Bitcoin Trading - some useful info and metrics

[cousinmuscles]

Hello folks I have been pondering about posting this and was reluctant due to having been into this many years ago in other public websites, I have deleted those accounts for safety so I don't end up doxing myself.

I have been into bitcoin since 2011 and have traded and made lots from it. Not trying to make this thread to brag or show off but from the years of experience and contact with many excellent traders (many I know who quit their jobs and trade for a living) there are some trading and non trading things crypto related many should know.

Exchanges
An important point to start with is knowing your exchange and all the contingencies that come with dealing with them. They are too many to list especially legal ones but let me give you some brief history of the two largest exchanges and some shocking truths that people just overlook. Two stories to put perspective on things and make you realize what it means to give someone power over your wallet and your money.

MtGox was the first large bitcoin exchange and dominated the bitcoin world. Seemingly good it was actually a disaster from the start. The first owner created an exchange platform for Magic the Gathering cards (Magic the Gathering online exchange) and heard of bitcoin, and decided to implement bitcoin trading on it. All went well early on 2011 and business was booming as was the price of bitcoin, until he noticed his balance sheets were off and he had missing coins (tens of thousands). He did not know what to do and sold the majority of the shares of the company to Mark Karpeles who then continued the business without fixing the issue at all. The exchange went on and the hacker had access to the exchanges wallets private keys and unloaded tens of thousands of bitcoins at a time for over two years, totalling hundreds of thousands of bitcoins stolen (I believe it was 600 thousand coins lost). Mark Karpeles never decided to even change the wallet or even implement cold storage with fresh private keys. For years people complained that their bitcoins were missing, or that they were unable to withdraw fiat to their bank due to MtGox having serious banking difficulties. On pretty much all forums this was silenced or the threads were left to die. Karpeles collected a $100k per month salary for his efforts and now that the company is still in bankruptcy proceedings he is trying to shortchange his customers (since he had 200k bitcoin left, he wants to pay back the customers in USD at the value bitcoin had back then, and make hundreds of millions $ off of this fiasco). Look up the story for yourself.

A little addition to the MtGox story is "bitcoinica", the first leveraged trading platform that came out of the blue, not even a registered company just a website made in days. Somehow it broke through and the supposed owner was a "14 year old genius named Zhou Tong" who was later found to be using a Microsoft IP address in China. This leveraged platform managed to amass lots of trading and was linked to MtGox (since it was just a website it didn't have a bank account, just redeemable USD codes through MtGox). It made volatility so high that a single trader with $10k managed to short bitcoin and made the price drop in half. When he tried to buy back there was no liquidity and he lost all his money. Most people got wrecked from this and exchanges made tons of money on fees. This exchange got supposedly "hacked" as it was hosted on a very cheap web hosting site with supposedly malicious administrators. Supposedly. Zhou Tong never to be heard of again.

Bitfinex was the next exchange to take over in terms of value. Bitfinex is a tricky company to try and figure out as it is three shell companies operating together, all located in areas where the specific services they provide are legal. It also makes it difficult to sue them or take them down, or make any company liable for damages. Bitfinex was created as a copy and paste off of bitcoinicas trading engine which was highly unstable and could liquidate your position pretty much any time at all due to the lack of liquidity and margin, and tons of bugs. Even a good trader got "ZhouTonged" or liquidated all of a sudden by random tiny market moves. Their historical feat is actually their loss of 172k bitcoin off of a supposed mistake. They had a third party company they worked with for secure storage and transacting. One day the hot storage wallets got filled with coins and someone with an admin password made a massive withdrawal totalling 172 thousand coins. Those coins are still unmoved so it was either a mistake or they are playing the long game. Users got a "haircut" on their accounts, they called it "socialized losses". They changed their policies to include this and they also after the incident mentioned they are not liable for their mishandling of your funds. Users got "Bitfinex USD" instead of "USD" for the USD or BTC value they had, which made for around a third of every users account value. This created token was possible to sell for USD for those who wanted to collect tokens and use them to buy shares of the company. So instead of Bitfinex shutting down the exchange and letting Interpol or local authorities seize the servers and inspect them, they closed access to the website/login and thought of this great plan. Whether this token scheme or lack of liability is legal anywhere, nobody knows. Or not reporting and working with authorities first. A month after the incident they sent users an email with an apology. I think it still is the largest exchange...

