BOTS, ETC and USDT: Following the Smart Money

Down go the miners… 🙁

Testing time over.

I’m in a better position now and armed to do the calculations for the next phase.

My full explanation is coming, but first, my virtual machine cluster is set up and I have seen it.  I can now run VMs in my basement datacenter!  The engineers who set up the cluster will get started moving in my virtual machines and I can focus elsewhere.  This was certainly the correct choice to hire out the tech work.  I’m looking forward to seeing how things turn out when a professional team sets it all up from the start!

My intention for mining ETC wasn’t to make a fortune. It was a proof of concept, a test case.  I needed to prove that running a GPU rig efficiently was possible, probable, and financially rewarding.  I ran the numbers and the margin is slim but it’s there.  I could mine and sell right away (like most folks) or I could mine and hold, then sell, both are profitable.  The latter is what I intend on doing since I can take the mined crypto into a BOT and gain more over time.  In fact, I am already using part of the ETC I mined in a Pionex BOT. I’d like to focus a bit on Pionex as it’s kind of amazing…

Here’s what I did.  I mined about 5 ETC in a month and I took a little more than 5 ETC that I mined, with a cost of about $225.  My cost was calculated like this:

• 1300 watts to run the rig which translates to 1.3 KWh (1300 / 1000)
• I use 1.3 Kilowatts per hour to run the rig which means that in 24 hours I use approximately 31.2 KWh
• The cost of 1 KWh of electricity ranges from a penny up to what I pay ($0.24) which is REALLLLLLLLLLLLLLY high…
• So, multiplying 31.2 KWh by $0.24 = $7.50 in electricity per day to run the rig
• $7.50 * 30 days = $225 / month to run this miner
• I was able to mine 5 ETC in 1 month, therefore my cost for those ETC is $225
• Per ETC I have a cost basis of $45 ($225/5)

Given that I have a cost basis of $45 per ETC and the market now shows 1 ETC being worth $68, I have an unrealized gain of $23 per ETC, or ($68 * 5) – 225 = $115.  I could sell now and net a cool $115 for just watching over this whirling mass of tech on my wall.  

Just to note that the $115 is taxed as capital gains.  The US government currently sees my electricity expense of $225 as my “cost basis.”  So if I were to sell them now I would need to hold aside $35 to pay the taxes at year’s end, meaning that I passively cleared $80 with this miner last month.  But that would ONLY be if I sold now which I don’t plan on doing.

Stage two of my plan is to take the newly created crypto and transfer it to a bot in order to build another bag of additional crypto.  I could also generate USDT to use for new crypto purchases or I could sell to USD to pay my bills.

Da BOTS…

I’ve completed round one of my testing; I’ve created new crypto with the HIGHEST cost I could imagine in order to generate yield in the worst possible circumstances.

Now……. Page 2…….  (don’t know how many of you get that reference, it might date me lol…)

Transferring the ETC into Pionex was easy as I copied the Pionex ETC deposit address and pasted it into my mining wallet, then clicked send. However, the ETC network isn’t particularly solid (ironically) and it takes a very long time for the transfers to clear.  After I pushed send, it took about 4 hours for my Pionex account to receive the ETC.  During this 4 hour timeframe I was able to watch the transfer activity in real time via the blockchain on BOTH my sending wallet and my Pionex account.

Once the deposit cleared, I proceeded to set up an “Infinity BOT” running with about 4.5 ETC. Here’s what it looks like today:

The above needs explanation.

What an Infinity BOT does is it buys and sells the crypto that I intend on HODLing (in this case my ETC.)  It will buy and sell many times over gaining a little USDT and a little ETC with each complete set of orders..

At this precise moment I have 4.07258986 ETC and have generated new 30.6189 USDT (which I could sell to USD 1 for 1) AND an unrealized profit of 63.854 USDT totaling just over 94 USDT.  This is a 34% gain over-all on the 5 ETC that I mined.

You are probably thinking: he lost 0.5 ETC, what gives?

It’s not lost, it’s just converted.  What a BOT does is it will convert a part of your base (in this case ETC) into your quote (in this case USDT) – so the value of the initial investment (in USDT) is preserved.  It’s just split up into both currencies so the BOT can have multiple orders running at the same time.

