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BTC · 8w

Bitcoin Options & the Stock to Flow Model — Trade Idea 2

Bitcoin Options & the Stock to Flow Model — Trade Idea 2

This is not investment advice. Here is the first and second article in the series.

TLDR; Stock to Flow could be the next version of ‘The Institutions are coming’ for newcomers. Once 10 day STF multiple, or Mayer Multiple goes over 2.4, I’ll start buying long-dated, way OTM puts. Until then I hold a mix of BTC and USD and I go Long Vol when my setup hits.

As a thought experiment, let’s say @100trillionUSD’s Stock to Flow (STF) model becomes the next bull market meme. This seasons version of ‘The institutions are coming’. What would cashing out based on this model look like on a curve?

Right tailed, MS Paint, a bell curve. Co-integrated with broken dreams.

The longer the STF model holds, the more newcomers become convinced it can’t fail, irrespective of the creator's warnings. As excitement builds, more people decide they shouldn’t sell below $100k.

If you look at the responses to any stock to flow Twitter thread, you get predictions that look a bit like this curve. The wisdom of crowds? Not exactly. The above numbers are NOT where I think peak selling will happen. The chart is where people say or think they will sell, in theory. In practice, Bitcoin newcomers usually buy when the all-time highs get broken, sell when the price doubles, and buy back towards the next top.

IF the STF model holds up, I expect the following to play out among more experienced market participants:

Some STF watchers sell off well before $100k (sell the news) and bank significant gains from $3–4k. Others will use STF in conjunction with the Mayer Multiple and other metrics and chart patterns, which may lead to selling before or after the coveted $100k. Some long term holders won’t sell at any price, creating the next ‘price floor’. Many are waiting to use Bitcoin as collateral in a less centralized way than current offerings. This often represents ‘a part’ of more experienc...
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