Taking Risks and Becoming Rich Through Crypto-Trading #30

Market Meditations | October 21, 2020

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Crypto is exciting when good news hits the press week after week.

Earlier today, another big headline took over Twitter when Anna Irrera, a writer for Reuters, came with a scoop that the crypto community has been waiting on for years: “PayPal to allow cryptocurrency buying, selling and shopping on its network”.

The significance of this cannot be overstated as Paypal, the online payments giant founded by billionaire Peter Thiel, currently serves ~320 million users around the world. At first, the service will be available to U.S customers but Paypal plans to expand the features to Venmo and select international markets in the first half of 2021.

We’ll expand on this in a moment, first here are today’s Meditations.

Today’s Meditations:

  1. Paypal Announces Support for Bitcoin, Ethereum, Bitcoin Cash and Litecoin

  2. Powell: A Central Bank Digital Currency Could Improve the Payment System in the U.S

  3. SEC Propose $5m Settlement Over $100m Kik ICO, Ending Year Long Battle 

  4. Validators Drop off Ethereum 2.0 Testnets as Mainnet Release Looms

  5. Copper Hits $7,000 a Tonne as ‘Green-Tinted- Rally Hots Up

  6. Purdue Pharma Agrees to an $8 Billion Settlement

  7. Dollar Weakens as Investors Keep Attention on US Stimulus Talks

  8. Investors Opt for the ‘Do Nothing’ Trade Ahead of US Election

  9. RookieXBT: All or Nothing, Rookie to Riches Through Crypto Trading

  10. Burnout: Recognising the Signs and Learning How to Avoid it

Paypal Announces Support for Bitcoin, Ethereum, Bitcoin Cash and Litecoin

After Square and MicroStrategy added Bitcoin to their balance sheets earlier this year, some said it was only a matter of time before a major U.S. company announced their support for digital currencies. Especially Bitcoin managed to gain the attention of some well-respected asset managers outside of crypto this year and has been establishing itself more and more as a global macro asset that could no longer be ignored. 

In the official statement today, Paypal wrote that the migration toward digital payments and digital representations of value continues to accelerate, driven by the COVID-19 pandemic and the increased interest in digital currencies from central banks and consumers. “The shift to digital forms of currencies is inevitable, bringing with it clear advantages in terms of financial inclusion and access; efficiency, speed and resilience of the payments system; and the ability for governments to disburse funds to citizens quickly,” said Dan Schulman, president and CEO, PayPal. “Our global reach, digital payments expertise, two-sided network, and rigorous security and compliance controls provide us with the opportunity, and the responsibility, to help facilitate the understanding, redemption and interoperability of these new instruments of exchange.

Increased Utility & Mainstream Adoption

Adoption of cryptocurrencies hasn’t been straightforward so far as the ability to pay with bitcoin and other cryptocurrencies outside of the crypto market has been very limited. The Paypal news is big in this regard as the company not only plans to support buying & selling of cryptocurrencies through its app, but users will be able to spend crypto across its network of 26 million merchants beginning in 2021. 

In their statement, Paypal wrote that “consumers will be able to instantly convert their selected cryptocurrency balance to fiat currency, with certainty of value and no incremental fees. PayPal merchants will have no additional integrations or fees, as all transactions will be settled with fiat currency at their current PayPal rates. In effect, cryptocurrency simply becomes another funding source inside the PayPal digital wallet, adding enhanced utility to cryptocurrency holders, while addressing previous concerns surrounding volatility, cost and speed of cryptocurrency-based transactions.”

In a tweetstorm Shawn Cheng, partner at ConsenSys, concluded that the news was a big deal because Paypal’s active user base dwarfs other companies that already support cryptocurrency payments to-date. With 26 million merchants on PayPal’s network and 346 million active accounts in the second quarter this year, Paypal’s move is yet another very promising step towards further adoption for cryptocurrencies in the coming years.  