So, at the time the screenshot was taken, 1 ETC was worth 68.9593 USDT, which means I had 280.842945932698 USDT worth of ETC now in this BOT.  To me I know and understand this to be a gain. However, I don’t know or understand the percentage calculations in Pionex yet since it’s new to me and there appears to be a variable missing here. So, how much USDT is in the bot?

I looked everywhere and can’t find this info. But in general, instead of watching the fancy charts, I follow my account balances.  I watch as the USDT builds up over time and the crypto in BOTs stays +/- 20% or so.  Since I have many bots using the USDT and only one bot using the ETC I can for certain confirm the ETC invested at any given time as it’s locked in open orders, but I need to guess on the total USDT invested.  I am still testing Pionex and I’ll write more about them as I continue on.

Sooooooo, my cost has not changed. I paid a total of $225 USD for 5 ETC which is worth 368 USDT now.  So, ultimately, without ANY extra effort on my part this BOT, it’s compounding my gains over time as it should.

So far this bot has done 625 arbitrages…

What’s Arbitrage?

Now here’s a super fancy word that really just means profit by buying low and selling high… Why do traders call it “arbitrage”? Who knows, but let’s just call it a profit cycle.

Traditional profit cycles contain 2 orders that, once both are filled, will generate a gain on one or both of the two currencies in the BOT.  The plan could just as easily be to buy ETC with USDT low and sell back high.  Or, selling ETC to USDT high and buying the same amount of ETC back lower for less USDT, etc.  A full profit cycle indicates that a profit has been made. In my case I’m using such small amounts to invest in the BOTS so my profit in each cycle is tiny.  But I don’t care because I’m not doing anything to earn it.

The BOT finds a proper entry point according to it’s programming and places an order to buy ETC with USDT.  Once that order gets filled, an order will be placed  on the other side of the trade; in this case a SELL of the newly purchased ETC for MORE USDT than it was purchased for is placed.  This is what I call a profit cycle.

I consider both sides of a profitable trade to be a profit cycle; the first trade sets the stage for the second and once the second trade is filled it posts the profit to the BOT.

Let’s look at the following as an example.

Above you see the last three “arbitrages” on this ETC/USDT BOT. In this case it looks like the “BUY” was executed before the “SELL” – so it’s buying ETC with USDT and selling back ETC to USDT.  The dates are in European denotion, so it’s DATE/MONTH/TIME

So, profit cycle (arbitrage) number 624 netted a 0.02418558 USDT gain…. Oh baby, goin’ to be rich on that one eh?  LOL.  It indicates that on August 21st at 2:07 PM a portion of ETC was bought for 2.6886 USDT and a fee of 0.00001975 ETC (which is 0.001349 USDT) was deducted.  That same amount of ETC was sold the next day at 68.747 for 2.7155 USDT and a fee of 0.001357 USDT was deducted.  Here’s the math…

To make it easy, the conversion of ETC to USDT is:

• 0.00001975 ETC in USDT = 0.001349 USDT

So the net profit of these two transactions is:

• 2.7155-2.6886-0.001357 – 0.001349 USDT = 0.024194 USDT

One thing I notice is that Pionex does NOT deduct their fees from the “profit” and I should be very careful here…

So, yeah, I made a little more than 2 pennies on that transaction – whoopty doo.  But imagine if I had 30 of these bots running 24 hours a day and that each bot makes hundreds of these full cycles (or arbitrages) each day… trust me, it adds up. Not to mention the ETC that was sold and bought back is something I STILL own, so even after the BOT is stopped, I’ll retain that asset and enjoy it’s appreciation.

Another detail worth mentioning is that the fees are coming out in ETC. I have to watch that and make sure my ETC isn’t decreasing exponentially over the course of this bot running.  That’s why I have my custom analytics environment which allows me to monitor these finer points .  I really must focus on those analytics since the reason I left Bitsgap was because I couldn’t follow the logic on their site and was unable to validate their massive claims of gains (although by following the balances I was able to validate that the BItsgap BOTs were making gains).

Pionex is an exchange and Bitsgap is a tool that connects to many exchanges. Although they both have BOTS, tracking them is very different.

Pionex has a visual indicator as well. Here’s what the last 7 days looked like:

You can see the thick lines – that’s when a full circle trade happens.

