Ladies and Gentlemen, Start Your Engines!

Won’t I look foolish if Bitcoin is going down again when this blog is read? Still, imagine for a moment it’s Monday, March 28th. 

Almost at once, all my assets started taking off.  Some seemed to have more gas in their tanks than the others, but hardly any were driving backward.  From my experience, this kind of universal green is rare and only seen before a melt up on crypto. So, ladies and gentlemen, start your engines for what could be a wild ride.

Crypto Runs

When crypto runs it tends to follow a predictably volatile pattern.  Unlike the stock market, a new class of data is available that is viewable in real-time.  Most crypto transactions make it to a blockchain and most blockchains are transparent.  As tools are created to consume this blockchain data, it’s far easier to understand super complex situations as they are quickly changing.

For example, you can follow the money.  Traditionally, the first money into a crypto run focuses on Bitcoin, Ethereum, and perhaps some legacy tokens. During this time, we see other layer-one coins like SOL, AVAX, and LUNA also gaining considerable market share.

This action usually increases the price on these assets first and temporarily sinks the new money into the main coins— only to be partially pulled out the other side into altcoins.  This pull and push of a main coin like BTC and ETH has been universal in the past few crypto runs.  During this run I think we will see similar network effects play out more drastically with believe SOL, AVAX, LUNA, and even ADA.

It’s basically large amounts of people and companies buying into the market either all at once or over time.  Say you have an extra 10 billion dollars like Terraform Labs founder and CEO Do Kwon.  Terra Labs, the creator of LUNA and UST, has announced it will buy 10 BILLION dollars of Bitcoin for the UST reserve, starting with a 135 million dollar purchase for the Terra Luna UST treasury.

How do you do that?  Well, you can’t buy all at once because there aren’t enough Bitcoins selling at a reasonable price.  So, you must do something called Dollar Cost Averaging, which is buying in smaller amounts over time.  For Do Kwon, a smaller amount is 135 million dollars, but a proper DCA can start with as little as $10.  There are many tools to do this, and I recommend everyone set up a small DCA into BTC and perhaps also into ETH.  It’s never too late.

Right now, there is much more liquidity trying to find its way into crypto from the private sector. Likewise, the equity funds with capital aim for BTC since analysts consider it bottomed out.  This situation should make for an interesting second quarter!

Recently, de-banked folks in Russia, Ukraine, and Afghanistan are purchasing more Bitcoin. As a result of these and other factors, this surge is creating a wall of money heading towards crypto.

Next Steps

First, Bitcoin and Ethereum will run; they are too intertwined to move alone. Then altcoins will start moving.  Many altcoins have low liquidity—meaning not many people are buying and selling them— leading to rapid melt ups.  It’s believed that ETH will race farther than BTC as the multiples left in ETH appear to be far greater in the short term than BTC.

I feel a bit like a weather person here when I say it seems as if the conditions may exist for a “melt up.”  A melt up is the opposite of a “crash flash,” where upward movement is exceptionally fast rather than an asset price going down really quickly.  This movement is sometimes called going parabolic or “mooning.”

Although this market climate is uncommon, it looks like something I have seen before a few times.  Each time I saw it, it led to a push for a new BTC high. And the last time I saw this was the start of the push up to Bitcoin’s current new high, over $69k.

I make these comments not because I’m prophetic but because I follow many intelligent people.  I have learned that the closest you can come to understanding an asset class is to embed yourself with the traders of the assets themselves.  Within crypto, those folks understand how money and wealth work.

The traders employ a few strategies, and some follow the “smart money,”— meaning they invest where the successful hedge funds invest.  Others follow sentiment and look at charts with the number of tweets or searches on a particular coin over time.  This information is helpful for many reasons, but a macro vision isn’t usually on these folks’ minds.  Short-term gains are what a trader wants, and the volatility of crypto provides an easy canvas to paint gains on.

Then you have HODLers who buy, hold, and enjoy life, not worrying about price.  Underneath it all, I’m a HODLer.  My long-term strategy is derived from following another type of professional— economists.  Economists are those who understand the historical significance of where we stand now as a world.  Many folks believe that several long-term cycles are currently overlapping and causing a lot of uncertainty, whereas crypto provides a non-governmentally surpressable escape valve for capital.

