Road to $1M: Parts 10-30

This article replicates my LinkedIn posts related to my Road to $1M over to Substack for a more public read. If you’d like to get the posts more nearly to realtime, make sure to follow me here on LinkedIn.

Road to $1M Day 7, Pt 10

doing 2 things today:

1. bought a small amount of long btc perps

2. looking into a polymarket bot

what will i do with the bot? betting markets are already highly efficient. the idea that there’s a general algorithm to profit is suspect from conception

well, there are some robust social price estimation effects, and i’m going to wager a little money that they remain. that betting markets are efficient but imperfectly so. i’ll refine this further, but i’m specifically thinking:

1. overconfidence bias + affirmation bias: people are more likely than neutral to bet yes on anything. the strategy here is simple: buy no when a yes contract is over 95% likely*

2. favorite-longshot bias: favorites are often underpriced because people are attracted to winning the lottery on an unlikely favorite

3. momentum strategies.

*this is pretty doomed to fail if i don’t have a way to filter “mechanically true” bets, like outcomes that have already occurred as yes but the market is still open. i could try an LLM with web search, news, or X integration, or i might just manually review these contracts instead of automating the trade.

Road to 1M pt 11, ADP jobs came in slightly bearish today so i shorted btc.

Also mapped my directional expectations through end of year by feeding a couple videos from Benjamin Cowen to ChatGPT and asking for month level directional expectations. See attached, all subject to dynamic revision ofc

Bear markets are tough because rallies can come and quickly. It’s easier to make money buying in a bull market than selling in a bear market. Main goal is just to survive and bias to cash, but I am going to try time the bear bull switch into march rather than sit out until june

Road to 1M part 12: jobs report came it way above expectation so im long today

Road to 1M part 13: i tried to buy the dip again but it kept dipping

so, i’m changing my strategy to be much less risk tolerant on long options until we get a bullish regime change.

main approach atm is still shorting BTC/crypto, and shorting with small sizes because I expect frequent bounce backs. I’m confident shorting until BTC goes under 55-60k. then i’ll step out. i think the real bottom is lower but i don’t want to short all the way to the bottom.

Road to $1M part 14: Betting Markets

I see opportunity for trading, automated trading, arbitrage, and domain-based edge

But I don’t have time to manually assess these markets with domain expert confidence.

So I looked for automated trading strategies.

There are some behavioral investment concepts I could leverage, such as the Outlier Effect, where people tend to overinvest in outlier bets.

But there’s substantial work involved to implement an always-up server that monitors and trades this stuff, backtesting, etc.

For now I took a shortcut: Copy Trading bets. I put in $200 just to test whether this evaporates. Stay tuned!

Road to $1M part 15: Polymarket copy trading update

while Polymarket betting is now legal in Virginia (afaik, ianal), it seems most (all?) major platforms have still not implemented access

so i’ll probably sit this opportunity out for now. down road i might implement my own bot if i find spare time

Road to $1M part 16: I think there will be a btc local low in the range of 50-65k then a bounce in the range of march-april (probably not april but maybe) then a new low in the range of may-june.

i’m looking at the 200 week moving average as a guide for this call

I don’t see any clear strong plays until buying at the new low; I think things will increase ~oct where we will have some weakness. could be a new cycle low or true bottom or it could be a local low. going to be pretty bearish most of the year.

stocks will likely rally on the fed rotation in June and may present a more bullish market compared to crypto through end of year

For now, I’m mostly in cash and I’m happy to stay here for a while, though I may accumulate some btc in the 50-65k range

Planning a bigger blog article between this afternoon and sunday! follow along!

not advice etc etc

Road to $1M part 16: The Big Crypto Short

My shorts (SBIT, ETHD, perps and futures - no options!) are 30% allocated now

going to place the rest of them this week with target BTC entry prices ranging from 74-85k.

looking to exit April or May.

not advice, good luck!

Road to 1M pt 17: leveraged etfs catch alot of heat but imo they feel MUCH more psychologically safe than manually handling futures or options, particularly for short positions

My short positions are printing today and yet im utterly stressed that they could null viciously at any moment

So, deleveraging literally just for reduced stress and not at all bc i think the floor is anywhere close

Not advice etc etc and im primarily thinking of crypto shorts not really playing with qqq rn tho it is a useful crypto canary

Road to $1M pt 18: Theta decay scares me, but I want leverage, but US regulations make leverage access tough. Eg 3x daily BTC performance ETFs are not allowed here as they are in Europe.

Coinbase does have perps but the leverage varies from ~3x-10x and since it varies, if I’m macro trading (which I am) then I have to effectively take the low number. So these are kinda OK, though I’ve had a mixed experience with Coinbase. I’m nervous to take a one-trick approach here.

