The tail end of 2017 saw the culmination of what we could call “the big bang”…
The explosion in to mainstream culture of cryptocurrencies – spearheaded by the
colossus Bitcoin.
Bitcoin itself went on a rampage in late 2017 – rising from about $7,000 to nearly $20,000 by
mid-December – giving those invested a very nice Christmas gift…
Ethereum, bitcoin’s #2, went from about $10 in Jan 2017 reaching highs of over $1,300 a year
later…
But we all know what happened in January…
From January 6th and February 5th, the bitcoin price fell from just over $17,000 to just shy of
$7,000 – taking it all the way back to November’s levels.
And where bitcoin leads – others follow…
Hundreds of coins saw double-digit losses, with hundreds of billions being wiped off the
markets each day.
Many reasons were given for the crash: hacking scandals… price rigging scandals…
government crackdowns both in the west and the far east…
For some, this was it… the ‘bubble’ was bursting and the dream was over. The drop in prices
caused those less savvy to panic sell, which in turn drove the price even lower.
For others – this was a time to rub their hands with glee and pick up coins at a knock-down
bargain price. In their mind, January was just a natural market correction and there’s only one
way crypto’s are going to go in the long-term (sky-high).
But who should you believe?
Are crypto’s a bubble? Is this the dot.com era mark two and have we reached bursting point?
Or are crypto’s here to stay?
Should you sell out?
Or buy in?
We asked a few of our team of expert traders and market analysts for their take on January’s
marker movements. Here’s what they had to say…
What crypto crash?
So… it happened…
The market CORRECTION that new crypto investors never saw coming.
It finally came about - triggering panic and a massive sell-off which grabbed news
headlines across the globe.
For weeks on end, alt-coins saw their prices gain double-digit percentages…
We saw previously unknown coins balloon, building multi-billion dollar market caps.
Yes, it’s great seeing all your investments go up threefold or more in a matter of weeks - it feels
like you have the crypto Midas touch…
Every coin you put your money into, giving you incredible returns…
But as fantastic as that sounds, it’s also totally unsustainable.
You see, it’s no secret that cryptocurrencies are volatile.
If there’s one characteristic that can be used to define crypto it would be its volatility.
The crazy swings, even on a normal day, is enough to turn any traditional trader away.
That being said, these massive sell offs are nothing new.
All you have to do is look over the crypto charts and you can see that actually, they occur pretty
frequently, nearly once a month to be more exact.
The last major sell-offs occurred in December, November, September, July… you get the point.
The key factor to note is that every correction occurs at a higher price point than the previous,
meaning that with time, the price of cryptos just keeps increasing.
Put simply, cryptos take ten leaps forward, three strides back, ten leaps forward, three strides
back…
The January 2018 bloodbath was well anticipated by seasoned crypto traders.
In fact, there’s been a crypto crash every January for the past three years:
In January 2015 the price fell from highs on $377 back down to $150…
In January 2016 the price fell from highs on $430 back down to $360…
In January 2017 the price fell from highs on $1140 back down to $750…
To them, this massive sell off is merely an Easter sale come early; an opportunity to buy their
favourite coins at a discounted price.
Why the decline this
time?
Now, when looking for specific reasons behind this month’s drastic decline, a few possibilities
come to mind…
Firstly, some government officials in South Korea (a MAJOR player in the crypto arena) have
recently gone public in denouncing cryptocurrencies… with some calling for regulation and
others, an outright ban.
This was, of course, met with opposition from crypto traders in S. Korea. So much so that
a petition against the proposed regulation gained over 200,000 signatures in just over two
weeks, meaning that the government has to officially respond.
Coinciding with this, the first of the Bitcoin futures contracts which went live on December
10th, were set to expire yesterday.
There is speculation in the crypto community that large hedge funds trading futures, took
advantage of the inexperience of new investors… manipulating the markets to induce a “flashcrash”
and in the process pocketing billions for themselves overnight
These people are professionals and have been doing this long before any Bitcoin futures
contracts existed.Ultimately, nothing can be said for certain, but it definitely makes sense.
All of this, coupled with the fact that alt-coins were severely overextended, created a perfect
recipe for a much needed correction.
And just to make it clear, that is exactly what it was, a correction… not a crash.
A 20-50% price correction is healthy for crypto in the long term. It helps to weed out weak
hands and creates stronger supports.
