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Introducing the UltraCoin Cryptocurrency Composite Index
Cryptocurrencies have been on a tear over the last 2 years, both in terms of mindshare and returns. This is particularly true of the last year, in which Bitcoin (the de facto proxy for cryptocurrencies) has heaved from $13 to $950, making a pit stop at $1200 along the way. This 7,308% return looks to be outrageously delectable to many a speculator and has even caught the eye of an institutional fund or two. The problem is, and what many novice investors have a problem conceptualizing, that astute institutional “investment” funds actually have a problem dipping their toes in the wilding appreciative yet hyper-volatile world that is cryptocurrencies.
The reason is because “investment funds” as opposed to beta chasing “trading” or “hedge" funds seek a measured return on investment. The raw returns that you see spouted for Bitcoin and the various alt.coins are actually not what the smart institutional money is looking for.
Put another way, you tend to get what you pay for. Risk is the price of reward, with risk being defined as deviation from expected return. You nearly never get a reward without bearing some risk to attain said reward. On the flip side, you should always demand a commensurate reward for the risk that you take. Measuring reward without taking into consideration the risk paid to attain such reward is akin to jumping out of the top floor of a 50 story building to revel in the exhilaration of the drop without taking into consideration what happens when you reach ground level. All in all, it tends to end ugly.
My clients are told that if you assumed $1 of risk to reap $1 of reward, then you effectively made nothing from an economic, risk adjusted reward perspective. This is difficult for the layperson to understand since those who reaped said dollar are left holding one dollar of nominal returns which looks, smells and spends like a dollar. They don't seem to get it until that third or fourth go around when they get 30 cents back for the dollar they invested (versus an amount over a dollar, hence a negative return). You see, probabilistically, you can reap more than you sow over the short term simply out of dumb luck. Realistically, the law of averages will catch up to you and eventually (and most likely close to immediately) you will reap what you sow, or... you get what you pay for!
Similarly, if bitcoin investors/traders believed they are doing well when bitcoin jumps from $13 to $950, they may be mistaken. The reason? Bitcoin has a modified beta of roughly 673! That means that it is volatile. Very volatile! More volatile than practically any basket of currencies or stocks you can think of. This volatility means that in a short period of time it's just as easy to be on the losing side of the trade of this asset as it is to be on the winning side. So, you're lucky if you bought at $500 and rode it to $950, but you could have just as easily bought at $1,200 and rode it down to $500.
With these concepts in mind, you should always adjust for risk before attempting to measure reward. By doing that you will find that you can compare disparate assets, ventures and opportunities that have different reward propositions and even different horizons by measuring the risk (or the economic cost) of the investments and then adjusting the actual or expected reward desired to compensate for said risk commensurately.
Notice how, if one were to take this approach, one can see the different risk adjusted returns between the top two cryptocurrencies by market value. Bitcoin is the most popular, but Litecoin is the most profitable - even when fully adjusted for risk.
The UltraCoin team has run these calculations, among many other currencies, on every cryptocurrency with a market value over $1 million. In addition, these currencies have been aggregated to form what we have coined as the "UltraCoin Cryptocurrency Composite Index" - a basket of cryptocurrencies upon which our custom UltraCoin derivatives can trade, hedge, invest and speculate.
These indices and calculations (not to mention a bevy of other calculations to assist in trading) are part and parcel of the UltraCoin client.
The graph below depicts the outrageous raw returns had by holders of bitcoin. It also denotes the extreme volatility experienced therein, particularly from late 2013 onward.
If one were to place a hurdle rate of required return to compensate for said volatility, the return curve will look somewhat different.
As you can see, all that glitters is not necessarily gold! I will be pushing for the beta release of the UltraCoin client quite soon, quite possibly at the Berlin Bicoin conference. In the meantime, for those of you who have not had a chance to play with the software, here are a few screen shots.
See http://ultra-coin.com/ to access the client when it becomes available.
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Here's the ZH article from Jan. 19th with the RT video of Max Keiser and Reggie Middleton talking about the new Bitcoin 2.0 derivative layer to control real things. Just in case anyone missed it or wants to re-watch it. I thought it was extremely interesting. But I don't think I can let myself buy into it...I'm still way too stuck on holding onto phyzz Ag and Au. I don't trust the goverment, NSA, the interwebz, or the power grid, etc. Too easy to just flip that switch and turn all this shit off and then what do we do? I have to stick to phyzz still at this point.
http://www.zerohedge.com/contributed/2014-01-19/bitcoin-20-aka-ultra-coin-bitcoins-derivative-layer-allows-virtual-control-re
It seems a lot of people are coming up with a lot of new coins lately. I wrote an article on what to look for in new cryptocurrencies and how to weed out problematic ones.
Which cryptocurrency should you invest in?
http://razorsforex.blogspot.com/2014/02/which-cryptocurrency-should-you-...
Reggie,
On the linked UltraCoin webpage (ultra-coin.com) you have a yellow call out that says "Here's the latest Max Keiser in which he and Stacey Herbert to a good job of explaining what I have in mind" but no link to a video. It should also be "...do a good job..." not "...to a good job...".