CME futures leverage looks capped to me. Am I doing this wrong? On Thinkorswim, I’m seeing a max effective leverage of 2.5x when I try to buy bitcoin (/MBT) or ethereum (/MET) futures. To make my life harder, I often trade on my phone and the UX isn’t ideal for this.

I do like futures for extended hours trading. there’s honestly alot to like here but I want more leverage for a specific trade. this isn’t a general analysis of futures, they’re useful in many cases, but I want more leverage!

2.5x-3x is acceptable, but what if there were a way to beat it?

Options can provide much stronger leverage. The problem is timing. Good tool for a specific intraday move etc but I’m not precise enough with my analysis, which is showing a local bitcoin bottom as early as next week and as late as end of May. So, I would need to have a pretty distant option. This defeats the purpose right? I need to eat the theta decay and this costs lots of money?

Yes and no: Deep in the money puts have less theta decay. I ran the math (please run the specific math as this varies by trade) and at current rates I can do a 10 week put 20% in the money for an effective 5x leverage. Strong enough to give me what I’m looking for and weak enough that I will be able to sleep! Some theta decay but not too much and I can bail out early if the crash comes early. Plus, if the price crashes early, the 5x leverage effectively increases.

Strategy 2: leveraged ETFs on margin. Robinhood margin is like 5-9%ish APR. I can buy a 2x etf like SBIT and then overbuy it on margin so I get 4x with no theta decay! I can hold it and not suffer crazy spikes and I can sleep. for the low price of 5-9%ish APR. This deal is only as good as my own confidence that the extra 1.5x will make up for the APR, but I think it will do so in spades!

blog article coming to spell it all out in a more organized way, but basically i have a 4-prong bearish strategy:

1. lots of 2x bearish etfs including some margin spend

2. one macro bear option on IBIT

3. coinbase perps spread over btc, eth, solana, xrp

4. currently holding some futures but planning to liquidate and move to the etf thing, while keeping some cash for opportunistic extended hours trading or other opportunity trades

Road to $1M pt 19: at this minute, btc price is up 0.5% on the week while QQQ is down 2.2%+

This is unsustainable and perverse.

I don’t know what combination of btc down or QQQ recovery will happen, but keep an eye out this week and monday open in particular. Futures premarket might clue us in before the bell

Road to $1M pt 20: yesterday I noted a perverse position of BTC price movement relative to the nasdaq and called for either btc to come down and/or QQQ to go up, potentially as early as today’s open

That happened, with QQQ snapping up to 595 at open, making for a day loss under 0.75% which is much more appropriate than the ~3% reached on March 8.

Still, I think a misalignment continues based on comparing the price movements of the past week to the month and 3 month levels.

We are in a bearish regime and bitcoin is a riskier asset than the nasdaq, so it is expected to fall faster. This holds in the month and three month windows, where bitcoin is down 24% and 2.4% approximately and respectively while QQQ is down 5.4% and 3.7%. This all makes sense to me: bitcoin is dropping faster anywhere from 0.5 to 5x.

Over the last week, however, bitcoin has increased 4.5% while QQQ has decreased about a percent. This isn’t just a surprising multiplier on relative loss amplification - it’s directionally opposite and perverse. (I wrote this by hand believe it or not despite the LLM slop template in that sentence. I recognize it and refuse to alter it because I find it hilarious.)

I continue to predict price declines for bitcoin. Realignment requires a minimum 5% move between the two assets. I imagine the move is likely to be shared between the two, but a 5% decline on bitcoin doesn’t sound insane either. That would bring the price around 65.5k which is well within its current monthly range.

Stay safe, feedback encouraged, and follow for more!

Road to $1M pt 21: i got squeezed :(

I got a margin call on my futures and in hindsight the reason was embarrassing and preventable.

I had cash sitting in my account and forgot that it was being used to support futures margin, so I invested it, then I got a margin call.

Lessons?

1. When holding futures, check on margin before investing cash

2. (1) is currently nontrivial in the thinkorswim +schwab mobile ux, in part because prices change which changes how much margin is needed

3. Because of 1 and 2, I update to favor leveraged ETFs a bit more than futures for macro trades. Futures are nice for opportunistic trades including outside of stock trading hours, but I like them less for macro trades

4. (3) is probably less of an issue with account level separation for futures trading. In such dedicated futures accounts, it seems easier to remember the necessity for margin cash, though still a little ux enhancement would go a long way if I just saw a line item for margin cash next to the actual cash, perhaps with a trailing week max margin needed

Road to $1M pt 22: Credible is emailing me about a personal loan as low as 7% fixed. Should I take that and invest with it? 🤔

It’s in the margin range from folks like Robinhood and Schwab, so why not just use standard margin?