And having said that, just a few hours after Bitcoin traded below $10,000 for the first time in a
month, it saw a massive surge of volume come in, causing it to “bounce” back up.
Following this, confidence came back into the market and both Bitcoin and alts saw double
digit gains once again, with Bitcoin climbing over $11,000 once again…
It was almost like nothing had happened.
Why I’m not worried
about the crypto dive
I
n January and for the first half of February, the crypto markets took quite a hammering.
To put into perspective, my holding in XRP fell from a $3.40 high, to $1.15…
But I’m not worried (I’m still up several hundred percent).
You see, when an asset has seen 35,000% growth in a year, the market clearly needs to have a
blow off.
Growth like that is totally unsustainable.
Take a look at these charts – showing the dramatic fall we saw back in mid-Jan:
All of the markets were following the same bearishness.
Times like this remind us why it’s so important to have a take profit strategy in your
investments, especially in such a volatile market such as cryptocurrencies.
One thing to note is that when a market goes up very fast, price discovery is hardly fulfilled.
This means that to fulfill a move, we have to see selling come in to almost validate whether the
move is correct or not – we have to see where the sellers are as well as buyers.
The reason for this is that we now know where the all-time high is, and so we can plan how we
will trade the market to get back up there.
5 key lessons I’ve learnt
trading cryptos
I
’ve traded for a long time…
And I’ve been profitable for about half the time I’ve been trading for.
I’ve traded every asset you can think of…
FX, equities, bonds, cattle futures, metals, oil… everything.
However, up until October last year, I had totally disregarded crypto currencies.
I thought they were fraudulent and pure pump and dump schemes (some still are, but it’s easy
to get around this by investing into those with a solid use case).
The thing was, I just had to get involved when I saw people making 2-300% in a matter of days
and weeks.
They are actually very good assets to trade, especially the liquid ones such as Bitcoin, Ethereum
and XRP.
Now, I just want to run through five things I’ve learnt in the short time I’ve been involved in this
market…
- The market adheres to price action far better than any other market I’ve seen
Crypto has three types of participant from what I can tell.
The market/investing newbie, those who have traded/invested frequently before, and lastly,
the whales.
What this means is that the latter group are looking to eat up the former group. The crypto
drop we’ve seen demonstrated how newer traders get forced out of their positions by the
larger traders.
This means that you have one group relying on emotion, and one group relying on systematic
techniques to position themselves in the market.
Since the smaller group have a lacking in knowledge (asymmetric information) compared to
the lager group, the market just trades between specific levels which can be easily identified;
compared to other markets, this will not happen so clearly and with such precision. - Coins with real use cases will survive – all others will be discarded
Whenever we have a recession, we have a flushing out of unproductive firms.
The same will occur in the crypto markets.
I recently saw a coin called PonziCoin the other week. What a brash, arrogant, and downright
disgusting way to try and make money.
The thing is, is that the type of person investing in this only knows the market when it’s good;
they are the type to lose all of their money through shoddy risk management and sheer gambling.
When the proverbial hits the fan, they’ll be left holding the bag, just like asset holders in
2007/08 (although I’m not comparing the crypto markets to that!). - Blockchain will become very important
The use of blockchain is huge.
I take a macro view of things when looking at markets and so I’ve looked at the technology
behind coins as well as the coins themselves.
The potential is incredible – smart contracts, being able to send money like data, and even
mobile phone connection usage in poor areas of the world – all of these are solvable by using
blockchain technology.
VISA currently has a job posting for blockchain developers, which is absolutely huge, since they
settle something close to a few trillion dollars of transactions per year. - Never short
I’m more than happy to short any other asset…
But crypto is not an asset class I am prepared to do this in.
I do not wish to bet on price falls at all.
The reason is because the edge is with buying in this market. It’s like penny shares on
testosterone, and you have to be prepared for a seemingly weak market to just go parabolic in
the space of minutes.
You don’t want to be stuck short.
Also, think about it. A crypto-currency can’t go below 0, so play the odds of an increasingly
rallying market, rather than one that will more than likely not just go to 0, provided the use
case is good enough, of course. - Be brave
Hold through price swings.
Remember point one – the bigger guys are always looking to shake you out.
Then refer to point two – if the use case is good enough, the market will buy into this and after
a while, that price fall you were concerned about will be negligible.
Are cryptos back in
business?
