Portfolio Update: Closing BTC

  • Closing 3.1% Position on Bitcoin (BTC) and Moving Proceeds to Cash

Taking Profits on Bitcoin, The Cryptocurrency Isn’t a Recession Hedge

In today’s Macro Note, we make the case for closing our Bitcoin allocation in our Model Portfolio. Please refer to it for the details.

Bitcoin is pricing in a scenario where fears of a bank run prove enough to force the Fed to unleash liquidity in the system, but not enough to trigger a full-blown recession.

That’s not consistent with our view of a recession materializing later this year, as prognosticated by the deep yield curve inversion. As a result, we don’t see it as a core asset in our portfolio.

We can’t find evidence suggesting that Bitcoin is a haven, let alone outperform bonds and gold in a recession. We see Bitcoin very much as a risk asset, vulnerable to economic risks like stocks are.

Although our position was small, Bitcoin is a volatile asset class and could meaningfully impact our portfolio. Without much conviction in it, we prefer to deploy that cash in more strongly-held ideas.

We’re closing our position at $27,619, 45% above our inclusion price in the portfolio when it was added in late-September. It’s outperformed the S&P 500 by 36%. We’re moving proceeds to cash.

Below is the updated Model Portfolio.

 

 

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26 comments

  1. (4) 4
    Hutch0321 says:

    Thank you. The bond ETF allocations will be interesting. Will we see a post on the VIX in the near future?

  2. (15) 15
    Wesley Lapp says:

    This is a suggestion for the Model Portfolio page. I would like to see a historical chart of the model portfolio history over time in real dollars (like start with $100 at inception) as well as the S&P 500. Right below the the current Morel protfolio summary graph. This would answer the questions of where we are now and where we have been. Cheers – Wes Lapp

    1. (6) 6
      GOT says:

      Thank you for the suggestion! This is something we do on the monthly portfolio reviews where we show the portfolio’s performance since inception benchmarked against the SP500. We also show the monthly performance against various indices. We are in the process of updating the model portfolio page so these portfolio reviews and all portfolio updates are easily accessible from there.

      1. (1) 1
        DrWho? says:

        On that note, it would be good to see the current level of confidence for any given investment if you start *now*. The statistics you see always consider the gains from the moment of inclusion, which is nice and good, but if you have any new member coming in now, I have no idea if investing in the portfolio as-is today makes sense. For example, I replicated the model portfolio a couple of weeks ago in one of my accounts, only to have EWY closed 24 hours after, at a small loss.

  3. (2) 2
    Paddy says:

    would you consider shorting the major indices (S&P, NASDAQ etc) possibly via a short ETF (Inverse) as there is no doubt we are heading into a bear market?? could this be added to the model portfolio?

    1. (4) 4
      GOT says:

      @Paddy That’s possible, but most likely any shorts we put in place won’t be through an inverse ETF. Inverse ETFs are meant mainly for short-term trading. Over long holding periods the performance of being long an inverse ETF can look very different from simply being short the index.

      1. (1) 1
        Veejay Mali says:

        Could you let us know of short interest fee charge on each index ?

    2. (1) 1
      Paddy says:

      Thanks for the reply Peter. enjoying the great content. In relation to short trades, are you considering ???

  4. (1) 1
    SVO says:

    Yep. Could see this one coming. Thanks!

  5. (3) 3
    Turtle says:

    question on the BIL etf, does it have to be bought at the 1st of the month, I see a staircase pattern on the chart. Is it not advised to get in any middle/end of the month? I just want a safe place to park cash in the interim, but didn’t know if the value of the ETF would go below my entry, unlike if I buy the Tbill direct.

    1. (1) 1
      Maxrothira says:

      The drop is because of the dividend and should be roughly equal to it.

  6. (3) 3
    Shawn Wang says:

    Would it be more clear for you to update the average price of Gold & TLT (your position) after you increased your position? Thank you.

