Altcoins Starting to Look Similar on the 4hr

We always hate to come out bullish on altcoins. But we are seeing a lot of similar setups happening on the 4hr charts. It’s starting to make us salivate a little bit. So we decided to post this here and then link it out to twitter because it feels better being loaded into one page.

Here is DGB trading against BTC on the 4hr. Note the golden cross, where the 50MA has crossed the 200MA. There is also a clear bull div in the RSI and a nice triangle pattern. We’re feeling bullish here.

DGB approaching a decision point

Here is SALT trading against BTC on the 4hr. What can you see that reminds you of DGB?

SALT mirroring DGB on the 4hr

And finally STRAT trading against BTC on the 4hr. What do you think we might see soon?

If you said a golden cross you receive a gold star. If you’re in STRAT right now, you might earn more than that gold star. We’re just saying.

Altcoin Season Act 2?

Is this setting us up for the second act of the altcoin season which arguably started in early December with XVG and XRP going absolutely bonkers? In the spring altcoin season of 2017, XRP and DOGE led the way with DGB doing incredibly parabolic things in a short time period. Will we see a repeat?

Here’s hoping!

Possible Bitcoin Price Floors Below $8,000?

Caveat Emptor – this post is wild bitcoin price speculation. But we created this blog to help us clarify our thinking. So welcome to our messy minds.

As you can see Bitcoin (BTC) is currently bumping on the bottom resistance line of the cloud and having a hard time punching through with conviction. And it is never a good thing to have several goes at it and not succeed.

Should it fail. Where are we going?

The bitcoin daily 180MA or 200MA are the next level of support. We’ve mapped both here because some crypto traders like to use the 180MA instead of the 200MA. There’s only $600USD difference between them. But we believe in being thorough.

After that, there’s little support on the bitcoin weekly cloud until we hit the $3,000USD range (shown in yellow).

But we think there may be support on the daily bitcoin chart right below the 200MA. That support is from the 32 day semi-consolidation period from mid-October to mid-November 2017.


The range of support on that move would be somewhere between $5,000 and $6,800 USD. Where it could settle and bounce for awhile.

This level is further supported by the NVT ratio for bitcoin during that same time period. This would seem to establish a level of support/resistance as well.

The blue box labeled number 1 shows the same time period, and includes a second test of that level with the support holding up. Note also that the purple box labeled number 2 shows a similar support/resistance shoring up any drop from our current pricing to the 180MA-200MA range.

Again, all of this is pure speculation. And if you have read our approach to trading cryptocurrencies you know we are in this for the long haul. But it is fun to try to model the immediate price ranges anyway. If only to keep ourselves intellectually honest.

The last factor to keep in mind is that all of the new money in the space has fairly weak hands. Even though they have been tested since December, a fall below the much hyped $8,000USD mark could force a panic dump on the market. In which case, as we all know, the market will overreact to the downside more than likely. Where quite a few of us will be buying and hodling all the way back up with our fingers crossed.

UPDATE: FEBRUARY 14, 2018
This post was spot on in predicting the range of support. As you can see, once price broke down below $8k it just kept going down till it hit the support area around $6,000 which we discussed above.

Learning to use RSI for Crytpo Trades

In trying to add new technical analysis tools to my crypto trading I am finding new love for plain old vanilla RSI. Here are three quick examples from today – January 24, 2018.

RSI in the BTC Chart

The first is the most recent BTC move down which started on January 6, 2018. Well before the Ichimoku cloud signaled a downward move on January 16, 2018, the RSI and price movement were giving indications of weakness in the upward move starting on January 6th. You can see the tweezer top followed by a telegraphed short fall and then a resurgence back up in price without a corresponding move higher in RSI. Volume, which I neglected to include on this screenshot also reflected the lack of enthusiasm in the move. Granted hindsight is 20/20. And the dragonfly candle immediately following the top might have headfaked anyone watching. But the subsequent move downwards should have confirmed the validity of the previous indicators.

 

RSI in the Present Moment

The second example is actually unfolding as I type. So we will see how well this holds up. This is DGB from today. On the chart you can see several indicators lining up.

