Understanding Crypto · Lesson 5 · Beginner
Store of value vs trading asset
You cleanly separate the money thesis from the trading view and treat BTC in a leveraged trade as a volatile risk asset.
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Two lenses
Money thesis: BTC as a possible store of value with scarcity. Trading view: BTC as a volatile risk asset with leverage. Both are different lenses on the same asset.
Ammous: sound money offers no reward. A perfect store of value only holds its value, it does not make you rich. Whoever wants 10x is betting on a risk asset, not on a savings account.
Before you plan a trade: clarify the lens.
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Test yourself
Why is perfect hard money a poor return investment?
- Because it only holds its value and delivers no cash flow
- Because it is illegal
You hold BTC with 10x leverage. Which view applies?
- Volatile risk asset with stop and risk rules
- Long-term store of value, just hold
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The key points at a glance
- Good hard money holds its value and for exactly that reason is not a return investment.
- BTC cannot be both a stable store of value and a 10x return.
- In a leveraged trade BTC is a volatile risk asset, not a savings account.
Deep dive
Why HODL is no strategy in a leveraged trade
For a spot holder, sitting tight may be legitimate, in a leveraged trade it is fatal. In the bear market BTC fell about 85 percent, many coins over 90 percent, and most HODLers had bought near the top. The Covid crash in 2020 sent BTC down about 60 percent within days.
You cannot sit out a leveraged position, because liquidation throws you out long before a price recovers. Behind this sits mental accounting: trading gains feel like house money, which is why the biggest blow-ups happen after winning streaks.
Drawdown math: the reason to separate the two lenses
Large losses are asymmetrically harder to recover than gut feeling assumes. An account liquidated to zero never recovers, no matter how good your thesis was.
- A 50 percent loss needs a 100 percent gain to get back to zero
- A 90 percent loss needs a 900 percent gain
- BTC drawdowns: 2011 minus 93, 2013 minus 85, 2018 minus 83, 2022 minus 77 percent
- Those are spot numbers, with leverage a fraction of that liquidates you
An unrealized loss is a real loss
The line it's not a loss until you sell is economically wrong. If your coin falls from 3 to 0.25 USD, the purchasing power is gone whether you sell or not. The test: would anyone trade your paper back for 3 USD today? No.
Ammous gives the counterpoint: sound money offers no reward. BTC cannot be both a stable store of value and a 10x return. If you want 10x, you are betting on a risk asset and need trading rules, not savings-account thinking.
Sources: Ammous, Burniske/Tatar
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