Hopefully this puts some sense into those who are unaware of what goes on in the crypto world and how deceiving the looks of a website can be. Google "list of bitcoin heists" for other stuff and look into what these unregulated IPOs really are. Scamming is a large part of the crypto economy.

Hopefully this sorts you out without having witnessed it first hand or experiencing it

[cousinmuscles]

Some metrics useful for anyone who wishes to know...

Metrics and correlations
I will list some metrics and some correlations which coincide with the major price increases of bitcoin, the bull markets.

• Google trends (search index - how popular the term "bitcoin" is in google searches) https://trends.google.com/trends/exp...=all&q=bitcoin. This one correlates with the price peaks. When it hits all time highs for a period, so does the price, as in the first major bubble in summer of 2011, the second bubble in April 2013, third in December 2013, and fourth in December 2017
  
• Number of transactions https://blockchain.info/charts/n-tra...s?timespan=all this also correlates with bull and bear markets

Beware, these are lagging metrics, meaning they don't predict the future and are kind of useless, however I use it to judge whether we are in a long term bull market (expansion, price increase, good news, new users) or bear market (contraction, long term price decrease, bad/less news, less transactions, stagnation of user base). I use it to judge the market this way but think for yourself as it is your money and your investment. I am mentioning this because this basic info is hard to disprove but I never hear of people talking about it, making me think people don't know what happens and when, they just follow everyone elses emotional rollercoaster.

[cousinmuscles]

A nice chart to show the increase of the price of bitcoin, it's not perfect but it shows what I am trying to convey:

https://www.tradingview.com/chart/msH9aoFn/

Zoom out so the chart starts at late 2010 and ends in 2025.

The Y axis is logarithmic, meaning the price is shown in powers. For every line up, the price increases by a factor of 2.5 or whatever your current zoom is set.

What this price shows is there is a growth curve that is slowly planing out. With every bull market and bear market, it always overshoots above the growth curve and then undershoots below the growth curve. IMO you should only buy when it is below this growth curve.

The volatility is decreasing. What I mean is in the past, for example in the first bubble in early 2011, the price increased 40x from $0.8 USD to $32, within three months. In the second bubble in early 2013 it went from $12.5 or so to $250 or so, a 20x increase, within three months. In the third bubble in late 2013 it went from circa $125 to circa $1200, approx 10x, within two something months. The last bubble lasted over a year so is difficult to figure out, but the first phase was november 2016 to april 2017 from $600 to $3000, then it took a break from increasing for two months, then kept going up and up, for another 6x+ increase to $20k.

It is not like in 2011 where you could deposit $10k in a shady website, short with 10x leverage and make the price drop in half. With millions of dollars you might move the price up or down a percent. The volatility is decreasing and the market is hardening, there is more liquidity and the market is no longer centralized in one major exchange. While this makes it less profitable (or makes you lose less if your investment goes bad), bitcoin is more rigid nowadays and is taken more seriously, and most people don't have trouble sleeping thinking bitcoin will disappear tomorrow.

[cousinmuscles]

I advise against daytrading in bitcoin. From all my personal experiences and discussions with traders is bitcoin does not have set contingencies with economic factors like e.g. currencies. A lot of media profiles use the power of their speech to influence the market in their favor. A lot of "whales" or people with tremendous amounts of bitcoins manipulate the market at their own will, most of the youtube videos of "pros" trying to show this only make a fool of themselves as they show they're getting fooled and don't "get it" in regards to the manipulation but instead just follow the herd and command others to follow too.

Methods I used to use in charting worked for a period until the market changed mood and different figures became powerful in the bitcoin world and made statements that changed the sentiment. I think bitcoin and altcoins are very unprofessional and often are set up to fool new traders.

