Today, we hosted an AMA with derivatives trader and Bitcoin influencer, Tone Vays. The AMA took place in our official WeChat group. It was hosted by TEAMZ CEO Tianyu Yang.
Tone holds a master’s degree in Financial Engineering from Florida State University along with bachelor’s degrees in mathematics and Geology. Tone has worked on Wall Street for almost 10 years starting as a Risk Analyst at Bear Stearns and later becoming a VP at JP Morgan Chase in the aftermath of the 2008 financial crisis. His expertise is in Economic Trends, Trading and Risk Analysis. Ever since getting involved in the Crypto Currency ecosystem in early 2013, he has been very active in spreading the relevance and importance of this technology as it helps promote economic freedom. Tone is now an independent content creator at ToneVays.com.
Below are the questions and answers to the AMA.
Tian: Thank you for joining tonight’s AMA with our Chinese community. We appreciate your support for TEAMZ. Also, Tone is a guest speaker of ChainTalk Crypto Asia Summit (May 20th 12:00 JST). Could you please let us know what topics you will cover then?
Tone: Happy to answer any questions I feel I have expertise in.
Tian: Cool, look forward to your speech at ChainTalk Crypto Asia Summit. Tone’s speech will be published here: https://chaintalk.media/summit/
About Current Issues
Tian: On April 20th WTI crude contract for May fell more than 300% to -$36.90 per barrel in New York, which expired on April 21. It was the first time that the WTI futures market fell below $0. Most people believe the price crash was caused by low demand of global crude oil.
I subscribed to your YouTube Channel, in the video—Market Pulse – $OIL is Worth Less than the Empty Barrel it’s in! — you mentioned the oil future crash is an unprecedented historical moment.
First, what do think caused this oil crash?
Tone: The Oil crash is certainly caused by this global shutdown. There is just no demand for Oil and the April Contract that went negative meant that people were willing to pay to get rid of their Oil because holding on it for an extra month would cost them more.
This contract had a mandatory delivery for May and no business needed more Oil. If the economy remains shut down until the end of May I would not be surprised if this happens again in a few weeks with the June Contract.
Tian: Next, it seems that global market is pessimistic about US oil market in the upcoming weeks or even longer. What do you think?
Tone: I am pessimistic as well, but Oil prices can rise sharply at any time. If say this shutdown causes many Oil exploration companies to fail, then in 6 months there could be a temporary shortage of Oil.
Speculators in the Oil industry would anticipate this several months ahead of time and will start to buy oil months in advance raising the price. There is no easy trade, if you everyone assumes Oil will only go down, then it has probably bottomed or will soon.
The stock market bottomed at the beginning of the shutdown in the US not at the end of it, investors are always putting their money on what they think future events will bring not current events.
Tian: Recently you tweeted that “…(as below)…” Can you share your thoughts about this book?
A MUST read image/story for anyone who thinks they were actually going to profit from buying $Oil this week at under $10.
It's from the book Options, Futures & Other Derivatives by John Hull —> read the entire thing for my Financial Engineering Degree pic.twitter.com/3SGq3UIiQq
— Tone Vays – TheFinancialSummit.com (@ToneVays) April 20, 2020
Tone: haha, so that picture has several books. The one that is opened to page 22 is called Options Futures & Other Derivative. It is a very advanced Financial Engineering book that teaches people about the math behind Finance and Financial Modeling.
There was a very funny story about a trader who accidentally bought a second contract on Cattle (Beef) instead of selling or closing the contract he had. So, he had to travel 1,000 kilometers to a Cow auction and had to manage Cows for a week until he could re-sell them.
This is what happens to people that think they could just buy Oil at a negative price and make money. If they don’t close the trade in time, they could be stuck having to receive 1,000 barrels of Oil at their house which will cost them way more than Negative $37 per barrel to deal with.
The book behind it is “The Coming Economic Collapse – How You Can Thrive When Oil Costs $200 a Barrel” by Stephen Leeb, PhD. I read this book 15 years ago and it scared me about the shortage of Oil and how bad it can get in the future. The Author could not be more wrong, instead of Oil going to $200, it went to negative $36.