  • Powell: A Central Bank Digital Currency Could Improve the Payment System in the U.S. In a panel discussion on Monday, TheFederal Reserve chairman Jerome Powell said that a central bank digital currency (CBDC) might improve the payment system in the U.S. A CBDC could lower costs for payment transactions while also making them faster, which would help modernize payment infrastructure and reach consumers traditionally underserved by financial institutions. Powell made clear that the Fed has not made a decision to issue a digital currency yet and noted that a great deal of work remains to be done before making such a decision. Powell said about 80% of central banks worldwide are exploring CBDC concepts, but suggested that the Fed is in no rush to issue one of its own. Read more

  • SEC Propose $5m Settlement Over $100m Kik ICO, Ending Year Long Battle. The U.S. securities and exchange commissions (SEC) have proposed settling their dispute over a 2017 token sale over a $5 million fine. Under the proposal, Kik must give the SEC 45 days’ notice on any transactions related to its Kin token treasury. That notice would expire 3 years after the judgement takes effect. Kik long said that wanted to fight the SEC in court, potentially setting a precedent for how token sales might be treated under U.S. securities law. However, it backed away from a jury trial request in March, and lost a motion for summary judgement last month. Kik General Counsel Eileen Lyon said the SEC should create clear rules for the crypto industry, rather than publish “conflicting statements” and other non-binding forms of guidance in September. Read more.

  • Validators Drop off Ethereum 2.0 Testnets as Mainnet Release Looms. If testnet participation is any indication, Ethereum 2.0 validators are getting excited for an official mainnet launch later this year. According to beaconcha.in, only ~50% of the necessary 66% participants needed to secure the Medalla testnet have stuck around and a similar low rate was noticed on the most recent Zinken testnet, which was one of the final opportunities to practice the launch of Eth 2.0’s Phase 0, a topic we wrote about last week. The low testnet participation rates are mirrored by rhetoric from Eth 2.0 developers who say they are ready for Eth 2.0’s Phase 0 to begin. Read more.

Copper Hits $7,000 a Tonne as ‘Green-Tinted- Rally Hots Up

Copper is emerging as one of the key ways for investors to gain exposure to a rollout of more wind, solar, batteries and electric cars, due to the metal’s use in electric wiring. Renewable energy is a hot topic and investors are keen to reap the benefits. 

Chinese President Xi Jinping’s pledge last month that the world’s second largest economy would be carbon neutral by 2060 is expected to lead to a focus on renewable energy in the country’s next 5 year plan, which starts in 2021. Similarly, in the US, Democratic presidential candidate Joe Biden has promised a $2 trillion green energy and infrastructure plan if he wins the election next month. 

It is therefore not surprising that copper hit $7,000 a tonne for the first time since 2018 on Wednesday, as strong demand in China and hopes for a wave of ‘green’ stimulus measures lift the price of the vital industrial metal. 

Benchmark copper prices trading on the London Metal Exchange reached as high as $7,025 in afternoon trading, their highest level since June 2018. The metal, used in everything from air conditioning units to cars and power networks, has risen about 14% this year, on the back of supply disruptions from China’s rapid recovery from the coronavirus pandemic.

Analysts at Goldman Sachs said metals such as copper could enter a “green-tinted bull market”. 

As the world’s largest economies turn to renewable energy, it certainly makes sense to update trading portfolios to account for some of this trend. 

  • Purdue Pharma Agrees to an $8 Billion Settlement. Purdue Pharma agreed to an $8 billion settlement with the DOJ to resolve probes of how it marketed OxyContin, a person familiar said. There’s a press conference at 11am ET to announce resolution of civil and criminal investigations into an opioid manufacturer. The powerful prescription painkiller helped touch off an opioid epidemic. The company will plead guilty to three federal criminal charges. The settlement will be the highest profile display yet of the federal government seeking to hold a major drugmaker responsible for an opioid addiction and overdose crisis linked to more than 470, 000 deaths in the country since 2000. As part of the resolution, Purdue will admit that it impeded the Drug Enforcement Administration (DEA) by falsely representing that it had maintained an effective program to avoid drug diversion and by reporting misleading information to the agency to boost the company’s manufacturing quotas. Read more.

