trading

Crypto prices, finding a new normal?

| roger nunn

In the last couple of weeks Bitcoin has gone from an all time high (ATH) of over $ 60 k to around 40 now.

There have been stories in the news of what a failure bitcoin is and its lack of stability, etc.

It’s only a couple of months since people were questioning whether Bitcoin could get to 40 k and being delighted when it happened.

I consider this to be ridiculous, as we react happily to an upward movement in prices and dream of being rich and then despair because of a correction, partially caused by people taking out some of those riches.

Now the prices seem to have settled and started going green again, heading upwards.

I get around the problem by making a strategy and putting in buy and sell orders that generate a profit without me having to sit and watch all day.

I don’t make 100 X gains but as they are few and far between I can manage without them.

Remove emotion from trading and hodling.

Bitcoin has crashed.

| roger nunn

Bitcoin has just dropped by about 10%. It’s a disaster, we must sell quickly!

I don’t believe that at all, I’m just mimicking the feeling that a get from the press whenever bitcoin dips. I also chose 10% as being representative rather than exact because it has happened many times and fully expect it to happen again.

Unfortunately the disaster type of comment sells stories and in so doing creates more selling and price drops. It’s very sad for those who get emotionally involved with their holdings and sell as the price drops, thereby losing money.

I like the volatility of crypto as it allows me to make money. I sell some of my holdings as the price rises, thereby making some profit.

When the price drops I buy some more and then wait for it to rise, so enjoying the volatility.

Stable prices are more boring, something that will happen as the market matured. In the meantime long live volatility.

Crypto, what to read about.

| roger nunn

I think it’s great to be involved, even though only slightly, in one of the new developments in finance.

As it is a new (ish) technology, it is changing very rapidly with new ideas appearing all the time.

Decentralised exchanges are a good example of rapid change. A year ago trading was done through an exchange who listed the coins and facilitated exchange, changing a fee on the way.

Exchanges have proliferated and got rich in the meantime. They have made it easy to buy crypto and then exchange it or return it to fiat.

Now we have decentralised exchanges appearing that automatically match transfers without direct fees. The exchange works differently with users being able to stake their crypto and share in the fees generated.

My problem is that however much I read (and watch) there is more new stuff being generated, creating new parts of the crypto world.

So I will follow the new developments such as creating NFTs and only get deeply involved when it seems to lead to change.

Looking to the future

| roger nunn

For about a week I have been trading futures, based on the rise and fall of bitcoin relative to the US $.

I have been using very small amounts of money with only 10 X leverage. This is because leveraging multiplies losses as well as gains. I put in stop-losses that sell your holdings automatically if the price starts to drop.

It sounds as though it should be a winner and seems to be for the professional traders.

I found that for the amount I was willing to risk, the fluctuations minute by minute were enough to very quickly move the price to my stop-loss level. This easily limited my losses and I managed to make a few gains. However I had to pay fees for every trade and I found that I was losing overall.

This last week saw an end or at least a break in the bull run so I couldn’t rely on a steadily increasing bitcoin to ensure profitable trades.

So I lost a bit but now I feel that I understand what it means to short or long a future contract so I consider the loss to be acceptable.

In the end futures trading can only be a form of gambling, we can’t know what will happen in the future.

It is exciting when you make a gain.

What are Bitcoin futures?

| roger nunn

As part of my ongoing attempts to understand the world of crypto I have been researching the idea of futures. As far as I know, it is impossible to predict what is going to happen in the future. However, I have been following a number of youtubers who consistently make profit on trading in futures.

So how can it be? Surely buying and selling in the future is either guesswork or just gambling, neither of which seems to me to be a good long term strategy.

This only scratches the surface so don’t be surprised if I miss out important parts of the action.

I have found out that I can use “leverage” to allow me to make or lose multiples of the money that I put into a cryptocurrency. A base idea is that I have to deposit enough money to cover any possible losses and then I can buy a contract that takes the change in the value (in US$) of the currency and multiplies it by the leverage factor. This allows me to make very big gains compared to the actual change in the value of the underlying asset.

I don’t like the idea that the reverse is also true as my losses are also multiplied.

The way the you make money is by allowing the multiplier to act when the price goes up and by selling quickly if the price drops. Luckily the mechanics of it is taken care of by the software on the trading site. This is called a long contract, with the reverse action being called shorting.

