Dysfunctionality Is At The Core Of Market Functionality
Financial Markets
No matter which financial market you are trading, they all share a very particular similarity, and that is unpredictability. If, as market participants, we knew the direction of any particular market, trading would be a breeze. However, as I am sure you know, that’s definitely not the case. Even when probabilities are high, markets tend to whipsaw and liquidate traders.
Even traders who have chosen the correct direction sometimes get liquidated. This is due to two primary reasons:
There is a very important underlying message being communicated here, and that is… money is made by leveraging the mistakes of others.
If everyone was hypothetically correct markets wouldn’t move. Essentially, markets move because people make mistakes, or they have no idea what they are doing. Either way, this provides an opportunity. Without these errors, there are no significant movements. You will notice a level of this understanding when markets become range bound.
This usually takes place during a time of uncertainty. In other words, no big bets in either direction… but rather a hesitancy from the market. In such a scenario, markets await a catalyst or news event. Something that will trigger a sudden directional bias. When we look at why markets are moving, we are able to ascertain and understand one of the key driving forces of any market.
Markets function due to dysfunctionality. In other words… the market thrives on mistakes being made. This is the motivation behind fakeouts, flash crashes, and other “market tricks”. These are designed to adjust the scales. This is why having a cool head and doing exhaustive technical analysis are so important. However, many fall for the “tricks” because they interpret them as legitimate moves.
This is only avoided by gaining knowledge, understanding, and experience, and keeping a cool head. Sure, you are not always going to get it right. However, your success rate will be significantly higher than those who are impoverished in relation to the abovementioned qualities and traits.
Just Like Anything Else
Operating within financial markets is much like anything else. Whether it be a career, sport, or any other related activity. Having the knowledge and experience is imperative. Get on the field with a team of professional sportsmen and see where you land. Likewise, there are those who commit endless hours to financial markets.
Furthermore, they have been doing so for years and even decades. A guy with a big balance, and ego to match, doesn’t stand a chance when coming up against such market players. Markets thrive on arrogance and overconfidence.
Final Thoughts
When a group of individuals is making money, another group is subsequently making mistakes, costly mistakes. The functionality of the markets relies on the dysfunctionality of the majority of the participants. I am sure you have heard that approximately 90% of retail traders lose money.
Unfortunately, it is this very dynamic that enables markets to operate profitably. The main objective is to ensure that you are on the correct side of the scale. This is not an immediate outcome, which is why so many try trading for a few months and then just fade away. Markets are a tough terrain.
That’s it for this one. All the best, keep it real, and see you in the next one!
The Amalgamation Of Crypto & TradFi
Systems, Protocols & Control
Regardless of whether you are looking at TradFi or Crypto, the power struggle is still very much a part of the game. The way of the world is control. He who has control has the ability to leverage and create wealth. This doesn’t change in a decentralized model. It is however a lot more difficult to achieve. Ultimately, a coin or entity that has a high level of decentralization is less prone to control.
It is however not exempt, which many tend to forget. Either way, there is still a level of control that remains with certain persons or wallets, depending on the nature of the entity in question. Certain individuals are attempting to increase their holdings and influence in certain blockchains and blockchain-based projects. The quest for power now has another playing field.
The idealists are unable to entertain such an ideology. It’s easier to ignore the elephant in the room. Where there is power to be gained, warfare will be waged. At the end of the day, this is the motivation behind all the “regulatory pressure” and FUD. Before we can correctly view the Crypto market, we have to understand the two key motivations at work, including the initial motivation of Satoshi.
Satoshi Style
Satoshi created Bitcoin as an alternative form of money, one that existed outside of the state and was not susceptible to the typical forms of manipulation and control. At least, that is the motivation he put forward and promoted. However, due to the market’s maturation, there is now a very different motivation at play. There is now an attempt to bring Crypto into the existing system.
The idea is that the existing control is maintained and that Crypto comes in under it. You need to view this in a hierarchical fashion. The goal is for TradFi to remain at the head, with Crypto coming in under its banner, while simultaneously improving its inherent structuring and processes. In other words, leveraging Crypto for the sole objective of increasing and improving the current system.