  • Dollar Weakens as Investors Keep Attention on US Stimulus Talks. A decline in the dollar gathered pace on Wednesday as US Democrats and Republicans inched closer to agreeing a second major fiscal stimulus for the world’s largest economy. Early gains on Wall Street receded, leaving the large-cap S&P 500 down 0.2 per cent by lunchtime in New York while tech-heavy Nasdaq Composite was flat. The mixed session on Wall Street came after Democrat House Speaker Nancy Pelosi and Treasury secretary Steven Mnuchin headed into their latest talks about a major relief package to help businesses and households through the coronavirus pandemic. On Tuesday evening, both sides reported they had made enough progress to keep the potential $2tn bailout alive, although nothing was expected to be signed before next month’s presidential election. The dollar index, a measure of the buck against six peers, slipped 0.5 per cent to the lowest level since early September. Read more.

  • Investors Opt for the ‘Do Nothing’ Trade Ahead of US Election. As the days count down to a US presidential election that could alter the course of global markets, some investors have crafted an odd-sounding strategy for navigating the outcome: they plan to do nothing. Polls point to a clear win for the Democratic party on November 3, potentially on a scale large enough to take the presidency and both houses of Congress — a result that could ring changes in sectors such as energy and healthcare and set the direction of wider stock and bond markets. But many investors are mindful that they failed to predict the shock victory of Donald Trump in 2016 — which triggered market convulsions on the night — as well as the longer-term equities rally that was stoked by his administration’s corporate tax cuts. Other surprises, such as the rise and then historic drop in sterling on the Brexit referendum night earlier that year, have left some investors preferring to just sit back and wait for the result. Read more.

RookieXBT: All or Nothing, Rookie to Riches Through Crypto Trading


Today’s episode features RookieXBT.

RookieXBT is a young Canadian crypto trader and investor that exploded on Twitter because of his risk loving but optimistic mindset. Rookie famously started putting magnets on his charts as a way to visualize his targets and managed to turn it into a well-known Crypto-Twitter meme going by the hashtag #magnetgang.

In this episode, we talk about how Rookie learned to take risks at a young age, borrowed money from his parents to trade and how he eventually developed  into a profitable trader. We talk mindset, surviving severe downturns and the power of compounding a portfolio through a few successful trades. We expand on his journey of building a big Twitter account, the benefits that come along with it and how to reward yourself with crypto profits.

I hope you enjoy this episode!

Things I learned:

  • Always have skin in the game, you need money in the markets to actually learn. You can never mimic the emotions of losing real money. Trading is more emotional than anything.

  • Avoid risk of ruin at all costs. Never risk losing it all, especially on one trade.

  • Never underestimate the power of compounding. A small portfolio can grow into something you never thought possible as long as you can pyramid profits consistently.

  • If it’s too good to be true it usually is. Parabolic price action upwards never lasts indefinitely. Milk the cow until it stops producing milk.

  • There’s a huge advantage to having a big following as it opens a lot of doors. You get access to better opportunities, early access to promising investments and companies regularly reach out looking for your help.

  • Consistency is the most important thing when it comes to growing on social media. Don’t just tweet to grow your following, do it for the sake of putting out good content and followers will come as a by-product.

  • There are multiple ways out there to make money. You just have to find what you’re passionate about and go all-in.

  • Being alone at the top is no fun. Try to lift people up with you. Success means nothing when it can’t be shared.

  • There are always opportunities to make money. Rookie started writing articles on the internet at age 14 and used that capital to start trading.

