Тег: Finance

Continuing the introduction to MEREXP

Material prepared for a donation of 30 USDC.

On 17.05.2024, I posted a review of the telegram channel MEREXP analytics. Unlike many other channels analyzing the cryptocurrency market, here, first of all, crypto was viewed simply as another type of currency, and the analysis focused primarily on the impact of global liquidity on it—and secondly, homemade metrics based on economic theory were used, which, paradoxically, is not that easy to implement within the framework of exchange analysis. In short, I liked the channel. Therefore, when the company running this channel approached me with an offer for an interview, I didn’t need to think long, especially since I still had questions from my review that hadn’t been answered. And here is what we came up with:

Ancap-chan: During the review of the Merexp channel, it remained unclear to me what your business consists of. You call yourselves an investment fund, but from the published materials, it is completely unclear how and in what you invest. The reader sees only analytics but cannot understand how skillfully you use them yourselves, and therefore cannot determine whether they should entrust their money to you. Perhaps you are still in the process of formation, and the business model will become obvious later. So, exactly how does Merexp plan to make money?

MEREXP Analytics: Yes, we spoke earlier about the fund’s investment product, but at this stage, we are not ready to accept assets for management from mass clients. This is absolutely unrelated to our trading strategies and analytics. The strategies and analytics have proven themselves well; this is easily verified by analyzing our early analytics on historical data. Moreover, we are constantly improving and supplementing our analytics and trading strategies with new proprietary developments, such as the Swallow AI. Our current refusal of the fund’s investment product is more related to the legal side; we fully understand the weight of responsibility for client funds, and we are not ready to manage assets without the certainty that client funds are safe and everything is legally properly formatted. But we are resolving this issue, and as soon as we settle the legal points, our clients will see investment products in the fund’s tariffs. As for earnings, the plan to sell investment products hasn’t gone anywhere, but in addition, we also plan to sell analytics and other products, such as Swallow AI, because the fund’s capabilities do not end with investments alone. And we would also like to demonstrate the quality of our models and our approach before offering investment products.

Ancap-chan: So, you are working in several directions at once: achieving the ability to accept investments, preparing your analytics for sale, and continuing to improve them. I would like to discuss where this analytics comes from. Typical analytics look like this: here is a price chart, and here is our guesswork based on the chart about where it will go next. Or: such-and-such an event is expected, it should affect the exchange rate in such-and-such a way. Your metrics, however, look completely different: here is the balance of supply and demand, here is the ratio of bulls to bears, and so on. Where do you obtain the primary data? Is it available in the public domain? Even if it is available somewhere, you aren’t looking at all exchanges, only some of them. Doesn’t this introduce distortions?

MEREXP Analytics: Correct observation; our metrics indeed differ, and there are strong reasons for this. But first, let’s analyze conventional analytics, where a price chart is built and, as you rightly noted, a kind of “guesswork” occurs regarding where the price will go. This is indeed guesswork, because such analytics are based on historical data—on what has already happened. Everything else is just assumptions and attempts to match the current situation with similar ones in the past. But even this is incorrect, because there are never absolutely identical situations; there is always a factor that can change the outcome, even if conditions seem identical at first glance. We approach the market from a different side. We analyze fundamental supply and demand data with a deep dive. It is precisely this data that forms the current market state. Of course, we also use classic metrics such as the order book, the tape, and the chart, but we need them more to understand how the market reacted to an event we already knew about in advance. We obtain this data thanks to the calculations of our analytical model. As for the primary data sources, of course, some of them are public sources. However, another part consists of our complex calculations, the result of the work of our AI and analysts. Yes, we indeed do not cover all exchanges yet, but this is sufficient, as it is well known where the main volumes of the cryptocurrency market are concentrated. Therefore, saying that a limited number of sources distorts the data would be incorrect. It would be more correct to say that it creates some margin of error, but it is so small that it does not affect the quality of our analysis.

Ancap-chan: And separately, I want to know the details regarding the use of AI. It is known that AI is used for trading robots. For example, charts are fed into it, and it invents incomprehensible heuristics on how it could have made money in the past, assuming that the same heuristic will work in the future. In other words, it’s advanced technical analysis. You don’t use technical analysis. So what application have you found for AI in cryptocurrency market analytics?