Unlike the Oil book the other two books I recommend and are written by very close friends of mine. Jimmy Song’s “The Little Bitcoin Book” and Tyler Jenks’ “Hyperwave Theory”
Tian: Thank you for you answer. As the market faces lowest demand amid COVID-19, negative oil price means the cost of transportation and storage has gone beyond the value of itself. We hope the pandemic as well as oil market can recover soon.
Tian: We are now faced with a global recession, stock markets have been hit by COVID-19, but it seems that BTC was not influenced as much as stock markets. Do you think BTC price would be affected by the global turmoil such as the pandemic, stock market, and oil market? And why?
Tone: Bitcoin Price has already been affected by it. In min march when stocks crashed Bitcoin crashed even more.
However, I believe that the worst for bitcoin is over. As for the stock market, I’m not so sure.
I believe over the 12 months; people will start to consider bitcoin a safe haven asset that could also bring them a better return.
I am also seeing lots of talk from Governments about Creating their own digital currency & eliminate cash (China might be one of the first), that will drive people into Bitcoin.
I also believe that governments will raise taxes because they will lose a lot of revenue from businesses failing over the shutdown.
I also see stricter laws on the movement of money, this also favors bitcoin.
I also think the Euro will break up as a common currency this decade as some countries might leave or get kicked out.
All of this will drive people into Bitcoin. And the halving is coming in a few weeks so once Bitcoin’s daily supply to the miners gets cut in half, there will be a lot less selling pressure.
Tian: Apart from external factors, let’s focus on BTC. How do you think May halving will influence BTC price? What’s your projection about the highest price of BTC in 2020 and when it will reach that point?
Tone: I think the halving has already been priced in but we just saw bitcoin rise in what is probably the last pre-halving pump.
I can see bitcoin rising to as high as $8,500-9,000 on this run up over the next month or two, after that I think it will pull back down but I don’t see bitcoin falling under $5,000 again.
If the economy continues to be poor, bitcoin will probably not go up much because people will just not risk the money they have left on Bitcoin.
As for end of 2020, I think bitcoin will be around $10,000.
Tian: Chinese crypto media reported that, China’s BTC miners’ control 65% of global hash rate with leading Chinese mining companies (Bitmain and Cannan) and mining pool (Antpool). What are your thoughts on China’s hash rate dominance? How do you think the dominance will influence the future BTC industry?
Tone: I think that 65% number is over estimated, I think it is much smaller. Also, just because a pool is managed in China, does not mean that the participants in that pool are Chinese, they could be from anywhere.
Bitmain has not been able to innovate in a while and I think they are no longer that important to the infrastructure. Canaan just sells mining equipment; I do not believe they are actually mining themselves.
I think that Bitcoin mining is pretty decentralized and will continue to be for the near futures.
Tian: During last Friday’s AMA with Roger Ver, we discussed about BTC and BCH. Roger stated: “the Bitcoin everyone got excited about originally offered fast, cheap, reliable payments, and was trying to become money for the world. The thing everyone is calling Bitcoin today no longer has the original vision. Now BTC is just coasting on its brand recognition.”
Do you agree with Roger? Do you think BTC has lost its original vision?
Tone: I do not agree with Roger.
For a short period of time, Bitcoin did not do what Roger wanted so he went and build an inferior competitor that the market values at around 3% of Bitcoins value.
I’m sure there were companies Netflix or YouTube that wanted to create what they did back in 1992 but the infrastructure just wasn’t there.
How far would that company get if they decided to create their own internet instead of working with the current one. For me & my business, bitcoin is very fast and very cheap but that’s not important. What’s important is that Bitcoin is Decentralized, has a high hash rate to give it security and has a reputation as a store of value to attract new users.
I am pretty sure that WeChat Pay is way faster than any crypto currency. Every developed country in the world has cheap/fast payments, Bitcoin was never competing to be the cheapest or the fastest, it was competing on:
1. Being the first unconfiscatable asset in human history
2. Being able to send a payment anywhere without a middleman
3. Having a finite quantity. (BCH for example is just insecure inflation to Bitcoin)
BCH has none of those features because it’s centralized and people like Roger have the majority of the control. For me the unconfiscatability is most critical, that is why I own Unconfiscatable.com and have a conference by that name.
About Crypto Exchanges
Tian: Exchange industry, is the most active one in the space. The current number of exchanges has reached an unprecedented large scale. CoinMarketCap reported that there’re 334 exchanges. As an experienced derivatives trader, what do you think of the exchange’s growth all over the world? Do you think the global situation of exchanges will change in the coming future? What kind of exchanges do you think will be successful long term?
