Altcoin Sidekick

Speculating in cryptocurrency is not about being right or wrong; instead, the most successful speculators and investors, focus on recognising the moments in time when supply and demand become unbalanced, creating asymmetric trading opportunities, where risk can be quantified, and, even if the position fails, valuable information can be received about the most likely future direction of the trend.

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If you want to invest not over the next hour, day, week, or month, enjoying the benefits of a short-term pop in price, history suggests those who understand the drivers of long term trends, detecting societal shifts whose effect will last not a month or two but years, hold an advantage.

In an era dominated by fake news, in an age where the general public is rapidly losing faith in their governments, and in an environment of rising populist thinking, something needs to be done. A solution needs to be found — the only question is: Are blockchains the solution?

As Bitcoin approaches a fibonacci 38.2 retracement, a level closely watched by technical analysts, let’s talk about the drivers behind long term trends.

The banking system is using a technology that’s 45 years old. The Ripple protocol, using XRP, is designed for faster, almost instant interbank payments, disrupting the global interbank system, but the SWIFT cooperative is not just going to let a new technology like Ripple takeover. FinTech banks are challenging traditional banks, offering app-based services, including multi-currency accounts, and the ability to buy and sell fiat currency at or near the actual exchange rate. But what if you want to interface your FinTech bank account with cryptocurrency assets?

With debt levels at record highs, the likelihood of a massive shakeup of the financial system increases. As consumers own higher levels of debt than ever before the likelihood of a six sigma event increases. Out of a future crisis, will blockchain technology emerge like banking, bonds, and stocks, as the fourth great invention of finance?

The tendency for the worst news to coincide with the end of a down move and the best news to coincide with the end of an up move has, like the slope of hope and the wall of worry, been turned into a handy aphorism. It shows up in the stock market, the forex market, the bond market, in fact, all liquid financial markets, including cryptocurrencies, exhibit this behaviour - even real estate.

Maybe, you just intuitively understand the role cryptocurrencies and blockchains will play in the future, but in the absence of engineering or tech skills, and, if you're not a futurist savant, where do you start?

Can cryptocurrencies be used as proxies for the strength of the underlying trend? Speculators have, over the years, tried many approaches to being on the right side of trends, using ideas and techniques ranging from technical analysis to esoterica. They’re all opaque. Traditional financial markets are a discounting mechanism operating in a window between six and eighteen months into the future. So, if TA has limited forward vision, are there other methods you could use?

If the cryptocurrency market has bottomed, hitting the trough of disillusionment in December 2018, then, what is more likely to drive cryptocurrencies forward in the future? Complex bolt-on bionic parts to boost existing blockchain limitations, or could it be something you’re already familiar with?

As the usage of cryptocurrencies increases, especially cryptocurrencies designed to be used as digital cash and payment systems, have governments been given a free case study on the power of data profiling? And, if governments use blockchains as the technology for cashless societies, because of the ability to track and trace every single transaction, will the profiling of social media accounts by Cambridge Analytica look like child’s play compared to the picture the government will have of not just you but of every citizen in your country?

A casino floor covered in slot machines is not a bad metaphor to use if you had to guess which, out of thousands of coins and tokens competing for the big time, will be the household names of tomorrow. One pragmatic approach is to follow the money. Out of the thousands of potential choices, around 95% of the total volume in the cryptocurrency markets flows into the top 20 coins by market capitalisation.

Out of distrust in centralised financial systems, came Bitcoin. And from Bitcoin, blockchains. In the future, what if blockchains are used for something other than their original intent? Could a solution to a debt crisis, an idea born to democratise citizens control of their assets, be used as a system of control? With the public long gone, is this why the big players are interested in cryptocurrencies?

Poker has a lot in common with financial speculation, and as the great Amarillo Slim said, “If you can’t spot the sucker in your first twenty minutes at the table, you are the sucker.” Anytime this is pointed out to someone, they’ll tell you it doesn’t apply to them, unaware that the subconscious patterns that manipulated them in the first place are hard at work behind the scenes protecting them from themselves.

Just like cryptocurrencies, personal computers went through a boom. If you could travel back in time, imagine taking a seat at the inaugural meeting of the Menlo Park Home Brew Computer Club, where enthusiasts were busy programming, designing, and dreaming. Sitting there, in Menlo Park in 1975, would you recognise the man who would be king?