MEREXP Analytics: In fact, we have many directions for the application of AI in cryptocurrency market analytics, and many of them are at the development stage. For example, take our supply and demand indices. After forming a suitable mathematical model, we can use neural networks for forecasting based on these indices, creating a new AI-based product. It is important to note that not all AI models rely on training on historical data with the assumption that the future will repeat the past. We consider such approaches too primitive, especially for our tasks. Our goal is to develop analytical models that will work not only yesterday and today, but also tomorrow, regardless of market conditions and external factors. First, we create correct analytical models, then we train AI based on them, and only then do we get the final product. A good example of such a product is our Swallow AI, which regularly analyzes news and evaluates the current news sentiment in the cryptocurrency market. We decided to offer this product to our clients so they could better understand how the news background affects the market. Today, news is one of the most important factors shaping market movements, but far from everyone can extract, process, and correctly interpret the necessary data for their trading strategy from a huge flow of information. That is why we offer Swallow AI as an ideal solution for instant news analysis, which saves a lot of time and minimizes errors.

Ancap-chan: Do you use only trusted news sources for analysis, or can the AI also draw data from one-off third-party sources? Your analytics have so far paid a lot of attention to fiat macroeconomic data. Will the AI also analyze fiat macroeconomic news, drawing conclusions about how it will reflect on the world of cryptocurrencies, or should this analysis be done for you by cryptocurrency news agencies?

MEREXP Analytics: Yes, we use a huge number of carefully selected sources that cannot provide false information, thereby reducing the inaccuracy of our AI’s readings. As for AI analysis of other markets (fiat, stock, commodity, etc.), it is important to understand here that all markets are closely interconnected. As an example of such a connection, we clearly see the link between the price of Bitcoin and global liquidity, and this is very easy to track in our analytical reports. Therefore, we will certainly track these interconnections. Moreover, work in this direction is already underway. However, it should be noted that this is a very complex and comprehensive system consisting of many AI-based models. Each of its parts must be developed separately and integrated into a larger general model. For comparison, you can take our Swallow AI, which analyzes news. Such a model is just a small gear in a complex system. This process is not fast, but in our opinion, this approach is the most correct, since for analytical tools, quality is the most important thing, as we are talking about risks.

Ancap-chan: Out of all cryptocurrencies, your reviews only concern the Bitcoin to Dollar exchange rate. However, many trade in other currency pairs, and therefore could expect analytics for them as well, especially when it comes to “altcoin/bitcoin” pairs. Do your analytical methods work in this area? Do you plan to expand your analytics in this direction?

MEREXP Analytics: As of today, we can say with confidence that a significant share of the cryptocurrency market is concentrated precisely in Bitcoin, and this in itself is an indicator that Bitcoin data has a huge influence on the market as a whole. That is why we started with the analysis of Bitcoin and its most liquid pairs, such as BTC/USD and BTC/USDT. Certainly, we plan to expand our analytics and track other markets, including pairs with altcoins. Our software infrastructure is already ready to work with this data. First and foremost, we plan to add analytics for “altcoin/stablecoin” pairs. Regarding the effectiveness of our methods, we analyze fundamental market laws, such as supply and demand. These are analytical models that will work in any market, since any movement is a consequence of changes in supply and demand. Thus, our model is applicable not only to Bitcoin but also to other cryptocurrencies, as well as to various financial markets in general, since the law of supply and demand works everywhere.

Ancap-chan: This turns out to be interesting. First, the exchange analyst Carl Menger in the 19th century derived the subjective theory of value, understanding that the theories prevailing before that were completely inapplicable to exchange trading. From this grew the entire Austrian school of economics. Then humanity, to explain economic phenomena, became fascinated by mathematical models that had less and less connection to the real world. And now, at a new level of mathematical capabilities, you are once again bringing the very law of supply and demand into exchange analysis, which was originally formulated based on exchange analysis. Typical spiral development.

So, you stand on a strong theoretical foundation, but you are crafting practical tools literally on the fly. A good discount for early buyers suggests itself, since they are effectively destined for the role of testers of a new product that will continue to be seriously refined. What is the overall intended pricing policy for your service? Will you sell each tool separately or the whole set as one package?

MEREXP Analytics: To an outside observer, it may seem that we are “crafting tools on the fly,” but in reality, before offering a product to clients, we conduct long and painstaking work. Each tool undergoes thorough verification and testing in various market conditions. For example, Swallow was developed as early as autumn 2023, and the supply and demand indices in the spring of that same year. We pay huge attention to the quality of our products and adhere to strict, multi-level verification criteria before market release. It is important to emphasize that our clients by no means act as testers. On the contrary, we discard many tools at different stages of development if they do not meet our high standards. This is part of a normal workflow that allows us to be confident that our products actually work and meet the stated quality. Regarding pricing policy, we understand the needs of the market and know that users want to try a product first before deciding to buy. Therefore, we are ready to offer promotions, free trial periods, demo versions, and we are also preparing training materials for our products. Our tariff plans will include both separate products and package offers so that each client can choose the optimal set of tools and not overpay for those they do not plan to use.

