10/09/2021
Bitcoin will be Bitcoin and bucket shops will be bucket shops.
Stocks, options, commodities and forex are no different from crypto in that they are filled with crashes, skulduggery and scandal.
If you're in crypto you need two strategies for dealing with crashes.
Bitcoin crash
Yesterday (7th September 2021) Bitcoin crashed, and as I write it is spiking down again. As a bear this is no surprise to me, but it is a major shock to many bulls who are expecting Bitcoin to go straight to $100,000 without a halt.
Bitcoin is plagued/blessed with volatility and, make no mistake, if it did not have huge volatility, it would not be the giant brand it has become and crypto would not be the financial earthquake that is changing financial services forever.
Markets are casinos; gamblers love to gamble and casinos love gamblers and ensure that they accommodate the players in as profitable a way as they can. Stocks, options, commodities, forex, they are no different from crypto in that they are filled with crashes, skulduggery and scandal, and the gaming tables are the same... ‘come play with leverage, come play with stop losses, this could be your lucky day.’
Edwin Lefevre wrote the classic trading book in 1923 called ‘Reminiscences of a Stock Operator’ about famous trader/speculator/gambler Jesse Livermore. The ‘bucket shop’ scams of the time and the general trading environment around 1890-1930 remain basically unchanged today (…but, but, but think of all the regulation we have now…). Livermore was an incredibly talented trader that committed su***de when he lost it all, as traders are fated - by their counterparties and math - to do.
Leverage and stop losses are just one example of how market actors like ‘bucket shops’ drive your account balances into their account balances. All the same finance scams of hidden charges, Ponzi schemes, ‘pump and dumps’ and so on are still everywhere to be seen in crypto, stocks etc. Where there are resources there are predators.
So, a wild crash in crypto is to be expected and is perhaps even guaranteed. Take this phrase and write it like this:
So, a wild crash in ______ is to be expected and is perhaps even guaranteed.
Fill the blank as you see fit: stocks, bonds, property, the dollar, gold, junk bonds…. It will fit in just fine.
Crashing is what markets do.
Therefore, if you want to play in crypto, or for that matter in any financial market, you need two strategies for dealing with crashes.
Strategy 1) What not to do
Do not carry much leverage if any. If an instrument is volatile do not carry leverage at all.
Do not hold stop losses on another party’s platforms.
Not your stop losses not your bitcoin.
Hold stop losses in your head.
Keep them away from the price and round numbers.
Do not hold positions for no good reason.
Be prepared to hold your positions after a crash if you get caught and stuck in one
If you are certain a crash is underway, do not hold and hope, sell.
Strategy 2) What to do
Never stop searching out the next crash. It is inevitable. One BTC at $60,000 is two BTC at $30,000.
Buy the crash but only well after it’s happened and the dust is settling. This is the ultimate test of an investor.
If you must trade during a crash, make sure you can depend on your providers not shuttering you in or out when it matters most (as true in stocks as in crypto). If you cannot depend on your service provider do not play. There is no customer service during a crash.
A crash is a 25% drop in a dull asset but 50%-75% in anything spicy like crypto and 90% outside the blue chip instruments of a market.
What next?
Here is the chart: Pm me for chart
Bitcoin price chart bulls and bears
I’m still a bear but I think the recent rally is heavily driven by the social clampdown in China with Bitcoin and other cryptos a way of expatriating capital away from a developing authoritarian nightmare; a nightmare where even kids who want to play computer games can’t escape the boot of ideology. The impact of this new development may prove to be extremely potent and not in a good way for many, but for crypto it could be very strong.
However, without that tailwind or other geopolitical conniptions I would expect Bitcoin to go under $20,000 but markets don’t listen to me. Like with every call, you must measure your speculation against what transpired. I produced a similar chart a few months ago showing the bull and the bear trend like the above. I hovered to the bear trend as the move I expected, and up went Bitcoin exactly on the bull trend as if by magic. Speculation is just that, and you have to believe what you see not what you think.
The above trends will therefore develop, and I remain a bear.
What to do?
The golden rule is if you think you know, you don’t, so stop. If you know you know then proceed.
Specifically:
If you are a Hodl’er continue to dollar cost average in. If it really does melt down then perhaps drop some extra fiat in.
If you don’t know what to do and need to ask then sell and save your fiat for when you are certain of your positions
If you want to buy the dip be sure you want to hold because you might need to Hodl for a long time. If you are looking to flip you should wait because this move could go way lower.
If you want to trade, look to go against extreme moves but only when they make your eyes bug out. Make sure the platform you use won’t choke and can execute under extreme volume.
If you are looking for a re-entry - like me - this isn’t it (yet).
If you are a tyro trader, study every tick of this. Crashes are where the real traders and investors make their killings because this is where the novices lose their shirts.
What am I doing?
‘Hodling’ what little ‘unstable coins’ I have. I am watching out for what will look great value when this move capitulates while focusing on midcap tokens for now. If this is the big crash of this cycle, after it’s all over and a week or two later, I’ll be picking a portfolio from the rubble.
Bitcoin dropped another $1000 while I wrote this article and jumped $1000 while I edited it. The big take away is Bitcoin will be Bitcoin and crypto will always crash and moon and that is one of the reasons it will always be a huge brand fascinating millions.
Long term, Bitcoin will go a lot higher ???? but it will not be a smooth or short road.
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