Timothy Enneking is the founder and the primary principal of Digital Capital Management, LLC (DCM). ——————- Two members of the Rothschild family are credited, perhaps incorrectly, with the (in)famous quote regarding investing: “When there is blood in the street” (James (mid-19th century) and Nathan (after the battle of Waterloo)). The family has been one of […]
The flow of positive news and teases around Ripple’s coin XRP lately had no stop. With the gold rush and speculations building up towards the cryptocurrency, equally it resulted with its expectations and predictions growing too. It all started with Brad Garlinghouse teasing on purpose that Q3 is going to be XRP‘s time and it could conclude with 2018 also.
“One of the things I will tease for a future announcement within the Q3 market reports, which we always share…where we see institutional participation in buying XRP. Q3 will definitely be a record of institutional participation in buying and interest in holding XRP.”
This move hoisted the number of crypto-enthusiasts turning their eye towards the speedy digital asset. Further analyzing Brad’s comments, we can speculate that institutional investors are already buying XRP or plan on doing so in this third quarter of 2018. One question everyone is asking, is why the price of the digital asset has not gone up if these purchases are happening.
With the pair BTC/USD finally reaching above the important $7,000, most altcoins followed accordingly as the green-bullish wave took over on Aug 28th. After testing and overcome the $0.3300 resistance level, XRP against the US Dollar made it above $0.3400 with 6.14% increase in the last 24-hours.
Source: coinmarketcap – per time of writing data!
On the upside, a close above the $0.3400 and $0.3450 levels may well clear the path for a push above $0.3500 which would great major support for the upcoming marks.
The platform introduced by Ripple’s team represents one of those innovative systems. While it has been around since 2012, it is still solidly backing up banking and financial institutions in their quest to provide more efficient and faster transactions that can be built around customers’ trust in each other and the network. This is one of the main catalysts that give the motivation to many investors and traders to choose XRP as its real-world adoption and utilization has been seen to have great results.
Since it made its debut in the crypto-verse with Jed McCaleb and Chris Larsen founding, its success has bloomed majorly reaching the third position in the top of the cryptocurrency list by market capitalization and being recognized world-wide.
As the end of August is signaling great steps coming, today’s market changes could have opened doors for a better month in September. Looking forward very much if the teasing is turning true in the 9th month of the year and how the team will act next.
With most of the crypto-verse concentrating on how only the leader Bitcoin (BTC) is performing against the US Dollar, Nano is playing the game as a top contender. Just Yesterday, EWN reported on how the gain-surfing coin is experiencing just above 10% increase for, but today it stepped up to 24% in the last 24-hours. That concludes to a 110.00% upward jump in price in 7 days reaching the mark of $3.47.
It is the second time that Nano (before known as RaiBlocks) is overcoming cryptocurrencies by market capitalization very speedy. Just one month ago after the announcement of its Mobile Wallet for mobile, it was positioned as the 40th largest by market cap.
As mentioned in a press writing, the team behind RaiBlocks did gather around the table in November to discuss the future and what is coming next for the project. Since then, it has been on plan for a rebrand to take place as the feedback by the community did support the idea for a name change so it better resonates with the public and mainstream audience. So Nano has been announced.
The Core Team wanted a name that represented the simplicity and speed of the project, and Nano does just that. The new logo uses several nodes, playing on the block-lattice design of the network, that connect to form an “N.”
The long awaited release of mobile-capable wallets was announced on June 22 by the NANO Team. Android first then IOS was released several days after. In addition to the mobile release, the Team announced open source downloads for Windows, MAC and Linux, praising the community for helping in the development of the wallet dating back to last year.
Prior to the mobile wallet announcement, the team at NANO had announced that the famous hardware wallet of Ledger Nano S, was supporting the digital asset effective June 11. In a tweet on that day, the team at NANO announced the following:
— Nano (@nano) June 11, 2018
Just recently, on the social news aggregator Reddit it was noted out that LocalNano.com has been given the green light and is live and running:
“It looks like localnano.com is live!
It is a service comparable to localbitcoins that allows an individual to trade nano on a P2P exchange. After looking through their documents, it seems that they do NOT plan on charging any trading fees. They plan to derive their profits from featured/promoted listings. Also, they want to incorporate in Malta.” u/Hefhsdhbfhsf, s/he stated
Bitcoin (BTC) lost-users of the Mt. Gox exchange could be getting back their affected money as it was declared that approximately $1.0 bln in BTC are getting ready to return.
