008: Trading Creator Coins

Welcome to CloutTrends – your must read for BitClout trends.

TL;DR

1. Invest in Creator Coins or trade them? It is not one or the other.
The first point to reiterate is that Creator Coins (CC) of active creators will, in most cases, outperform holding $CLOUT. This is because CC are denominated in $CLOUT and therefore they rise together and equally when there are no net money flows in/out of the CC. However, if there are net inflows to a CC, it will outperform $CLOUT, and if there are net outflows from a CC, it will underperform $CLOUT. So, both investing and trading good CC can be an effective way to experience more financial gain than HODLing $CLOUT. This is not to say ape into all CC and scams are still very prevalent. So do your research and read the details below before getting started.

2. Update on the exchange listing of $CLOUT
Both volume and volatility have been low in the first few days of $CLOUT trading on Blockchain.com. This comes as a surprise to many but it is great news because it means not many are selling $CLOUT. Early investors are HODLing rather than taking profits, signaling their conviction in BitClout’s bright future. The muted price action also means that there is not huge buying demand at current price levels but what did you expect before adoption accelerates?


Let's Go Deeper

The financial side of BitClout


Many creators see BitClout as a way to monetize their content and following. That is indeed one financial aspect of BitClout. But to others, the ability to invest in and trade Creator Coins(CC) has appeal.

I have seen an increasing number of posts about CC trading and questions about where to find the right content and community. An example from @scottco here:

Cleary there is some interest, but why trade CC?

Again, CC will outperform $CLOUT for most active creators. This advocates for both HODLing and trading. But the main argument for trading is that volatility can enable greater profits and compounding great than the gains achieved through HODLing. Pause for a moment… CAN… but not necessarily will. As with other financial instruments, trading can be challenging and it is important to understand your strategy and risk tolerance.


The two main methods of analysis that apply to stocks, also apply here --> Fundamental & Technical. Let’s consider both:


Fundamental Analysis


This section would be very long if a comprehensive attempt was made – let’s just get an overview of the possible metrics that could be considered fundamental.


Fundamentals should be things that pertain to the value the creator brings. Some might try to equate things like coins in circulation and USD locked to the “balance sheet” since those are like share issuance and treasury items(that are traditionally on a company’s balance sheet), but because the creator does not have a lot of control over these items at the moment I think we should stay away from these in our fundamental analysis. Those metrics would be more appropriate in a risk screen or part of portfolio construction.


Fundamental metrics candidates:

  • All engagement measurements(posts, replies, reclouts)
  • Operating history(account age, username changes, FR changes)
  • Cashflow(FR) usage(to CC, dividends, growth projects)


Technical Analysis


Since technical analysis techniques are very similar across instruments/asset classes (at least similar to implement – can behave quite differently), this type of analysis will likely be the starting point for most traders. Also, the data crunching is easier and the tools are better. However, take for example momentum – it works due to the human “follower” mentality but sometimes these effects are muted if there are not many participants(traders or buyers that are monitoring).


For these reasons, technical analysis may take quite a bit of time to earn its keep and could be coupled with fundamental analysis in the near-term(some people believe this should always be done).


When is it best to trade CC?


There are few things to consider here. What is your holding period and how many positions will be traded (in addition to position sizing). Swing trading, generally weeks to months, is a great for when a trend can be established and when your planned position quantity is relatively high(but less than broader HODLing).


When there is increased volatility with no clear direction, fewer positions with greater liquidity can be traded sorter-term (hours – days). Keep in mind that early on very few CC will have sufficient liquidity for this and with lower priced CC your order will have a large impact (use @prosperclout to estimate). This creates a “slippage” like effect – but different because a consequence of the bonding curve rather than the order book (like would be the case in a secondary market).


Now, how to trade CC?


This could mean a few things --> Strategy, tools, which type of capital structures(pooled, margined, community managed)


Strategies are too vast to discuss here but there might be discord server in the work. Follow @ccTrading to stay in the loop.


Tools – The current best for technical analysis is @bitcloutpulse and the curre nt best for fundamental analysis is @prosperclout (comment with corrections if there are new or better tools)


Structures – This will be covered in a future edition because the best way to start is by using your own $CLOUT and starting with small amounts. There are some already existing successful projects like @GoatETF and the very first creator index @Clout50 .


Are there trading fees and is the Founder Reward(FR) like an expense ratio or tax?


The transaction fees on BitClout are negligible and they are no different if you are actively trading.


The best way to think about FR is as a “buyer’s tax” and could be modeled as a transaction cost (although not uniform across creators). For longer-term investors FR is a way to support creators and is one way to tip them or financially contribute(don’t forget we also have diamonds – currently underutilized).


But for traders this buyer’s tax acts as a “hurdle” to a break-even or profitable trade. For a FR of 20%, in order to break even that CC has to increase 25% from the purchase price or cost basis.


The FR can potentially be circumvented in the future when there is secondary trading of CC. You could even do OTC of CC now but that is not as frictionless (also not any reputable outfits doing this at the moment – just peer to peer). Creators may not like secondary trading and the FR avoidance but there is already some discussion around this (again from @scottco): 

To summarize, trading can be lucrative and fun but there are many factors that must be considered and the research and trading can eat up a lot of time. If you don’t already feel compelled to trade, then chances are it is not right for you and you should just invest in creators that you want to support or in a creator index like @Clout50 .


$CLOUT Exchange Listing Update

First read the TL;DR. Then realize that the main driver of $CLOUT prices is BitClout adoption. The supply is constrained and now we have scarcity, but new buyers want to confirm utility. Some early crypto has risen to prominence as a store of value; that is not the case with $CLOUT which powers the world’s most important decentralized social media platform and that is its value.


Possible adoption catalysts:

  • More bans by other social media. Twitter recently temporarily suspended Dave Portnoy and the BitClout heroes the @Krassenstein brothers were permanently banned from Twitter - read more here  
  • Better creator and content discovery on the platform (currently being enabled by @cloutted)
  • Influencer audiences joining. Audience comes first, then the influencers, not the other way around. It is the chicken and the egg problem and some pioneering influencers will lead but the majority will follow their audiences.

Currently $CLOUT is only listed on Blockchain.com but rumor is a Coinbase listing is in the works and it is already trackable there.


Here is the price action over the last few days:

That’s it folks.

Potential topics for next week:

  • Still a need to support women on the platform. Starts with on-boarding but must continue throughout.

    Post on BitClout and tag @CloutTrends to let us know what you want to read about next week. Also, please reshare if you like the edition or post any snippets with attribution. Spreading the word helps us continue to operate since we are 100% community funded and do not run any ads or paid placements.

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