seconds.

Note that for comparison, the Mt Gox trading engine lag as displayed by bitcoinity.org did not exceed 4 minutes at any time after the first minute or two of this wait. (I began following Mt Gox activity directly as soon as it became apparent something had gone spectacularly wrong.) And ironically, when the order finally executed and I immediately closed it for a loss, that happened immediately and without delay.

I have emailed Joe at BTC.sx hoping to find out what on Earth was going on, but I am posting this now in hopes it will serve as a warning to anyone else who might be wrong-footed by this surprising and frustrating "Awaiting Fill..." message.

Impact on the Fund

Due to the fun of repeatedly chasing my tail for several minutes, backing out of positions left unhedged by the BTC.sx delay, and eating the spread both at BTC.sx and at ICBIT as a result, the fund has taken a haircut of just over 2% -- enough to erase all our gains to date.

On a personal note, I am not at all happy about this outcome.

[MPOE-PR]

On a personal note, I am not at all happy about this outcome.

Well, you can take solace in the knowledge that among the people actually doing BTC finance, you're a prime laughingstock.

[DrGregMulhauser]

Well, you can take solace in the knowledge that among the people actually doing BTC finance... 

Yawn.

You may take solace in the knowledge that among people actually doing finance of any kind, it is pretenders such as yourself and MP who are laughingstocks.

[MPOE-PR]

Yawn.

You may take solace in the knowledge that among people actually doing finance of any kind, it is pretenders such as yourself and MP who are laughingstocks.

Link me.

[DrGregMulhauser]

Just a quick note for folks following this thread directly: we've now opened registration for the second round of our Forex Volatility Fund, and I'll post a separate announcement shortly. (Registration will remain open thru 6 March at 12 noon GMT.)

In addition, we've decided to offer two companion funds at the same time, both operating along the same lines as the main FVF fund, but one offering long-only exposure and the other offering short-only exposure.

Finally, I've updated the document on risk factors for funds involving derivatives in order to highlight the fact that returns from a directional position established using futures can be impacted significantly by changes in contango or backwardation, quite apart from directional moves in the underlying spot market.

[Edit: corrected registration deadline to 6 March from 10 March.]

[DrGregMulhauser]

Folks following the BTC Growth funds -- and especially participants in the Forex Volatility Focus fund -- might be interested in a separate thread on an article I sent out earlier today called "Selling the Froth: A Simple Hedged Forex Strategy for Bitcoin-Denominated Returns". It covers a simple strategy which is relevant to the fund.

Any comments, etc. are welcome!

[DrGregMulhauser]

February - March 2014 Results

Final NAV and Overview

For the month to 7 March 2014, the BTC Growth Forex Volatility Fund's final net asset value dipped to .0966 BTC per unit, turning our previous cumulative rise of 1.3% into a cumulative decrease of 3.4%.

We were negatively affected first by BTC.sx's failure to execute orders, as reported previously, and then even more so by ICBIT's flip-flop on excluding Mt Gox from March futures settlement.

On 18 February, ICBIT's administrators repeatedly refused to acknowledge the possibility that Mt Gox should no longer be considered a functioning exchange for the purpose of calculating settlement of the March futures contract, claiming that doing so would wrongly amount to moving the goalposts on the terms of the contract. (Of course, ICBIT's administrators have repeatedly moved many different goalposts, with little or no warning to traders using their platform.) For anyone with a view that Gox's problems would continue or worsen in the short term, this refusal to acknowledge the possibility of excluding Mt Gox from settlement calculation appeared to represent a clear opportunity, since the burgeoning volume and plummeting price at Gox all but ensured that settlement would be calculated on the Gox price and that the futures would therefore fall significantly.

Just two days later, however, ICBIT administrators announced that they would, after all, exclude Mt Gox from March settlement calculation. While this move brought clarity to a market undoubtedly puzzled by ICBIT's prior refusal to acknowledge the obvious, it was also strongly negative for those of us who had taken their previous refusal to acknowledge the obvious as a reliable indicator of the exchange's intentions with regard to the March contract.

As for BTC.sx, which was built atop Mt Gox, the service shut its doors to trading during the month; the fund ceased trading on the platform after the order execution failure, however, and was thus unaffected by the closure.

Fund Rollovers and Return of Capital

Registrations for a potential second round of the fund, as well as for the two companion funds -- one long-only, and one short-only -- closed on 6 March 2014.

However, in line with my comments at the end of the "Selling the Froth" article, I have elected not to proceed with these funds for the time being. Therefore, all capital will be returned to participants shortly. For those with new registrations of interest, please note that this means no bitcoins should be sent at this time.

(Incidentally, for anyone interested in the particular strategy outlined in that article, according to my calculations the approach continues to offer guaranteed profit up until a roughly 350% gain in the value of BTC vs. USD, assuming a 10% cost of fiat capital and excluding any additional gains from lending BTC -- at least, if you trust ICBIT. Even at a 40% cost of capital, it remains profitable up until a 200% gain in BTC vs. USD.)