Almost all crypto-enthusiasts, traders and investors know about the history of Mt. Gox and how in a very short amount of time it went from the biggest and world leading exchange to a complete shut down. In 2014 it was reported by the exchange that more than a billion dollars in crypto was lost due to an attack. However, the saga was not done as 200k in BTC were located later on. Additionally, major amounts of pioneer BTC were sold when the coins reached the record marks.
Returning to the current highlight, impacted users can request their lost bitcoins with the use of an online feature which enable claim-submission for the money that is yours and its gone. The tool is available on the web-page. When it comes to corporate creditors, the process of reclaiming the lost coins will be available later down the road but in a likewise ways.
The deadline for filing proofs of claims is October 22, 2018 (Japan time) (must arrive by this date). If proof of claim is not filed by the deadline, then disenfranchisement (i.e., loss of the right to claim) might apply, so please be careful.
In late-June 2018, documents revealed that the Mt.Gox case would be transitioning from bankruptcy proceedings to civil rehabilitation. Although this may seem mundane in and of itself, many investors breathed a sigh of relief, as this meant that trustee Nobuaki Kobayashi would stop the sale of BTC on spot market exchanges.
When Mr. Lubin was asked about the current crypto-environment and the market, more precisely about networks and protocols that would give decentralization or speed for security, he remained unfazed while replying:
“Ripple isn’t really a Blockchain technology, it’s sort of a payment system, so I don’t really consider that a competitor,”
While for EOS he added:
“a slightly, maybe slightly, decentralized approach at building a Blockchain system.”
The slightly quality was labelled to EOS as Joseph Lubin described the decision-making system of twenty one people that know each other:
“EOS is an interesting technology but it’s incredibly dangerous to treat it as a layer-one technology,” he continued, disagreeing his perspective was “geek speak for the death of EOS.”
However, on the other side with the San Francisco based blockchain giant signing down three partnerships with leading exchanges, the token XRP is leading paired with US Dollar with 9.78% increase in the last 24-hours.
Ripple (XRP) enthusiasts have long been complaining that Ripple, the overseer of the altcoin finds more use cases for the cryptocoin, saying many of the partnerships sealed by the company were not in favour of XRP.
Now, Ripple (XRP) has danced to their tune. The blockchain company announced that xRapid, which is one of the most viable tools for cross-border payments, and majorly powered by XRP, has sealed a deal with three exchanges.
Ripple has partnered with U.S.-based Bittrex, Mexican Bitso, and Philippine Coins.Ph cryptocurrency trading platforms within its initiative to build a “healthy” ecosystem of digital asset exchange.
As reported by Ethereum World News previously, Pantera Capital has been an integral part of this flowering industry for over five years. Along with recently reaching a five-year milestone, the industry veteran has also posted a lifetime return of 10,000 percent (100x) on its foremost fund, an astounding feat to say the least.
It seems that with a recent announcement, which has been relayed by TechCrunch, that Pantera is looking to continue to achieve astonishing ROIs (return-on-investment) with a recent move to open its third venture fund.
Pantera made its debut in the nascent crypto and blockchain industry in 2013, raising $13 million for its first fund. Later, the San Francisco-based firm raised nearly double the previous amount for its second venture fund. While those funds succeeded as aforementioned, posting staggering returns through investments into early-stage crypto tokens and blockchain-centric projects, Pantera’s aspirations have not been quenched. So most recently, the investment company is seeking upwards of $175 million for its third venture fund, an increase of over seven-fold from the second investment round.
Paul Veradittakit, a partner at the firm, gave a statement on the ambitious target amount, noting:
“[The target amount is a] function of how fast the space is moving, the talent coming in, the opportunities, and the sizing of rounds. With more interesting later-stage investments [on our radar], too, we want to be flexible and able to move with the market.”
According to a document recently filed to the SEC, Pantera has already made a substantial amount of progress, garnering over $71 million in capital allocation from 90 individual investors or investment groups. Veradittakit notes that this new investment vehicle will be a so-called “evergreen fund,” where it will be structured to have an “indefinite” lifespan that lets investors come and go as they choose.