Satoshi envisioned an independent network… two separate worlds. However, every effort is being made to destroy this idea. As the saying goes: “If you can’t beat them, join them”. This is the primary objective, an amalgamation that sees TradFi maintaining its “supremacy” and dominance. The powers that be have no intention of allowing society an independent form of money. They are happy to allow Crypto, provided they have control.
As a result, true independence will become increasingly scarce. Look at Binance today, as opposed to 2017. Or more recently, look at Ledger, as opposed to 2014. The net is widening, and the goal is to destroy independence and true self-custody. Whether you are able to accept it or not is another matter. However, the true essence of Bitcoin was lost a long time ago. There are however still significant benefits to the network.
Understanding The Landscape
Those who understand the marketplace are the ones who extract value from it. Idealists, ultimately live in a bubble, unable to accept the sometimes harsh realities that are contrary to their own desires and ambitions. Understanding your terrain is imperative if you are to navigate your way correctly. This is also why the majority are unable to discern seasons in the market… they allow their own ambitions to muffle reality.
Understanding the future movements and maturation of any particular market gives you an edge. What should happen is not always necessarily what ends up taking place. This is an unpopular truth for idealists to stomach. However, understanding and accepting this is often at the heart of fortunes being made.
Final Thoughts
It’s quite clear that regulatory arms are being utilized as “whips of control”. The underlying message is: “Buckle or die”. There is no intention of allowing self-sovereignty and self-sufficiency. The true dynamics of decentralization are now facing an enormous test. This is definitely going to be an interesting ride. See you next time!
The Challenging World Of DeFi – Where Does Value Truly Lie?
Taking The Plunge
Regardless of if markets head lower or not, at some point, DeFi players have to re-enter the arena. It’s obviously ideal to re-enter once a bottom has formed. This is more important than actually timing the bottom. Why? Well, since you are in the DeFi sector to secure a form of passive income, the most important aspect is that your collateral doesn’t devalue, and along with it, your rewards.
Currently, we find ourselves in a rather unusual market. This is largely due to the economic climate, monetary policies, macro events, as well as the initial stages of a decoupling. There have been strong signs indicating that there may be more to this current trend than just a brief visitation. Obviously, the banking crisis has played an enormous role in triggering this decoupling.
Even though further downside (Crypto) is likely, I do however believe that it will be extremely brief. Picture a scenario similar to March 2020. I envision a flush-out, followed by significant upside. This is if it takes place. As mentioned before, when I envisioned a banking collapse back in 2022, I pictured it unfolding in the last half of the year. So, for me, it happened earlier than I had expected.
This is the basis of my modestly bullish shift that took place a few months ago. If we look at the Crypto market, in light of DeFi, there is a level of confirmation. If the Crypto market continues in either of my two scenarios, it’s a good time to begin thinking of DeFi. There is either a slow grind-up or a brief collapse. In either outcome, there is no long-term depreciation, which is imperative in the DeFi space.
However, if markets collapse and remain “compressed” at significantly lower levels, the story changes… and rather significantly. This brings me to the topic of value. Where do you find true value? If DeFi projects depreciate heavily over an over-extended timeframe, which ones are not only going to survive but also go on to regain value and eventually appreciate further?
Multiple Factors
Unfortunately, when it comes to DeFi, there are numerous factors outside of market conditions that can cause the value of a particular token to depreciate. For instance, an exceptionally high yield will inevitably encourage heavy selling. A hack or exploit of the protocol can trigger exceptional depreciation. Do you remember Bunny Finance? The protocol experienced a hack in 2021, I think it was, and has never recovered even in relative relation to the bear market.
The BUNNY token is currently trading at $0.11 with an all-time high of $512.75, according to CoinGecko! That’s a gonna! These are the dangers that come packaged together with the exceptional gains of the DeFi market. This is why I tend to look out for stablecoin opportunities. Firstly, the aspect of impermanent loss is greatly reduced, and secondly, due to the nature of stablecoins, there is a level of stability.