  • A Golden Cross (when the 50MA crosses the 200MA to the positive)
  • A potential Adam and Eve pattern forming as drawn in the yellow V and U marks on the chart.
  • Finally – the divergence in the RSI at the bottom.

Specifically the RSI seems to be confirming that this latest down move doesn’t have the strength of the last. If that is the case then we may indeed form a double bottom with price rising from here. We’ll check back in a few days to see if this move actually confirmed itself or not.

The last example is LBC, also from today. LBC seems to be mimicking DGB with a golden cross forming, RSI having a bull div and a potential Adam and Eve forming.

To close, remember, technical analysis is merely a stacking up of probabilities. Then theorizing about what might come next. I’m feeling bullish right now on DGB and LBC based on these charts. But who knows if a black swan will put its thumb on the scales in the next few hours/days and wreck these weighted possibilities.

The Best Way to Approach Trading Cryptocurrencies

Disclaimer: Before we get started please read the disclaimer in the footer of this website.

This is a quick overview of the two most effective ways to experience and survive the very volatile cryptocurrency markets over time. These two methods are based off of a couple of years experience with this dynamic asset class, and represent what to date has worked well. These two approaches are not silver bullets as they rely on the subjectivity of the investor/trader in timing entries and exits. But if you can learn to control your emotions, and not buy high when the euphoria and FOMO hits, and sell low when the panic hits the markets you stand a good chance of not losing everything. Boy, what a pep talk.

Now with that out of the way, let’s get started.

We will approach trading and investing in cryptocurrencies in two ways here.

The first is the Buy and Hold investment strategy which is a fairly passive approach to the markets. The second strategy is what could be termed a Bitcoin Maximalism approach combined with Seasonality and Opportunism and is a much more active trading approach to crypto.

BUY and HODL

This is fairly straightforward.

You buy BTC or ETH or LTC and hold it for a long time on the belief that its value will go higher. While it may sound boring, traditionally in the cryptocurrency market it has worked. At least it has worked consistently with the major coins – Bitcoin, Ethereum, Litecoin and Ripple. With each of those being up a minimum of 3,000% in 2017.

This approach requires you to have a long term outlook, and be invested in a coin for a minimum of three months and normally much longer.

But do not assume that by just buying and holding you are opting out of the dynamic aspects of this market. You are not. In fact, you should be prepared to experience the dread of having your buy-and-hold investment portfolio drop at least 50% in paper value at least once every 6 months. As an example – buyers of Litecoin at its first all-time-high (ATH) peak had to wait three years before it regained its former heights (in USD) in mid 2017. But, if they held on for another few months after finally breaking even on their investment, they had the potential to make returns of at least 10x.

Historically, buying and holding your portfolio through the downturns and not selling at the bottom when the fear was greatest has been rewarded for holders of BTC, ETH and LTC. This is not true of the same strategy with other altcoins, many of which dropped to zero in value, so do your own research (DYOR). AND please understand that all of this is subject to change quickly as cryptocurrency is an extraordinarily fast marketplace and ecosystem. Past performance is not indicative of future behavior.

The last point is that in many cases a buy-and-hold investment portfolio of BTC has outperformed someone who was actively trying to trade altcoins over the same time period. Particularly when the person actively trading was unfamiliar with the cryptocurrency markets and did not understand how they differ from traditional markets.

Active Trading Towards Bitcoin Maximalism

This is the second strategy which has performed well in the cryptocurrency markets over the past two years.

This is a much more active approach and is not for everyone. Seriously, these markets move 24 hours a day, 7 days a week, 365 days a year. There is no break, and some of the most massive moves have occurred over holidays, weekends and at night. So you ABSOLUTELY need to be aware that if you are going to try to actively trade in crypto you have to be prepared to watch them like a hawk, or develop your own system for mitigating your risk.

For those of you familiar with stop-losses, a note of warning. When you are trading some of the more illiquid markets of the smaller cap altcoins, stop-losses sometimes simply don’t work. This can happen for a variety of reasons. Most often it is a lack of appropriate liquidity to cover your position without extreme slippage. But it can also be due to an exchange simply being off line at the time you need it most. Or their wallet is being worked on. Or the blockchain network is congested and your transaction can’t execute quickly enough.

