Brilliant piece as always. Very well articulated. Loved the comment on bonds, probably the clearest explanation of the trade versus investment difference. Bravo!
Florian, regarding bitcoin, it has always shown distinct underperformance when inflation is clearly above target and the Fed shows disinterest in enforcing its inflation mandate. The last time this happened before Jackson Hole this year was April of 2021 as inflation broke above 3. The Fed called it transitory, continued QE, and didn’t raise rates from the lower bound.
At that time, the S&P corrected 10% before continuing, gold steadily rose, and BTC went from $64k to $29k, a downward move far in excess of its usual correlations to equity. I believe this is because BTC is a very long duration asset. Its duration is so long no one even knows what cash flows it purports to promise. It certainly isn’t a commodity in any genuine inflation-hedging sense, as no immediate value can be extracted from it in absence of “exchange value” (the true definition of a hard asset).
Thanks Florian, interesting read!
Brilliant piece as always. Very well articulated. Loved the comment on bonds, probably the clearest explanation of the trade versus investment difference. Bravo!
why swiss franc? if you foresee general USD weakness, why not consider other FX like AUD, MXN or even CAD?
Florian, regarding bitcoin, it has always shown distinct underperformance when inflation is clearly above target and the Fed shows disinterest in enforcing its inflation mandate. The last time this happened before Jackson Hole this year was April of 2021 as inflation broke above 3. The Fed called it transitory, continued QE, and didn’t raise rates from the lower bound.
At that time, the S&P corrected 10% before continuing, gold steadily rose, and BTC went from $64k to $29k, a downward move far in excess of its usual correlations to equity. I believe this is because BTC is a very long duration asset. Its duration is so long no one even knows what cash flows it purports to promise. It certainly isn’t a commodity in any genuine inflation-hedging sense, as no immediate value can be extracted from it in absence of “exchange value” (the true definition of a hard asset).
Hi, Florian.
1/ What kind of sizes do you put on trades? Can you give examples?
2/ What is a typical risk budget you assign per trade (or range)?
3/ Do you change these risk budgets per trade given YTD PnL?
1&2 30-200bps and backsolving size to that 3 no but reducing risk when in draw down. Happy Christmas!
appreciated