I’m watching the balances of my assets to make sure this doesn’t sell everything, but if it dips a bit and comes back it’s all good.  Just as long as it’s gaining. 😉

It seems silly to say this, but the ETC isn’t my main goal.  I don’t want to earn more ETC and hold steady, I want to earn more USDT, convert to USD, and use that to live.  So, my focus is on this bot growing new USDT; when it’s grown large enough, or if the USDT value of my ETC in this BOT gets larger than 450 USDT, I’ll sell the whole thing and liquidate the asset into USD.  It’s then that I realize my capital gains and put aside 30% of the sale price minus the cost basis.

Take a look at the Infinity BOT below; I started with a de-risked bag of UNI worth 525.096 USDT and now it’s gained 161.81 USDT in value. This puts the bot at a liquidation value of 686.906 USDT. I’ve already removed my investment from this bag, so this UNI has no cost-basis so what remains is pure profit.

I’ll also sell this bag at the top of the current bull market.  I expect the bull market may go on for a bit though. But the longer it goes on, the more USDT these bots will collect.

Volatility

Have you heard that crypto is far too volatile to get involved?  Price swings are so enormous you could lose all your money immediately?  I suspect you’ve heard something along these lines, but the truth about volatility is that if you understand it, it’s the best way to make gains in ANY market.

Take these two bots for example.  I honestly only care about my BTC and a few other crypto assets that I’m HODLing for the long term.  UNI and ETC are not one of these (well at least these bags aren’t in my HODL portfolio as I have other UNI and ETC doing other things…)  So to me, once those bags are de-risked, I can send them to the BOTS until the technical analysis of the market starts going south. From there, I’ll sell the BOTs and lock in my profits, moving onto another bag – or purchase another asset when it’s in it’s growth mode.

Both of those bots were running for 21 days total. Take a look at the charts and notice how much movement occurred.  Below is a tradingview.com chart for ETC/USDT and UNI/USDT.  It indicates price over time and shows the full 21 days the BOT has been running.

The y axis is where people bought. The x axis is denoted in days and the line is the price and shows the rate of price change over time.  Notice the up and down movement and how it’s far greater than any traditional stock.  This means that the “volatility” is greater.  To me, this is a HUGE benefit as there are far more opportunities for my BOT to make gains.  Each line on this graph is 1 full hour of trading.

As a side note here, you’ll notice both have rather large run ups on price to start with.  When I look to start a BOT I study the market carefully and BOT only on assets that are bullish.  The reason for this is that I really need the trading activity to move from the bottom and into the middle of the bot in order to capture the full volatility.

Every now and then I get lucky and I start a bot at the exact right time.  Below is a bot that has only been running for 4 days and has already made 49% as a result of the volatility and extreme price jump.

This is LoopRing (LRC) measured in USDT (Tether) and each line on this graph is representative of 15 minutes of trade volume:

See the large impulse (push up in price) starting around 7am on August 22nd?  Why such a rise?  Personally I don’t care–I just see it as a gain. But in order to understand why there is volatility in crypto, you need to understand yet another important concept.

Social Momentum

Now let’s turn our attention to social media. Twitter, Facebook, Instagram– all platforms that you’re familiar with from your personal and perhaps professional life, but how do these social platforms relate to crypto?

There is power in millions of people reading the same tweet at the same time and making the same decision at the same time.  This power is turned into demand or lack thereof for certain assets.

Take for example Loopring (LRC) – a layer 2 protocol that sits on top of ETH.  In a nutshell, the ETH blockchain has a “side blockchain” for LRC and LRC manages that.  LRC touches back to ETH blockchain only when it needs to spend, give, deposit or withdraw ETH.  

On their twitter page (https://twitter.com/loopringorg) I see on 8/22 they announced that there will be an NFT platform on their network and a new wallet coming–which is the day before they announced new liquidity options.  This may seem like gobbledygook to most, but to people like me who understand the LRC project, these are HUGE milestones.  In essence these announcements give a little more clout to the LRC project.

For those of us who don’t have LRC in our portfolio, we may decide to buy it.  The majority of investors in the crypto market are long-term investors and there are a lot of investment choices within the crypto space.  In general, folks buy whatever they see when they see positive news.  This puts buy pressure on the LRC/USD pair and there is no more LRC to buy then on August 20th, so that pushes the price upwards.