Ancap-chan: Well, I think we’ve discussed enough for an introductory acquaintance. I’ll allow myself to briefly summarize:

  • In perspective, Merexp should become an investment fund, meaning taking money from clients and multiplying it. However, before that, you have a number of legal difficulties to resolve.
  • In order to make successful investments, you have created and continue to refine your own analytical toolkit. At the current stage, you intend to earn by providing these tools to clients, with which they can successfully invest themselves.
  • At the core of these tools lie those basic tenets of economic theory that have not yet been fully applied to exchange analysis, which makes the product unique, at least for the moment. This is primarily the analysis of supply and demand, as well as the automatic analysis of the news background using AI.
  • You plan to offer clients a flexible grid of tariffs depending on which tools they actually plan to use.

I think it’s also worth giving readers key links: to your website and other platforms through which you plan to publish your materials. Are there any other important points that we missed in the previous conversation and that should be mentioned?

MEREXP Analytics: Perhaps it’s worth adding that we have literally just launched our website. And Swallow AI, which we mentioned repeatedly today, will be launched by us on September 1st. And those who manage to purchase a subscription to Swallow by September 15th will pay 5 dollars for the first month of subscription instead of 15.

Ancap-chan: It’s a kind tradition to offer gifts for those who read until the end. Thank you for the detailed answers. I will definitely find time to browse your website and try this very AI—and then I will certainly report back.

My partners and I created the MEREXP investment fund and share some of our analytics in a Telegram channel. Could you evaluate the channel?

Lisoz Tech (the question is accompanied by a donation of 15 USDC)

Here is the link to the channel: https://t.me/merexp_analytics

It only started being populated recently, since May 2, and so far it has been doing so on a daily basis (at one point, my own channel had a similarly auspicious picture). The materials can be roughly divided into two categories: reviews of specific markets and articles explaining the advantages of Merexp Analytics.

As far as can be understood, the advantages lie in the fact that the company uses its own proprietary metrics. I particularly liked the breakdown of how these metrics work based on historical Bitcoin data. Admittedly, based on the channel’s materials, it remains unclear how the raw data for all these metrics is collected, but perhaps the company shares this information with its clients.

The fund views Bitcoin as simply another asset in the stock market, which gives the reviews their own charm, since the Bitcoin market is usually written about either in the context of cryptocurrency world news or in the context of technical analysis; here, however, the focus is mainly on the influence of fiat liquidity fluctuations and similar matters.

Strictly speaking, this is already at least the second attempt to launch the fund’s channel; the first happened in December 2023, and by February 2024, publications had already ceased. Back then, the publications were much less regular and concerned Bitcoin exclusively.

It was somewhat surprising that there is no link anywhere in the channel’s materials to the investment fund’s website or its analytical division. This is inconvenient both in terms of presenting materials (for example, the website could contain a convenient archive of review publications broken down into categories by individual markets), as well as a lack of information about the fund that is awkward to present in a Telegram channel format (for example, information about the volume of attracted investments and the fund’s portfolio). Instead of a website, it is suggested to contact the support bot for all questions. This model of presenting material and interacting with potential clients is not very clear to me, although perhaps it is simply a trend. After all, people even manage to do business on Instagram.

The feedback bot was tested by me at the most unfavorable time — on a Friday evening. The response time was 40 minutes, which is very good.

Or perhaps the website and other interactive tools are currently being actively finalized and will soon see the light of day. If so, I even appreciate such an approach: first fully develop one’s key know-how that provides an advantage over competitors, and only then pay attention to how to present them to the public. This is much more honest than first making a beautiful presentation and website, then attracting venture investment, and only then, possibly, spending that investment on the development of metrics and algorithms.

In any case, I subscribed to the channel because the content provided there is quite original. Regarding Bitcoin, it will even be possible to track how the forecasts come true, and if they prove reliable, then perhaps I will start looking for entry points, rather than just buying coins blindly as soon as I receive income exceeding the subsistence minimum.

Could you criticize Stasik Ay Kak Prosto in this video?

https://youtu.be/ymVOQpFkQSY

The video contains several assertions.