What's even worse is for many trading platforms the liquidity isn't there and the interest rates for the loans are high. For my part this meant that often when I made trades they would go bad or less good because of the aforementioned factors, despite my predictions being good. What was even worse was failures on the exchanges part in terms of lag (this is a serious issue, if you put in an order and it shows up minutes later, and after the price has changed, you're screwed), and error (exchanges like bitfinex previously didn't work perfectly, such as jumping from one price to another while skipping the buy/sell orders inbetween, then later liquidating your position). What was and probably still is triple worse, to top it off, is that in bitcoin land (it still is AFAIK) there is minimal regulation on exchanges and people with humongous amounts of money can move the market as they wish. Also, many exchanges have openly admitted to insider trading as they have access to data we don't.

Trade with caution and know your exchange!

[Mr.BB]

Crypto trading tips:

1. Dont use leverage
2. Dont use leverage
3. Technical Analysis is useless
4. Research 12 hours a day
5. Buy the fucking dips
6. Dolar average trades (dont go all in, use one <1% of your stack for each position)
7. Dont buy with credit card
8. Watch graphs for 12 hours
9. Be patient
10. Hodl

[Bio-Active]

Being patient and buying low!!!

[Tovarasu]

Crypto trading tips:

1. Dont use leverage
2. Dont use leverage
3. Technical Analysis is useless
4. Research 12 hours a day
5. Buy the fucking dips
6. Dolar average trades (dont go all in, use one <1% of your stack for each position)
7. Dont buy with credit card
8. Watch graphs for 12 hours
9. Be patient
10. Hodl

This right here ! TA on crypto is like teaching a gypsy not to steal.

[Mr.BB]

This right here ! TA on crypto is like teaching a gypsy not to steal.

Like a good friend says, TA is looking into the past.

[marcus300]

Like a good friend says, TA is looking into the past.

Lol lol
Its like driving your car through the rear view mirror.

[cousinmuscles]

Screw TA and IMO even daytrading. Wait for this long bear market to go through. Do actual research on whether there is still potential for another bubble and if it is actually worth putting any money in again...



Major bull market 1, first green like: early 2011
Bear after
Major bull market 2: 2013
Bear after
Major bull market 3: late 2016 and all of 2017
Looks like a pretty clear bear market now.

The black line shows a general trend and how it overshoots/undershoots.

Every bull market has perfect (although lagging) correlation with google trends index (search index) and number of transactions per day. These are undeniable and there is no need to analyze news.

However preceding a bull market you do have to look at what growth opportunities exist for the ecosystem, what technological improvements can arise and what obstacles can be broken.

I see future possibilities for growth due to
1) ease of transactions and better wallets - this is much better than a couple years ago, now I don't even use addresses and the recipients signature is included when I enter the transaction so it is much safer... but this can still be made tremendously better to include less technically proficient users

2) compact and truly anonymous transactions through Lightning Network - this has been in the talks for years, in essence it helps make transactions off chain, for as many transactions as you want, until a final settlement which is then stamped on the blockchain. This makes bandwith usage on chain scale down to hundreds or even thousands times more while also allowing for unrecorded transactions (100% untraceability)

3) yet another reward halving

wonder what else there is right now...

[cousinmuscles]

https://www.bloomberg.com/news/artic...criminal-probe

They're about 7 years late.

https://www.bloomberg.com/news/artic...yptocurriences

Tether has been an issue for a long time now and makes one wonder how is it even allowed, won't be good for a while when it pops!

[Lahom]

Every bull market has perfect (although lagging) correlation with google trends index (search index) and number of transactions per day. These are undeniable and there is no need to analyze news formula 1 mexico
. However preceding a bull market you do have to look at what growth opportunities exist for the ecosystem, what technological improvements can arise and what obstacles can be broken.

[Frank777]

Good topic! To be honest, I'm not an expert in trading, so I'm looking for some useful info to improve my skills. I've already found cryptocurrency trading tools and I hope they can help to gap my knowledge gap. But I'll keep your posts in mind. Thanks for sharing your experience, guys!