Top Altcoins After Bitcoin Breaks $18,000 #42
Market Meditations | November 18, 2020
They say you have to strike while the iron is hot. A lot of attention in this newsletter has been focused on Bitcoin (BTC) lately but it’s hard to write about something else when bitcoin leaves no bear unfazed. Barely any BTC shorts remain in profit and news about new institutional investors entering the space keep coming in on an almost daily basis. Let’s have a look at some reasons why BTC rallied 60% in a month, but also why we need to remain prudent and why an eventual correction is almost inevitable. I will also give exclusive insight into the altcoin market and signs I want to see before increasing my altcoin exposure.
We need only consider 3 reasons to understand how we got to $18,000:
1) Established Uptrend
Knowing the difference between a ranging and a trending market is fundamental as a trader. When bitcoin broke $12,000 again after the correction in October, it made a new higher high and thus continued the higher time frame uptrend that started in March. Notice how the moving averages fan out as the uptrend begins.
Since then we saw no signs of a trend reversal whatsoever. Bitcoin has continued to make higher lows and higher highs without giving people on the sidelines a chance to (re)-enter the market. We know that the market will eventually have to cool off a bit but guessing where the (local) top will be when digital assets are in a bull market has not been a successful formula for many traders. Trends in crypto tend to extend beyond price points that most traders are expecting, oftentimes ending in a local ‘blow-off’ top once the market overheats.
If you wish to learn more about trend Identifications these videos will help
2) Treasuries/Institutional Interest
A surge in institutional interest has been one of the main drivers behind this year’s price action. I’ve written about this extensively and it’s a trend that I don’t see slowing down anytime soon. The genie is out of the bottle and given bitcoin’s performance this year, more and more clients will start asking why their manager does not have exposure to bitcoin yet.
3) Bitcoin Halving
One of the most anticipated events this year was the Bitcoin halving in May. Public events like this are generally priced in by forward-looking investors and that is exactly what happened. Bitcoin remained mostly range-bound leading up to the halving leaving many traders looking to trade the bullish catalyst disappointed.
Similar to 2016, the market only started rallying after the halving had taken place. With block rewards cut in half, miners can sell less bitcoin on a daily basis which, combined with the increased demand we saw this year, led to a supply and demand imbalance that resulted in upwards price pressure this year.
The Road Ahead: Will There Be a Correction?
Markets rarely go up in a straight line. During the 2017 bull run, we saw multiple 20-30% corrections during bitcoin’s run towards $20k and I don’t suspect this time to be any different. Allow me to talk you through my reasoning.
Headlines like the 300k price prediction by a Citibank executive make uninformed market participants FOMO into the market believing that they won’t get a chance to buy lower. For Market Meditators who want to know more about this, I have created a video for you. To add even more value to this exclusive community, today’s self improvement section will focus on how to avoid herd mentality. This will be particularly useful to traders who find themselves led astray by headlines.
To summarise: anyone who has spent enough time in the market knows that we’ll eventually see a correction after a run like we’ve seen this month, although it is almost impossible to predict where the market will turn.
Like I mentioned above, guessing a top when the market has momentum is a loser’s game and investor’s with a longer time horizon shouldn’t be scared of it. For traders, it can provide an opportunity to re-enter the market.
What About Altcoins? Finding the Next Bitcoin
We want to continue reaping the benefits of the crypto market. Let me share some TA with you to explain what coins I will be watching and where I see potential.
LINK / USD
Notice the steady uptrend and the claim of the key resistance at $12.82. This is arguably one of the easiest systems to build in crypto, steady uptrend into key level claim. Looking to $15 next.
With so much new money entering the space, it is not unreasonable to expect that some of those inflows will eventually reach the altcoin market as well. For the past two months, the majority of altcoins have underperformed with bitcoin sucking all the liquidity out of the altcoin market similar to the 2017 bull run. ETH/BTC, oftentimes used as a barometer for altcoin strength, continues its downtrend that started in early September this year but is approaching some very strong support levels.
The so-called DeFi blue chips, namely YFI, SNX, AAVE and UNI, already bounced strongly with price movements of +100% in less than a week. The bottom looks in for those pairs which might positively influence the broader altcoin sentiment. For altcoins to really start gaining momentum, a reversal on the ETH/BTC is something to look out for. Given the liquidity of altcoins, a lot less money is needed to move the market so once the sentiment turns, we could see some aggressive bounces across the board that will lead to incredible trading opportunities.
And so, we have reached the end of the meditation. What did we cover? We retraveled the journey to $18,000. We then considered where Bitcoin might travel to next. Finally, I let you in on what I have my eyes on and see as the next Bitcoin. I wish you good fortunes and I hope you can continue to reap the benefits of the crypto market. This newsletter will provide market meditators with the knowledge, tools and self mastery to navigate the road ahead.
Grayscale’s Crypto Funds Cross $10 Billion in Total AUM. Crypto asset manager Grayscale is now managing more than $10 billion worth of assets across its funds. In a tweet, Grayscale disclosed “Net Assets Under Management, Holdings per Share, and Market Price per Share for our Investment Products. Total AUM: $10.4 billion” Grayscale’s Bitcoin Trust (GBTC) remains the most popular by far and currently has more than 80% share of the total AUM at about 8.85 billion. According to The Block Research, GBTC holds a massive amount of bitcoin (480,900 BTC). Read more.
