Looking for patterns

When trading crypto I am looking for patterns. I don't make many trades; as mentioned previously my strategy is to find coins I like, buy and hold. Still, with volatile markets, there is always the temptation to panic and sell when a price drops heavily.

The market last week was one of the most active I have seen, I believe this was mainly driven by the legalisation change for crypto in Japan and the increased liquidity in the market.

Through active periods, with either the whole market or an individual coin, you will usually see a dip after major gains, rather than try and play these dips I just hold through them. I always worry that if I call a drop wrong, my re-entry point will be much higher.

One interesting pattern from last week was the end to the seesaw price movements of Bitcoin v Ethereum; historically, when one was up, the other was down and vice versa. This was really due to traders moving balances between coins.

The recent bull run has not followed this pattern, implying increased money into the market, likely institutional investment, hedging across both. With Bitcoin hitting new all-time high prices and Ethereum marking out a place for itself as the clear 2nd placed cryptocurrency, the volume of news on wider financial and consumer news sources is driving wider awareness and interest. The chart shows from Google Trends the growth in searches for both Bitcoin and Ethereum. Google Trends is a great resource for validating bull runs.

With such a big gains last week, I was interested to see what would happen this weekend, I expected a dip across all coins but noticed something which might prove significant. For reference, I track two things separately on a daily basis, my total portfolio performance and my trading account for smaller altcoins.

Both accounts followed the same pattern all week apart from on Friday:

  • Total portfolio down -2.33%
  • Altcoin trading account up +3.18%

What I read into this is a couple of things:

  1. There is an increase in liquidity in the market and for me, the weekend drop of the major leading coins was due to weekend profit taking. This is regularly seen with crypto on a Friday afternoon and really is only ever driven by professional traders.
  2. There is a clear increase in investment in smaller altcoins. I think this is due to in part to FOMO (fear of missing out) on the next big thing, picking the right next coin can see massive returns. You don't tend to see profit taking with smaller altcoins, my guess being institutional investors tend to hold, and retail investors tend to trade weekends too.

What does this mean for me? Not too much really. I am still not sure whether we are in a bubble and I am watching the market closely. For my major coins, I am going just to sit and wait.

I am going to pay more closely to the smaller altcoins; some real gems are starting to emerge. Syscoin, Stratis, Siacoin, Counterparty and Bitshares are all flying. I may start diversifying some of my investment across to these. I am spread across 24 smaller altcoins which I may consolidate down over the next couple of weeks to a personal few favourites. While a good spread allows me to hedge across them, tracking each coin intelligently is hard work.

 Any questions then please give me a shout.