Summit of Killington Peak, Vermont, looking north towards Pico Mountain

Summit of Killington Peak, Vermont, looking north towards Pico Mountain

The Antifragility of Bitcoin

August, 2019

 

Hello all - the Austere team headed up to Vermont's Green Mountains last week for some R&R. We summited Pico Mountain, spotted a lone black bear feasting in a meadow on the mountainside (prepping already for hibernation undoubtedly), and then traversed over to Killington Peak, which happens to cover a small part of the Appalachian trail.

The number of people in the United States who go hiking/camping/backpacking, has exploded in the past two decades. Similarly, if you've read Nike founder Phil Knight's autobiography Shoe Dog, you'll discover that "going on a run" was considered weird prior to the 80s. (Now, nearly everyone does marathons or 5Ks.) When my father who was an avid hiker in Poland's famed Tatra Mountains came to the States nearly 40 years ago and began trekking across the Adirondacks in upstate New York, he would come across hardly anyone after monthly wilderness sojourns. The resulting surge of popularity in the "outdoors" lead to the success of firms such as Patagonia, The North Face, and Clif Bar. A similar success story can be said of Bitcoin, as its price rise several years ago coincided with the rise in popularity of digital assets.

Pacing along the trail in the middle of the woods within the Green Mountains, in a Walden state of mind, pondering the antifragility of nature, a clear rationale for Bitcoin's dominance stood out quite clearly: I generally am against providing any price predictions as they are pure guesswork at best, misinformation at worst, but it's hard to argue against the notion that BTC has anywhere to go but up in the long-term. The lone reason, as I've mentioned in previous writings, is the attribute of censorship resistance, which has massive appeal to those with significant wealth and those who also wish to extend their net worth for generations without any risk of seizure by a third party or central authority.

What other asset is capable of censorship resistance? Land, cash, and other physical valuables can be seized easily (unless hidden well or illegally laundered) and digital bank accounts are the least safest from any central authority.

The lone cloud on the BTC parade happens to be its inherent volatility, which is of course where Austere comes in - dynamically hedging large BTC portfolios against sudden, regular 30%+ drops in value, ensuring their sustainability indefinitely.

Meanwhile, the FOMC as promised delivered a 25 basis point cut to the target Federal Funds Rate, providing a subsequent boost to BTC price, just as we mentioned in our previous newsletter. IV on Deribit has dropped a bit to ~88% - still quite high. We've also noticed a pricing disparity between the two lone crypto option providers, LedgerX and Deribit - vol is currently slightly cheaper on LedgerX, presumably to attract more investors and boost liquidity.

Until next time.

Brian Koralewski is the Founder and Managing Partner at Austere Capital.

You can reach him directly at brian@austere.capital

*(The information within this email is NOT investment advice and is our opinion ONLY)*