So, with all of those caveats out of the way, here is the approach which many use to maximize their portfolios and hedge against total loss.

Have Two Portfolios

First, they have two portfolios. One is for hodling long term. The other is for actively trading.

The goal is to try to keep at least 50-60% of your cryptocurrency assets in the long term portfolio. This may be made up of BTC, ETH and any other altcoin you think may turn out to be a big winner down the road. These coins are all kept in cold storage and are meant to be held for at least a year, with 5-10 years not being out of the question.

In the actively traded portfolio you may hold as many as 45 coins at any one time. The goal with this portion is twofold – expose yourself to the potential exponential upsides of the altcoin market and maximize your returns in terms of both BTC and fiat.

This seems deceptively simple. It is not. Emotions can wreck your positions, mis-timing your entries and exits can drain your profitability and most importantly for the crypto markets – BTC can wake up and go on a giant bull run and decimate your alt positions.

Trading with the Seasons

Altcoins have a strange and ever-changing relationship to BTC. Whenever BTC makes big moves altcoins seem to fall or stall. But altcoins tend to go into what is colloquially called “Altcoin Season” when BTC is moving sideways or trading in a range. For the past two years, BTC seems to have a cyclicality to it which tracks fairly neatly to a calendar year’s quarters. There is a great explainer on this trend here. The periods of decline or stagnation in the BTC trend are when altcoins sing. This is generally from mid-winter to late spring. With BTC reasserting dominance starting in late spring and carrying forward to close out the year.

Altcoin season is most likely driven by the influx of new people into cryptocurrency. These new entrants tend to come into crypto through BTC. Then they branch out to ETH and LTC on the same exchange. Then they hear about exponential returns of 100x in altcoins and go searching for “the next bitcoin” when their BTC investment stops going up >20% each month. And in fact, over the past two years many people who held altcoins during altcoin season have experienced holdings which did go up 10x-50x at least once.

Don’t Be a Bag-Holder, Unless You Want To Be

Many an investor has stopped being an investor and become a trader who goes on to do very stupid things because they experienced these kind of runs either directly or peripherally.

The biggest sin is going “all-in” on a coin which they think will be the next BTC with a significant portion of their portfolio. This is a bad idea. Sure, if you get really lucky, you could turn $10,000 USD into $3,000,000 USD over the course of a few weeks if you have unbelievable timing and are THE MOST AMAZING TRADER OF ALL TIME. But the chances of doing that are ridiculously low.

More to the point, if you are new to this, you will probably not sell near the top. Why? Because, you will be thinking – “this mega bull-run is going to go on forever”, “I AM THE MOST AMAZING TRADER OF ALL TIME” and “this coin is going to be the one which eclipses BTC forever”!

Of course it is, and of course you are. Of course. So you hold that coin through what you think is a minor correction (even though it just dropped 20%). Then you fail to sell the dead cat bounce and you ride your precious coin all the way down like Gollum and his ring.

Which is how you become a “bag-holder”, and you join a lot of other “bag-holders” as the “community” around that coin. This is the community which spends its days hoping and praying that their coin will someday rise from the ashes. Which it might. But not anytime soon. In the meantime, BTC and many other altcoins just went 10x and you missed it.

The safer bet would have been to put $1,000 USD into 10 altcoins instead. You would still have made $300,000 USD on only one of your investments and you didn’t have to be THE MOST AMAZING TRADER OF ALL TIME. Because you probably won’t be. Seriously, you probably won’t be the most amazing trader of all time. If you are, please remember the little folks.

So, instead of being naive with your money, maybe you should think about figuring out how to do your own research, find a few projects you think have a good chance of going to the moon and then split your trades amongst them.

Look at the BTC Chart First, Last and In-Between

Now, once you have your basket of altcoins you need to look at the charts for each on a regular basis. BOTH CHARTS. What does that mean? Well, you need to look at both the fiat chart, and the BTC chart.