The biggest problem with technical indicators is not the indicator itself, but you. Human beings are pattern recognition machines. Subtle shifts, changes in light or sound, and our fight and flight mechanisms kick in. This kept you alive in our hunter-gatherer prehistory, but it does not serve you so well when looking at patterns or shapes on a chart.

Consistent speculators approach the business of market speculation, just like a building company, who price bids according to their expectation of success, factoring in lost bids because they don’t expect to be awarded every bid they make. Before the 5% engage with the enemy, they have studied the lay of the land, and know the expected cost. Like the building company, the 5% know without reasonably accurate expectations, they have little chance of remaining in business.

A cryptocurrency wants to muscle in on the most valuable business model in history. How big is the potential, and what problem is this upstart cryptocurrency attempting to solve?

The 5% understand controlling the order flow is a complete waste of energy and effort, and it’s mentally draining too. The 95%, in contrast, have not yet figured out that anything can happen at any time and that controlling the process is impossible, like trying to hold back the tide.

The inconvenient truth: Most people new to the world of speculation and trading start defining trends with indicators and signals from the past. They don’t take the time to learn why trends begin, how trends move through time, and how they end. Technical analysis is often used to show how easy it is to be successful in hindsight; however, the reality, for most, is different when they attempt to use a TA system in real time.

Instead of spending time on social media, reading articles, on what may, might, or could happen, instead of dropping thousands of dollars on trading systems and indicators, are there any lessons out there, hidden in plain sight, in the last place you’d ever look?

In any risk-based endeavour, the majority of participants waste enormous amounts of time, not to mention mental energy, searching for something that does not exist - the risk-free trade. Currently, at coinmarketcap.com, when you view all coins, you’ll see a list of over 2,000 coins and tokens to choose from. Outside of the obvious industry leaders, like Bitcoin and Ethereum, how do you decide which coin or token to take a position in?

The cryptocurrency markets may be in a downtrend, but the internet is abuzz with articles promoting news or comments from the industries leading lights. But most of the articles are just regurgitated comment and quotes pieces with little nutritional value for readers wanting to build up their knowledge of the crypto space. The majority of crypto buyers get caught up in the hype and are influenced to take a position, not with their own analysis, but by the opinion of others. The problem is, what happens when a position doesn’t behave the way you expect?

In 2007, when Apple released the first iPhone, Symbian was powering an estimated 125 million mobile phones. Nokia used Symbian to power its smartphones until 2011 when it changed over to the Microsoft Windows phone OS — another potential market-leading product that did not live up to early expectations. The first generation of mobile computing products, Apple’s Newton and Psion’s Psion 3, both failed. It’s not easy, without the benefit of history, to figure out the new technologies that will succeed and the ones that are destined to fail.

Social proof is used with many other sneaky tactics to elicit some kind of response from the person, reading, watching, or listening. Some people make investing and speculating in cryptocurrencies more complicated by thinking they will gain an edge if they learn how blockchains work. An increasing number of professional money management businesses now use investor psychology quantitatively as a tool to evaluate probability.

Sentiment, in late 2018, is at the opposite end of the scale from the euphoria surrounding Bitcoin and cryptocurrencies a year ago. In December 2017, the only way was up, and valuations for Bitcoin was (on the cautious side) $25,000, and on the less cautious side, half a million plus. Then, as the cold light of 2018 dawned, things began to change.

As Bitcoin matches the prior percentage drops from three previous price bubbles, the underlying Bitcoin network is showing an increase in wallet users, matched with an increase in the number of transactions, and the computing power of the Bitcoin network is over 150% above the levels at the beginning of the year. With Bitcoin's price action juxtaposed to its underlying fundamentals, the 5%, the most consistent speculators and investors, don’t search the internet in search of opinions in alignment with their own. They grab a stethoscope and observe Bitcoin’s vital signs.

How do you measure your performance? In terms of what? Throughout history, gold has been used as both a store of value and currency of exchange. Today, society has placed its trust in centralised authorities. We measure our wealth, or net worth, in dollars, euro, pounds, yen, or other local fiat currency. Investors and speculators don’t measure their net worth in Satoshi’s or Ether, ADA, or Stellar, the biggest change will come when this is no longer true, but for now, net worth is measured in fiat currency. The question is — How can you protect fiat currency inside the cryptocurrency ecosphere?

