Market Meditations | April 30, 2021
As $BTC struggles we look elsewhere for opportunities.
Spotting plays on both $ETH and another altcoin.
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Crypto. BTC, ETH and BNB caught our attention today. Fundamental and technical analysis below ?
Legacy. Stocks dropped from all time highs as traders assessed corporate earnings, economic data showing potential inflation pressures and hawkish remarks from a Federal Reserve official.
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As predicted in last week’s analysis: “Assuming $50,000 holds, a period of sideways price action is probably ranging up to and testing $60,000.” The 100 Day Moving average has held and BTC is slowly working up to $60,000.
Since reaching a high above $56,400 on April 28, the price of Bitcoin has dropped more than 6% back down near the $53,000 support level.
Despite the lull in market activity, signs of mainstream cryptocurrency integration continue to emerge on a near-daily basis. Earlier today, Coinbase announced that users can now purchase up to $25,000 worth of cryptocurrency per day using their PayPal account.
Beyond financial institutions, The government of Ethiopia revealed a partnership with Input Output Hong Kong (IOHK), the research and development arm behind Cardano (ADA). The goal of the new partnership is to use blockchain technology to overhaul its education system.
Looking out into the future, next week’s expected launch of CME micro bitcoin futures is predicted to open the door to a potentially wider customer base.
Ethereum is showing strength and is ripe with opportunity. We’re expecting continuation past $3000.
$2600 and $2500 levels provide great opportunities for entries.
Whilst Bitcoin continues to struggle, the ETH/BTC pairing has started climbing higher in a move that was predicted by multiple analysts. The bullish moment in the ETH/BTC pair has also reignited conversations about Ether price eventually flipping BTC.
The upcoming EIP 1559 upgrade is regarded as a strong catalyst of the recent ETH bull-run. We could be seeing a classic “buy the rumour, sell the news” configuration that may drive the price up until EIP 1559 is released in July this year.
The upgrade includes features such as shifting from a proof-of-work to a proof-of stake chain including a burning fee mechanism.
The slumping price of Bitcoin weighs down the cryptocurrency market with a majority of altcoins experiencing minor losses. Today, however, BNB has been leading the way.
Reinforcing the strength of two prevailing market narratives “exchange tokens” and “cheaper ethereums”.
We’re seeing potential for a breakout past $600 and looking at $800 as our next target.
Losing $560 invalidates this idea. Also pay attention to the daily close, there is still the possibility that this will be a false breakout.
We move so fast in crypto recently that we can lose perspective. Recall that BNB started the year trading at a price level of approximately $37. Now, BNB is more valuable than some of the leading financial firms worldwide including French banking giant, BNP Paribas.
Digital exchange Binance, the company behind BNB, recently expanded its stock token listings with the addition of 3 new tokenized stock pairings. Further, Binance has burnt a record number of BNB tokens this year. “When you burn coins, they are taken out of circulation forever. It increases the value of the remaining coins,” Binance CEO, Changpeng Zhao mentioned on Twitter earlier this month.
How to Become Invaluable
Whether building a network within the crypto community or in a traditional job role, making yourself invaluable is an essential skill that will continually boost your net worth. To achieve this, all you have to do is ensure your team relies on you for their own success. If in a traditional job role this increases job security and earnings potential. If building a network within crypto, you become core to the success of those around you who will then share their own skills and alpha with you. That sounds great, but exactly how do you do it?
Give without expectation. Constantly add value to your network whilst expecting nothing in return, and you will become a trusted member of your group. For example, if you research a project, share that research with your team with no strings attached.
Build and run processes. Processes are the bedrock of efficiency. Ensure you make yourself essential to the building and running of those processes and you will be essential to the efficiency of your team.
Always look to collaborate. Collaboration is the key to success. When you work with a group, each member can focus on their own strengths to produce a net outcome that is greater than if operating individually. For example, if you are a fundamental analyst, look for others such as technical analysts and combine your abilities.
Identify your strengths and then specialize. When you offer a unique skill to your team you add value that no one else can. To leverage an example, If no one in your team has a strong understanding of on chain analytics, learn the skill and offer it to your group.
Set high standards. Consistently producing quality output will ensure you are viewed as reliable. When you are reliable, the team will trust you with important tasks that are essential to success.
Whether you are a crypto trader, entrepreneur or office worker, being invaluable to those around you can have a major impact on your trajectory. Follow these tips and you will reap the rewards.
How to Trade Like Alameda with Sam Trabucco
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Sam Trabucco is a quantitative trader at one of the world’s best crypto trading firms, Alameda Research.
High leverage in crypto can exaggerate price movements
When liquidations occur, the exchange sends a market order that closes your leveraged position. If the market is highly leveraged, it can lead to a cascading effect where these market orders continue to push price in the same direction, liquidating even more positions. To produce your own insights check out historical liquidations data at bybt.
Play strategic games to improve your trading
Games such as poker require you to make fast decisions under uncertainty and to understand probability. Learn the fundamentals of such games and practice them regularly.
Think in terms of expected value (EV)
Any bet that has probabilities and payouts (such as trading) has an EV. Consider a coin flip where you win 2 dollars if it’s heads and lose 1 dollar if it’s tails. The EV will be ($2 x 0.5) + (-$1 x 0.5) = 50 cents. The more positive the EV, the better the bet is.
Alameda assign a 1-2% probability to risk of ruin when entering new yield farms
They then discount the expected returns on that farm by the risk in order to compare that farm against other capital allocation opportunities such as trading.
Never risk more than 5% of your entire portfolio on one trade
Whilst this comes from conventional poker wisdom, the same applies to trading. If you do not manage your bankroll properly, you may be left on the sidelines when a big opportunity arises.
Be cautious of using too much leverage
The more leverage you use, the higher the chance of liquidation. Always make sure you have calculated your liquidation price in advance and are aware of the risk you are taking on.
Age is essential to your risk tolerance
When you are young, risk of ruin is significantly less important as you have a longer time frame to increase your net worth. You are therefore able to take on riskier opportunities, even if you risk your net worth dropping to $0.
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Disclaimer: The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. We are not financial advisors. Every investment and trading move involves risk. Do your own research when making a decision.