Price Pressures

I HATE being a crypto trader. Which is why I’m not. So I guess I don’t have much to complain about since I’m not really a crypto trader. But the vast majority of crypto news is slanted for traders.  Really good articles are written and the conclusion is often a statement of how the article’s subject might affect the price of the market…. This makes it really frustrating and depressing occasionally to be in this industry.  Everyone is always focussed on price.  And always on Bitcoin price.  Why does the price of BTC each day matter to a HODLer? It doesn’t.

Crypto, and our people in general, are doing lots of good for the world.  I wish we as an industry would focus more on these things and less on the “price go up, and price go down” played out cycle.  Bitcoin price will always go up and down, get over it.

In fact, there is a really good recent documentary on the topic.  One I recommend everyone watch no matter their proclivities towards crypto.  It goes through the positive and the negatives very succinctly and explores nearly every angle to the majority of the main stories.

Cryptopia: Bitcoin, Blockchains and the Future of the Internet (2020) https://www.imdb.com/title/tt9203586

Anyone who wants to know about crypto must watch this.  Anyone who knows a little should watch this to expand on their knowledge base and anyone who is curious should watch this to see the world through a new lens.  It’s fascinatingly thorough and extremely easy to follow.  There aren’t people using fancy words to seem superior or people spewing negativity onto others, it’s a true, honest take on the most revolutionary new thing since the Internet itself. Most importantly, it’s very approachable as the technical details of what Crypto is are explained in plain english by the leaders of this emerging industry.

We as the crypto community should switch up the talking points because truly this is a new world with old world values.  Skipping the talk about value, price and trading shows a whole world of resurrection.  A crypto world where new ideas are being tested to solve age old problems more keenly and work on newer society norms has begun in earnest.  

Things like replacing an old stogie hijackable corporate entity with non-centralized efficient DAOs are now possible.  Additionally, a new NFT-based deed storage system is being made available for folks in third world countries to prove they own the land they have lived on for multiple generations.  Providing the means of financial self-sovereignty for so many who were previously unbanked is being accomplished.  Even the ability to track the lettuce in your fridge on a blockchain, all the way back to it’s seeding, soil conditions, and farmer with great detail to quickly learn and avoid mass contingent events, is also being contemplated.  Solving real problems is what I’m in this new crypto world to do – not to make people uber rich on the back of others.  We as a society tried that already and it didn’t work, so why would we expect it to work again?

Lets let the price battle leave the headlines and stay with the traders who need to watch it and move forward the discourse in a properly well defining mode allowing all to see the wide range of crypto influences already present.

Price as it’s seen by a HODLer…

If I were to own 1 Bitcoin now and don’t want to sell for another 5 years, why would it matter to me that it’s only worth $37,364 right at this moment and it was worth $69,420 a few months back?  Wouldn’t it only matter what it’s worth in 5 years when I aim for my first BTC sale?  Then you ask what will it be worth then?  Heck if I know, but I do know it will be worth much more than it’s worth this year.  It has to be or else the folks with a big bag of USD wouldn’t have bought it at all.

There isn’t any traditional asset I own that I am “supposed” to keep this close of an eye on.  Aren’t all US-based stocks supposed to grow and keep growing in perpetuity?  That’s the going thought in public discourse, right?  Newer highs are just right around the corner, otherwise no one would buy anytime.

I’m positive that HODLing is not a fast way to make a lot of money, but I believe this is part of a recipe for a healthier life.  I feel awful for the daily traders who set things up correctly and have a perfect trade layed out then BTC goes the wrong direction and forces them out of the trade at a loss.  This is the power of BTC and why all traders monitor its price movement so closely.

I don’t need to see all the USD I will spend in my life all at once nor do I need my accounts to always move upward relative to USD since I’ve switched to a BTC-based life outlook.  I’m happy letting a strong asset like BTC grow over the years and I work on gaining more BTC over those years. For me, I don’t like to buy it.  So I stack it via my bots.

