How can I hedge against a collapsing USD?

[malathione]

On 4/7/2023 at 4:59 AM, Neeranam said:

People laughed when I bought bitcoin at $1500 in 2016. They weren't laughing when I sold at 18K less than 2 years later, and $55k 5 years later. 

I mean the USD is losing value due to inflation and money printing, this is obvious and if you think otherwise, fool you. 

The US Dollar is finished, due to a corrupt government and $30 trillion in debt, which they will never be able to pay off. 

That's not the USD depreciating, that's the BTC appreciating. Just because Lithium and Copper are up, as well, is not indicative of the base currency depreciating, more a function of relatively inelastic supply and increased demand. 

[malathione]

18 hours ago, Neeranam said:

You're welcome, good luck. For the last 7 years all my liquid assets are in cryptocurrency, not usually Bitcoin but others. Recently, Bitcoin has proved itself and is starting to do what it was invented for.  There are lots of Luddites here that are scared of blockchain tech and know nothing about it. Just putting a small percentage of your assets into something like Bitcoin has proved better than any other asset over the years. I put all my salary into Bitcoin now and currently using my crypto.com credit card in the UK for nearly everything. There is volatility but a bit of research shows how to handle it best. 

Having both Crypto.com and Ultimo cards, I seem to prefer Ultimo although early days yet. 

[uncletiger]

3 hours ago, persimmon said:

Some caution is needed when considering using short ETFs - most are only suitable for day trading or very short holding periods . Maybe compare the performance against the actual x rate and see if it matches .

Personally , I can`t see the $ rate changing by such a huge amount , but if I really thought that would happen , I would sell all my $ assets and buy ROTW stuff ( UK , EU etc ) .

Hi Persimmon. Thank you for the warning and perspective.   As I said earlier, my query is in regard to future cash flow, not assets that I hold. I already have a relatively diversified portfolio with exposure to various different commodities, securities and currencies that should provide adequate insurance against any USD failure. I am now trying to hedge cash flow for living expenses, as my compensation is denominated in USD and my expenses are in THB. As the work has yet to be done, I can't "sell" this as an asset, and I am only concerned about guaranteeing a stable USD/THB exchange rate.

 

[Neeranam]

58 minutes ago, malathione said:

Having both Crypto.com and Ultimo cards, I seem to prefer Ultimo although early days yet. 

Interesting, thanks. 

I'm waiting for a multiversx card. 

Also invested in Tap, which should have cards and will be big. 

https://www.tap.global/gb-en

Edited April 8, 2023 by Neeranam

[Pink Mist]

A video post with unsubstantiated fearmongering has been removed.

[3NUMBAS]

buy rubles

[nigelforbes]

Just to put the, "collapsing Dollar" into perspective, see below the DI for the past three years, USD is now heading back to 100% of full value for the first time in quite some time: https://www.marketwatch.com/investing/index/dxy

 

 

 

[Neeranam]

One thing that totally baffles me is when some people here say that Bitcoin has lost value. To those who say such nonsense, care to explain?

 

 

[Neeranam]

On 4/6/2023 at 10:34 PM, Chicksaw said:

Sell dollars and buy bitcoins to hedge against the dollar falling 80%? Hmm, I see a GoFundMe campaign coming: Family asking help as Dad loses all in hare-brained scheme.

Not sure what you are on about. Not 1 person who has bought and held Bitcoin for more than 2 years has lost money.  

[Lee65]

48 minutes ago, Neeranam said:

Not 1 person who has bought and held Bitcoin for more than 2 years has lost money.

Except the estimated several % of BTC lost every year by those who lose their wallets or keys.  Or couldn't convert back to their spendable currency.  Or held their BTC on collapsed exchanges.  Or died and left inaccessible BTC (nobody had they keys).  Or, or ...