The last few weeks have seen the downside become exposed on a huge range of assets.
For many newer traders, this may have been your first time experiencing trading through
a tough period.
However, the asset that people have been most concerned about is Bitcoin, and more broadly,
the crypto-currency space in general.
A 70% drop is not an easy thing to stomach. Will the market come back? Will it go to £0? Will I
lose all of my money and be laughed at by my friends who I told to get in on it?
These types of things go through your head, and it’s only natural. You experience every single
emotion during the mania.
Below, the chart depicts the typical story of a price fall and the fervour surrounding it…
But I want to answer the question of whether we are currently over the price drop.
In short, yes.
During the early part of February, there has been a buyer who has accumulated around
$900,000,000 worth of Bitcoin between the prices of $9000 and $7700.
This is huge. Crypto Sale Now On
What should you think about the recent correction in cryptocurrencies?
Bitcoin trading at below $7,000 after peaking around $20,000 just before Christmas.
This market moves awfully fast. The cryptos with huge market caps such as
Ethereum, Ripple and Bitcoin all took a big hit as the New Year kicked off.
But why?
What happened?
The selloff was a result of many things. One such reason was the announcement from the
South Korean government related to regulation in the cryptocurrency space.
However, following this move other countries have been rumoured to be following suit, and all
this has created an anxious fervour within the crypto world.
Add to this the revelation that the crypto Tether may have been manipulated to keep it inline
with the US Dollar – with an angry US Commodity Futures Trading Commission issuing a
subpoena to the Bitfinex exchange – and tensions are indeed high.
More rumours are now circling that Tether may not be able to support its $2 billion plus market
cap due to the sell-off, which if true, could see Tether completely crash, bringing other cryptos’
prices tumbling.Where does the crypto market go from here?
This shift from a completely unregulated marketplace to one that more resembles traditional
financial markets has caught a lot of investors off guard, but the reaction in the markets is very
much overdone.
When prices begin to fall, it shakes a lot of newcomers out of the tree, so you can see a lot of
action like this.
Use that to your advantage!In the short term, headlines may continue to contribute to crypto market volatility. But the
long term reasons for holding Bitcoin and other cryptos are as valid as ever.
In fact, I see this recent sell off as a golden opportunity to enter the crypto market at a deep discount.
Every significant pullback over the past year has seen buyers aggressively enter the market.
That means that you should consider cryptos as being “on sale” right now.
Major cryptocurrencies are trading at a serious discount relative to the 2018 open.
Just keep in mind that average volatility in these markets is much higher than equities or
indices, so crypto investors must be prepared for large intraday moves, even on the way up.
They should be prepared for further volatility, as headline risk is still very much present.
But that’s not a reason to stay away.
No, you won’t see this type of volatility in blue-chip stocks like a Coca-Cola or Boeing. But you
won’t make fortunes in them, either.
Having said that, with crypto markets in their early stages it is extremely easy for inexperienced
investors to get involved in a crypto offering that isn’t innovative, unique or offering any value
proposition to speak of. With new offerings daily, it’s important to cut through the noise to find
the most intriguing offerings.
Now, calling the pullbacks in Bitcoin and other crypto markets the best opportunity of the year
this early on might seem like a bold prediction. But historical trends and momentum support
this idea very strongly.
I have been a full time trader and investor for almost two decades. And I have never seen an
opportunity like this.Now, a lot of people compare the crypto space today to the dotcom boom of the late 90s
when anyone with a domain name and half of a business plan could get a massive valuation.
We all know how that ended…
The point here is, there’s a lot of rubbish in the crypto space. Make sure you don’t buy any.
Too many people invest in markets they might not understand. There are fortunes to be made
in cryptos, but you have to know what you’re doing.
Seize the opportunity!
5 reasons why I think
Bitcoin will hit $100,000
I know, Bitcoin has come down a lot from it’s pre-Christmas highs. But to me, that’s perfectly fine.
I’m happy about it, in fact. You should be too.
It just gives you the opportunity to buy cheaper before it rises again.
And it will rise again…
My trading career was built on my ability to spot and follow trends. I’ve been successful doing
this, I’ve traded 50 million shares of stock and made over $7 million, all on my own account.
While some traders can find success trading counter-trend setups, I have always focused on
riding momentum and chasing prevailing market trends.