Also, if the site is about UltraCoin you should remove the superfluous Apple slam "Apple Is Now Losing The Tablet Wars Not Only To Android But Itself As Well Featured *". Don't mix your metaphors. If the site is about UltraCoin make it about UltraCoin only. What if Apple users want to use UltraCoin? You will immediately alienate them, and others may doubt that you have a consistent purpose for UltraCoin.
Same goes for the mobile computing push: "Why Tech Is Far And Large The Biggest Thing This Millennium - Lehman, EU Crisis Included". The site should be all about UltraCoin and it's purpose. If you are going to have testimonials they should be about UltraCoin specifically. You should also avoid "I" amd "I'm" because this is a team effort of you and developers. Change it to "We".
+1 for your constuctive criticism. Kinda interesting that you need to give marketing advice to someone who should know much better. What has happened to the Reggie Middleton that once upon a time actually deserved our respect?
Google glasses.
Reggie Middlefinger.
Jumping on the bandwagon after the train has left the station.
@Reggie Middleton
Good try man, but honestly you might as well be selling laptops to cavemen when it comes to the ZH userbase. They only understand the government approved finance vehicles, including Gold and Silver, which have been co-opted a long time ago. (Why else do you think coin shops are allowed to exist? If precious metals were so disruptive, they would've shut them down a long time ago.)
Anyway, good luck on your client and contract systems, it seems you have seized the opportunity that most others are criticizing. That is, until they find out what the actual utility and returns are. It isn't easy being on the forefront of a new innovation, but something tells me you're used to striking out on your own path and understand the pitfalls of others who can't comprehend your vision.
so, you rag on the ZH userbase for not buying Reggie's client.
Are you going to buy the client?
The client is free.
Call me old fashioned, I'm sticking with silver coins. Now thats real coin, and you don't have to put a surname in front of it to convince someone of its worth.
" See http://ultra-coin.com/ to access the client when it becomes available."
error message on this link
Other interesting Alt.coin resources FYI:
https://www.itbit.com/ (pretty comprehensive service for trading BTC)
http://www.cryptocoincharts.info/v2/markets/info
http://www.cryptocoincharts.info/v2/arbitrage
you mean Kleptocurrency!
ultra-coin.com is presently diplaying this error
Error displaying the error page: Application Instantiation Error
These ultra coin links DO work:
http://ultracoin.com/
http://www.ultracoin.net/index.html
And if you need some laundering done there is this one:
http://www.yelp.com/biz/ultra-coin-laundromat-wallingford
Good luck and stay safe people!
;)
I do like BitCoin and have some. Though right now my 420 Index is king!
While in Denver area I tended to only accept physical over paper. ;)
What index are you happy with? Link?
"420" is a drug culture reference to marijuana. Smoke 'em if you got 'em!!
I hear you there bro. HEMP et al taking off like scolded cats this morning.
P:S No thanks Reggie. Good luck though!
It is pointless to make a composite index of cryptocurrencies, as some of them (like dogecoin) are not serious contenders to begin with. Some others resemble pump & dump-schemes. Trading in Altcoins is equivalent of trading in forgotten penny stocks. Right now, bitcoin has no real competition.
Why is dogecoin not a "serious" contender. What do you mean by serious?
Putting aside the Shinu Iba marketing scheme for a moment to discuss the flaws with the implementation itself:
nearly 40% of all DOGE coins are already mined. It is hyper-inflationary beyond all imagination, right up until next summer when suddenly there will be no mining revenue.
Without steady growth in transactions that pay fees, the coin will suddenly stop working. If mining plummets, the blockchain will get attacked, probably just for the lulz.
I bet the solution will be to hard fork it and simply remove the currency cap, so everyone gets 100 million new coins each block. This will destroy the value of the existing coins.
Bitcoin had 4 years until the first reward halving, and then it took off in value after that. Bitcoin has over 100 years until the network must rely solely on transaction fees to support itself.
DogeCoin halves reward approximately every 90 days.
And there you have it: changed to 5 billion coins per year inflation. Wanna bet that changes to 5 percent per annum?
http://arstechnica.com/business/2014/02/dogecoin-to-allow-annual-inflati...
This is looking promising.
What is "Auto Updation"? Is that a real term or are you using an ESL programmer?
Ah. Another nice picture of a bitcoin looking like it's made out of gold.
Human are attracted to that color like flies on manure ;D
Good luck with this one. There is plenty of competition but seems like you have leg up on the creating a trading platform market. Just keep in mind you really need to decentralize the exchange or someone else is going to build on this and do it themselves eventually. Plenty of competition in this ring but like with any gold rush selling pick axes and pans is where the real fortunes lie.
Bitcoins remind of flippo's
http://www.bing.com/images/search?q=flippo&FORM=HDRSC2
they where very popular among children.
Thanks Reggie. Let the dinosaurs die. It's their fate.
The Bitcoin Channel