Burnout: Recognising the Signs and Learning How to Avoid it

We find ourselves in an age where man is seemingly limitless and unstoppable. We have access to the entire world at our fingertips. All we need is a laptop and an internet connection. With these two things, we can order food, interact with people and make a living. One of the downsides of the age of instant gratification and possibilities is that we forget that we are merely human beings. Our body works around the clock to keep us going. We are more similar to vehicles than we are to Gods; we need fuel to keep the engine going and are highly susceptible to breakdown if we don’t take precautions. 

Many people don’t recognise the signs of burnout until it is too late and it becomes entirely unfeasible to continue with our day to day tasks. Anyone who’s continually exposed to high levels of stress can experience burnout. This stress could be caused by a range of factors: personality characteristics like the need to be in control, certain careers and caring for children are a few. 

The signs of burnout are clear. If you look out for them, you should be able to take action before you go too far down the line. The signs are the following: 

  • Exhaustion. Feeling physically and emotionally depleted. Physical symptoms can include headaches, stomach aches, appetite or sleeping changes.

  • Isolation. Burnout can lead to us feeling overwhelmed. As a consequence, we are less likely to socialise with and confide in family members or friends.

  • Escape fantasies. Dissatisfied with constant pressures and responsibilities of reality, people with burnout may fantasize about running away or travelling alone.

  • Irritability. Losing your cool far more easily as simple tasks (combined with existing lists of things to do) can feel insurmountable. 

  • Frequent illnesses. It is fascinating how intertwined our mental and physical health are. Long term stress can lower our immune system, making us more likely to take ill. 

And of course, burnout does not all hit at once. We tend to go through various stages. To start with, we have excessive drive or ambition. We then go on to push ourselves to work harder. In order to facilitate this, we neglect our own needs (self care, sleep, exercise and eating well). Our own needs seem inferior to the goal we are set to achieve. Instead of acknowledging we are pushing ourselves to the max, we blame external factors for our troubles. Soon, we have no time for non work related needs. At the time, these all seem like sensible and necessary decisions. As our impatience mounts, we enter the denial stage. Then comes withdrawal from friends and family. Withdrawal leads to aggression and behavioural changes which create a feeling of depersonalisation (feeling detached from your life and ability to control it). Inner anxiety and depression creep in. Finally: mental or physical collapse. Perhaps you have a sense for whether you are in one of the burnout stages and if so, how far in you are. 

The steps to avoid burnout are relevant for everyone. Especially when it comes to trading. Trading is high pressure and it doesn’t have an organised ‘start’ or ‘close’ so sometimes we end up working countless hours. So that leads me to how to prevent burnout: 

  • Exercise. Not only is exercise good for our physical health, but it can also give us an emotional boost. I know it can seem daunting to do a workout after the end of a full work day. What gives me the drive and motivation is knowing that I will always feel better after my workout.

  • Eating a balanced diet. Eating a healthy diet filled with omega 3 fatty acids can be a natural depressant. Try flaxseed oil, walnuts and fish for a mood boost. Also, never neglect your diet. It is not worth it. Even if you are busy, bulk cook healthy meals. There is always a way around this.

  • Practise good sleep habits. Our bodies need time to rest and reset, which is why healthy sleep habits are essential for our wellbeing. Whether you are an early bird or a night owl, ensure around 7 hours good quality sleep. The quality of your sleep can be improved with less caffeine before bedtime, establishing a relaxing bedtime ritual and banning smartphones right before bed. 

  • Ask for help. During stressful times, it is important to reach out for help. Keep a dialogue with those around you. 

If you can treat the above as gospel, you can avoid burnout. What this means is that following these guidelines is not circumstantial. Rather, no matter what we are faced with, we ensure we are practising these habits. Afterall, if you can avoid burnout, you will be more efficient and capable of achieving your goals in the long run. 

Disclaimer: The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. I am not a financial advisor. Every investment and trading move involves risk. Do your own research when making a decision.