Chapter 5Hedging Bitcoins with Options on the World Wide Web
During 2017, Bitcoin's price rose from $1,000 at the beginning of the year to $20,000 by December, increasing 20‐fold, with a few sharp drops. When the cryptocurrency markets experienced a sharp downturn during the third week of December, with leading cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) down 80% or more, skilled cryptocurrency hedge fund managers, who rushed to surf the cryptocurrency waves on the World Wide Web, were still standing on their surfboards.1
An altogether different story was unfolding for those who had been knocked off. “I'm not sure one can really define why some traders make it, while others do not. For myself, I can think of two important elements. First, I have the ability to imagine configurations of the world different from today and really believe it can happen. Second, I stay rational and disciplined under pressure,” explained Bruce Kovner a legendary hedge fund manager in an interview with Jack Schwager for his Market Wizards book.2
“Is My Life Over?”
A college student from California, in a Reddit post, sent out SOS signals—start‐of‐message marks for maritime transmissions requesting help when catastrophic loss of property is imminent—“Is my life over?”3
Apparently, the student, encouraged by the 2017 crypto market surge—which many likened to the tulip mania—without any awareness of the tax consequences, began surfing the World Wide Web by trading cryptocurrencies. “I feel ...
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