I keep all of this in mind when considering an exit plan for my Bitcoin position. And because I
see no major reversals in the trend, I can’t develop a solid exit plan.
The move higher in Bitcoin is one of the most amazing things I have seen in my career.
Every major pullback last year saw buying interest. And we saw new highs minted on a regular basis.
This is the type of trend that I cannot step away from. I know about the pullback. But the
upside momentum is unlike anything we’ve ever seen before. So for now, I need to hold my
position as long as this momentum lasts.
You’ve heard plenty of people say “It’s too late to get into Bitcoin.” Odds are those people
don’t have a position in Bitcoin nor have they ever.
I understand why some people feel this way.
Looking at Bitcoin’s chart over the past year or so can make someone feel sceptical about
further upside. When I look at that chart however, I can only think of reasons I think Bitcoin will
move higher.With that in mind I want to share five of the biggest reasons why I think Bitcoin still has massive
potential upside and could go to $100,000 — 10x higher than today…
Bitcoin $100k Reason #1:There’s Plenty of Money on the Sidelines.
When stock market bears talk about the reasons they think the market is heading lower they
often cite a lack of “new” capital to be invested.
This argument assumes that most investors are fully invested in the market and have no more
cash to deploy.
This couldn’t be further from the truth when it comes to Bitcoin markets.
Due to the fragmented exchange and platform options in the crypto market, many investors
have forgone entering these markets. As ease of access increases so will investment.
That could mean a serious leg higher for Bitcoin.
Bitcoin $100k Reason #2: Institutional Money HAS to Buy Bitcoin Now.
Even though you can’t yet use Bitcoin to pay your credit card bill, there has been some serious
movement from institutional players in the past few months.While these institutions have yet to fully “buy in” to the idea of Bitcoin, we have seen some
clear signals that this might be just around the corner…
A number of major financial exchanges have recently listed or announced plans to list Bitcoin
derivatives for public trading.
Most people fail to realise that institutions that plan on trading in or making markets will HAVE
to buy Bitcoins to hedge their positions.
This means that new institutional money will have to come into the market as volume of these
derivatives increases.
Again, this brings a wave of new capital into the market.
Now, while there has been some interest in Bitcoin ETF’s, the US Securities and Exchange
Commission has made it difficult for these funds to get past the proposal stage, citing concerns
over volatility.
This might be a roadblock for now, but trust me it won’t be for long.
Once the first Bitcoin ETF is listed, investors will be given unprecedented access to these
markets and that would be a huge benefit to those long Bitcoin.
Bitcoin $100k Reason #3: Increased Adoption.
A huge number of businesses now accept Bitcoin as a legitimate form of payment (more than
100,000 worldwide). As more companies do this it increases the practicality of Bitcoin and its
inherent value.A number of large publicly traded companies now also accept Bitcoin. Companies like Microsoft
and Expedia now accept Bitcoin as payment for certain products and services.
While this is a MASSIVE development for these markets there is still huge growth potential for
Bitcoin based on the fact they have barely penetrated the payments market yet.
Bitcoin $100k Reason #4: Increased Attention in the Media.
I’m sure that over the past month you’ve been bombarded with Bitcoin-related news on pretty
much every media outlet you can think of.
I hate the phrase “there’s no such thing as bad press…” but in this case it’s absolutely true.
The amount of new money brought into the market by these stories has pushed a number of
cryptos, Bitcoin included, to new highs, despite the recent pullback.
The more people exposed to these markets the more interest there will be, this can only be a
good thing for the market.
Bitcoin $100k Reason #5: The Bitcoin Trend is Unprecedented.
The last year of trading in Bitcoin has been one of the most impressive things I have seen in my
trading career.
As a momentum trader there has never been a more intriguing market. When there are more
buyers than sellers markets go higher, that’s been the case for a long time in Bitcoin.
Despite the recent slip, there hasn’t been any major events or developments to change that so
there’s no reason for me to expect it won’t bounce back. And then it could be off to the races again.
It might not make sense to some but think about this old trading adage…
“Markets can be irrational longer than I can stay solvent.”
In short, this means don’t fight the larger trend. I couldn’t agree more when it comes to
Bitcoin.
There are actually way more than five reasons I think this market is moving higher. With this
many reasons for it to go higher why wouldn’t you want a position?
If any one of the scenarios above plays out the market will take a huge leg higher. As I’ve said, I
see this as inevitable.
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