I Focus Mostly on Bitcoin Trading, Here's Why
Trading is a very specific game and one must know oneself very well in order to succeed in this game.
The first couple of years are just that, a learning experience of getting to know yourself, the game, the markets and facing all of your extreme feelings and mental programs. So I suppose this is the main reason why I mostly trade Bitcoin, I have a hunter's mentality. I need singular focus and as little distractions as possible. I like to stalk my prey, study its habits and know how to cook it properly. So for me and me personally, “this is the way,” so to speak (Mandalorian reference). A personal preference. A character predisposition.
I have to know the things I trade and know them well. I have to feel comfortable sinking larger (for me, peanuts for someone else of course) quantities of capital in order to be able to sleep peacefully at night. Remember kids, sleep is important. If you can't sleep at night with open positions, you're doing something wrong.
I am big on values. It's just how I'm wired. In life and in work. I have to align myself with the values of whatever I am trading to some degree or other. It's just how I function. And I love Bitcoin and what it represents. Freedom, sovereignty, independence. While I can squint in one eye and play an obvious day-trade play on an altcoin, I do not feel comfortable being in one for longer periods of time. They feel to me like holding a hot potato in my hand... quick pass or I'll get badly burned.
Why is that?
Well, because I believe that the vast majority, and I'm talking 99.99999n% of all altcoins are going to zero. It's only a matter of time. There is no IF, only WHEN. I also believe that 99% of them are blatant scams and I am unwilling to partake in these sorts of activities. In Crypto particularly the people getting scammed are the most uneducated, financially vulnerable and emotional crowd. That goes for all the wannabe traders as well. They are easy to exploit and since there are basically no consequences for the scammers in this space, they are rampant everywhere, spreading like viruses in an open worldwide Orgy with a neon sign above the entrance "Everybody's welcome, anything goes!".
The Pareto principle of 80/20 does not apply here. It's 99% vs 1% in this space and I am being generous. A digital wild west. You either make it big or you die without a kidney in a ditch somewhere. I love it for the freedom it represents, and the insane potential it has, but I make no excuses for the bad that comes with it. I simply choose to avoid it as much as possible. I used to give it my all to steer people in the right direction, but I've mostly given up, since the promise of 1,000x returns and Lambos is simply too intoxicating for most to resist. Alas, I will be spend some time in future posts warning you lot from the dangers that lurk in this vast sea of opportunity and peril.
I have also amassed some pretty painful scars in the markets during the past couple of years. I started out like most, I suppose. With a little bit of money and a dream, lacking any experiences or real knowledge of the markets. Mine wasn't so much about easy riches, I don't really believe in that idea, I was determined and still remain, to learn the trade and make it my livelihood for the long haul. Still, I had to start somewhere. And as we all know, we learn best from our own mistakes. The more painful, the better.
For instance I had to learn the hard way that some altcoins never recover from a drop, no matter how long you wait. They simply vanish into oblivion. A few years later no one even remembers the promise they represented. The once mighty community of believers and trolls alike, never to be seen or heard from again.
I also had to learn that even though something is down 50% in the span of a few days, it can and will go lower still. Wiping any unprotected leveraged trades with it. I've learned the true meaning of Black swan events, the unpredictable events that no one sees coming. I've had to make peace with the unpredictability of the markets and adjusted my mentality to the fact that anything can happen in the markets, at any time. I've had to learn that "risk management" isn't just some academic financial jargon, but an extremely important part of the trading game. And life in general, I suppose.
I've had to learn what third party risk means and how to protect yourself from it, as much as you can. I've had to learn that even really big companies, trusted companies, can disappear in an instant. Puff and all your money is gone. A gift for the Gods and a few scammy bastards, now enjoying the life of a pubeless millionaire, without a shred of guilt weighing them down as they drown themselves in margaritas and p****.
Scars and principles aside, there is also a big difference in how to trade altcoins compared to trading Bitcoin. And here we make the loop to the beginning of this article. I won't go into details, but I will leave you with a few thoughts.
First, the similarities, starting with an almost absolute correlation. Altcoins usually trade like a heavily koked up Bitcoin. In other words, like a leveraged Bitcoin. They mimic Bitcoins moves and any slight weakness in the big boy will ruin even the most enthusiastically raving party any altcoin might have. For me, that just introduces additional monitoring components and stressors, that make charting altcoins rather pointless for the most part. And since I do trade on leveraged exchanges, I’m at the top of my risk limit anyway. More volatility does me no good, because I have to lower my position sizing accordingly, thereby eliminating any potential upside of larger volatility. If one only trades on spot exchanges and doesn’t touch laverage (not a bad idea, by the way), then playing altcoins based on Bitcoin moves, is a completely acceptable and sensible way to play the game. It’s how I’ve started.