I would like to thank all participants for the opportunity to offer this fund and also for their patience with the impact of the unforeseeable vagaries of the exchanges which the fund relied upon.

[MPOE-PR]

February - March 2014 Results

Final NAV and Overview

For the month to 7 March 2014, the BTC Growth Forex Volatility Fund's final net asset value dipped to .0966 BTC per unit, turning our previous cumulative rise of 1.3% into a cumulative decrease of 3.4%.

We were negatively affected first by BTC.sx's failure to execute orders, as reported previously, and then even more so by ICBIT's flip-flop on excluding Mt Gox from March futures settlement.

On 18 February, ICBIT's administrators repeatedly refused to acknowledge the possibility that Mt Gox should no longer be considered a functioning exchange for the purpose of calculating settlement of the March futures contract, claiming that doing so would wrongly amount to moving the goalposts on the terms of the contract. (Of course, ICBIT's administrators have repeatedly moved many different goalposts, with little or no warning to traders using their platform.) For anyone with a view that Gox's problems would continue or worsen in the short term, this refusal to acknowledge the possibility of excluding Mt Gox from settlement calculation appeared to represent a clear opportunity, since the burgeoning volume and plummeting price at Gox all but ensured that settlement would be calculated on the Gox price and that the futures would therefore fall significantly.

Just two days later, however, ICBIT administrators announced that they would, after all, exclude Mt Gox from March settlement calculation. While this move brought clarity to a market undoubtedly puzzled by ICBIT's prior refusal to acknowledge the obvious, it was also strongly negative for those of us who had taken their previous refusal to acknowledge the obvious as a reliable indicator of the exchange's intentions with regard to the March contract.

As for BTC.sx, which was built atop Mt Gox, the service shut its doors to trading during the month; the fund ceased trading on the platform after the order execution failure, however, and was thus unaffected by the closure.

Fund Rollovers and Return of Capital

Registrations for a potential second round of the fund, as well as for the two companion funds -- one long-only, and one short-only -- closed on 6 March 2014.

However, in line with my comments at the end of the "Selling the Froth" article, I have elected not to proceed with these funds for the time being. Therefore, all capital will be returned to participants shortly. For those with new registrations of interest, please note that this means no bitcoins should be sent at this time.

(Incidentally, for anyone interested in the particular strategy outlined in that article, according to my calculations the approach continues to offer guaranteed profit up until a roughly 350% gain in the value of BTC vs. USD, assuming a 10% cost of fiat capital and excluding any additional gains from lending BTC -- at least, if you trust ICBIT. Even at a 40% cost of capital, it remains profitable up until a 200% gain in BTC vs. USD.)

I would like to thank all participants for the opportunity to offer this fund and also for their patience with the impact of the unforeseeable vagaries of the exchanges which the fund relied upon.

Well at least the laughter continues.

[Peter Lambert]

Yawn.

You may take solace in the knowledge that among people actually doing finance of any kind, it is pretenders such as yourself and MP who are laughingstocks.

Link me.

The silence is deafening.

[DrGregMulhauser]

Yawn.

You may take solace in the knowledge that among people actually doing finance of any kind, it is pretenders such as yourself and MP who are laughingstocks.

Link me.

The silence is deafening.

Isn't "Link Me" the Australian "get a job" site?  

I suspect MP's PR lackey could do with one of those -- especially now that MP has finally realised the gross inadequacy in his former approach to options market making, as discussed elsewhere. (Or maybe we're all to believe that market makers are supposed to get caught out accidentally transacting a boat load of options they're inadequately prepared for, and then supposed to scramble around in a panic for a couple of days after the fact as they try to hedge the position they accidentally got themselves into...yeah, that must be it...maybe that's how it's supposed to work... Or you know, maybe it's just those doggone data feeds...yeah, blame it on the data feeds, 'cause it certainly couldn't have been incompetence at the helm, could it?)

But why import the boringness of MP into this thread?  

(Edit: Oh, and to answer the question, in case it wasn't as obvious as it should have been: people actually doing real finance don't tend to hang out with a band of sycophants banging out mindless drivel on IRC and thus don't run around offering pointers to others to retrieve their archived gems of such mindless drivel.)

[MPOE-PR]

Isn't "Link Me" the Australian "get a job" site?  

I suspect MP's PR lackey could do with one of those -- especially now that MP has finally realised the gross inadequacy in his former approach to options market making, as discussed elsewhere. (Or maybe we're all to believe that market makers are supposed to get caught out accidentally transacting a boat load of options they're inadequately prepared for, and then supposed to scramble around in a panic for a couple of days after the fact as they try to hedge the position they accidentally got themselves into...yeah, that must be it...maybe that's how it's supposed to work... Or you know, maybe it's just those doggone data feeds...yeah, blame it on the data feeds, 'cause it certainly couldn't have been incompetence at the helm, could it?)

