Crypto bloodbath - stick to your strategy

It's a bloodbath out there, look at the picture.

Bitcoin is on the march again, up another 6.6% over the last 24 hours, to $1,677.81 (market average from Coindesk) and at $1,714.63 on Coinbase.

Two things tend to happen when Bitcoin goes on an upwards run:

  1. Everything else drops, see the attached chart
  2. There is no reaction

Okay, that obviously sounds stupid and reads as - when Bitcoin goes up, then anything can happen.

Bear with me, I'll explain.

I'll go with point 2 first - there is no reaction. I have only seen this happen a few times but happening more recently. I have taken this as a signal for increased new investment as usually, it is at a point where Bitcoin hits a significant price point, or there is major market news. For example when Bitcoin market price matched an oz of Gold (which actually means nothing, it was more of an emotional trigger) or when Japan legalised digital currency as a form of payment. These types of events lead to new money coming into the system; new money equals more liquidity which equals growth.

With point 1 - everything else drops, this is the most common pattern and occurs around 90% of the time. Since I started trading, I have noticed this pattern quite a lot. One of the things which drive this is that some the exchanges use Bitcoin as a trading pair, what this means is rather than trade money for alt coins you are trading Bitcoins, as such when you liquidate a position you are liquidating back to Bitcoin. When Bitcoin is rallying, people liquidate their alts to immediately join the Bitcoin run, if you get in early then great, most people get in too late, miss and are then stuck with Bitcoin at a high price, when they get back into altcoins they are even more expensive. There are many sad stories of people chasing markets and gradually reducing their overall investment portfolio.

The exchanges are full of immature, emotional investors, you only have to read the chat logs where people are panicking, selling at a loss only to regret it later.

Another key thing which drives this is margin trading. Margin trading is where you leverage a trade for multiple returns, equally if you get it wrong you face a multiple loss. Margin trading is highly risky, involves borrowing money you don't have, means more risk, means emotional decisions. Margin trading has another risk too, some of the exchanges crash when the markets are going crazy which means you can't close a position and get stuck holding the bag.

I will write more about margin trading another day...but for now, repeat after me "I WILL NEVER MARGIN TRADE". I repeat, never margin trade. I used to margin trade tech stocks and lost a lot of money, I will never do it again, to me, it is the same as borrowing money to bet on the horses. Most people lose margin trading, it is a market instrument which the exchanges love because they make so much from it.

Again, repeat after me "I WILL NEVER MARGIN TRADE".


Early on, when the majority of my investment was in Bitcoin these market movements were never an issue, now I hedge the market and am more invested in altcoins it affects my portfolio. I am down 10% today. 10% is huge right? But I am not worried, I haven't reacted, I made a cup of tea and carried on my same routine. Why? There is always a bounce, and as I keep saying I am investing in the market.

And markets never go up in a straight line!

The question is what to do when the market does this. I see two choices, firstly play the market or secondly follow your strategy. If you want to play the market, the signals are always there, once Bitcoin has a dip, and you can see an upwards march coming, you usually have a day to liquidate your alts into Bitcoin. Equally, once Bitcoin hits resistance, you can reverse back into alts.

The second choice is a strategy, mine always being to hedge the market, believe in the tech, have a good spread and a few small speculative investments. I am always tempted to play the market; I am getting better at reading it but still don't.

A strategy has worked for me; my portfolio is up 225% this year. I recommend the same for anyone. Playing the market is tough, and you are up against unknowns, that said, there are small opportunities:

  1. When a dip happens it can be a chance to pick up cheap altcoins, for example, I think Ethereum and Dash are cheap today. That said, I wouldn't buy Ripple because I am unsure of the tech.
  2. It is also an opportunity to make a few small speculative price investments on small altcoins because they tend to take the biggest hits when the market turns, usually because they have a high proportion of smaller retail investors (greedy gamblers).

My biggest piece of advice though is not to get too emotional and try and chase the market. When you chase, you will likely lose, come to an opportunity too late and keep flipping on the wrong side of a market movement.

If you are new to crypto investing, then I suggest you just sit on the sidelines for a couple of months. You will start to get a feel for what happens; you will see the signals and then you will be able to make small smart changes to your portfolio which will allow you to gain a small margin increase over the total market movement.

In conclusion:

  1. Be patient
  2. Don't chase the market
  3. Don't day trade unless you really know what you are doing
  4. Don't get emotional
  5. Never ever fucking day trade

Funny side note, during the time I have taken to write this article my 10% portfolio drop is now only 5%, I expect a full retrace by the end of the day.

Any questions please ask. As I keep saying, do not get emotional, do not invest money you can't afford to lose and only invest in things you understand.

Big love x