This idea moves us into several theories beyond the scope of this article. But in general, economists are closely watching to see if there is any blowback for the swift kick out of Russia.

What does this have to do with Bitcoin?

Bitcoin is money that is free from government intervention.

It’s hard to say to someone who doesn’t yet understand, but folks who want the ability to transact on their own are sometimes prevented.  Like the folks escaping from Ukraine— their banks haven’t worked for many weeks, so how do they get their money to follow them?

These large political and economic waves all coming simultaneously in history is the recipe for a Super Cycle.

Or, this could be just the second leg of the current bull market since we haven’t officially turned bear.

Super Cycle

To clarify, a Bear market is when the market is trending down with lower prices.  Conversely, a Bull market is if the prices are rising.  I won’t bother you with the technical details of confirming these trends—but just know that bull is up and bear is down.

A super cycle is an extended bull market.  Some super cycles can extend a bull cycle slowly over a decade.  I’m certainly not saying we are or are not in a crypto super cycle, but signs are pointing to yes.

For a trade to be completed, a buyer and seller coalesce on a price, and then the quantities exchange accounts.  So, to buy BTC, one must be selling it.  Because we can see into the blockchain, we know that the amount of BTC available on exchanges has been shrinking by a large percentage for the past two months.  Folks who bought a LOT of BTC over the past year have been moving them into large wallets to HODL.

Also, since we can see inside the blockchains, we know when folks move large amounts of crypto, and the amount of stable coins being deposited into exchanges continues to grow.  To most of us, this action signals more dollars are readying to buy less BTC, which should also contribute to upward movement.

This potential price increase makes sense because we appear to be on the cusp of adoption as more than a few legacy municipalities and companies take crypto for payment for their services and products.  At least one nation and perhaps 2 or 3 in the next few months should have BTC as currency or on their balance sheet.  And there still won’t be any more BTC than there was in 2009.  So once again, there’s a lot of money waiting to buy, but not enough BTC.

With only 21 million Bitcoin available, each millionaire in the USA can’t even have one whole Bitcoin.

I believe many deep pockets want into crypto, and with each new purchase, wealth moves from the legacy FIAT system into the newer Crypto asset class.  Each appreciation of an asset means that more wealth supports the community, allowing growth by leaps and bounds. Some call this process hyperbitcoinization, which will let Bitcoin help crypto grow larger than its three trillion-dollar market cap high.  This growth occurs not only because of the money but also because the people behind the money want to get involved to protect their investments.

Crypto has no short on ways to get involved!

I feel this trend is the start of a stair-step stacking of permanent market share into crypto assets.  I think this means that many of the small-cap coins will turn into large caps over these next few months as Bitcoin and Ethereum battle for the title of King.

Ethereum, remember, has a significant network effect since most all defi assets are still connected to ETH by trading pairs. And, of course, nearly everything is connected with Bitcoin via trading pairs.  Therefore, as the value of ETH and BTC increases, the real assets paired with them are lifted as well.

During this next leg of what I believe to be a super cycle, I expect Bitcoin to progress slowly but steadily—a few steps up and one back down, then a few more up and another back down.  This characteristic is healthy and advantageous in a novel asset class like crypto.  Don’t let anyone tell you otherwise. Volatility is how gains are made via trading, botting, or even HODLling.  Volatility culls the “weak hands” and replaces them with “strong hands.”  Strong hands will not sell at the price they buy into, so they mark it up and wait.

I think I have prepared my investments to ride this wave correctly. I just wish I started with more crypto in my bags.  But, the small bags have already grown, and with Bitsgap and Pionex, I’m able to set and forget these bots as most are already surfing along.  It’s just a matter of monitoring and restarting the bots that aren’t productive anymore.

When I wrote my original “Catch a wave” article explaining my strategy, there weren’t any visuals to explain what I saw in my head.  I had seen these in the past during the last leg of this bull run, but none of those spikes were really that pronounced as the starting point was mid-range.

Botting Benefits

I wanted to cut through the noise and show you the signal, and in this instance, it’s a showcase of my strategy.  It’s the details of how I see the market in four dimensions. Over time, quoteless bots should be investment vehicles, run in perpetuity if you get the proper buy-in to start your bot.