But why import the boringness of MP into this thread?  

(Edit: Oh, and to answer the question, in case it wasn't as obvious as it should have been: people actually doing real finance don't tend to hang out with a band of sycophants banging out mindless drivel on IRC and thus don't run around offering pointers to others to retrieve their archived gems of such mindless drivel.)

So basically, you've got nothing and can't say so.

[DrGregMulhauser]

So basically, you've got nothing and can't say so.

Gosh, you are just so unbearably clever that I don't know how I ever got by without you.

Have you noticed, MPOE-PR, that each and every time you have attempted to start a substantive argument with me of any kind, I have handed you your a** on a platter? Check your own posting history and note how many times you have followed me around and insisted on starting something, only to wind up looking like...well, like someone who isn't garnering much positive PR.

You start arguments with me, I finish them. You start mud-slinging matches with me, I get bored, and so does everybody else.

The thing is, I -- like most people who know up from down in Bitcoin land -- don't actually spend any time at all thinking about you or talking about you or your puppet master. It's only when you insist on getting in people's faces that anyone actually bothers with you -- and hey, I get it, that's why MP pays you every month to try and drum up attention for his shrivelling empire. When you do start banging around and making a spectacle of yourself, I'm sorry to break it to you, but huge swathes of the folks who grok the finance end of things just laugh quietly and walk away.

The difference is, these folks have the class not to belabor the point, they have the class not to run around after you saying "hey, look at this joke I just made up about you, and I think it's really funny, and aren't I brilliant?", and they certainly have the class and the self respect not to bother writing up such drivel for public consumption and handing out the URLs to it. It's just an embarrassment to us all -- but most of all to you. It's just that you don't seem to realise it yet.

So, as I've told you pretty much every other time you've jumped up and down in front of me, begging for attention, if you have something worthwhile to contribute -- like, say, an actual cogent argument or a statement of fact -- then I'm all ears, I respect that. But if you're just here to piss all over somebody else's discussion thread, why don't you go somewhere else where you're actually welcome, or maybe start a fan club thread for yourself and perform in front of whatever audience chooses to attend?

[MPOE-PR]

Gosh, you are just so unbearably clever that I don't know how I ever got by without you.

Have you noticed, MPOE-PR, that each and every time you have attempted to start a substantive argument with me of any kind, I have handed you your a** on a platter? Check your own posting history and note how many times you have followed me around and insisted on starting something, only to wind up looking like...well, like someone who isn't garnering much positive PR.

You start arguments with me, I finish them. You start mud-slinging matches with me, I get bored, and so does everybody else.

The thing is, I -- like most people who know up from down in Bitcoin land -- don't actually spend any time at all thinking about you or talking about you or your puppet master. It's only when you insist on getting in people's faces that anyone actually bothers with you -- and hey, I get it, that's why MP pays you every month to try and drum up attention for his shrivelling empire. When you do start banging around and making a spectacle of yourself, I'm sorry to break it to you, but huge swathes of the folks who grok the finance end of things just laugh quietly and walk away.

The difference is, these folks have the class not to belabor the point, they have the class not to run around after you saying "hey, look at this joke I just made up about you, and I think it's really funny, and aren't I brilliant?", and they certainly have the class and the self respect not to bother writing up such drivel for public consumption and handing out the URLs to it. It's just an embarrassment to us all -- but most of all to you. It's just that you don't seem to realise it yet.

So, as I've told you pretty much every other time you've jumped up and down in front of me, begging for attention, if you have something worthwhile to contribute -- like, say, an actual cogent argument or a statement of fact -- then I'm all ears, I respect that. But if you're just here to piss all over somebody else's discussion thread, why don't you go somewhere else where you're actually welcome, or maybe start a fan club thread for yourself and perform in front of whatever audience chooses to attend?

Keep dreamin', it's a good dream.

If you spent any time at all studying the history of Bitcoin finance, and the practice of Bitcoin finance, instead of nursing the various narcissistic injuries MP indirectly delivered to your squishy, metastatic ego you'd know he's it. He's it. You lost your "investors'" BTC on Icbit? MP told you not to do that. This is what the man does, he dominates this field like no field was ever dominated in the history of human endeavors. Drop the pretense and the dog and pony show, Dr. ForeSkinHead, and start studying MP. He's your god, and your fumbling to come to terms with that makes you look all retracted.

[DrGregMulhauser]

If you spent any time at all studying the history of Bitcoin finance, and the practice of Bitcoin finance...

Bored now (again).

Time to run off back to your scientology thread and try to find your emperor something to wear -- or just keep hoping that nobody else really understands why he got himself into such a pickle trying to be an options market maker that he actually had to back out of the business completely.

[BitcoinINV]

I find the fact that you are engaging in a "war of words with MPOE-PR" horrible business practice and would expect better behavior from a someone who holds Phd (Even if it is in philosophy  ) .