Saturday, November 11, 2017

Crypto 11.11 Thoughts

Just a week ago, I wrote a post regarding the Alt-mageddon that was happening at the time - BTC was heading higher into the fork and alt coins were languishing badly. My final conclusion? Alts were cheap, and they should be bought, rather than chasing BTC at all time highs.

One week on, and what do we get? A perfect bottom call, hehe.

Just a sample of 4 of the alts that are quite popular: OMG, PAY, LTC and ETH.

At that point of time, BTC was at 6,800 and now we are back at 6,800 again. I did say "...BTC can easily blow past $7,000 and hit maybe 8k..." and we actually did go all the way up to $7,950.

The call-off of the fork is both a good thing and a bad thing.

Current crypto traders would now all be leaving BTC to go into extremely cheap and depressed alts at extremely oversold levels.

However, at the same time, fresh money (mostly from private hedge funds) that have never bought crypto before and had been waiting for weeks due to the fork uncertainty finally have the "all-clear" sign that the BTC community would not be fractured. This means that the big money would be coming into BTC.

I did mention that big money can ONLY flow into BTC, maybe some ETH and a minimal amount into LTC and an extremely insignificant amount into small alts. Most of them don't have the mandate to go into anything other than these, and even if they do, the markets aren't big enough to absorb big orders yet. Big traditional money is unfortunately still locked out of alts.

Unlike traditional markets where the HFTs run the show, in crypto it is still the whales and liquidity that makes or breaks a market. If I was a whale, which money would be easier to eat? Crypto investors moving into alts at all time lows, or fresh meat jumping onto the BTC wagon?

My take is that the easy money is killing the new BTC boys who are coming in with old rules for old assets. There are no traditional markets with the volatility of cryptos, and that is what you would use to shake out all these people from their positions. Huge spikes on either side will kill off positions by traditional traders, and that is what we saw. Post-fork, there was a BTC 4H candle that had a range of 12%, lol.

That's one way to kill new traders and make a ton of money, haha.

There's also the BCash conspiracy about taking over BTC and whatever. I actually would like to see an attack on BTC to see how resilient it actually is. But this BCH thing feels more like a massive pump and dump, rather than a realistic takeover scenario.

Moving forward, I expect BTC to head lower and shake out a lot of the new people that came in post-7000. I'm prepared to go in at 6200, 5500 and I'll prepare the kitchen sink for 4800. The way that the BTC market is progressing, a 40% drop is like a complete market catastrophe and probably a good drawdown level to consider entering hard - at least, I would be. Hence, the 4800 kitchen sink level.

Of course, BTC could just continue blowing up again. Really, who knows? BTC has been a dip buyer's dream come true, and I honestly suspect that it will stay that way for some time. Risk adverse entry points would be the RSI30 on the daily chart, which has proven to be exceptional entry points. More risky people can consider the same thing, but on the 4H charts.

I have bought on both those entry points, so my BTC purchases are currently in heavy profits.

What about the rest of the market? Ethereum has been grinding the 300 range for the longest time. I'm inclined to believe that the 300 resistance level has actually turned into support now. However, if BTC does get toyed around with, you can be assured that most of the alt markets will drop as well. However, considering the fundamentals of ETH moving forward, I am pretty bullish and I try to aim my accummulation around the 300 levels.

IF, and that's a big if, a few major dapps release on the ETH ecosystem over the next few months, I think that ETH would likely break away from mirroring BTC's up and down days and will instead, finally go off and do its own thing. I think that this is very possible, given the lineup of dapps reaching mainnet launch phase. Upcoming dapps to go live are as follows: Maker, Augur, DigixDao, Melonport and Kyber.

While the stupid money is chasing ICOs and playing chicken with ponzi coins and HYIPs, I believe that the smart position to be in is to wait in some of these extremely promising projects that currently have no hype because they aren't live yet.

For smaller alts, especially the ERC20 ones, I expect their prices to flop around like nobody's business until they hit/miss their own major milestones. For promising projects, a delay of a major milestone could be a great opportunity to accumulate on the negative sentiment, as long as you can strong confidence that they will eventually deliver and it would be good. 

However, I also do think that the cards are lined up that we could see an alt rally that lasts several months. This depends if BTC just generally trends lower, or would be called-off if BTC's price is killed.

Regardless, I feel it's unlikely for legitimate alts to go much lower from these levels.

My base case scenario is for BTC to trend lower and bounce around 6000-7000, for ETH to slowly trend up towards $360, and for the alts to all slowly but surely trend higher. That is the playbook I have right now. But considering how fast the market moves in crypto, I could change my positioning if the situation warrants it.

My advice for long-term crypto investors (3-5 year hold)? Don't buy shitcoins. Long-only strategy. No leverage. You might not make as much money as shitcoiners, but you have massively greater odds of not dying and still coming out good.

This is a pretty "technical" post, with a lot of numbers here and there, which means absolute mambo jambo to most people, but meh, this blog is also a place for me to think outloud.

There are plenty of fundamental reasons for crypto to continue going up and up and up in price, but that's not for this post today. I'm entirely convinced about the future of crypto, but I don't want people to think that there are no risks involved and buying and investing in them would make them rich. If you have problems looking at -2% positions on your stocks, you are gonna shit blood all over yourself when you see your portfolio drop 10%, in an hour. In crypto, scared money don't make money.

Stay safe in the wild wild west. The path to crypto glory is littered with dead bodies of noobs.


  1. Noobs are FOMOing hard right now and it is losing them money. Hopefully they wise up soon!

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