Now, these are definitely not guarantees. Personally, I think that Hive’s HBD currently offers the most attractive opportunity within the DeFi space. Not investment advice, but merely my opinion. Look at CAKE, the native token of the DEX and AMM, PancakeSwap. A change in the lock-up periods has completely devalued the token. Holders that staked their CAKE for an entire year recently offloaded their rewards on the market.
Prior to this adjustment, there was no lock-up period. There was a set APR, regardless of whether you held for a week or a year. Now, the longer you lock up your tokens, the higher the APR. This literally changes everything, and makes it rather unattractive, at least to me.
One has to factor in all of these possible scenarios, which can make the DeFi realm a rather daunting place, especially for noobs. However, there is no escaping it. This is DeFi, and until the sector matures, and hopefully improves… this is what it means to take part in the DeFi realm.
Final Thoughts
Despite the inherent risks, many investors do their best to navigate the DeFi market, in the hope of securing a prolonged period of satisfactory gains, at least in relation to the rest of the market. This is why I have signaled out HBD. To me, the risk/reward ratio makes sense.
Investors will have to do their own research and personal evaluation. Investing is always a risk. It’s like rain… it’s always wet. There’s no getting around it! Anyway, that’s it for this one, catch you next time.
Leofinance – Incentivization & Decentralization Getting An Overhaul
A Season Of Change
Change is often a difficult pill to swallow, especially if you are comfortable and enjoying life the way it is. Well, within a very short space of time, Leofinance has seen a complete overhaul with the launch of the new UI and other adjustments to tokenomics and internal structuring. The legacy UI is no more, and the pride is now on a new and exciting chapter of the Leofinance journey.
Growth seldom takes place outside of change. Even growth that appears to take place sporadically will require change/adjustment in order to accommodate the change. If you are wanting to see development, adoption, and growth within the Leoverse you are going to have to accept that change is inevitable. The new UI still has a number of issues that need to be ironed out, as well as a few additional enhancements, at least in my opinion.
Eventually, over time, the legacy UI will no longer be remembered. It will require time for the community to settle and become comfortable. It is also difficult to grow accustomed to a new experience if there are issues, which is why it’s imperative to sort out the remaining bugs as soon as possible. A recent post by @anomadsoul left me with somewhat of a positive outlook when it comes to curation.
Stake-Based Curation & Leo.voter
Something that became glaringly obvious to me during the days of the old UI was the centralization of upvotes coming from Leo.voter. There was virtually zero guesswork. I knew exactly where the upvotes were landing, provided the authors published a post that day. To me, this was a concern. Firstly, due to the subtle messaging that anyone with a certain level of emotional intelligence will pick up on.
Secondly, it encouraged mediocracy. Knowing your article for the day is virtually guaranteed a Leo.voter upvote creates a “leach” mentality. Quick question. What’s driving the growth of Leofinance at the moment, or better yet, who? Second question. Who is reaping the benefits of the ecosystem? Third question. Why is this happening? Anyone who can answer these three questions honestly will be able to identify an enormous issue.
The centralization of the “benefits” of the network being distributed amongst the upper echelon. Everyone talks a good game. Never listen to what is said, rather monitor what is done. In the abovementioned post by @anomadsoul, this issue appears to be gaining some attention. I can also understand that it can sometimes be difficult to discover great content. To be fair, I have seen a little more diversification of late.
A new update will enable the community to put forward articles for curation. The amount of articles each person can suggest is linked to their staked LEO holdings, which is fair. This will definitely aid in providing and promoting a more diversified vote. There are a lot of changes currently taking place, as well as more in the pipeline. OGs will argue that they have somehow earned their claim on a Leo.voter upvote.
That’s true… but only if you are operating within a centralized entity. The only thing you earned is directly linked to your last publication. In a decentralized world, a quality article gains a reward. It’s a big shift to a strong level of decentralization. It will be interesting to see how Leofinance fairs in this endeavor.
Two Points
Running and managing legacy businesses for two decades taught me a lot. Two of the most important aspects that you need to address when working with a team or a community are as follows:
- Encouragement
- Dealing with issues
There’s nothing worse than a bootlicker. Give encouragement and praise where it’s due, but then also speak out against what needs adjustment or correction.