[Neeranam]

4 minutes ago, Lee65 said:

Except the estimated several % of BTC lost every year by those who lose their wallets or keys.  Or couldn't convert back to their spendable currency.  Or held their BTC on collapsed exchanges.  Or died and left inaccessible BTC (nobody had they keys).  Or, or ...

That's not what I meant by 'lost' but fair point. I suppose people die and lose other assets too. 

There is no issue these days to convert Bitcoin to spendable currency. I bought a newspaper then a coffee and a bacon sandwich this morning with my crypto card.  i used it to get on the London underground, just touching my card onto the turnstyle. I bought my plane ticked with the same card. 

[Lee65]

1 hour ago, Neeranam said:

Not 1 person who has bought and held Bitcoin for more than 2 years has lost money. 

Well I was giving you the benefit of the doubt but it turns out this statement, even as you intended it, is patently false if valuing BTC in USD.

 

Even if the holder did presciently sell their BTC at the most immediate and opportune time, there are occasions where they would have been underwater for longer than two years.  For example: BTC purchased at the end of 2017.  Or at the start of 2021.

[Neeranam]

2 minutes ago, Lee65 said:

Well I was giving you the benefit of the doubt but it turns out this statement, even as you intended it, is patently false if valuing BTC in USD.

 

Even if the holder did presciently sell their BTC at the most immediate and opportune time, there are occasions where they would have been underwater for longer than two years.  For example: BTC purchased at the end of 2017.  Or at the start of 2021.

OK, if someone was stupid enough to buy Bitcoin at the peak of the bull cycle then make it 3 years. 3 years for an investment is not long, IMHO. 

My point was that no one who invested in Bitcoin at times like now, have never lost if the HODLed for a while. 

[KannikaP]

1 hour ago, Neeranam said:

Not sure what you are on about. Not 1 person who has bought and held Bitcoin for more than 2 years has lost money.  

Depends on when those two years actually were. 

[Neeranam]

20 minutes ago, KannikaP said:

Depends on when those two years actually were. 

Not really. If you are a long term investor in Bitcoin, it's practically impossible to lose money. It averages 100% a year, since its inception.

 

Almost 100% this year alone. I said before that it will reach 50k very soon, and 220k in the next 2.5 years

 

Edited April 11, 2023 by Neeranam

[swissie]

The OP asked how much does it cost. In Dollar and Cents. Well, here it is:

To establish "a hedge" with futures one must short the $ against the BHT.

CAUTION: Often overlooked, "Carrying Charges / Financing Cost" come into play.

Currently, a $ vs THB hedge would cost you a whopping 23.76 % per year. Extremely expensive.

Source:
https://www.oanda.com/uk-en/trading/financing-costs/

 

[uncletiger]

8 hours ago, swissie said:

The OP asked how much does it cost. In Dollar and Cents. Well, here it is:

To establish "a hedge" with futures one must short the $ against the BHT.

CAUTION: Often overlooked, "Carrying Charges / Financing Cost" come into play.

Currently, a $ vs THB hedge would cost you a whopping 23.76 % per year. Extremely expensive.

Source:
https://www.oanda.com/uk-en/trading/financing-costs/

 

Interesting. I will study this. I'm not sure how you got that figure, but I will try and figure it out. Thank you.

 

In fact though, I am trying to do this with financial instruments available from Thai institutions. From experience, I would expect Thai brokerages to give better rates on Baht trading pairs than anything offshore. Sadly, I have been unable to find any Thai firm that can do options on futures. And from my limited understanding this seems to be the only truly risk free way to do it.

 

 

 

[Longwood50]

https://www.investopedia.com/terms/c/currencyfuture.asp

You can trade in currency futures.  Many companies do that when dealing with foreign purchases or sales to prevent loss from currency fluctuations. 

[FarAngMoh]

1 hour ago, uncletiger said:

Interesting. I will study this. I'm not sure how you got that figure, but I will try and figure it out. Thank you.