I have been testing out the action and so far have not managed break even. This is because there are always charges to be met, so you have to make big gains to cover the costs as well as the loss making trades.

I have to say that it feels like gambling to me, and is very time-consuming.

Bitcoin is going through the roof

| roger nunn

Bitcoin is currently worth around $46,000 each. As usual, most of the altcoins follow suit with some dropping in value and some making spectacular gains, far higher than Bitcoin itself.

It is a rising market, where it starts to feel as though the sky is the limit. I prefer the expression of going through the roof as it indicates a barrier and brings the expectation that there will be a drop afterwards.

As far as making money is concerned, sitting and hodling in a rising market is just asset appreciation. It looks like a good money maker but it’s only real when you sell the bitcoin and realise the profit. It’s a good feeling when the market is rising and you can see yourself getting richer.

However, being a trader is something else. It means studying the different coins, buying low and then selling as they rise to take the profit. It is less exciting because you can always imagine how much more you could have made if you had waited a bit longer.

The harder thing is how to make money on a falling market, something that happens often. It means building a buy and sell strategy that makes use of the relative difference in value between various coins, buying and selling to take advantage of price changes.

How to do it? This is the trail that many of us are hoping to follow. It’s not easy.

Crypto Strategy

| roger nunn

It’s interesting to be part of a change, I can watch the crypto world evolving around me while trying to learn about it myself.

Even without talking about new developments I am trying to see the best way to find a strategy in crypto.

If I look only at buying and selling coins on exchanges, it resembles Fiat currency trading but much faster and with much higher movements in exchange valuations.

A coin exchange strategy therefore means learning to identify patterns that lead to big changes in coin values.

Also, I think that as the crypto market matures the automatic trading will soon reduce the chances of getting very gains of over 100X.

So now I have to plan for both a medium and long term strategy.

In the meantime let’s just continue to play the crypto exchanges.

What is a crypto exchange?

| roger nunn

I am writing about individual parts of the crypto world as if they are discrete. They are not discrete but I like to see the function of each part as separate, it helps me to see clearly.

Holding crypto is a matter of having the right series of numbers, something that is simplified through software in wallets. Trading crypto is the ability to buy crypto with fiat currency ($, €, etc), exchange one crypto currency for another or buy fiat with crypto.

Buying crypto with fiat or selling it back relies on using banks, and so is subject to bank charges, regulations and delays that can be imposed at any time.

An exchange is one way to trade one crypto for another. The user creates a trading account on the exchange and then can transfer crypto from a wallet for trading. The exchange does not normally buy and sell the crypto directly, it is a market place where traders put in buy or sell requests. So when you want to exchange crypto (e.g. exchange bitcoin for etherium), you are relying on another trader who wants to make the same trade reversed. The exchange simply facilitates it by hosting the traders’ accounts and charging for the service.

Once you start trading in crypto you see the benefits of a market that is open 24/7, has fast trades and low costs. It doesn’t help you choose your strategy, though, as it’s easy enough for the crypto that you are hodling to drop hugely in value in a matter of minutes.

Using an exchange can be very exciting, though, especially if you can learn to control your emotions and follow a trading strategy.

This is a very simplistic view of exchanges, it is supposed to help by giving an overview of its place in the crytpo world

Am I too late to invest?

| roger nunn

I find that people often want to start investing (in shares or in crypto) following a news item that talks about skyrocketing values. The news item usually gives headline figures showing how much someone has made or could have made in a particular market.

Most of the time the changes in crypto are much faster and much more extreme than in shares, so I this is the most interesting case.

Bitcoin is an good example. It is now close to its all time high (ATH) and so does that mean that I have missed my chance to invest?

No.

The price of Bitcoin (in US$) goes down as well as up so there is always likely to be the chance to make money. I am only talking about the simplest of trades, buying or selling at the current moment (spot).

All through Bitcoin’s history it has had ATH values, all of which have later been surpassed. There are well known patterns of price change, none of which is perfectly predictable but all of which are sure to happen.

One of the easiest to follow is the phrase “pump and dump”, where buyers (usually automated traders) keep on buying in a rising market, thereby pushing the price higher and higher. While it is rising you can sell at any time and make a profit. After a period of time, there will be a big sell off (dumping), where the price drops very fast.

So it is never too late to invest, just make sure that you sell before the next dump. By the way, choosing the right moment is easier said than done.