Well, I found that these providers don’t support standard margin on leveraged ETFs like SBIT and ETHD

IIUC robinhood wont let you have any margin at all for ETHD specifically as one example

Road to $1M pt 23: playing the average trend in bitcoin is turning out to be pretty painful

In hindsight I would:

1. Enter when average historic trend is down and current price is over the average. By doing only the former, I basically made a bad bet that mean regression wouldn’t happen.

2. Watch the betting markets for price peak and bottom estimates, in addition to historical analysis. Entering in the 75-80k range would put me in a much better position than my actual average entry around 71. This entry difference looks small and it is relatively small, but (a) some of my portfolio is in options and futures so the timing value also matters, (b) I could potentially monetize the trip from 70 to 75 and (c) just the psychological benefit of less time in the red

Road to $1M, pt 24: metals are an interesting haven asset, so when a basket of metals starts outperforming the broader market or the tech market, it makes an interesting bull-bear regime indicator

perhaps through N week cumulative return comparison

Road to $1M, pt 25: i trust the red line for the dec 2021 top more than the orange lines for QQQ resistance towards bubble/cycle end state

The following low ~270 is also possible but I’m not sure how probable, so I personally wouldn’t want to short below even 480 though I would hesitate to enter until a positive trend is established. Staying in cash is also risky. The search for haven assets is worth some analysis time.

The orange diagonal up on the lows is another attractive resistance line but the problem is history shows QQQ lows are clearly nonlinear. So it will be wide and unreliable error bars to take that approach

Road to $1M, pt 26: Sell in April (Probably) and Go Away

I’m heavily persuaded by Ben’s call for April weakness, likely in the first two week (link in comments).

I’m currently holding lots of SBIT and ETHD which I will partially liquidate and rotate into 10k in IBIT puts IF I see an entry point early in the week with a cost basis over 67k and I would majority exit the position - biasing towards a full exit unless - at 62k, just before sweeping the YTD low. These puts will be for late June or July and I would be ready to hold into May if needed, but my base case exit is April.

I’ll keep SBIT and ETHD at that point as I think the price will sink further and I can tolerate holding all year if needed. If we go below 55k, I will be more than 80% out of all short positions, biasing towards a full exit by 51k and I won’t plan to return to short positions until June-Sept time frame, expecting a separate local low in Q4

Road to $1M, pt 27: on the Bitcoin Flag math. Peak to top of Nov 22 to Jan 15 flag was a percent increase of ~14% and change.

Call it 15% for conservative math in this application

Now take the current flag’s start date on Feb 6 with price of 64k and change. call it 65k for conservative math in this application

The approximate flag top would then be 65k * 1.15 -> $74,750

not advice, just beware: it’s close. the drop could be as early as tomorrow. high confidence we get a local low pre-June, low but not very low confidence it might be this week.

Road to $1M, pt 28: shorting crypto is going poorly at the moment for me. Portfolio is broadly down 25%.

The good news is I have no time decay so I can just wait it out.

I have 10% of my investment basket in cash which I also plan to use for shorting, but I want to allocate that once I think we are at a local top or even heading back down in price with momentum. I’m mainly looking for deceleration signals in the range of three days to three weeks rather than any particular price target, but if price exceeds 82k I will go ahead and enter a short. It may not be optimal but I feel it would be good enough at that level to avoid risk of missing entry entirely.

I’m high confidence we will meet or exceed the low to date on bitcoin’s price by end of year and likely by end of October; I’m low to medium confidence we will test the low before then. If before October, likely in the range from now to end of July.

Road to $1M, pt 29: i went long google on an option inspired by some info from Kevin Paffrath which I was friendly to take because this long position effectively hedges downside risk to my crypto shorts and I saw a nice entry point

Turned 1K into 1.5 K today and cashed it. A small move, but every bit helps!

i remain about 10k down overall

Road to $1M pt 30

Bitcoin lost a second peak test and it’s running up against longer term more robust resistance.

This local top was a lower high, but not by much.

QQQ continues to rocket. YTD QQQ is outperforming btc, consistent with the macro risk adjustment thesis.

For now, not much has changed in my approach. 80% btc bear etfs and 20% cash. If it jumps to 85+ I’ll heavily consider october put options but for now, every day I hold my cash looks like a win to me because I save on theta. I’ll make the put bet at some point, but I don’t know if we are going to get a significant drop over the summer so I’m playing it safe (relatively).

And I have no idea where QQQ is going near term so I’m hesitant to buy there too. “Outperforming btc” doesn’t mean it will keep going up, since I’m anticipating a btc drop.