An army of bootlickers won’t get you far. Why? Because, like all bootlickers, they find a shinier shoe to kiss. Work with people that challenge you, that encourage you… not those who just simply agree with everything you say. If this doesn’t sit well with you… you might have to consider that you are better suited to a centralized world. Although pure decentralization is a myth, there are definitely higher levels attainable than what most decentralized platforms are currently experiencing.
Final Thoughts
Anyway, hats off to Leofinance for attempting to deal with this particular issue. I won’t congratulate yet, as we actually need to see how this idea plays out. Either way, it’s a noble move. The growth and engagement on Threads has been an encouraging journey to have been a part of. I hope to see more. Hopefully, we can see that 100K mark being obliterated soon. All the best, catch you in the next one!
Bitcoin Ordinals & BRC-20 Tokens Encouraging Lightning Adoption
Creativity Or Spam?
The recent spike in BTC transaction fees has left many a Bitcoin maxi rather unimpressed. Many argue that what is currently taking place in regard to Ordinals and BRC-20 tokens is nothing but spam, and unnecessarily clogging up the network. I would go as far as to say that in this particular instance, I agree. However, only to a certain degree. Personally, I like the idea of non-fungibility on the BTC network.
However, I have to agree that much of what is currently taking place is more “spammy” in nature than anything else. Crypto enthusiasts however need to be careful of carelessly throwing out the baby with the bath water. Look, even NFTs on Ethereum and Solana are a far cry from where I envision the sector to be. However, as with most things, it’s a journey of maturation and discovery.
An initial surge in interest and “creativity” is to be expected. This is how these events unfold, it’s nothing new. Despite the surge in fees, there is a silver lining to this cloud and one that I have been waiting some time for! Congestion on the Bitcoin chain opens up the way for layer 2 solutions, and in particular, the Lightning Network.
Lightning Is Bitcoin As Cash
Obviously, transaction fees on the native chain have always been high, especially for micropayments. However, Lightning changes the rules and enables payments at a ridiculously low cost to the consumer. What we have yet to see is the support from major exchanges. Despite decentralization being king, CEXs still have relevance in terms of “value transition”. However, the recent announcement from Binance is likely to open up the floodgates.
Binance has announced plans to add Bitcoin Lightning Network withdrawals for users. This is likely to trigger a domino effect with additional CEXs following suit. Earnings in other Cryptocurrencies can now be received and spent on the Lightning Network. This is something that would personally interest me, and I’m sure will aid in the adoption of Lightning as a payments network.
If Bitcoin is a store of value, as well as a savings mechanism, it makes sense that at some point savers will become spenders. There is a need for Bitcoin as cash, even though for many, it is still an unrealized utility. I believe Bitcoin will operate as cash in a more significant way within the next five years. Countries like Lebanon, Argentina, and Turkey are already living within this reality.
First World countries have been spoilt, but not for much longer. A significant shift to Bitcoin and other Cryptocurrencies is simply a matter of time… and nothing else. People operating within a Bitcoin/Crypto standard will be looking to transact speedily, inexpensively, and with the least amount of volatility. Bitcoin Cash no longer has any real future as digital cash. Perhaps, other advancements may occur on Smart Chain.
This was something that I envisioned some time ago. The BCH community was getting rather excited about the low transaction fees on BCH, as well as its future as digital cash. For the most part, I just kept silent. It was evident that once lightning was a working product, it would steal the show. A superior store of value, as well as a more decentralized network… why would you require anything else?
Final Thoughts
Regardless of what becomes of Ordinals and BRC-20 tokens, I am just pleased that Lightning is gaining a foot in the door, especially when it comes to CEXs. Spending Lightning sats is extremely fast, and significantly cheaper than most chains. It’s a great user experience… and that counts when you are looking to utilize a Cryptocurrency as cash. It will be interesting to see how this unfolds. All the best, catch you next time!
Building A Base of Decentralized Tokenized Assets
Appreciation Or Value?