Previous venture investments include early-stage allocations into BitStamp, Xapo, Ripple, and Circle, which have quickly grown to become foremost players in the crypto asset industry. So it goes without saying that Pantera’s venture investments span this multi-faceted industry and are rather successful as well. As Veradittakit puts it:
“Pantera has invested in lots of wallets and exchanges focused around the world, in Coinbases of different geographies, in enterprise-related blockchain companies. More recently, we’ve funded everything from big data to decentralized application platforms.”
Pantera’s Three Primary Investment Strategies
Many are hopeful that this new fund will succeed, with the firm utilizing venture strategies, along with three following investment strategies that have helped it excel in this nascent industry.
Firstly, Pantera has a fund that exclusively invests in initial coin offerings (ICOs) that look promising to the firm’s assessment and analysis team. As CEO Dan Morehead elaborated, this specific fund buys pre-sale ICOs, which are often early-stage investments when the risk/return ratio is at its peak.
Morehead added the fund does not only invest into ICOs but also provides “the right connections,” creating a symbiotic partnership to benefit both parties.
Secondly, Pantera has a Bitcoin-centric vehicle that has been likened to a hedge fund, with this being the firm’s flagship fund. As aforementioned, the fund has obtained a staggering 10,136% return “net of fees and expenses” on the original investment.
Last but not least, the American company’s last fund invests in established cryptocurrencies via exchanges. Utilizing a machine learning algorithm, the fund can automatically invest in cryptocurrencies, while also fitting its investments to the needs of Pantera’s executive team.
It is unclear in what direction the fund will head, but as the aforementioned firm partner notes, this industry is still in its infancy and there is still a lot of opportunity for growth.
That kid you know who’s now driving a Lambo because he traded something called dogecoin? He has more in common with Japanese rice traders from the 1700s than you might think.
Besides the ability to brag about their newfound riches, both traders likely analyzed price action and investor emotions by using the candlestick charting style.
Although modernized in the late 1800s by journalist Charles Dow, the core principles of candlestick charting remain intact today. Both the modern and historical technical analysts who swear by the style regard price action as more important than earnings, news or any other fundamental principles.
In other words, all known information is reflected in the price, which is precisely displayed in the candlestick.
Anatomy of a candlestick
A candlestick represents the price activity of an asset during a specified timeframe through the use of four main components: the open, close, high and low.
The “open” of a candlestick represents the price of an asset when the trading period begins whereas the “close” represents the price when the period has concluded. The “high” and the “low” represent the highest and lowest prices achieved during the same trading session.
Every candlestick uses two physical features to display the four main components.
- The first feature, known as the body, is the wide midsection of the candlestick and it depicts the open and close during the observation period (most charts will allow you to set the range for the candlesticks)
- The close is represented at the top of the body in the green candlestick and at the bottom of the body in the red candle.
- On the opposite is true of the open, which forms the bottom of the green candlestick and the top of the red candlestick.
- The final two components, the high and low, are represented in the second feature of the candlestick known as the ‘wick.’ Wicks are simply displayed as the thin lines extended above and below the body.
Cryptocurrency traders tend to take advantage of the inherent market volatility by using charts on the intra-day time frames. Each candlestick typically represents one, two, four or 12 hours. (A longer-term trader will likely choose to observe candlesticks that represent a single day, week or month.)
A candlestick becomes “bullish,” typically green, when the current or closing price rises above its opening price. The candlestick becomes “bearish,” typically red, when its current or closing price falls below the opening price.
The money makers
A candlestick rarely keeps its figure for too long in the volatile cryptocurrency market.
For instance, if the 2-hour candlestick opens at a price of $10 and jumps to $13 an hour later, the shape of the candlestick will have drastically changed since opening.
But traders have also come to realize the same candlestick shapes occur at the same stage of a price trend, no matter what is being traded. It can be very lucrative to identify such formations because they can expose clues as to when a trend might reverse, continue or when market indecision is at its peak.
Three of the most useful candlesticks for identifying a potential trend change or for gauging market sentiment are the “doji,” “hammer” and “shooting star.”