Mexico’s Second Richest Man Reveals 10% of His Liquid Assets Are in Bitcoin. Billionaire Ricardo Salinas Pliego has said that 10% of his “liquid portfolio” is in bitcoin. In a tweet on Tuesday, Ricardo recommended the book ‘The Bitcoin Standard’ by author Saifedean Ammous and answered ‘YES’ to having bitcoin in his portfolio, a question that was asked by “many people”. Pliego said that “Bitcoin protects the citizens from government expropriation” and the other 90% of his investments are tied up in “precious metals miners”. Read more
Cynthia Lummis, Wyoming’s Incoming Senator, Wants to Explain Bitcoin to Congress. Speaking to Fox News, Lummis, a Republican and a former member of the House of Representatives, said she believes bitcoin is a great store of value, and she plans on making that point in the Senate. She will succeed Republican Sen. Mike Enzi, who is retiring after four terms. “I know there isn’t much known about bitcoin, especially in the Congress,” Lummis said in the Fox News interview, adding that she wants to ensure everyone understands the cryptocurrency’s importance as a great store of value. Read more.
Scaramucci’s $9.2B SkyBridge ‘May Seek Exposure to Digital Assets’. Anthony Scaramucci’s hedge fund, SkyBridge Capital, gave itself the ability to bet on cryptocurrencies this week. In a series of filings with the U.S. Securities and Exchange Commission (SEC), we read that “The Company and Investment Funds may also invest in securities of companies related, in whole or in part, to digital assets or digital asset technologies The technologies underpinning digital assets are highly disruptive, and the future successes of such technologies are highly uncertain.” The documents are meant to give SkyBridge green light to invest in other funds that have money in the crypto markets or in companies supporting the ecosystem. Read more.
Robinhood Seeks Advisers for Potential IPO Next Year. Robinhood Markets, the trading platform that’s proved popular with novice investors, has asked banks to pitch for roles in an initial public offering, according to people with knowledge of the matter. The company is aiming to go public as soon as the first quarter of 2021, said the people, who asked not to be identified because the information is private. Read more.
Quinten Francois: From Passion to Profession, Writing a Book and Gold VS. Bitcoin
Quinten (@QuintenFrancois) is a crypto youtuber, investor and author of the Dutch book ‘De Bitcoin Revolutie’. He is the founder of popular Youtube channel Young and Investing that has grown to 69k subscribers making him one of the biggest influencers in the Benelux. Quinten is also the founder of the Facebook community Cryptocurrency Investing which also has more than 70,000 members.
In this episode, we discuss what mistakes Quinten made during the bear market and lessons he learned. We talk about why Quinten is such a strong believer in Chainlink and why 75% of his crypto portfolio consists of BTC, ETH and LINK. We also talk about what it takes to grow and monetize a Youtube channel, why sponsored content isn’t necessarily bad and we end with Quinten’s life achievement: writing a book on Bitcoin.
Things I learned:
Learning from mistakes is one of the best things you can do.
In crypto, market cycles are accelerated. An entire crypto market cycle lasts ~ 4 years while it takes 10-20 years in traditional markets. Going through both a bull and a bear market is invaluable.
Crypto is very volatile so it is never a bad idea to diversify your portfolio a little bit.
Bitcoin’s fixed supply is a big advantage it has over gold. New technology could allow us to mine gold more efficiently. A strong increase of inflation for gold would almost certainly lead to a big decrease in price.
On Youtube you really need to keep the audience engaged. Your content must be good enough for viewers not to have to go to other channels to find information.
Consistency is also key. It’s hard to really grow if you only produce 1-2 videos a week. Other metrics that influence the algorithms are tags, video thumbnails and the first sentences of the description.
There is nothing wrong with sponsored content as long as users know that it is sponsored and you genuinely believe in it.
The team is the beating heart of a project and the team doesn’t deliver, your idea is worth nothing.
In the process of writing a book, you regularly fight against yourself. It takes persistence and a clear motivation as you won’t get rich from publishing it.
You should never compromise your values for monetary gains.
Herd Mentality: How to Not be a Sheep Trader
Headlines like the Citibank bitcoin one can throw us off track as traders. As much as we like to focus on and believe in our technical analysis, we read the headline and can be tempted to follow a herd mentality. If Citibank says it, it must be true – right? They are one of the largest investment banks in the world – aren’t they? These aren’t the types of thoughts you want to have as a successful trader. Here’s how to avoid them.
Wisdom of crowds is the idea that large groups of people are collectively smarter than individual experts when it comes to problem solving, decision making, innovating and predicting. The idea can be traced bank to Aristotle’s theory of collective judgement. While it might have worked for Aristotle, it doesn’t really work for traders. Just consider the 1990s dotcom bubble or the 2008 collective belief that people don’t default on their mortgages.
Within trading psychology, herd mentality can take the form of panic buying (or selling) due to the increased number of people doing so. The Citibank article has probably influenced many non-Market Meditators to panic buy and forget to be prudent.
Right, how do we avoid it:
Switch off autopilot. By the time you have entered a trade, you should already know why you entered the trade. Don’t blindly follow a headline, exercise a genuine level of scrutiny and do not lose sight of the reasons why you entered the market.
Make a conscious effort to form your own opinion. Force yourself to justify your decisions independent of others. Read newsletters, twitter and whatever resources at your disposal to educate and empower yourself to make better informed decisions. This seems obvious, but it is this level of discipline which will make you a better trader.
Take time when making decisions. Take time to assess why it is a good idea to buy into a market. Even if this risks being behind the curve, it is all part of the discipline and will stop you from buying into fads.
Remember that stress affects decision making. The markets can be extremely stressful, try to avoid letting that cloud your decision making.
Be willing to go on your own. Don’t be afraid to stand out, you could well be ahead of the crowd when trading.
It is a natural part of human psychology to seek validation and follow the crowd. I challenge Market Meditators to resist this and exercise autonomy, careful analysis and confidence.
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.