Crypto is a great asset class for wealth creation. However, along with the volatility come times of depreciation. These are extremely difficult periods for any investor, especially newcomers. However, a balanced portfolio will always look to incorporate assets of value and stability. This is often in the form of precious metals, art, and real estate.
This is where tokenization is beginning to become a lot more attractive to many investors. Crypto maxis can now own the abovementioned “value” assets in the form of Crypto. Proof of physical ownership comes via the ownership of a digital token. In other words, you get to own physical assets in a digital form. Not only that, but you get to hold them yourself, as well as trade them on decentralized blockchains.
This is something that has interested me for years, and am quite bullish on this innovative concept, especially looking ahead to the following two bull markets. I believe that by 2030 there will be trillions, possibly even tens of trillions, in terms of tokenized real-world assets. So, is this going to become an addition to the average Crypto portfolio? I definitely think so.
Knowledge & Availability
It’s always the same during the initial stages of any new asset, or asset class. To a large extent, people are simply unaware. They are not on the lookout for new and exciting ways of doing things. Rather, they are immersed in their work, family, and social life. It’s a difficult nut to crack… but, eventually, it does crack. The “portability” and ease of ownership are however a great selling point. Hence, my optimism, in regard to the 2020s being a decade of enormous growth for tokenization.
We are currently in the stage of development and advancement. When an idea comes to life, so do the challenges and hurdles inherent to the idea. Performance and liquidity “rails” are busy being optimized, ultimately, making the concept that much more attractive. Along with that comes the increase and expansion of available and tradeable assets.
As more assets get put on the blockchain, the benefits become clear, ultimately, instilling trust and accelerating adoption. Now some of these real-world assets will gain some level of additional value being on a blockchain. However, for many, their value is dictated by their natural market and valuation. At this stage of the game, the most attractive aspects are ease of ownership and 24/7 liquidity… oh yes, and portability.
Final Thoughts
This is not a new idea. However, in terms of practical application, it is rather new. The pioneering stage is often exciting, but also comes packaged together with a lot of hard work and challenges. Personally, I am looking to slowly begin acquiring a diversified portfolio of tokenized assets, as well as the coins that I believe will be key in this monumental shift.
At the end of the day, it’s about having access to the entire spectrum of investable assets, while utilizing one sector, Crypto. Many of these investments also tend to act as a hedge for your standard Crypto portfolio, which is also a form of comfort. That’s it for this one, catch you next time!
Crypto – Finding A Routine That Works
The Crypto Life
For some, Crypto is everything… for others, it’s a bit of a passion, a side hustle. Either way, making time to “get stuck in” can sometimes be a little challenging. Many people already feel as if they don’t have enough hours in the day. However, that excuse is simply not going to cut it. Establishing a routine, or even re-establishing an existing routine needs to be a primary objective if you are looking to make any significant headway in your Crypto journey.
Something I noticed during my time in the business world, and overseeing hundreds of staff members over the years… is that dedication is often short-lived. Most people are able to put their best foot forward for a couple of weeks, or even months. Very few were able to continue in the same “spirit” in which they began. This is human behavior, which is why routine and discipline need to be additional ingredients in order to experience success.
Crypto enthusiasts are generally traders, content creators, and DeFi participants. These require varying degrees of effort and time, with DeFi being the least demanding. Depending on how involved, as well as diversified you are, will dictate the amount of time and dedication you need to bring to the table every day. I have addressed routine quite extensively in a previous post. However, finding a routine that fits/works is a lot more challenging than being aware of what you need to appropriate.
I would advise reading, “Routine – The Mother Of Consistency” in conjunction with this article. The application of knowledge is often where many tend to experience difficulties and resistance. Simply being aware of what you need to do and accomplish is not enough. You have to find the best way to execute and accomplish your daily goals. Getting this wrong can often lead to “missing the mark”, which can also lead to discouragement.
Encouragement Motivates
Being productive in and of itself is an encouragement to those who are able to sustain a productive lifestyle. However, if you find that you are consistently missing the mark, it may eventually become a significant discouragement, one that is actually able to wipe you off the board. The greatest barrier to a successful routine is often time management. If something isn’t working, the obvious answer is to adjust your approach.
