How to use cryptos’ volatility to your advantage
Thursday, 30 November 2017
By Bernd Struben
- If you can’t stand the heat…
- The secret to sorting the crypto winners from the crypto losers
In yesterday’s Port Phillip Insider, I said it may be time to ‘sell the banks and buy bitcoin’.
Well, I got at least one of them right. Arguably both…depending on when you bought bitcoin. And assuming you didn’t sell it in a hurry.
Let’s look at the banks first.
All of the Big Four banks are down today, as are their smaller competitors.
At time of writing Commonwealth Bank of Australia [ASX:CBA] is down 2.35% in intraday trading. And Australia and New Zealand Banking Group [ASX:ANZ] is down 1.04%.
Because earlier this morning, Malcolm Turnbull conceded defeat. The pesky royal commission into the banking, superannuation and financial services industries is now officially a go.
Turnbull announced the inquiry will run for 12 months, with a final report due in February 2019.
Investors are clearly concerned about just what kind of dirt the royal commission is going to dig up. And if history is anything to go by, those concerns are likely warranted.
Time will tell…
As for bitcoin, well, you likely read the doom and gloom headlines earlier today.
After reaching a peak of over US$11,400 yesterday, bitcoin plunged to under US$9,100. Roughly a 20% loss in less than 12 hours.
If you bought in at the peak, panicked, and sold at the trough, you took a big loss. Hopefully you didn’t do that!
Bitcoin, after all, is notoriously volatile. And it’s already roaring back.
More after the markets.
Overnight, the Dow Jones Industrial Average closed up 103.97 points, or 0.44%.
The S&P 500 fell 0.97 points, or 0.04%.
The biggest action was on the NASDAQ, which lost 87.97 points, or 1.27%. Losses in the tech sector were driven by a 3.7% overall drop in the so-called FANG stocks — Facebook, Amazon, Netflix and Google. These four stocks alone saw their combined market value fall by roughly US$60 billion.
In Europe, the Euro Stoxx 50 index finished up 6.42 points, or 0.18%. Meanwhile, the FTSE 100 fell 0.90%, and Germany’s DAX climbed 2.34 points, or 0.02%.
In Asian markets, Japan’s Nikkei 225 index is up 11.95 points, or 0.05%. And China’s CSI 300 is down 0.55%.
In Australia, the S&P/ASX 200 is down 35.61 points, or 0.59%.
On the commodities markets, West Texas Intermediate crude oil is US$57.31 per barrel. Brent crude is US$63.11 per barrel.
Gold is trading for US$1,283.70 (AU$1,696.89) per troy ounce. Silver is US$16.57 (AU$21.90) per troy ounce.
One bitcoin is worth US$10,591.80.
The Aussie dollar is worth 75.65 US cents.
If you can’t stand the heat…
I’m sure you’ve heard the old saying, ‘If you can’t stand the heat, get out of the kitchen.’
The adage is attributed to US President Harry S Truman. A man who lived and died in times when even science fiction writers couldn’t conceive of cryptocurrencies.
But if Truman were alive today, I imagine he’d say the same thing about bitcoin and the other cryptos. Bitcoin alone has already tumbled 25% or more three times in 2017. And the year’s not over yet!
We’ve said it before, and we’ll say it again. Investing in cryptos is not for the timid. And never invest with borrowed money, or with any money you can’t afford to lose.
Now that that’s out of the way, let’s have a look at bitcoin’s price action over the past day.
The green line in the graph below is bitcoin’s price in US dollars. The blue line represents its market cap (left axis).
Click to enlarge
How’s that for volatility?
The more than 20% decline was likely caused by some larger holders taking profits as bitcoin surged above US$11,000. There’ve also been suggestions that some delays and temporary outages at the major exchanges, like Coinbase, may have spurred more selling.
The dip below US$9,100 was met with thinly-veiled glee from the crypto naysayers. Was this the beginning of the much-awaited crash? Had bitcoin’s bubble been pierced? How low would it go?
The answers to those questions in order: No. No. And not any lower…at least for now.
At time of writing, bitcoin is trading for US$10,591.80. That’s up 5.6% from its price of US$10,031.56 when I penned yesterday’s Port Phillip Insider. (And, ahem, when I recommended selling bank stocks and buying bitcoin.)