Most people new to crypto only look at the fiat value of their holdings. Which is fine. But it means that you will miss out on the opportunities provided by leveraging the trading pairs to maximize your returns. How does that work? It is actually fairly simple. You try to enter into your altcoin positions when they are priced low against BTC. From a technical analysis perspective this means using the BTC chart to find your 50% fib, your support and resistance and cloud entries. (Not sure what any of that last sentence meant? Check out one of the best free resources for learning TA for the crypto space here.) By using BTC as your primary trading pair for your altcoins you can also get a feel for where a specific move might stop. This is particularly true when a coin goes past its ATH in fiat. In times like that it may seem like your altcoin is in price discovery mode. And it is, in fiat. If you look at the BTC chart, it is probably following a similar pattern to one which it has followed before. Which will tell you where you might want to set your sell orders.

Selling

Knowing when to sell an altcoin is a bit of art. It is very easy to fall in love with a project and think that it will indeed upset BTC. They call this the Flippening. But it has yet to happen with any authority. Why? Because BTC has the greatest network value and first mover advantage. It is also the reserve currency of the crypto world. Sure it could happen. But most people are betting that it won’t. Really, they are seriously betting big money on it not happening. And these are very smart, very wealthy people who are very familiar with the space. So for this exercise let’s assume they are right.

What that does for us is to inform our next most important decision – when to sell.

Many successful crypto traders use their altcoin positions to maximize their bitcoin positions since they are betting that it will be the long term winner. Their process is pretty straightforward. During altcoin season, when their altcoin positions are roaring upwards against BTC, they are selling bits of their positions into BTC on the way up.

So they might enter an altcoin position at 1000 satoshis. When that altcoin reaches 1200 satoshis they might sell 10% of the position into BTC. When it reaches 1500 satoshis they might sell another 10% into BTC. When it reaches 2000 satoshis they might sell another 40% of their position. When it goes to 3000 satoshis they might sell another 30% of the remaining position and then let the rest ride. By approaching their trading this way they have more than doubled the BTC they put into that trade. And they still have an altcoin bag which might do something stupid – like go 100x. Then they can sell it and have 10x+ the amount of BTC they started the position with. Then when BTC makes another parabolic move they have a lot more of it with which to ride the swell.

They can also take part of their profits and apply them back to their long term holdings, and cash out some as well. Which is, after all, the goal here.

If you are going to be a trader, remember to keep a separate long term holding portfolio, and to learn to do technical analysis. It will make all the difference in the world.

We recommend Coinigy.com for doing your Technical Analysis of the cryptocurrency markets.

List of CryptoCurrency Exchanges

For Buying BTC, ETH, BCC and LTC with Fiat (USD):

         

 

For Buying Altcoins

                         

 

For Doing Technical Analysis on Cryptocurrency

 

Cryptocurrency Glossary

This is a living document which tries to define things which might be new to people, or are misunderstood by people entering the cryptocurrency world. If you would like to see something defined here please let me know in the comments below. Same with anything you see which is not defined correctly, or is defined poorly. This is more geared towards the lay person side and not the technical side of things – no definition of merkle trees, zero knowledge proofs or the byzantine generals problem here (unless you ask for them).

Also, ‘coins’ and ‘tokens’ as well as ‘crypto’ and ’cryptocurrency’ are oftentimes used interchangeably here.

Bitcoin

The original cryptocurrency.

Started in 2009. Abbreviated as BTC. Started by Satoshi Nakamoto. The bitcoin whitepaper is here. Whitepaper with annotations is here.

Wonderful resources for understanding more about BTC here – lopp.net.

Still trying to understand bitcoin? Don’t worry you’re not alone. Here’s a good way to start – Explain Bitcoin like I’m a five year old here.

Etherum

Currently the biggest altcoin by market cap (coin market cap). Started by Vitalik Buterin in 2013, launched in 2015. Built around the idea of Smart Contracts and allowing the creation of Decentralized Applications – Dapps. Read the whitepaper here – Ethereum White Paper.

Its trading symbol is ETH. There is also a hard fork of it which is called Ethereum Classic.

Ethereum Classic

A hard fork of Ethereum which came out of the decision to role back the hacking of the DAO in summer of 2016. Its trading symbol is ETC. Not confusing at all for people when they read lists of trading symbols with this one at the end i.e. btc, eth, bcc, etc.