Tone: I think that the space will eventually consolidate, it is very hard to build a new exchange and get volume because traders get used to the exchange they trade on and others want to trade where most other people are trading.
Out of the 334 I feel that only about 10 are actually relevant and the rest do not matter that much. The future of exchanges will also largely depend on regulation.
Tian: The number of Chinese exchanges is growing rapidly. Binance, Huobi, OKEx are leading the Chinese and global exchanges markets. From a trader’s perspective, can you briefly share your user experience or comment on these 3 exchanges?
Tone: I am currently focusing on trading tradition US Equity and Commodity markets; they have been more exciting than Bitcoin. I do not like to trade bitcoin because it involves me giving up the possession of those bitcoin.
I find bitcoin too dangerous to gamble with as hacks happen all the time. I traded on OKEx long time ago I’m sure it’s different now.
I also find the tools provided by these exchanges too simple, I am used to trading on traditional professional brokerages.
I also am against ICOs. I would never trade on Binance because I feel they cheated by creating the BNB token giving the exchange an unfair competitive advantage by printing a billion dollars out of thin air.
Tian: You used to say: “in today’s market, hope, luck and long-term valuation models are not an effective strategy for active traders. If you are not a believer in buy and hold, you need to master the skills of other professional traders so that you can compete in this high-stakes game.”
As a professional derivatives trader, what’re your secrets to your wonderful performance in this high-stakes game?
For normal traders, how can they “master the skills of other professional traders?” What’s your advice for them during turmoil?
Tone: The most important skill set of a trader is Risk Management, if your position size or leverage is too high, a single trade can wipe you out. You can make 10 perfect trades in a row then the 11th will reset your account to zero and you don’t get to play again.
After that it’s patience and trust in your trading strategy that you have spent an unreasonable amount of time testing and putting together.
I try to teach people how to trade so they make their own decisions and come up with their own strategies. I believe in technical analysis and chart patterns, but there are other ways.
As long as you are doing something you have built yourself you will be fine. If you follow other traders, you will have a very frustrating career.
Tian: As a professional trader, what excites you the most, what gives you the most sense of achievement? Your personal results, happy for your fans results, or something else?
Tone: I quit my job in 2014 to be a full-time trader because I no longer wanted to do it for my company or on the side for myself with my cell phone during meetings.
After a few years, I got a little tired of it. I was not having fun sitting at home all day in front of a computer. I made pretty good money, but life is more than making money in front of a computer screen.
What excited me was Bitcoin so I wanted to do more to promote it and tell people about it. That led me to my career as a public speaker and having a YouTube channel about bitcoin.
Of course, promoting bitcoin costs money, so I had to get income somehow. Traveling as much as I do make it impossible to trade so I started teaching people how to trade on the weekend.
Now I am home in Quarantine, so I started full time trading again. I’m doing really well and get very excited when I close a great trade, but I would rather go visit the Great Wall, something I was supposed to do this June but now don’t know when it will happen.
The majority of my YouTube audience however are traders so most of the shows I do are about trading, need to provide my fans what they want.
About The Future Market
Tian: After the Virus we are very welcome to China and enjoy the view of Great Wall. What are you expecting for the crypto industry in the coming 5 or 10 years?
Tone: I believe that in 10 years the majority of the world will see bitcoin as a challenger to be the world reserve currency that everyone will want to use.
Message to Chinese Community
Tian: Tone you have been very active in global crypto industry and events. Also, you often share opinions and experience on your YouTube Channel (https://www.youtube.com/ToneVays).
Last, what’s your takeaway message for our Chinese community?
Tone: I have heard about so many scams and Ponzi schemes out of China it makes me sad. Please educate all those around you that the only part of the crypto space that is real and worthy of your hard-earned money is Bitcoin. Everything else in the Crypto Space will probably be irrelevant in 10 years or not even exist.
Attendees Q&A session
Q. When will you come to Tokyo?
Tone: Don’t know :(, maybe this year.
Q. Are you primarily day or swing trading? Also, who do you recommend to take your course?
Tone: I am Swing Trading but some of my trades end up being day trades because of the current high volatility environment. It’s really up to you if you want to take my courses ?