Is Bitcoin a store of value or a digital currency suitable for everyday use? How do you choose between Bitcoin original with SEGWIT and bolt-on performance boosters or Bitcoin Cash? Which version is going to be successful, and, in a factoid filled world, how can you make sense of the madness — especially if you’re just starting out? A recursive dive deep into the technical abyss, or take a step back and ask two simple questions.

Is Bitcoin a store of value or a digital currency suitable for everyday use? How do you choose between Bitcoin original with SEGWIT and bolt-on performance boosters or Bitcoin Cash? Which version is going to be successful, and, in a factoid filled world, how can you make sense of the madness — especially if you’re just starting out? A recursive dive deep into the technical abyss, or take a step back and ask two simple questions.

Take a step back, and keep it simple. Ask — Is the technology in alignment with government agendas? Is it more likely that sovereign states will allow you to control the buying power of your own money, or is it more likely that government agenda (and businesses who own patents on technology) will support a blockchain designed to keep data safe, scalable, and future-proofed against the potential of a paradigm shift in computing power?

If you’re interested in investing in blockchain technology, how do you make a choice? Is it possible to take a fair guess on what the future will look like, and is it still possible if you don’t possess any technical computer science skills? Which technology do you back? What has the greatest chance of making it? If you buy for the longer term, how do you know if the investment you make has a shot at the big time? Is your investment idea at the start of a new trend or is it experiencing a sugar rush?

The 5% Club don’t waste time trying to unravel the technobabble. Instead, they go in search of a toll bridge. The most successful and consistent speculators and investors respect the technology but know understanding how the technology works is not going to be of much use. It’s all about context. You may read about a particular feature of a blockchain or cryptocurrency, but unless you can understand the advantages and disadvantages the information is next to useless. If you’ve not got a technical background, and find the technical material on blockchain technology not just overwhelming but incomprehensible — don’t panic. It’s not the disadvantage you might think it is.

On the 11th October 2018, Bloomberg announced Coinbase’s active customers have dropped by 80%. If you look at the recent action of Bitcoin and the leading cryptocurrencies, you’ll see that the crowd has packed up and left. They’ve moved on the next big thing. Where have the crowd gone? Are there any potential triggers that will drive the public back into Bitcoin and blockchain investment?

Transport yourself back to 1995. Imagine you’re sitting in a cafe — not a coffee shop. (This was before the trend of coffee shops replacing pubs) You’re listening to a group of young computer software engineers talk about their vision for the future of computing. One guy stands up and starts with this… “What if the computer of tomorrow was held in your hand? A device you took with you everywhere. What if the programs were colourful icons, like jelly beans you clicked with your finger? And what if they were everywhere. Inside the bus, even on the side of the bus, at work, at play. Everywhere.”

After they have an inevitable string of losses, the 95% start to fiddle with the indicator settings. They back-fit the settings that produced the best results in the past, and they stack indicator after indicator onto a chart expecting to find the magic combination to unlock the success they’re so desperate to achieve.

If you want to buy the next Apple, Microsoft, Amazon, Facebook, or Netflix for pennies on the dollar, you’re going to have to take risks. The 95% think the value of an investment is reflected in the price. They compare the high price of $3.32 to the low price of $0.245 and consider $0.57 as cheap. f you’re going to sit around the table with the global elites, it pays to know what they know. And they know this: it’s not about price; it’s about value.

The majority of traders, the 95%, place their focus and energy into trying to be right. It’s their first major mistake. This is one reason why the 95% spend so much time searching for the perfect system. It’s why they invariably give up on a trading system because they are disappointed with their results. A lot of traders look to complex solutions, like using trading bots to make their trade decisions, because they are time-starved and they’re sold on the idea that automation will solve this problem. Often though, it’s because they want a fast solution to their real problem.

The 95%, not being entirely clueless, have taken courses on technical analysis. The 95% are taught changes in momentum precedes changes in price. They are trained to use moving averages and moving average based indicators. Indicators based on the relationships between the open, high, low, and close of each bar or candle. If a move backed by an indicator signal and a positive comment from a respected guru doesn’t work, the 95% attempt to force the chart to fit their beliefs. And before long, they’re lost at sea.