I can see the charts showing the price over time and the volume on both piles at each price point.  I have to look at a chart and imagine what it could look like in a day, week, month, year.  No, I’m not clairvoyant. I watch the same signals that a trader watches, but I don’t buy and sell. Instead, if an asset is predicted to increase in value, I start a quoteless bot.  I then restart as many times as possible (without losing my base crypto) to follow that trading pair down to the lowest point. Eventually, the bot will take as the trading rises from the bottom of the grid.

During the crazy low points of the market, I was restarting bots so frequently I went a little insane.  I was approaching 100 bot restarts per day, and it was depressing to see all the red and read all the negative FUD (Fear, Uncertainty, and Doubt).  I watched as assets depreciated from $500 to only $50 across all my botting bags and listened as news about crypto turned into fear-mongering.  But I reminded myself that I’m a HODLer and not a trader, so this is NOT a loss unless I sell.

Of course, I sold some because I was impatient and short-sighted. And as usual, the ones I sold went on to show substantial gains even though I sold them at a loss. Oh well!

I want to share what “riding a wave” means because I can now demonstrate it.  When I think of a wave, I think back to a sine wave— the elongated sideways capital S you probably remember from high school.  If I were to start my bot on the bottom of the middle of the S, I could ride it to the top.  This movement forms the trading channel. And when an asset goes sideways, this is what usually happens.

Trading inside this trading range is common, so a bot can remain in action so long as the entire trading range is inside the bot.  If the asset falls out the bottom of the sine wave, I verify the base assets are returned and close out the bot.  A proper mechanism to trail up is enabled if the asset appreciates above the top of the trading channel.

I want to illustrate a few points in the graphics below and focus on the strategy, so I removed the pairs and prices from the images.  As you look at each picture, focus only on the movement of Green Buys and Red Sells that lead to making a few pennies or sats with each round trip.

Just Started

Here are a few bots that have just begun and haven’t moved above or below the trading grid. You’ll notice red and green lines across the chart, which indicate where I have my buy and sell orders for the grid bot.

Getting Ready to Trail Up

The goal of a bot with the trailing up feature is to follow the asset’s price with enough wiggle room to afford reasonable price movement without leaving the bot range for too long.  As these bots approach the top of the grid, they enter what Bitsgap calls the “trailing” mode.  Lower buy orders are relocated upwards in the bot to accommodate an expansion of the top of the grid to follow the asset price.

Moving On Up

This graphic shows trading below the grid.  These are examples of bots that have trailed up already.  These are the onesI start with that aren’t worth much USDT, and by the time I end, the bot bag has grown in USDT value quite a bit because of this upward price movement.  Therefore, all the trades going up this grid get more profitable.  Where I may have only made a penny or two on the bottom of these bots, I might make 3 or 4 pennies on the top.

My goal is to keep these bots running forever and keep my BASE HODL assets as well as the gains they make.

Sideways Markets

Not to be overshadowed— a sideways market is an outstanding botting market.  The above graphic shows why.  It’s a steady income that does not need monitoring. This particular case appears to be making higher highs and higher lows, showing almost all green. This situation indicates it’s probably making a new bottom.  Who knows.  All I know is my bot is set, so I don’t need to do anything else for a while on this one.

The Break Outs

Ideally, you want to start quoteless bots on depreciated assets to warrant a significant upswing like the example below.

In both cases, I started the bot at critical technical levels.  If you are a trader, you’ll recognize this as a point where the asset could break out;  In these cases, they broke up, not down.  I look forward to seeing if their upward momentum continues.

The ‘S’ (Super) Cycle

The following two graphics illustrate a perfect example of the “S” strategy.  I started the bots on what I thought would be the bottom of the middle of a sideways S.  I enabled bitsgap’s trail-up function and let it roll.  The bot has already moved up quite a bit, which means my asset is now much more valuable— adding to the returns I receive on my bot as each round trip gets more lucrative.

I know you can’t see a clear S, but if you follow the line, it kind of makes an S. Notice that I started the bot at that bottom part, and it’s risen.  This is NOT by accident.  I pick my botting pairs for a reason and restart them ad-nauseum until I get the best bot bottom. This strategy is necessary because the closer you get to the bottom, the higher the volume.