This is where many make the fatal mistake! Instead of cutting time from other recreational activities, they trim down their routine. Sure, if such a decision enables a more manageable routine, why not? There are other creative ways of allowing yourself more time, in regard to your routine.
- Get up earlier
- Go to bed later
- Cut TV time
- Other time-saving ideas
Instead of cutting productivity, it makes more sense to cut out unnecessary activities. Getting rid of more TV screen time is never a bad idea, in my opinion. Sure, it’s great to just disconnect sometimes… and just unwind, doing nothing. However, many take this necessary pleasure a little too far. Cutting back would enable additional productivity, while simultaneously removing unnecessary pressure, in regard to your workload.
Expiration Times
Another way to ensure and encourage productivity is to assign allotted times to various tasks and activities. This can help to eliminate daydreaming and other distractions. It’s amazing how powerful this simple idea can be. Whenever you complete a certain task timeously, look at how long it took you to complete it. Simply set that as your standard, and work towards operating within its predefined parameters.
One can choose to later revisit these designated limitations, and tighten them even further. Another viable option is to get ahead of yourself. If you find that you made good time for the day, get going on tomorrow’s schedule. There are sometimes tasks that can be done in advance. At the end of the day, you have to find ways to make it work!
Final Thoughts
Having a plan of action is just the first step. Finding a way to appropriate and incorporate it into your life is where the challenge lies. Don’t become discouraged if you find you are missing the mark. Rather, find creative ways to make it work. Trim and adjust other areas of your life… don’t just focus on your routine. Try to find acceptable compromises. That’s it for this one. All the best, catch you next time!
Litecoin – The Halving, New Wallet Addresses & Payment Adoption
The Legend Lives On
Before this year draws to a close Litecoin would have celebrated its 12th birthday. That’s right, very few of the early altcoins are still around, let alone ranked at number 15 according to market cap. Many have often dismissed Litecoin due to its lack of development. However, LTC is advancing in its own unique way, and remaining in the Top 20 is a clear indication of that. A coin that truly has no value doesn’t last long.
There has also been a lot of criticism regarding Charlie Lee selling his bags at the top of the 2017 bull market. However, as a decentralized blockchain, that shouldn’t be an issue, and furthermore, it’s mostly just jealousy. People tend to hate those “smarter” than them. Face it… it was an excellent execution, almost perfect. I have always enjoyed Lee’s manner… cool, calm, and unfazed by criticism.
I remember watching a debate between him and Roger Ver of Bitcoin Cash. The way in which he dealt with Ver was rather commendable. For many in Crypto, it’s solely about the money. They forget that certain qualities destroy wealth and opportunity, while others encourage and nurture it. Litecoin continues to display an extremely healthy level of volume. In many instances, significantly higher than coins ranked above it.
Upcoming Halving
Litecoin is one of the few PoW coins that actually benefits from its halving. The previous BCH halving had little to no effect. However, the last LTC halving had a rather significant effect on the price. Litecoin does seem to operate rather differently in terms of its halving in that it appears to be much more of a psychological event, in that the previous two halvings saw the price beginning to appreciate a few months prior to the halving.
Looking at the previous halving, Litecoin rallied for months going into the halving. According to an article by CoinDesk, LTC saw significant appreciation during the first four months of 2019. Remember, this was still bear market terrain.
- January – 3.8%
- February – 46.3%
- March – 31.15%
- April – 22.00%
Those are significant gains for a top-tier altcoin. Furthermore, if you think that LTC is unable to produce gains, think again. From the last cycle bottom to cycle peak, LTC managed to muster up a return of 1800%… not bad for a dinosaur. The screenshot below clearly displays how LTC begins rallying a few months prior to the halving.
I expect this halving to be no different. Judging by past performance, LTC is on the cusp of a fresh rally leading into its next halving, which is approximately 3 months away. Too bad it’s kicking off in May. You know the old saying, “Sell in May and go away”. Anyway, I am still expecting a relatively good performance from LTC over the course of the next few months.
