Are More Traders Moving to Crypto? Trend is Your Friend

Years ago I got some mentorship on Forex trading from someone who had been doing it for a long time very successfully. No automated trading. Infrequent trades based on manual technical analysis and avoiding news events. He was very very adamant about always trading in the direction of the larger trend.

The crypto market is fairly new. The recent astronomical gains over the past 6 months have drawn in many investors (many without any Forex trading experience). A lot of people out there hoping to make quick easy money to buy that car or house. On a scale of market maturity, 100 being equivalent to the major fiat currency pairs, I’d say the crypto market is at best a 50 overall with Bitcoin and Ethereum being more mature than average and Alt Coins being less so with more volatility.

In any case, there’s still going to be a lot more entry of new investors into the crypto marketplace going forward as long as these big gains continue to be made. For US Clients, currently you can only sell short on BTC and ETH in the CME Futures Market (unless you go with an Offshore Broker). The majority of new investors, both retail and institutional, are not going to go with Offshore brokers.

I would think due to the potential for a further significant increase in investors coming into cryptos, this will create a very strong upward mid-term trend. In Forex, there’s the saying “The Trend Is Your Friend”. Seems to me, Cryptos, with 2-5X leverage have more potential in the mid-term to reliably make more profit than fiat Forex. I’m sure there are some staunch seasoned Forex traders that consider Cryptos a kin to a “Pyramid Scheme” but it sure seems to me that until the market is matured and the number of new investors coming in has slowed down, it’s going to maintain a strong upward trend for what, maybe another year? Then I would think the volatility (except for newer Alt Coins) is going to flatten out and be more like fiat Forex. In which case I would imagine the brokers will be steadily increasing the available leverage above 5X because currently the volatility of crypto has a leverage multiplier of about 10-20X, so trading with no leverage in BTC/ETH is roughly the same as trading EUR/USD at 10X. I’m surprised the offshore brokers still are not going higher than 5X at this point. However most new crypto investors have no concept of prudent trading practices like not risking more than 1-2% of your equity on a single trade.

Thoughts?

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It is interesting. I setup two accounts a month ago. One was a demo Forex account with MT4 subscribed to what I considered after careful research to be one of the more reliably profitable signals (trader had at least two years historical data), the other was a crypto trading account with no leverage that I just performed the same technical analysis I did for Forex years ago when I was trading myself. In one month time, the Forex Signal had 70% profitable trades and made 6% in a month (anything above 5% in a month, consistently, is pretty darn good for Forex in my book.) The crypto account I was trading Alt Coins only in the upward trend direction (for reasons I mentioned in my original post - primiarly influx of new traders in the US that can’t short sell), had 90% profitable trades and I easily made 32% in a month with conservatively triggered trailing stops.

Now I’m not naive to think this “honeymoon / gold rush” period on Alt Coins is going to last forever. But boy, this sure looks like a golden opportunity as I watch eToro plaster CNN with advertisements telling everyone “just download the app, it’s easy to trade crypto!”

There’s just not enough institutional traders trading the Alt Coins (yet) to short sell to cause huge pullbacks. The general social hype on crypto is too large. You would be taking a very high risk to short sell Dogecoin or Ethereum right after a pump. The upward trend is really strong. There’s going to be a lot of beginner traders though late to the game that are going to get burned once the market goes bull for a period and the short sellers come in for the kill.

I wouldn’t invest in Dogecoin. It’s too much like a joke, Ethereum is a better option. I learned everything about it on https://cryptoinformator.com/.

The predictions are based on the fact that Ethereum is much larger than a unit of Ether. This decentralized network has its own search server. It provides smart contract services (strictly defined contracts that eliminate the need for third parties-notaries, courts, persons who store money), but also the creation of decentralized applications (there is no third party that stores user data, but they are on a blockchain stored by a large number of people).