I have several other crypto bags that I believe will be worth more than my Bitcoin over time, so why all the focus on Bitcoin?  Why does the industry bite down so hard when Bitcoin falls and why is it so exuberant when Bitcoin runs up?

The answer is very strange but relates to why I haven’t had to do much bot restarting this past week.  Also, it relates to why the week prior I was on my computer nearly all hours of the day restarting as markets bled lower.

Bitcoin and the Crypto Universe.

Cash used to be king and it still is, but I believe BTC has moved in as the queen.  BTC has a true super power and that’s why I believe all the focus is on it’s price.  ETH has the same super power but it’s not quite as pronounced since BTC still overshadows ETH.

BTC is still far below the USD market cap.  I doubt it’s even a blip on the chart comparing the both.  Yet as BTC goes up or down it affects all the other crypto assets in amazing ways because of the sheer volume of pairs involving BTC.  The true power of a BTC move sends a staggering ripple through any asset it trades against buying up or selling off the illiquid markets and raising or lowering market pairs a step in their long-term sideways channels.

These are the events that I use to establish the best bot lows and ride until the other side of the move and I switch things up to ride BTC up.

Why does BTC crash so quickly?

Many things go into a BTC crash just as many things go into a BTC run up.  It’s certainly above my pay grade to know and/or explain all the factors, but I believe the main one at this point is leverage.  It seems rather strange to most, but when there is hype and excitement in the market folks place BETs.  They bet a LOT on upward mooning activity and rather than putting their money where their mouth is, they use leverage to “borrow” money and bet with that.

A moonshot is a bet that whatever you purchase won’t fall below your price too far and will, in fact shoot, through the moon or go parabolic thus returning you many multiples of your investment.

OK, so it may make sense to place a leveraged moonshot just before an asset’s price grows exponentially but how and when this will happen is anyone’s guess.  So, when the market is excited and everyone is happy, folks start these long term leveraged trades and what folks don’t often consider is that an asset will go down quite a bit until it goes up….   And what if it just goes down.

Folks often overlook the rules and are overcome with the greed to succeed in the trade of their life – but when you bet with an exchange’s money they take collateral from your account to secure that bet.  I have steered clear of leverage for the very reason I’m going to explain here and I never encourage someone to use leverage unless they are a skilled crypto trader.

Liquidations drive crashes

So when a “bet” goes south it’s almost always because BTC crashes and pulls the rest of the market down.  Almost no matter the crypto asset.  This allows the exchange to liquidate an account (sell all of its assets) to pay back the bet plus whatever their fees are.

So as BTC’s price goes down, it pulls other markets down also.  A few markets trigger liquidations on some exchanges and that causes forced selling of general assets (BTC included) which pushes prices even lower and causes even more liquidation events.  This is called a cascading liquidation event and is almost always the reason why BTC goes down really quickly.  Ironically these can be seen in the charts before they happen and good traders are often ready to short the asset and buy back much lower.

If the good traders can make a gain when the market goes down, who is losing with the liquidations?  It’s usually new retail investors who go too far too fast with a basic understanding of crypto trading. 

If you take anything from this, just take your time.  Do one thing well and move on.  There’s no hurry – we are ALL still really early into Crypto.

With leverage there is a multiplier and the “loaning” is done by taking the initial investment and adding onto it up to 100 times the original investment.  So if I bet $1 that BTC is going up, the exchange will front the $99 other dollars.  If BTC goes down a percentage point I’d get liquidated.  I only bet $1 so I’d lose about $150 of my assets, but imagine if I bet $1000, that could wipe out years worth of gains in one silly bet or even close out an account completely and forfeit all the assets held on behalf of you at that crypto exchange.

Notice I say BET – because it is.  Gambling with crypto is dangerous especially when you don’t know what you are doing.  You are NOT gambling by buying and selling crypto (depending on what you buy and sell), but when you borrow money from a non-regulated exchange–and/or use leverage–you are gambling and I highly discourage it.