Bitcoin Cash

A hard fork of the original bitcoin blockchain. Forked in August of 2017 at a 1:1 ratio. Highly politicized within the crypto community. There is a lot of FUD (Fear Uncertainty and Doubt) being spread around that Bitcoin Cash is the ‘real’ Bitcoin. Specifically since Roger Ver, one of the primary drivers behind the Bitcoin Cash hard fork owns the bitcoin.com domain and directs people to Bitcoin Cash instead of Bitcoin when he is telling people to “buy bitcoin”. Its trading symbol is BCC or BCH depending on the exchange.

Forking

Do you like it ‘hard’ or ‘soft’? Forks are exactly what they sound like – forks in the road for a crypto project by which either a new coin is created at some ratio to the original or the whole project’s ecosystem is updated for the original coin. Some of the most politically charged hard forks are the Ethereum hard fork which produced Ethereum (ETH) and Ethereum Classic (ETC) after the DAO hack in June 2016; and the hard fork which created Bitcoin Cash out of Bitcoin in August of 2017. Soft forks are more like upgrades of existing software systems. This is best demonstrated by the SegWit updates to Bitcoin, Litecoin and others. More about SegWit on Wikipedia here.

Altcoins

Basically any other cryptocurrency than Bitcoin (BTC). Includes Bitcoin Cash, Litecoin, Ripple, Ethereum and many many many others. Here’s a list – coinmarketcap.com

Shitcoins

Slang for altcoins.

Exchanges

These are locations where you can buy and sell cryptocurrency. Think of the New York Stock Exchange, but multiplied many times over. Here’s a list of exchanges and a rough description of where they fall on the spectrum – Cryptocurrency Exchanges.

Coin Max Supply

Total amount of coins to ever be produced under this fork of the project – e.g. BTC max supply is 21,000,000

Circulating Supply

The number of coins outstanding in the world currently. These may exist because of a pre-mine, mining-efforts-to-date, airdrop or other.

Pre-Mine

The number of coins allocated to the principals, the company, the seed investors, or any persons or entities prior to the release of the coin on the open markets. This means that there are significant holders of these coins who could control the market or dump on you at any time.

Coin Market Cap

Roughly speaking it is the number of coins circulating multiplied by the averaged current price across all reporting exchanges. In crypto this is a little deceiving because you may have many different exchanges posting significant price differences. As I write this, South Korean exchanges are posting a significant premium (22%) to all other exchanges for BTC. Which seems like a great arbitrage opportunity, but usually isn’t because of the difficulty in moving fiat into and out of crypto. You can see the list of each coin ranked by market cap here – coinmarketcap.com.

NVT Ratio

A method for valuing the network effect of a coin based on its transaction volume similar to the P/E ratio for equities. Specifically the Network Value to Transactions (NVT) ratio measures the dollar value of cryptoasset transaction activity relative to network value. This is a simple way to compare how the market prices one unit of on-chain transactions across different networks. When paired with the market cap of a coin it is a decent way of seeing which coins may be under or overvalued. More here.

Arbitrage

The act of simultaneously (or near enough to count) buying and selling a cryptocurrency in order to take advantage of different prices on the same asset.

Fiat

Not a car, well, not in this case. Fiat is any government backed currency and the one with which you are probably most familiar using to buy and sell things. This would include the US Dollar (USD), the Euro (EUR), Chinese Yuan Renminbi (CNY), South Korean Won (KRW), Japanese Yen (JPY) and so on.

Trading Pairs

Composed of two currencies, can be both crypto, or crypto and fiat. The first currency is the one which you hold and which you are using the buy the second. So for instance if you are buying $1,000USD worth of bitcoin, your trading pairs are USD/BTC. If you are trading Bitcoin for Ethereum then your trading pairs are BTC/ETH. In crypto most cryptocurrencies trade against BTC, not fiat. For people who are new to the crypto space and have never traded forex (foreign currencies) this may seem like an insignificant thing to understand. But it is in reality one of the most significant ways to gain an edge in understanding and trading the crypto markets.