Wallet Growth
The network continues to experience a steady increase in the creation of new wallet addresses. Taking a look at the second largest blockchain network, Ethereum, in relation to Litecoin reveals just how strong Litecoin’s demand actually is.
The creation of new wallets on Ethereum has been ranging between 100K to 120K, while in the case of Litecoin, it’s more in the region of 120K to 220K.
It’s also important to remember that ETH has smart contracts and DeFi as significant drawcards. While, at this stage, LTC is solely being used as a payment and privacy coin.
Massive Adoption
At the tail-end of 2021, LTC was accepted by more than 50 million merchants. Litecoin is also the second most transacted Cryptocurrency on BitPay, the world’s largest Crypto payment processor. In actual fact, 25% of all transactions on BitPay are performed with LTC. Getting things done is a lot more important than “hype”. Remember, this is exactly how ChainLink went from nowhere to a top-tier altcoin.
LINK was one of the top performers of 2020 and in many ways a forerunner in the 2021 bull market. Litecoin continues to grow in real-term metrics, as well as adoption. The fact that it is not reflected in the price yet is actually a good thing. However, I don’t believe that will be the case for long, expect anticipation of the halving to kick in soon. All the best, see you next time!
Shorting Memecoins – Avoiding The Number 1 Mistake
Feeding Frenzy
Just as everyone jumps on the bandwagon of a mooning memecoin, there are also those waiting to ride it down in a short position. For those unfamiliar with shorting, It’s basically a typical “BUY” order in reverse. Simply put, the trade becomes profitable once the price begins to drop from the point of entry. Thus, we have a “LONG” position, which is, in essence, the same as purchasing tokens and waiting for them to appreciate, and we have a “SHORT”, which is the aforementioned process in reverse.
There are numerous “tools” traders utilize in order to identify a potential trade. However, when it comes to shorting, resistance levels tend to be a fairly reliable indicator. That being said, one should never enter a trade without further confluence. However, in regard to memecoins, it is often a little difficult, due to a lack of available data. This is primarily due to the token not having any measurable “history”.
Even if there is a fair amount of history, the sudden explosion in price tends to nullify the previous price action. This is one of the reasons many become casualties trying to short memecoins. They begin guessing where the top is instead of making use of a rather simple element of technical analysis, which I will elaborate on shortly. In order to open a short position with confidence, a trader has to allow the pump to mature and play out.
Key Resistance Levels
Unfortunately, due to the nature of memecoins, traders have to make use of lower time frames. The example I am going to be expounding upon is on the 4-hour chart, which is not too low, and allows for a decent trading range. Because memecoin traders are generally avoiding previous price action, they tend to do the same, in relation to the current price action. However, the sudden movements are creating data that can actually be utilized, unlike the previous price action.
What traders often tend to do is reason that the token has rallied too far, and interpret a short-term correction as the top. This behavior would often occur in a scenario similar to that of number 3 in the graph above. Inexperienced traders would consider this to be a reversal. However, the key mistake here, is that this is only a retracement. Ideally, you want to see a double rejection. This does not necessarily have to be a double top formation.
Referring to the graph above, the rejection at number 1 looks similar to the rejection at number 3. However, it is followed by another rejection at number 2. So, what we have here is the creation of a resistance level. You can clearly see that after the correction at number 3, the price action later breaks through that level where it was previously rejected. In other words, the appropriate entry for a short trade would be just after the rejection at number 2.
Traders who went short at number 3 would have been liquidated. However, adhering to the technique I have just explained would have protected traders from entering a short position prematurely. Don’t be deceived into thinking that you are going to miss out. Waiting for the applicable conditions provides a trade opportunity that has a very high likelihood of being successful.
The screenshot above reveals and points out a trade opportunity of approximately 27%, which becomes even more significant thanks to leverage. A trader using 10X leverage here would have secured a 270% return, provided they were not too greedy, and exited the trade.
Final Thoughts
Effective trading requires patience, as well as the practical application of knowledge. Over time this becomes a skill. The key here is to allow the pump to mature, while simultaneously viewing the progress on multiple time frames while you wait for a key rejection… not a retracement! That’s it for this one, catch you next time!