The above mentioned correlation does break from time to time, for short periods of time. That is probably the only time that playing specific altcoins makes sense. Just keep in mind that no matter the news, no matter how bullish something seems to be, no matter the size of the green candles, if Bitcoin takes a dump, the whole ecosystem goes down the drain simultaneously.
Trading only one asset and knowing its ins and outs is a very different approach to trading on multiple markets at the same time. One is all about narrow focus and familiarity, the other is about scanning everywhere for those occasional opportunities that pop up and exploiting them. Every trader needs to find out which approach is best for him personally.
If I summarize, I like to focus on trading Bitcoin mostly (not solely) because:
I operate best when I can really focus on something and discard all distractions, just me and the naked charts.
I need to know and trust what I’m doing, my values coincide with the Bitcoin ideal.
I have developed systems and trust in those systems on Bitcoin, I’m not a big fan of constant experimentation in this regard (anymore).
I trade on leveraged exchanges so additional volatility of altcoins is more of a problem than an opportunity for me.
I don’t like additional risks that trading altcoins and new platforms entail.
I don’t like scanning all the social platforms for news, tips and tricks.
I see no real advantage in diversifying in this space because correlation is too high.
I like to have one, max two positions open at one time, I hate having to monitor a lot of positions and markets at the same time.
My portfolio isn’t big enough for it to make sense investing a few % into risky assets in hope for a moonshot, essentially playing the VC game.
I like to have at least an illusion of control over my portfolio, I like the ability to monitor where I’m at at all times.
“I have me some scars” from trading altcoins (in the voice of an old pirate).
For the most part the only people who make a lot of money with altcoins and get to keep it (very important distinction) are those:
Who got lucky going in on the right coin at the right time and selling at the right time (I've never been that lucky).
With inside information, founders, large players who buy up initial allocations, influencers who shill altcoins and get paid either with information or participation in the initial phases of distribution, and then sell when it hits the market (I don't have those connections or inclinations).
Specialized traders of the season who capture the novelty of the current moment ahead of time and exploit the loop holes, systems, algorithms, airdrops, initial market inefficiencies, big trends... scooping up enormous opportunities that present themselves in those narrow periods of time and have the balls to play in those sandboxes of shiny diamonds and ravenous sand worms (there is serious money to be made here, but it requires a completely different approach to what I'm comfortable and skilled with).
Short term focused traders who have developed good trading systems for their favorite altcoins (not too dissimilar to how I approach trading Bitcoin and how I traded altcoin in the early days).
I know, I know... but your friend is making a killing just playing with altcoins from his phone, "pineapples, apes, pancakes, yields, meta masks, JPG’s, woohoo..." and just bought a new car, house or whatever. I've known many of those, even some freshly made millionaires among them. Funny enough none of them retained that money to this day and doesn't know how to replicate his success again. And I'm not dissing on them, I'm really not. I am as happy for them as anyone, I really wish they all got to keep their money and make it really big. I do. I've just been around the block a few times now and I've unfortunately seen how it usually ends. It's a fun, exhilarating ride on the way up, but a hard, painful, dark crash on the way down. Easy come, easy go is a tale as old as time.
You might think that I'm pooping on shitcoins, I'm sorry altcoins and you might be right. But that doesn't mean that going the Bitcoin focused way is the right path for you. Play around, have some fun, experiment, try all the new things, browse all the telegrams and discords, take your chips and try your luck. You never know, you might just end up being one of the four big categories I've mentioned above. Or you might be a new breed of altcoin winner, finding your very own way of recognizing and exploiting opportunities in this market.
Just maybe don't go all in. Learn about managing risk with proper allocation, because that's about all you really have any power over in the altcoin world. You know, imagine a lake overflowing with frenzied Piranha guarding randomly distributed gems on the floor of the lake. Risking only one finger at the time, might be worth the risk, while free diving for the one big shot, might not be such a brilliant idea.
Since I'm more focused on trading, psychology and Bitcoin, I'm afraid that "altcoin 1000x when Lambo '' people might not find much value in my writing. In all honesty, most of the content out there is being made just for them anyway. The get rich quick ideology sells big and when there is demand, there will always be ample supply. May they all prosper in their own way and fall for as little traps as possible, while exploring the uncharted forests of untold riches and hidden dangers.
As for the rest of you, I do hope that by embarking on this journey together, we will have learned something new about the markets, trading and ourselves. I do not pretend to know everything, hell, I'm just smart and experienced enough to know that I know absolutely nothing in the grand scheme of things. And the market is the perfect tool to remind us of that fact every once in a while. Nevertheless I just want to add my 2 cents in the ultimate treasure trove of information, experiences and opinions that is the internet. Hopefully some of you might find it useful or at least mildly entertaining.
Disclaimer: nothing here is financial advice, just a fellow trader meditating on his trading journey, sharing the lessons he learned and debating some personal opinions that are only that, opinions and nothing more.
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