You’ll notice that the most recent BTC plunges were (percentage wise) less than in the past. I believe it’s because high leverage has all but been eliminated from being used in the industry.  The industry self-regulated this as no outside ordinance forced non-regulated exchanges to comply.  I believe the 100x and even the 50x leverage has all but been discontinued and, as a result, these cascading liquidations aren’t nearly as gnarley as they once used to be.

That’s not to say BTC won’t still do it’s thing (going up and down quickly) . Just perhaps not as quickly and not as drastically as previous years, only time will tell.

BTC Movement

So when BTC goes down it’s really funny. It depreciates against the USD and it affects the whole crypto market.  It’s so hard to explain this to a traditional trader, mostly because trading in the stock market is not allowed. 

Funny huh.

Trading is the act of providing one asset for another – so to me, for trading to be allowed I’d need to be able to trade APPL stock for AMZN stock and back without being forced to dip to USD in between.  The traditional marketplace where stocks are able to be bought and sold is not a “trading” marketspace, so classically trained “traders” on the legacy systems are unable to carry their understanding into crypto as easily.

Crypto is more like forex trading where almost every asset is changeable to any other asset either directly or with a well known path.  Ironically Forex is the trading of currencies and is akin to you going into your bank to get Canadian Dollars for a trip up north or Euros because their money looks cool lol.

Extending Crypto marketplaces from a traditional stock buy/sell platform introduces the concept of trading and as a result it’s possible to trade BTC for ETH, then ETH for AVAX, then AVAX for BTC without dipping into a stable coin in between.  This interconnectivity forms a web of pairs that exist on many platforms and most crypto assets are almost always related back to ETH and/or BTC.

The BTC Ripple

There’s a BTC rule one of my trading groups has and I paraphrase.  “When BTC goes up, most other crypto’s go up and when BTC goes down, most other crypto’s go down.”  This is also seen as a correlation, and certainly there are outliers, but in general the movement of BTC proceeds the movement of the other assets.  So a BTC quick crash is an indicator that other assets may move down quickly also.

Soooo, when BTC drops a ton all at once, there’s a bit of a ripple in all these other pairs.  It’s visible as a large influx of price either appreciating or depreciating, ironically the opposite of what BTC is doing.  So while perhaps the asset may be depreciating in USDT if BTC drops, nearly all the altcoins that pair against BTC rise in their relative BTC value almost all at once before they settle into a newer / higher trading range.  This is an anomaly that only seems to exist in crypto trading and I find this BTC downturn usually cements my bots in place for a longer amount of time as this price up-tick jolts bots against BTC that were trading near the low side of the grid up a little and perhaps enough to sustain it long term.

Since I have to re-do my monitoring system my only goal with my bots currently is to keep them running.  I’m not focussed on hunting the best bots since the bags I’m using are so small in USDT value now.  I have about 40 bot slots and I have to keep 40 bots rolling because I never know which asset will pop off when and I want to participate in the upside.  So as BTC goes down, my bots against btc go up – but my bots against USDT go down…

The UpSide

When BTC goes up, a similar thing happens, but because many other assets are going up also, the altcoin vs BTC charts start looking strange.  BTC is a beast as it’s very expensive as compared to most other crypto assets.  It can really only move a small percentage up or down but the monetary move is large.

For example a $300 move now is only a 1% move as the asset itself is over $30k.  But take for example the ONE coin, an asset around 19 cents now.  This is an asset that can move quite a bit of a percentage in a day.  Think it through, even if the actual gain is only 2 cents that’s more than a 10% move.  Pair these two together and a very interesting chart is born.

In the ONE/BTC pair and you’ll see that as ONE and BTC are both rising, ONE will be usually rising at a greater percentage which should mean that the ONE/BTC pair will go up.  Usually this is noticeable mostly for the coins under a penny and hence those bots against BTC are phenomenally rewarding.  Bots on coins between a penny and a dollar do well too in these situations.  Though large quantities of assets are needed in any of these assets to gain a meaningful amount of QUOTE.