The doji is a prime example of what traders mean when they say a candlestick represents human emotion or market sentiment. When the asset price swings in both directions before closing near its opening price, it is clear the market is indecisive about the asset’s true value.The classic doji candle representing an indecisive market comprises equal-length wicks and a very thin, centrally located body. Further, there are several variations of doji, which signal trend exhaustion/trend reversal.
A hammer is the precursor to a potential downtrend reversal and can be a big money maker for the bulls.
Hammers are formed when price sinks below the open only to later return and then close above the open. Such price action signifies that at one point during the trading period sellers temporarily gained control but quickly gave it back and then some, for a bullish close to the candlestick.The physical features of a hammer consist of only one wick roughly two times the length of the body which is located at the top of the candle.
Last but not least, the shooting star is the exact opposite of the hammer.
The shooting star occurs at the peak of an uptrend when the bulls rally to start the trading period, but eventually lose control to the bears who drag prices to a close below the open.It’s important to keep in mind that the longer the duration of the candlestick, the more powerful its effect is on the overarching trend.
For instance, a hammer spotted in a one-hour candlestick will have almost no impact on a 6-month long downtrend, whereas if the hammer formed on a 1-week long candlestick, its reversal impact would be much more significant.
Candlesticks via Shutterstock
Tim Enneking is managing director at Crypto Asset Management. Robert Brauer and Andrew Kang are members of the Crypto Asset Management ICO Analysis team.
The number of initial coin offerings (ICOs) is growing rapidly, having raised an astounding $5.6 billion in 2017 alone. More outrageous is that, by most estimates, over half of the ICOs launched in 2017 have already failed.
In addition to the hundreds of ICOs being launched every month, our management company Crypto Asset Management (CAM), also receives around a dozen emails per day from new companies planning on launching crypto tokens to raise capital. CAM, through the various funds and share classes it manages, invests in less than one out of every 100 ICOs that comes across its desk.
Out of absolute necessity, we have developed an analytical framework for ICOs, which CAM applies to every such opportunity it evaluates.
In this article we explain what we call The Seven Pillars Of ICO Investing™, which we’ve rigorously crafted over several years of investing in crypto and other assets.
Pillar #1: Team
The critical element which we are searching for is an experienced team, ideally with a strong track record in developing and launching blockchain technology. In addition, the team should have experience in the market it is targeting. A team that is not only competent, but capable of developing, completing and/or expanding the project is paramount to its success.
A couple of additional issues to consider are:
- Does the team have a vesting token schedule that will properly incentivize it?
- Do the advisors have the right experience and are they actively engaged?
- Does the project have any notable financial backers? (VCs, other hedge funds, etc.)
Pillar #2: Idea
Without a compelling, realistic and timely idea for a blockchain-based enterprise, the investment will almost certainly fail.
A few of the key things we look for are:
- Total addressable market: How large is the opportunity? We want as large of a market as possible (See: ethereum, filecoin).
- Product-market fit: Does the business address an urgent problem? (0x, ChainLink)
- Unique value proposition: What facets of the technology enable it to stand out from the competition? How much competition is there (Wax)? Ideally, the tokens has proprietary technology, and as little competition as possible (Orchid Protocol).
There is clearly an interrelationship between Pillars 1 and 2. However, if we had to choose between them, we would clearly rather invest in an “A” team working on a “B” idea than a “B” team working on an “A” idea.
A talented group of people are the lifeblood of any business, and crypto is no different.
Pillar #3: Execution
In the cut-throat business world we live in, the only thing that matters is results.
A brilliant idea and great team are nice, but execution is everything. Is there a working prototype or does your idea only exist in a nebulously written white paper? We prefer to invest in a product that already exists to some degree (Presearch, Basic Attention Token, Superbloom, FunFair), whether in the crypto space or analogously in the fiat space (Wax).
Finally, we look for some sort of proof that the company will be able to hit future milestones.
Pillar #4: Legal/Regulatory
This pillar is essential given the current and growing regulatory uncertainty in the industry.
Almost every week, there is news of a governmental agency in one country or another taking regulatory action or making a new statement around ICO governance. Of course, almost as often, there is news of a different country considering crypto-favorable legislation. Comprehensive regulation in many marketplaces is on the horizon and it is imperative to ensure that ICOs vigilantly navigate the landscape to the best of their abilities.