  1. From the perspective of world-systems theory, civilization constantly goes through the same cycles: a new center of global business activity rises, money flows to money, a huge bubble inflates, and soon any production at the center of the bubble becomes unprofitable, and money begins to be made directly from money, through the turnover of various securities. Eventually, the bubble bursts, and soon a new one begins to inflate around a new center. The US will burst as the global hegemon, and China will take the stage.
  2. Any attempts to imitate the global hegemon can no longer be successful: it is pointless to try to increase one’s investment attractiveness, open markets, reduce tariffs, and build institutions—it is impossible to break out of the status of the periphery during the inflation stage of a financial bubble.
  3. Cryptocurrencies have become exactly the same overvalued financial asset, and when the bubble bursts, they will similarly lose the lion’s share of their value.
  4. The shortage of graphics cards caused by increased demand from miners cannot be covered by expanding production because the era of globalization is ending, trade wars are beginning, and the local Chinese market does not need that many graphics cards; fear, honest gamers, you will be stuck with five-year-old junk.

I will answer briefly by points.

  1. As strange as it may sound, stocks are not just numbers in brokerage accounts. These are investments that go to the companies that issued the shares, and they, in turn, by no means spend everything on management bonuses and buybacks—some is indeed invested in production, specifically in the periphery, where it is cheaper. At this moment, it is important for peripheral countries to be attractive for these very investments.
  2. If it is pointless to imitate the hegemon, then how will a new hegemon emerge? If world-systems theory reflects real processes adequately enough, then someone must launch a new cycle with themselves at the center. This means there is a mechanism for leaving the periphery. And it is logical to assume that for this purpose, one really should not simply imitate the hegemon. One should not imitate the hegemon in its current dying state, but rather look back to the time when it was young and healthy—while, of course, adapting to current technological realities.
  3. What does a burst bubble mean? Many companies suddenly lose value and find themselves unable to find a buyer for their goods. Demand is mainly for consumer goods, which become more expensive relative to capital goods. The proud owner of crypto, who previously invested in mining, begins to invest in potatoes, selling first the miners (and they become cheaper), and then the crypto itself (its price also falls). The market becomes saturated with cheap used graphics cards, demand for new ones decreases, it becomes unprofitable to invest in their production, and no trade wars are even needed—gamers are stuck with five-year-old junk. I will only note that miners and crypto will get cheaper relative to conventional potatoes during the deflation stage of the bubble, but relative to a conventional dollar—that is far from certain; it might enter a tailspin of hyperinflation.
  4. Will globalization end as a result? For adherents of world-systems theory, it is somewhat strange to discuss this. Where will a new global hegemon come from if there is no globalization? Without it, hegemons will be local. So, since everything goes in circles for you, global trade turnover will not disappear anywhere.

I am not attempting to judge here how correct the theory itself is. The theory is relatively young, more or less explains the observed facts, and makes verifiable predictions. As it becomes clear which predictions turned out to be false, they will either be patched, or this line of thought will be considered a dead end, and a theory based on completely different premises will be used—why not.

Financial freedom and violence are incompatible

Supporters of authoritarian-right (conservative) ideas should consider whether the financial and economic freedom they so praise is even compatible with the persistence of physical violence in society.

Those who believe that free economic relations can be ensured in a society where violent activity is permissible—and where a strong centralized organ of violence exists—are making a fairly significant mistake. Let us correct this error.

Let us first note that the problem is much broader than state violence, meaning that the mere destruction of the “stationary bandit” will not solve it. The problem lies in aggressive violence as such, regardless of its source. The public will only continue to support states in strengthening financial control as long as the threat of financing violent activity, such as terrorism, exists. And even in a stateless society, people, fearing they will become victims of violence, will continue to pressure free and independent financial structures to control the flow of finances as strictly as possible. Moreover, the structures themselves are interested in control, as violence threatens them as well.

Perhaps you have heard of cases where some European banks voluntarily blocked the accounts of cryptocurrency traders due to suspicion of financing terrorism, even though the traders provided all legally required documents within the AML/KYC procedure. The state did not compel the banks to do this, but they nevertheless decided to forego a portion of their profits to reduce potential reputational damage (if the cryptocurrency was indeed obtained for jihadism or contract killings and this later surfaced, clients concerned with their own reputation would not want to do business with these banks, even if the banks had done everything correctly from the perspective of state law).

Also, do not forget that in a society with an unresolved problem of violence, financial control will inevitably grow with scientific and technical progress, as potential violent actors will have more opportunities to cause significant harm—for example, by using high-capacity energy sources, new types of explosives, or even biological threats in the form of intentional viral infection (DNA synthesizers are becoming more accessible every year).

Where will all this lead? To the fact that many market agents, driven by fear, will most thoroughly verify the origin of funds of any subjects entering into transactions with them. After all, who would want to conduct a transaction with a person who earns their money by selling explosives to terrorists, thereby putting their own life at risk?