So this is a new generation of cryptocurrencies that bases its business on the blockchain. Still, it finds a broader purpose and lures users into paying for its services through ETH units.

Short term swing trading only in the upward trend direction is quite profitable but that’s mainly because of all the hype that was built up around it. Due to the recent big dip the last two days, it seems to be staying in a tight range indicate a loss of enthusiasm. People investing in these hyped Alt Coins generally move on to the next new Meme Coin fairly quickly.

Shiba Inu (SHIB) is considered the new Dogecoin. It’s motto is “The Dogecoin Killer” however it’s not accessible via many brokerages yet and virtually none for USA traders. But Chinese traders are investing heavily in it, skyrocketing it like Dogecoin a while back making it the 16th largest coin by market cap in a matter of a few weeks. I suspect you will see many of the desperate traders looking for that next 1000% return in 3 months coin start to abandon Dogecoin and move to SHIB.

Traditional investment or banking apps like Robinhood, Cash App, and Paypal are opening up more users to cyrptos, that’s for sure. Robinhood and eToro brought in several million new “investors” in just the span of a couple months.

I don’t know if those users are actively trading, but more likely buying and holding. And the whole Wallstreetsbets mania and Elon Musk/Dogecoin news feed are definitely doing a great job at advertising for cryptos in general.

Adoption will only continue to go up.

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I think the key is that NONE of these major brokers (and PayPal) allow US Clients to Short Sell. So all these new customers can only BUY. Yes there will be pullbacks and many of these new crypto investors will panic and sell, but then it will always rebound because they can’t change to a short position instead of long to further push the price down. Currently US Institutional Investors can only short sell Bitcoin and Ethereum Futures (they may be using some sort of exotics to short sell Alt coins, but I doubt it.) So as more institutional investors put larger portions of their portfolio into those two, there is a possibility in the future for them to push the market into a longer-term bear market by taking short positions instead of just a temporary pullback. I think it will be a while before they take that risk though because, with the influx of new retail traders who can only buy, they would be going against the trend.

There was an article saying that the current huge bull market is similar to 2017 (but on a smaller scale) in which percentage-wise there was eventually a large correction with a bear market over a longer-term than just a couple of days. However there weren’t mainstream brokerages with millions of retail clients entering the market at that time.


I would keep an eye on the Coinbase user growth statistics. As long as they keep adding 10% more verified users a month, the upward trend will remain strong in my opinion but of course with volatility. The volatility though is not that big a deal because most are trading with no leverage. But to a beginner investor, it’s very scary to watch their balance drop by 20% in a couple days. If you were even trading at 5X leverage, you’d be wiped out though.

Beware of trading the lesser known Alt Coins. There is the possibility for HUGE returns (like betting the trifecta at the race track) but there is a high risk many investors will exit these coins in mass all of the sudden when they have “run their coarse” and everyone wants to take profit. They essentially amount to a different version of a pyramid scheme unless that Alt Coin becomes a legitimate form of payment for mainstream commerce. Only the ones that got in early make all the big profit and the late comers take the huge losses.

You should consider subscribing to @WARONRUGS on Twitter. They research Alt Coins to determine which ones have a high risk of a “Rug Pull” which is when the creators of the Alt Coin cash out “pulling the rug from under the other investors.” All the US Crypto Brokers don’t carry those super high risk brand new Alt Coins, just more of the mainstream Alt Coins. But is Dogecoin a fad and will be worthless in 5 years, or will it outpace Bitcoin growth rate over 5 years?

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I would also pay for purchases in bitcoins in the store. That would be very convenient. It would be great to make purchases like this, and I think it would greatly simplify life with a bitcoin mixer. But at the same time, this will devalue the dollar and hundreds of currencies, too. From this, the economy of many countries will fall significantly, since exchanging currency in the same tourist countries raises a lot of money. For ordinary people, this is only a plus, enough to feed the already rich people on this is already worth thinking about yourself and your family. And so, the state takes vast taxes.

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