The threshold issue is jurisdiction: in what country is or will the ICO company be incorporated and the ICO executed? This determines the rules that will apply to the company’s actions and the ICO.
Depending on the approach taken, we may apply the somewhat arcane rules of the Howey test (in the US or if US investors are targeted or allowed to invest), KYC/AML principles (which are essentially universal) and applicable securities law.
Pillar #5: Tokenization
A significant number of the ICOs we analyze do not actually need the blockchain, tokenization or a public sale of their tokens to be successful.
When this is an issue, it is usually the last – public sale – which is not necessary. (NASDAQ’s settlement system is an excellent example of where tokenization is a brilliant idea but a public market would be superfluous, or even counterproductive.) Also, they are sometimes glorified apps that could be built without creating a specific token, despite how much “utility” the founders may claim their token provides.
With the enormous amount of value exchanging hands over the blockchain and the prospect of getting “free” money without giving up any equity, it’s not hard to imagine why many industrious entrepreneurs try to identify any possible reason to launch an ICO.
That being said, one of the crucial things that every investment we make must have is a legitimate reason for “tokenizing” their business, and for creating a public market for that token (OmiseGo, Icon, Raiden Network, Cosmos).
Pillar #6: ICO Structure
Similar to traditional venture capital investing, the financial underpinnings of the deal ultimately determine the decision to invest. The characteristics of an ICO can have important implications on the expected upside of the token.
This can be split out into two categories – ICO mechanics and ICO deal structure.
- ICO Mechanics – Historically, ICOs with a lower hard cap tend to outperform ICOs with massive hard caps. While it is important that the parent companies be well funded and have sufficient runway to work with, ICOs need to have a convincing plan for use of proceeds as the potential upside decreases in proportion to the amount raised. The precise metric here is valuation of the token economy – a derivation of the hard cap. Both the valuation in light of circulating tokens at launch and the valuation upon release of all tokens are factors that we consider.
- ICO Deal Structure – The deal should be structured in a way so that investors are not at a disadvantageous position to the market.These are a few of our considerations:
- Distribution: The team should have a compelling structure for the distribution of tokens, fair allocation among team/advisors and investors, programs for market uptake, etc.
- Distribution Schedule: Given the fast-moving pace of the crypto market, the distribution schedule should not massively favor specific parties. While long distribution periods can be considered acceptable for high-potential ICOs, individual liquidity preferences should be considered.
- Discounts: Discounts are ubiquitous in the ICO environment, so examining the discount levels given to different tranches allows investors to understand where they stand in relation to other stakeholders.
- Equity Stakes: At Crypto Asset Management, we like to be part of the growth of the company and investing directly into the equity of a company allows us to play a greater role in that development. In the world of token sales and short-term liquidity, people often forget that the value proposition of a company can be just as great or even greater than the token ecosystem it is developing.
Pillar #7: Price Drivers
Even if we believe a team is able to create a great product that incorporates a token with an imperative use case, this does not necessarily mean that we will want to hold the token or invest in the ICO. A token must additionally have a mechanism to drive price appreciation.
A token with constant supply without any incentive to hold, will not be subject to buying pressure which significantly outweighs selling pressure over the long run (Votes). This is underpinned by the concept of price risk, in which individuals will lean towards reducing their exposure to price volatility in favor of fiat or a form of stable currency. (Kyle Samani has written an in-depth piece on this velocity problem here.)
A few of the price drivers we look for include:
- Network Volume: In almost every instance the value of a token increases as the number of transactions on the blockchain increases (bitcoin, ethereum). This is one of the most basic, yet influential, indicators of demand, and is also the reason we invest primarily in protocols rather than dapps.
- Market Leadership: We look to invest only in tokens that are clear market leaders, or have the potential to be in the near future. Usually, these tokens have a distinct and growing unique advantage over their competition (Practical VR).
- Incentives to Hold: There is a clear reason why a user would rather hold than spend the token, which can be related specifically to speculated price increases or other non-monetary rewards (Presearch, PROPS). We won’t invest in a token that’s only purpose is a medium of exchange.
- Supply Changes: This can include limiting inflation, meaning the token supply does not dilute the value of all tokens over time, or token burning, where the supply of tokens in the system decreases over time (Binance Coin, Iconomi).