    1. (1) 1
      GOT says:

      @Shawn Wang Yes, that is great feedback. We’ll be replacing the Price at Inclusion with the Average Price in the Model Portfolio table going forward to capture the changes to the position over time. Please stay tuned for those changes in the near future.

      1. (0) 0
        cewing11 says:

        @GOT, it would be super valuable to have real time updates at the date and time of inclusion and price. Sometimes, it is very hard to tell and if someone wants to “trade along” it is not possible. Other sites include a text every time they make a change like “Added .5% TLT at 104. Not a trade recommendation or guarantee. invest at your own risk . . .” This real time update has alowed us to make real time trades that are great rather than waiting a few days from the trade when we have been waiting for an update and by the time we get the news the price has moved away from it – if we can’t real time trade the model portfolio when markets are moving so fast we have have to start to guess and that is not what we are paying for. The good news is you are doing such a good job we have been guessing in line – but it would *greatly* increase the value of the service to get real time updates.

    2. (0) 0
      jackgr says:

      A related question is when does it make sense to add to the portfolio non-cash positions. In a recent post, you said that GLD was near long term resistance, and it appears to have broken out, but nothing more has been said. Is it time to add to the GLD position or is it best to keep funds in cash and wait for a pullback? Likewise SLV, TLT and VIX.

  7. (1) 1
    Sharon Tsi-on says:

    What about shorting the DAX? Will appreciate your comment this time, as till now, I havn’t receive any answers to my questions.

    1. (0) 0
      GOT says:

      @Sharon Tsi-on Thank you for the question. We don’t have a view on the DAX particularly at the moment. That said, our work on the dollar points to weakening this year, and as a result we expect non-U.S. stocks to outperform U.S. ones.

  8. (1) 1
    Clayton Beckwith says:

    If I understand correctly, I should refer to your advice daily and adjust my portfolio according. Thk u

  9. (-2) -2
    jackgr says:

    Glad you’re dropping BTC. I have always considered it speculative snake oil along with ETH and the other denizens of the blockchain sea. It’s nice to see it leaving the portfolio where it was an unwelcome distraction. Now, the portfolio fully inspires confidence for weathering the storms that lie ahead.

    1. (2) 2
      Maxrothira says:

      I don’t buy everything in the portfolio. I do like bitcoin updates. I feel sorry for crypto only members (I was one at one time) because the altcoins have been forgotten and bitcoin updates in general are few and far between.

  10. (1) 1
    Veejay Mali says:

    “……fears of a bank run prove enough to force the Fed to unleash liquidity in the system, but not enough to trigger a full-blown recession.” ??

    Did you mean to state “…not enough to prevent …..”?

    1. (3) 3
      Maxrothira says:

      Peter is saying that that he disagrees with BTC bulls who say BOTH: 1) Banking crisis will create fed fueled liquidity, and 2) Banking crisis is not enough to make a full blown recession.

      His views on these are too nuanced but here is a try: Fed right NOW is not a start of a fed balance sheet expansion. The banking crisis is helping further banks tightening lending = recession coming.

  11. (3) 3
    apr3r says:

    Reminder that historically most Bitcoin annual gains occur over a VERY short number of days per year. If you miss those 2 or 3 weeks each year, you get left out. Your argument seems reasonable that Bitcoin will not perform well in a recession and will likely sell of with stocks. That said, you will however then need to consider re-entering a position before being left behind on the next pump. Currently BTC is year to date (March 2023) the top performing asset (+68% approximately).

  12. (0) 0
    John Greco says:

    Love the info and chart! Please add a column for % gain/loss since inclusion? Thanks

  13. (0) 0
    Kabat says:

    generally I agree with decision,
    but
    don’t You think that the same as when You reduce position in BTC it was too early to close position?

  14. (0) 0

    […] Closed BTC (Bitcoin) given it’s not consistent with our view of recession for 2023. Our historical analysis shows that Bitcoin isn’t a recession hedge. […]

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