That’s how fast things move in this revolutionary market.
The secret to sorting the crypto winners from the crypto losers
So far today, we’ve only looked at bitcoin, the largest digital currency by market cap.
But, as you know, the crypto market is far bigger than just bitcoin. Including all of the smaller ‘coins’ — some with market caps of just a few million dollars — there are around 1,200 cryptos in virtual existence. With more coming onto the market almost every day.
As bitcoin was tanking last night, most of the others went down as well. Ether — the second biggest crypto by market cap — fell from US$522 to US$422 in a matter of hours. That’s an 18.5% loss.
But not every crypto went down. Have you heard of Peer Coin, for example? Don’t worry if you haven’t. I hadn’t either until our in-house crypto guru, Ryan Dinse, brought it to my attention.
Ryan, of course, was watching the price action across the crypto market closely.
He sent me an email early this morning, before bitcoin’s rapid rebound. But Ryan wasn’t concerned with what he called ‘a savage selloff’.
He knows it goes with the territory.
More importantly, the ‘Flip Trading’ method Ryan has painstakingly developed over the past several months tends to deliver some of its greatest gains during periods of high volatility.
I wrote to you about his ground-breaking new way of buying and selling cryptos yesterday. He hasn’t released any of the finer details yet. But next Tuesday he unveils all the details in a brand-new report.
Among other things, the report reveals how you can Flip Trade cryptos…why no one has discovered this way of buying and selling cryptos yet…and why Ryan believes 2018 will see more Flip Trade opportunities than ever before.
We’re sending it at no cost to any paid subscriber of Port Phillip Publishing. But ONLY if you let us know you’re interested. To register your interest and ensure you receive Ryan’s ‘Extreme Flip-Trade Crypto Buy-List’ next Tuesday, click here.
Anyhow, here’s the email from Ryan that was waiting in my inbox when I logged in this morning:
‘I’m sure you noticed bitcoin dropped almost 20% overnight. A savage selloff from the US$10,000+ hype.
‘This volatility is the kind of thing you get used to as a crypto investor.
‘But it might be a rude awakening for some of the newbies that bought in yesterday for the first time.
‘Here’s the important thing that no one talks about though…
‘At the same time bitcoin dropped, an altcoin called Peer Coin (PPC) increased by 40%.
‘In fact, except this one and a handful of others, most other altcoins dropped sharply.
‘That’s interesting information for a crypto investor.
‘It doesn’t mean Peer Coin is a definite buy. But it’s certainly worth looking at. Why did it go up on such a negative day? Is there sustainable buying power behind it? Has it reached a technical milestone? Has it flipped to a buy?
‘Understanding comparative volatility and divergent trends is the secret to sorting the crypto winners from the crypto losers in the long term. In the big shakeout of 2018, a lot of people are going to lose a lot of money.
‘But those that understand market dynamics will be invested in the eventual winners. The Amazons of crypto rather than the NetMarkets!
‘So instead of fearing volatility, you should welcome it. If you can use it to your advantage that is.
Day traders, of course, have long embraced volatility. Stocks with big price swings offer the most profit potential if you get the timing right. And the biggest losses if you get the timing wrong.
But day trading is not only risky. It requires serious commitment. It’s not called ‘day trading’ for nothing.
Few of us have the time or inclination to spend five days a week glued to ticker screens. Whether that’s trading stocks or cryptos.
When I brought this up with Ryan, he assured me that Flip Trading cryptos is nothing like that:
‘We’re not day trading here. We’re talking maybe five to eight flips on trade periods that can last six to 12 months.
‘In some cases, the flips will be even fewer. For instance, this year, if you timed it correctly, you could potentially have made a 6,595% gain in six months just from “flip trading” Siacoin. I’ll show our subscribers exactly how this works next Tuesday.’
A potential gain of 6,595%. That would see $1,000 morph into $65,595…in six months.
We’ll leave it at that today.
Tune in tomorrow to hear from publisher Kris Sayce.
And to receive Ryan Dinse’s complete dossier on Flip Trading at no cost, be sure to register your interest here.