 

In fact though, I am trying to do this with financial instruments available from Thai institutions. From experience, I would expect Thai brokerages to give better rates on Baht trading pairs than anything offshore. Sadly, I have been unable to find any Thai firm that can do options on futures. And from my limited understanding this seems to be the only truly risk free way to do it.

 

 

 

I think all theoretical ways to lock in the rate (risk free hedge) have been covered in this thread.

 

it’s important to understand that these methods are normally used by companies to reduce currency risk on large balance sheet items — not by individuals to protect their purchasing power on living expenses… so it should not be a surprise if these methods are unsuitable, impractical or even impossible on an individual basis and on such a small scale.

 

I would encourage the OP to take a serious look at the USDTHB rate from Jan 1, 2007* (when it was 34) until today. It has mostly traded in the 29-37 range for the last decade and a half.  This can help you assess the likely risk of upside (+9%) and downside (-15%) from the 34 level, and whether attempting to hedge that is really worthwhile. 

* pre-2007 rates include some “hangover” effect from the Asian crisis (I moved to Asia just before the crisis, lived through it all).

Edited April 11, 2023 by FarAngMoh

[FarAngMoh]

59 minutes ago, FarAngMoh said:

I think all theoretical ways to lock in the rate (risk free hedge) have been covered in this thread.

 

it’s important to understand that these methods are normally used by companies to reduce currency risk on large balance sheet items — not by individuals to protect their purchasing power on living expenses… so it should not be a surprise if these methods are unsuitable, impractical or even impossible on an individual basis and on such a small scale.

 

I would encourage the OP to take a serious look at the USDTHB rate from Jan 1, 2007* (when it was 34) until today. It has mostly traded in the 29-37 range for the last decade and a half.  This can help you assess the likely risk of upside (+9%) and downside (-15%) from the 34 level, and whether attempting to hedge that is really worthwhile. 

* pre-2007 rates include some “hangover” effect from the Asian crisis (I moved to Asia just before the crisis, lived through it all).

One final morsel for thought… in the event that the dollar were to collapse, it would be highly unlikely that the THB could remain strong and not devalue as well. In fact, it might lose more than the USD in such an event.

Like the old saying goes… when the US sneezes, the rest of the world gets a cold. Maybe it will change in the future, but for now the USD is a currency that is too big to fail and a collapse would be a catastrophic event for the entire planet.

[KannikaP]

14 hours ago, Neeranam said:

Not really. If you are a long term investor in Bitcoin, it's practically impossible to lose money. It averages 100% a year, since its inception.

 

Almost 100% this year alone. I said before that it will reach 50k very soon, and 220k in the next 2.5 years

 

Rubbish. I bought Bht 100,000 worth of Bitcoin three years ago through Coins. It's now worth 62k and was down to 23k in January.

[sqwakvfr]

Recently Robet Kiyosaki said buy Crypto and Gold.  I won't be doing this.  So I will go down with the dollar. 

[nigelforbes]

Every picture tells a story:

https://www.google.com/search?q=bitcoin%2FUSD+graph&rlz=1C1UEAD_enTH996TH996&oq=bitcoin%2FUSD+graph&aqs=chrome..69i57j0i22i30l6j69i58.7208j1j15&sourceid=chrome&ie=UTF-8

 

[Lee65]

On 4/7/2023 at 1:01 AM, uncletiger said:

What options are there, from Thailand and only using Thai financial instruments, to hedge $25K for 6-9 months?

Do you have USD 25k surplus now?  If so could you not cheaply and easily achieve near enough what you are asking for by trading that USD 25k for THB now?

[Gecko123]

On 4/7/2023 at 2:08 AM, Neeranam said:

Only hedge I can see is gold and Bitcoin, most of my wealth is in the latter. 

That's not what you told us just a little while back when Bitcoin was at 15K. Just saying.