As a result, transaction costs will only increase, and any inaccuracies or suspicions will lead to the blocking of bank accounts and the seizure of funds from a suspicious person, just to ensure that violence is avoided. Many may be caught in the crossfire for no reason (the problem of “false positives” remains). This will clearly slow down the economy, making it quite inefficient, which will ultimately lead to a sharp decline in people’s well-being and the stagnation of progress. Even the use of uncontrollable financial instruments, such as cryptocurrencies, will not help, as they will be useless if the majority of agents in the economy refuse to accept them, again, fearing a violent origin.

Conservatives may object—that this is exactly why a strong state is needed: to deter violence. They believe that if it is properly organized within constitutional frameworks that limit its growth, it is possible to ensure both economic freedom, so people can earn money and engage in entrepreneurial activity without hindrance, and a low level of violence.

However, a strong state cannot exist without financial control; for its existence, it needs enormous funds, which can only be obtained by levying high taxes on people and enterprises, as well as by using monopoly privileges in a significant portion of economic spheres. A strong state is incompatible with a free economy. And even a weak, minimal state is also incompatible, as it always degenerates into a strong state; politicians cannot be stopped from expanding their powers, as we have clearly observed throughout the history of states. Even the most seemingly liberal states, such as Switzerland, strengthen economic control over their citizens every day.

Moreover, politicians have interested groups of people supporting them and many justifications for increasing control—be it the expansion of state social programs, the increase of defense capabilities, or the supposed development of the economy. The latter is the most absurd thing one could imagine—how can the violent extraction of funds from the economy through the taxation of its participants, as well as the strict limitation of their activities in certain economic spheres, help it develop? Nonsense! Yet some interested groups follow even such nonsense.

I think it should now be clear that the fight against violence as a phenomenon in general is critically important for achieving financial freedom and all its accompanying positive aspects. And social models that permit the initiation of violence—whether it be state-monopolized and centralized, or private and independent—clearly contradict financial freedom.

Bitarch

Do you think it is worth lending to the state in the form of purchasing government bonds? And corporate bonds of state corporations?

A few thoughts from the author of the question:

The state’s primary source of income is taxes, and it is likely that to pay interest on bonds, the state will resort to increasing its debt burden. Unsuccessful bond placements from the state’s perspective are a signal that it is not trusted enough to attract funds as cheaply as it wants, and this could lead to a reduction in government spending.

At the same time, the inability to borrow may lead to reaching into pockets through taxes.
I am inclined to believe that it is better not to lend to states, but from a selfish position, such a decision does not always seem optimal—rates can be attractive, and risks low compared to other offers on the market.

But if one does not want to deal with the state for ethical reasons, then things are somehow more complicated with state corporations.

Private Banker™

I hesitated for a long time to answer this question because I am not very well-versed in finance. Similarly, for example, in his recent interview with Alexey Markov, Grigory Bazhenov says that this is not his field, so he is not accountable to anyone here, but is asking questions himself. Of course, it is easier for me, because the question concerns not the profitability and reliability of certain investments, but the ethical side of the matter, and anyone is capable of formulating an ethical judgment.

But even to answer from an ethical standpoint, I want to be sure I’m not just talking nonsense. Essentially, what are my doubts? Suppose I say that lending to the state is bad, and one should put money in a bank. And this turns out to be stupid amateur advice, because banks not only pay lower interest but also use the money received from citizens to buy those very same state company bonds. Or I name some private company whose bonds are not shameful to buy, and it turns out that its controlling stake belongs to some ghoul who actively cooperates with the state, including to squeeze out their competitors.

But if one stubbornly tries to keep their hands clean, where should one invest? In Bitcoin? If the goal is to save for old age, then—definitely in Bitcoin. But if one wants to live even partially on passive income, then one wants to choose from instruments that provide cash flow. In real estate, as Kiyosaki preached? One might think that developers in Russia are less of a ghoul than the top management of state corporations. Yes, actually, it’s not always clear where the coins come from with Bitcoin either. Maybe you are helping an official wash a bribe? Of course, the most ethically flawless investments are agorist businesses. But what reliability can we talk about here?

Therefore, let me answer this way. The very desire to reflect on which investments are more ethical and which are less is wonderful. The desire to punish companies or governments for unethical actions by dumping their papers is a powerful reputational tool; it should be used. But in conditions where it is difficult to find completely clean assets, one can, at least, practice smart voting: buy those who are relatively decent, at the expense of those who are complete psychos. All other things being equal—prefer private entities over state corporations. If there is access to global stock markets, then look at the papers of governments and companies from countries that behave more decently. But, of course, without forgetting about risks and profits.

And still, buy some Bitcoin for old age.