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Investing

Coin Market Analysis by Robert Chernish

Coin trading has been one of our primary topics over the years, and we have seen some pretty big surprises. Today was another one of them, when we saw the markets tank almost 10% across the board, and there are some takeaways that should be considered when looking at your portfolio.

First, in 2015 almost every exchange started creating bots that would monitor the price of a coin on their exchange, in relation to other exchanges, and these were modelled off of the trading bots introduced across all major stock exchanges since the advent of the computer.

When one exchange experience a large selloff, it usually triggers a selloff on the other exchanges, and vice-versa, that is why you always see the prices consistent across the board, so as to prevent arbitrage trading. In the olden days (last year), this was not the case on many exchanges, and good old fashioned coin traders were able to make enough on arbitrage to pay the bills.

This has since been quelched with almost every exchange running some sort of bot. Now, this really begs the question? Is this market activity a product of human trading or machine trading? Where is the logic?

To dig in deeper we have to look at machine logic. In many cases, the program does not care whether the markets are up or down, because the machine does not consider time like human logic does, because it lacks emotion. If the machine wants to sell Bitcoin down to $5000, if it programmed to buy it to $20000 in two weeks for now, then the machine is doing the right thing. It is creating an advantage by using it’s own logic to lower the prices across the other exchanges. Some of the questions come from understanding which machines, or which humans, are making the decisions?

This is almost always a small group or people, or machines that control the majority of the market supply, and contrary to popular belief, this form of inside trading has been happening since the dawn of time. In fact, it is entirely disgusting to see people get called out for insider trading, because if you take a look at any business in america, or any organization, most particularly the corporation, it is clear that these organizational models are designed solely to provide such business, that is directly related to the model of inside trading.

Consider today’s tariffs between USA, CAnada, China, and almost every other country….it is clear that the world is entering a commerce war, and this in some ways, may have been triggered by the invention of Bitcoin.

In many ways, more and more people are trading like machines, because they are trained to trade this way. Only people like Mr. Buffett and other tycoons who can afford to hold, or buy, in down markets will succeed in a downturn, because everyone else sells themselves short.

At this point, the question here is to buy, sell, or hold, and of course, many people get emotional and panic sell, and as a result, end up losing the game. The alternative mode is to consider a position of holding, and mapping out your holdings against your current budget to determine a measure of risk that is acceptable to the requirements you have to your lenders and traditional responsibilities, versus your goals as an investor.

During hard times, people always band together to survive, and this is very clear when you see a downturn in Bitcoin as people band together to try and support their favorite coins….The problem, is that it is often rare for a coin to make great gains when Bitcoin is in a downturn, which is strange, because in a human logic case, it makes sense for a winner to show its strength and rise from the ashes.

Why a winner doesn’t emerge? Because machine logic is being used. If Bitcoin were in an actual downtrend and not a programmed mechanical downtrend, then other coins would likely start to exceed, and conquer the market cap share. How long the downtrend goes for is entirely unknown, but it is clear that after a downtrend, there is usually an uptrend.

MORE THAN JUST LOGIC
In simple terms, the downpush from BTC is a clear win for large volume investors looking to buy with Fiat. There is nothing more advantageous for banks or large fiat buyer than a downtrend BTC because it knocks the socks off all the Fiat pricing since BTC is the main pair. Even though the price in Bitcoin may remain constant, you can still buy a coin with cash for up to 10% cheaper.

Let’s take a look at Ethereum, since it is a good example, with just over 2,000,000,000 USD in trades today.


https://coinmarketcap.com/currencies/ethereum/#markets

You can see that the price in BTC is down 2%, while the price in USD is down 13%, so in reality, large investors are selling their Bitcoin for USD and crashing the BTC market, while at the same time using their USD to buy other coins like Ether and Ethereum Classic at a 10% discount.

Chances are these large buyers are also bidding on their own downsales to pick up and panic sellers, and winning both ways. Once their coffers are full, the rest is history.

It is rare that USD/ETH is the top pair, so this just proves my analysis, since most of the volume is in USD, whereas, traditionally it was in BTC.

    Conclusion:

Read into the markets before doing anything drastic.

Conclusion2:

Get expert advice before doing anything drastic. Email me at robert.chernish@gmail.com if you would like to discuss large scale trading or high level tax advice.

Thanks

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