Satoshis

Currently the smallest unit of the bitcoin currency recorded on the block chain. It is a one hundred millionth of a single bitcoin (0.00000001 BTC). Traders talk about buying altcoins in ‘sats’ or ‘satoshis’ and traders will interchangeably represent them with both the decimal and without it. For instance they might represent the same price for a specific cryptocurrency as ‘0.00022521’ or ’22,521’.

KYC

Know Your Customer laws. This is why you have to put a lot of personal information into any exchange you want to use. Depends on the jurisdiction for the geographical location of the exchange or its operations.

AML

Anti Money Laundering laws. These are paired with KYC to prevent people from laundering money through the financial systems. That includes crypto.

Fundamental Analysis (FA)

Abbreviated as FA a lot. Fundamental analysis of a cryptocurrency based on the merits of the project, the background of the people on the team, any extant partnerships or backing which they might have, any underlying infrastructure which they are already leveraging, the quality of the code, the engagement and pace of activity of the community, the list of recent commits on GitHub or another repository, etc.

Technical Analysis (TA)

Abbreviated as TA a lot. Technical Analysis is the analysis of the trading chart of a given coin on a given exchange, or across a multitude of exchanges. Usually centering around resistance and support, volume, patterns, etc. It is based on probabilities and not certainties.

Tether

Also known as USDT. This is a cryptocurrency allegedly pegged at a 1:1 ratio with USD. In reality it fluctuates a few cents in either direction on a regular basis based on whether the markets are feeling bullish or bearish. But it is usually within 2-3 cents of $1 parity. This is not the same as USD. It is a cryptocurrency. And there is some doubt about its stability long term. But it is a decent vehicle at the moment for moving converting some coins to dollar-like vehicles while you wait for a move without being roped to the volatility of Bitcoin or another cryptocurrency trading pair. A lot of new people like to do this because it emulates the way in which they think about trading stocks, real estate, gold, or squirrels (just kidding on the squirrels part… I hope).

OTC

Stands for Over The Counter trades. These are trades for cryptocurrencies which are performed off of an exchange between individuals or institutions for a specific price. Generally how early trades in new coins are made, or how large amount of fiat money is onboarded or offboarded from the crypto space.

HODL

Just a misspelling of HOLD. Meaning ‘hold your coins’ through the rough patches. Or hold the door. Originated from one of the first big crashes in BTC in a post on reddit.

Paper Value

The unrealized value of your cryptocurrency assets on paper in your portfolio. These are different from realized returns which are the actual profits or loss you take when you sell your cryptocurrency assets for fiat, another asset class or another crypto.

DYOR

Stands for – Do Your Own Research.

2FA

Two Factor Authentication. This is a way of using two factors to authenticate a user. Usually done via a username and pwd as well as using SMS, Google Authenticator or a hardware key. In crypto always use 2FA and use something like Google Authenticator instead of SMS as your second form of authentication. These days it is far too easy for hackers to port your phone number and then steal your funds. Turning on 2FA should be one of the first things you do when you set up an account on an exchange.

Coinbase and GDAX

Coinbase is a prominent USA based exchange which allows people to purchase BTC, ETH & LTC with fiat. They have a wholly owned exchange called GDAX where you can actively trade BTC, ETH and LTC. But this is not immediately clear for most new people. GDAX uses your same login credentials from Coinbase, and you can transfer funds directly from Coinbase into GDAX.

FOMO

Stands for Fear Of Missing Out, and it is probably the number one way people blow up and lose everything.

Blowing Up

This means to lose everything because of overexposure to an asset class which loses everything.

FUD

Stands for Fear, Uncertainty and Doubt. Oftentimes used when the news cycle is spewing all kinds of weird, and typically bad news.

Disclaimer: No content represented herein or linked to from this website should be considered financial advice given directly to you by this website or its authors or owners. All information on this website is for educational purposes only and is not intended to provide financial advice. Any statement about profits or income, expressed or implied, does not represent a guarantee. This website is neither a solicitation nor an offer to Buy/Sell options, futures or securities. No representation is being made that any information you receive will or is likely to achieve profits or losses similar to those discussed in the website. The past performance of any trading system or methodology is not necessarily indicative of future results. Please use common sense. Get the advice of a competent financial advisor before investing your money in any financial instrument.

© 2018 Blind Swallowing Thing