Investments That Generate Passive Income – What Matters Most?
The Same Page
Firstly, a common misunderstanding in regard to passive income, is that it requires investment. This is not necessarily the case. Although I will be addressing this particular aspect of passive income, it is also important to bear in mind that this can also be achieved via other “creative” methods. Perhaps, I will address some of these methods at a later stage. However, for now, it’s back to the matter at hand.
I am sure we can all agree that many of the casualties of 2022 were investors in search of yield. The carnage within the lending space has definitely put a damper on the whole idea and concept of creating passive income within the Crypto space. However, even catastrophic events are not going to bring an end to investors seeking out passive income opportunities. They simply retreat, re-evaluate, and re-enter the battlefield.
Someone who has “working capital” will always put it to work, regardless of the risks involved. What they will however do, is attempt to identify the best possible opportunity or opportunities. In actual fact, choosing opportunities, as opposed to a single opportunity is one of the strategies a prudent investor utilizes. This is the first, and often most effective rule of successful investing, diversification.
Diversification
One of the biggest mistakes investors made in 2022 was remaining within a single niche. Many believed that diversification within the lending realm would protect them. As a result, many chose to diversify by making use of multiple lending services. For example, an investor split their capital between Celcius, BlockFi, and Hodlnaut. Unfortunately, it didn’t help! Diversification is not diversification if it remains within a single niche.
A prudent investor would have considered an approach that incorporated true diversification, while yet remaining within the Crypto space. Below is an example that incorporates different sectors within the Crypto space that simultaneously provide a level of return and diversity:
So, what we have in the abovementioned example is an allocation to one or more lending services. There is also an allocation to a stablecoin investment, as well as a token that pays dividends, based on the revenue of the platform. An investor who is seeking even more diversity could have made use of an opportunity such as tokenized real estate. This brings me to the next point.
A Healthy Risk/Reward Ratio
Risk usually rises in conjunction with the yield on offer. An exceptionally high yield is usually indicative of significant risk. A prudent investor will attempt to identify opportunities that have favorable relativity ratios at work within the risk/reward ratio. In other words, in relation to the “benchmark”, these opportunities are more favorable without increasing the risk profile.
This can also take place in reverse and is most notable in regard to tokenized real estate. In other words, your invested capital is unlikely to experience devaluation, while simultaneously providing an acceptable yield. Some opportunities don’t even offer great returns, and yet are inherently risky. Personally, I avoid such opportunities or consider them a gamble with minimal exposure.
Liquidity & Ease Of Access
This is very important! It doesn’t help much if you earn yield that you have no access to, or have difficulty accessing. I have seen a lot of this. Often I encounter people I know who have begun “playing around” in the Crypto space. This usually involves some type of HYIP that has been redesigned to attract uneducated Crypto investors. What you usually see is a low withdrawal threshold. In other words, what investors are actually able to realize is minimal.
Essentially, these platforms hold your capital, and earn yield with your capital, while simultaneously supplying investors with breadcrumbs. This is exactly why DeFi and WEB3-Based opportunities are the way to go. You get to decide when and how much you would like to withdraw. Furthermore, you can withdraw your entire investment at any time. This is how it should be in regard to your own money, right? Nobody gets to tell you how or when to eat the food in your own house.
These are the flaws of TradFi, which scammers love to leverage, and subsequently, use as a valid reason for their “restrictions”. Being able to trade these earnings for BTC, or any other usable currency is also extremely important. There needs to be a healthy level of liquidity. If you are going to battle to spend or acquire your capital it’s perhaps not the best option.
Final Thoughts
Identifying viable investment opportunities for ongoing passive income is often a process of elimination. It’s important to work through a list, in order to establish which are actually viable. Many investment ideas appear great at first glance. However, only after entering these investment ideas do investors realize the pitfalls involved.
This is exactly why, as an investor, doing your own research is imperative, and should never be overlooked prior to entering any investment opportunity. That’s it for this one, catch you next time!
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