 

Bond market ghouls (which I proudly consider myself to be) are always being taken to task for being negative because their portfolios will appreciate if the economy hits a rough patch and interest rates go down. But you Bitcoin fan boys make bond market ghouls look like Mary Poppins with your apocalyptic rooting for the collapse of the US economy and dollar in the hopes that Bitcoin will ascend as an alternative currency.

 

The problem I see with that narrative, Neeranam, is that were the dollar to severely weaken, US citizen's purchasing power (especially for imports) would drastically drop and inflation would skyrocket. There would obviously be tremendous political pressure to alleviate this. A flight out of the dollar into Bitcoin would only further exacerbate the dollar's weakness.

 

So, if there is a precipitous drop in the dollar (and I don't disagree that that could/will happen) don't you think that one of the first counter-measures the US government would take to help stabilize the dollar would be to ban Bitcoin?

[Neeranam]

2 hours ago, Gecko123 said:

That's not what you told us just a little while back when Bitcoin was at 15K. Just saying.

 

Bond market ghouls (which I proudly consider myself to be) are always being taken to task for being negative because their portfolios will appreciate if the economy hits a rough patch and interest rates go down. But you Bitcoin fan boys make bond market ghouls look like Mary Poppins with your apocalyptic rooting for the collapse of the US economy and dollar in the hopes that Bitcoin will ascend as an alternative currency.

 

The problem I see with that narrative, Neeranam, is that were the dollar to severely weaken, US citizen's purchasing power (especially for imports) would drastically drop and inflation would skyrocket. There would obviously be tremendous political pressure to alleviate this. A flight out of the dollar into Bitcoin would only further exacerbate the dollar's weakness.

 

So, if there is a precipitous drop in the dollar (and I don't disagree that that could/will happen) don't you think that one of the first counter-measures the US government would take to help stabilize the dollar would be to ban Bitcoin?

When I say bitcoin, I really mean crypto. 

I had none a year or do ago, bitcoin I mean but bought a lot at 17-19k last year. 

The US government can't ban bitcoin and would be foolish to try, they would lose heaps. 

 

[Neeranam]

4 hours ago, KannikaP said:

Rubbish. I bought Bht 100,000 worth of Bitcoin three years ago through Coins. It's now worth 62k and was down to 23k in January.

What price in $ was bitcoin 3 years ago? 

 

I see it was $6,900.

Now it is $29,900.

 

Yet you have lost?? 

Edited April 12, 2023 by Neeranam

[swissie]

16 hours ago, uncletiger said:

Interesting. I will study this. I'm not sure how you got that figure, but I will try and figure it out. Thank you.

 

In fact though, I am trying to do this with financial instruments available from Thai institutions. From experience, I would expect Thai brokerages to give better rates on Baht trading pairs than anything offshore. Sadly, I have been unable to find any Thai firm that can do options on futures. And from my limited understanding this seems to be the only truly risk free way to do it.

 

 

 

As you mention, a Dollar Put Option is another way to go. But notice: The Option is linked to a futures contract. That means not only come the "Carrying Charge" for the futures contract into play, you would also have to pay for the Dollar Put Option.

In other words, before your "hedge" even starts to "hedge", the Dollar would have to have taken a historical nosedive already. Financing cost 23% plus 10% Option Premium = minus 33%. After that, your "hedge" will start to work.  That makes for a lousy hedge.

PS: If at all, something like that should be done via a internationally operating broker, not by any Thai Bank. They are not equipped to handle complicated "financial constructs". Not to speak of their high commissions, just for buying and selling Thai Stocks. I hate to think what they would charge if they have to involve a "Corresponding Broker".

 

[Neeranam]

On 4/12/2023 at 2:46 AM, KannikaP said:

Rubbish. I bought Bht 100,000 worth of Bitcoin three years ago through Coins. It's now worth 62k and was down to 23k in January.

This is impossible.  

Please try to explain.

[Seppius]

1 hour ago, Neeranam said:

This is impossible.  

Please try to explain.

Maybe he did it on Etoro leverage, I hate that broker