The prices are inexpensive relative to the value the LRC Project can potentially provide (with these new features) so lots of people wanted to buy all at once.  As a result, the price increased quickly.  The demand attracted a higher price and my BOT captured the ups and downs (volatility), making gains every step of the way.

Social media is the balance sheet of crypto as it’s a way for a team behind a crypto asset to relay progress to their customers, investors and anyone who wishes to purchase their token for potential asset gains over time.

You see, volatility is a good thing if you understand it and if you use it correctly.  You can follow the social media clues or you could use a platform like AltCoinAlerts to quantify social media data like I do.  Everyone has their own risk tolerance and, to me, a poor use of volatility is to sell an asset that I’m HODLing as it’s depreciating in value.  So, when BTC dipped to under 30k this year, I sold NONE of it – in fact, I worked hard to earn more BTC.  Now that BTC is around 50k, I believe it’s time to earn some USDT and I’ll leave my BTC alone.  Much of it is staked in interest earning accounts which means I’m gaining BTC daily anyhow. Once I turn my miners on, I’ll be minting new BTC daily as well.  And once I get solar in, the BTC I mint daily will be without a Cost Basis.  I can’t WAIT!

The Truth

It’s important to understand that most of the large banks have already added BTC to their balance sheet. And when they bought, they bought BIG.  This means that it’s in their best interest for the price of BTC to increase over time.  It’s also important to understand that most of their cost basis is in the 30k to 50k range.  However you might feel about banks, institutional investment funds, and hedge funds, these entities are the driving force behind ALL of the markets.  Stocks, bonds, options, crypto, gold, housing – you name it, the largest holders of those assets are almost always large financial institutions.

These financial institutions have a lot of Bitcoin now and continue to buy more.  Because the Bitcoin market is still relatively small, the large positions these financial institutions hold allow them to buy and sell large quantities of Bitcoin at once.  This gives large Bitcoin holders the ability to move prices up or down depending upon their desires.  Imagine selling 2,000 Bitcoin – the market will move just on that sale.  This creates artificial volatility and is sometimes done to time with events or announcements which accelerates the price movement.

Crypto Markets are moved by big players, big team announcements, and/or events.  From a trader’s perspective news is the main driver of crypto price movement.  Positive or negative news gives way to reactionary buying / selling by the masses.

But that’s not the only thing that gives value to Bitcoin.

What is Scarcity?

Harkening back to an economic maxim, a higher scarcity value means that the asset is in greater demand and / or has a smaller supply.  For example GOLD has a higher scarcity value than SILVER hence the price for GOLD is higher than SILVER.

Bitcoin’s scarcity level is far greater than most other assets on this planet.  Even gold’s scarcity is less than Bitcoin.  An article on the NASDAQ website does a really good job explaining this. 

Future gains on Bitcoin may not be in multiples as the past, but gains will be in larger chunks of cash over time.  For example, it’s far easier to appreciate between $100k to $200k than it was to appreciate from $25k to $50k.  That’s just the way markets work.

Think about it: Bitcoin’s supply started by minting 50 new BTC every 10 minutes in 2009.  BTC’s halving is responsible for this cut.  Every 4 years or so the amount of BTC minted with each block gets cut in half.  It’s already been cut down to 12.5 new BTC every 10 minutes.  In 3 years it will be reduced to 6.25 new BTC every ten minutes. 4 years later it will be down to 3.125 BTC every 10 minutes.  This means that there will be less and less new BTC for people/banks to buy over time – and you can bet that many folks who already own BTC will not be willing to sell. Or, if they do, they’ll sell and buy back like what I do in my bots.  An article at Two Prime explains this concept in depth.

Finally, What if Bitcoin Goes to Zero?

What if it all evaporates? What if the government shuts it down? what if….  

You can come up with many things to worry about, but in general the truth is that the largest US financial institutions would lose billions if any of these things were to happen.  These financial institutions have purchased Bitcoin as they believe it’s a better store of wealth over time.  Bitcoin’s scarcity is really high and the largest holders of Bitcoin are legacy financial institutions.  Until and unless all large banks liquidate their Bitcoin I dismiss such fear mongering because no senator would stand up to the banks before – so why would that change all of a sudden.  So, in essence – I follow the smart money…