Cryptocurrencies on January 11, 2018: outlook


*I don’t trade cryptocurrencies. The best strategy for trading a crypto bubble is a classic trend following strategy.
Here’s the outlook for various cryptocurrencies based on the aforementioned strategy.

Discretionary outlook based on charts

  1. Don’t buy Ripple on the MoneyGram news!
  2. Don’t catch the falling knife in Ripple.
  3. Trend followers in Ethereum should remain long, but watch out for Bitcoin.
  4. Now is not the time to buy Bitcoin.
  5. Nobody knows when the cryptocurrency bubble will end. But governments are moving against it.

1:55 pm. Don’t buy Ripple on the MoneyGram news!
Ripple announced that it would team up with MoneyGram on crypto-currency enabled payments. Ripple spiked on this news.

Do not chase the spike. Trading a bubble based on news is how you get killed in the long run. A bubble’s medium term direction has nothing to do with fundamentals or news. It’s completely driven by irrational speculation.
Instead, wait until Ripple breaks out and makes a new all time high. That’s the safest way to play the bubble in Ripple.
8:25 am. Don’t catch the falling knife in Ripple
Ripple continues to fall after breaking below its 9 ema.

Trend followers should stay away from this crypto. No one knows where Ripple will bottom. Perhaps it has already bottomed. Perhaps it will fall to $1. Who knows.
Wait for Ripple to stabilize and breakout before buying.
7:45 am. Trend followers in Ethereum should remain long. But be careful.
Ethereum’s uptrend is still intact, and it hasn’t broken below its 9 ema yet.

Trend followers need to be careful. If Bitcoin breaks down below $10k, then Bitcoin will tank. That mini-crash will bring the entire crypto world down, including Ethereum.
6:33 am. Trend followers should not buy Bitcoin.
Governments are moving against Bitcoin (see below). The only way to know if Bitcoin’s bubble is over is to wait for a breakdown. If Bitcoin breaks down below $10k, then Bitcoin will tank.

China banned Bitcoin in September 2017. Bitcoin tanked 40%. But it did not make a new low after bouncing from its -40% low.

South Korea is moving to ban Bitcoin. If this action causes Bitcoin to break below $10k, then there’s a high probability that Bitcoin’s bubble is over. This time will be indeed different when compared to previous government actions.
6 am. Governments are moving against cryptocurrencies.
Here’s what I think about cryptocurrencies in the long term.

  1. Cryptocurrencies and blockchain are here to stay. Blockchain is a technology with real uses (like the internet in the 1990s).
  2. HOWEVER, the prices for household-name cryptocurrencies like Bitcoin are in an insane bubble.
  3. Nobody knows when this bubble will end. Maybe right now. Maybe in a few months. Maybe in 1 year. That’s the thing about bubbles. Markets can stay irrational longer than bears can stay solvent.

More and more governments are moving against the bubble in household-name cryptocurrencies like Bitcoin.

  1. The U.S. Senate will hold a hearing with regulators next month on potential financial risks (i.e. bubble) poised by cryptocurrencies. Here’s the CNBC link. Do not expect the crypto space to be unregulated forever. Uncle Sam will eventually come in and impose reasonable regulations.
  2. South Korea’s government said that it will ban cryptocurrency trading. South Korea’s volume in crypto trading is MASSIVE. Here’s the Reuters link.

That’s why traders should only go long cryptocurrencies using a trend following strategy. When the bubble pops, contrarian traders who are long cryptocurrencies like Bitcoin will get killed! They’ll buy when Bitcoin tanks 50%, only to see Bitcoin crash another 50%.

3 comments add yours

  1. Troy, you are correct on ripple. I got in at .25 at last breakout and my 20 day low stop is .63 cents. Wait on breakout to play trend upward and bearish is sub .48 level

  2. This may be a simple question but how do you decide on which time frame to use for the least noise?

    • For cryptocurrencies? A few days. Definitely not on a daily basis.
      I don’t trade crypto, so take these thoughts with a grain of salt.

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