If you ask simple questions based on the evidence of what is actually happening, you’ll be able to adjust your expectations on the likelihood of Bitcoin regaining its title as the hottest game in town or imploding and continuing its descent. By asking the right questions and adjusting your expectations, you’ll be able to spot the windows in time where Bitcoin tips its hand.

Turning up to a gunfight with a knife in your hand is not a good idea,(unless you’re Britt from the Magnificent 7) but the 95% do just this when they jump into a market with little planning, dreams of avarice in their heads. Being aware of what you’re up against is half the battle. The other half is mastering your emotions. Begin your journey towards 5% club membership by flipping your mental focus away from profits and towards risk.

The 4th dimension is fear, and if you could measure it, you could gauge the panic level in the market. If you could gauge the level of fear, not in decibels, but in how much price movement Bitcoin is likely to move in the future, it would give you a way to measure the fear. And if the level of fear is at an extreme, just like the screams and shrieks from an old-school squawk box, it means that traders are trapped — if prices reverse.

Trading and investing in cryptocurrency markets has the potential to change your life. It has the potential to give you access to a commodity almost everybody wants, but so few people have. The freedom to live life your way. Beholden to none. But what can give you freedom, also has the power to destroy you. The journey towards self-sufficiency and freedom begins with trust. Trust in the information and trading strategy you have figured out, and not in a tip received on YouTube. The journey starts with asking the right questions.

Success in the cryptocurrencies markets is about timing. You can have a great idea, and you could be proved exactly right over time, but if your timing is off, or you use the wrong trading strategy for the specific situation you’ve uncovered, then you’ll struggle to make a profit. The Key to being a gatekeeper is being able to drill down and ask the market clearly defined questions. And clearly defined questions come from translating the price action into behavioural conditions. You are looking out for three of them. Thinking in threes.

Understanding how expectancy works, along with the risk of ruin, is the 5% club’s key to understanding it’s not the market they have to defeat, but themselves. The voice inside your head, the voice that keeps you safe, is the greatest enemy you will ever face. Expectancy is a tool that will help you understand how you behave. It’s your protection against how you react to the internal and external shocks waiting to keep you out of the game. Awareness of your behaviour and biases is how you evolve from being inconsistent to becoming the house.

What separates the 5% club who generate consistent returns in the cryptocurrency markets from the 95% who don’t? The 5% club focuses on the size and probability of their losses instead of fantasising about how much they’ll win. When you understand your edge, you can begin to use risk management and position sizing to take advantage of the opportunity. When you know how much you’re risking, the size of your position, and the probability of success, you can calculate the probability of going bust— your risk of ruin. Before you do that, you need to uncover an edge. One of the tools the 5% club uses to let them know they may have hit pay dirt is expectancy.

You thought you’d found the perfect vehicle, your chariot of the gods, to help you master the cryptocurrency markets. If you’ve been frustrated with your results, it’s not because you’ve not found the right transport. It’s because you don’t know how to drive it. It’s not charts, indicators, and stop losses. This is what the 95% use and this is why they keep crashing. If you want to get to your destination, it’s edge, position size, and money management. These are the steering wheel, brakes, and clutch of your chariot, and just like learning to drive, it takes time to coordinate how to use them.

Prices transition between trends in phases. And knowing what phase you are in can help you manage your emotions. It works like this… Down Trend — Emotion Bar — Accumulation — Base — Break out — Up Trend — Emotion Bar — Distribution — Break down — And the cycle begins again. All hidden in plain sight. Conventional market dogma says markets are essentially random because they are efficient. But they don’t factor-in the math of emotions and assume market participants act rationally at all times. They don’t.

Do the right thing. Be right, study hard, work hard, get the best grades, go to the best schools, win the race, kick the goal, score the touchdown, hit the home run. It’s competitive and exhausting. Would you ever pay the sticker price for a car in a car showroom? We ask, why does the general public get it so wrong when it comes to trading and investing? Why is our timing so bad? Our intuition serves us well during everyday life, but why does it abandon us when we interact with cryptocurrency and financial markets?

Anyone who places a wager on a market outcome exposes themselves to built-in natural biases and behaviour patterns. From cryptocurrencies to real estate, prices move through a cycle of accumulation and distribution. How prices move and your built-in behaviour patterns are closely related. If you’ve ever bought an asset when all around you are doing the same, you’ll know how this feels.