Pretty

Sorry, I just think they look cool.

Now, as I sit and wait, I don’t have much to do other than replace underperforming bots.

Underperforming Bots

I’m starting to devise a way to compare bots because I can use several comparison factors that make sure all my running bot slots are maximized. I think I have winning bots on all but two slots, and I want to make sure I get the right bots to maximize my gains.  To arrive at my conclusions, I had a few elements to contemplate—- these are the same factors you must also consider.

Volume

First off, pick a pair on an exchange with lots of volume because large volume offers more opportunity for trades.  This process is as easy as going to coingecko.com and sorting by daily volume. Or, it can be as tricky as anticipating project trends, such as when an asset will get “hot” or when folks may “FOMO in.”  I start a bot on hot trends because the volume isn’t there yet, but it should come as the marketing campaigns hit the mainstream.

Price

It’s bizarre to write this, but there is far more money to be made botting in assets worth less than a penny.  The reason is simple—people are “quantity challenged” and don’t understand that it’s far better to own a smaller portion of a more solid asset than a more significant amount of an “iffy” one.  In my case, I have all these layer-one coins I bought way below a penny, like ZIL, VET, and ONE.  I bot with them all; however, ZIL is my favorite!

Quantity

The more quantity in your bag equals a larger increase in value—sort of.  I figured out this fact a while ago, and it’s why I don’t get depressed when I see a $500 bag decrease to $50.  I know that the inverse is possible with the right circumstances.  I want to keep my large quantity bags no matter what because as those assets appreciate and I bot with them, the returns per round trip get better and better. When the trade nears the channel’s top, it bursts out and trails. This action makes the value of the bag grow.

Daily Percentage vs. Actual Gains

Lastly and most importantly is monitoring the daily percentage gain and the actual daily gain.  I may be making 1% a day on a bot, but the bot started with $50 worth of assets, so my 1% per day equates to only $0.50 on that bot.  To me, that’s not a bot worth having unless the signals point to it appreciating quickly. In this case, I want to catch the move up since that’s when the bots gain quite a bit of QUOTE.

On the other hand, if I’m only making 0.5% per day on a bag worth $1,000, it might seem too small. However, that’s a whole $5 per day and could be a keeper depending on the asset.

Status Update

A few days after I wrote the intro to this article, many of my bots started doing amazingly well, and I’ll share details in a future update.  But I want to point out that I have only restarted about ten bots this week.  Amazingly, I freed up my life to do other things while still retaining active investments.

I only hope my plan to set and forget works because I believe this long-term uptrend is here to stay. Even if there are down cycles on specific markets, it should only provide an off-ramp to recover my BASE and realize the QUOTE gains— so bring it on!

The only nagging question in my head before I tell the world about this is if the stats are correct.

I don’t mean am I losing money or making money because I can attest to the trickle of new assets. I mean, am I making the same money that these Kucoin, Bitsgap, or Pionex bots say I am?

As we always say in crypto: “don’t trust, validate.”  This is my next goal—VALIDATE these gains. I need to wait for one of my round two bots to finish to accomplish this task.  You see, I had a plan from the beginning to step into this botting game.  I didn’t want to invest a ton of money and time if it wasn’t worth it.  I set up stages, and I needed to reach certain goals to consider a phase complete.  Then and only then do I move to the next step.

The first stage took about 18 months. That was when I learned all of this information and formulated my strategy. And yes, I lost a lot of crypto in the process, but I learned a ton.  

Stage one’s goal was to learn how to apply Warren Buffet’s trading rules to my strategies so I could continue to phase two.  Warren Buffet famously said, “the first rule in trading is don’t lose your money, and the second rule in trading is to see the first rule.” Once I could run a smaller bot and see it come out with the same amount of BASE that I started with, phase two was born.  

Phase two is moving on to larger bots; I began this phase a month or two ago.  I haven’t completed a valid test bot in phase 2 because the markets continue to climb slowly. These slow but consistent moves are okay because they make quite a nice return.

Once I get confirmation from the first few bots, I’ll expand my bot army to include more of the larger bots. With the power behind my expanded ranks, I should be in a better position to turn this over into a proper, full-on investment mode.

Stay tuned!