- Profit Sharing: Part of the value that is extracted from the system is given back to the token holders (Augur, NEO, Neon Exchange, Ethorse).
- Staking: Having users of a network to lock up their tokens either for network consensus or as a requirement in certain processes. (Bee Network, Open Platform, NuCypher, Video Coin).
- Sufficient Liquidity: If the project isn’t proactive about getting listed on multiple exchanges, preferably top-tier exchanges, we will likely not make an investment.
Please note that, as a general rule, we are not in favor of asset-backed tokens as an investment vehicle at this time. There are no real drivers of price formation after an initial, relatively small boost for convenience (Sandcoin, OneGram) and the opportunity cost is consequently too high (there are far great returns elsewhere).
Importantly, the effect of implementing strong incentives to hold is multiplicative. Not only will the price increase be driven by the inherent tokenomics design, but also by speculation directly related to the implementation of these drivers.
Despite the incredible number of fly-by-night operations in the world of ICOs, it is certain that token generation events are here to stay. Such events are completely transforming the traditional venture capital industry and, for savvy investors, are creating fortunes literally overnight. For unsophisticated or undisciplined investors, ICOs are a minefield that should probably be avoided. However, for those who perform proper due diligence, the odds increase for realizing breathtaking returns on your investments.
This article is an abbreviated summary of our process for investing in ICOs.
Here at Crypto Asset Management, we’ve also developed more in-depth tools, such as our innovative 64-point ICO Scorecard and a more traditional Private Equity Due Diligence Checklist.
Stack of coins via Shutterstock
The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.
Steven Hopkins is chief operating officer and general counsel of Medici Ventures, an Overstock.com subsidiary focused on the advancement of blockchain technology.
In 1987’s Black Monday stock market crash, Sam Walton, the world’s richest man, lost more than half a billion dollars in a few hours.
When reached for comment, Walton said, “It’s paper anyway. As far as I’m concerned we’re focusing totally on the company doing well and taking care of our customers.”
He didn’t care about dollars; he cared about his asset Wal-Mart, and he still owned that.
History of the #HODL
In bitcoin’s volatile and roller coaster past, “HODL” was the meme that bound the cryptocurrency community together. It stood for the proposition that we all believe in the future of bitcoin. It’s both funny and insightful.
Here is the original post by GameKyuubi on a Bitcoin Talk forum (spelling errors and profanity included):
I AM HODLING
I type d that tyitle twice because I knew it was wrong the first time. Still wrong. w/e. GF’s out at a lesbian bar, BTC crashing WHY AM I HOLDING? I’LL TELL YOU WHY. It’s because I’m a bad trader and I KNOW I’M A BAD TRADER. Yeah you good traders can spot the highs and the lows pit pat piffy wing wong wang just like that and make a millino bucks sure no problem bro. Likewise the weak hands are like OH NO IT’S GOING DOWN I’M GONNA SELL he he he and then they’re like OH GOD MY ASSHOLE when the SMART traders who KNOW WHAT THE FUCK THEY’RE DOING buy back in but you know what? I’m not part of that group. When the traders buy back in I’m already part of the market capital so GUESS WHO YOU’RE CHEATING day traders NOT ME~! Those taunt threads saying “OHH YOU SHOULD HAVE SOLD” YEAH NO SHIT. NO SHIT I SHOULD HAVE SOLD. I SHOULD HAVE SOLD MOMENTS BEFORE EVERY SELL AND BOUGHT MOMENTS BEFORE EVERY BUY BUT YOU KNOW WHAT NOT EVERYBODY IS AS COOL AS YOU. You only sell in a bear market if you are a good day trader or an illusioned noob. The people inbetween hold. In a zero-sum game such as this, traders can only take your money if you sell.
so i’ve had some whiskey
actually on the bottle it’s spelled whisky
(But only if it’s payable in BTC)
It was not about bitcoin versus bitcoin cash or 1,000 other cryptocurrencies. It was bitcoin vs. the world and we ALL embraced it.
It only took 11 minutes for this post to become a meme that became the rallying cry for the entire crypto world. We were all on the same rollercoaster ride and GameKyuubi, in the depths of his frustration, had (sort of) elegantly articulated both what it feels like and the best trading strategy for an asset this volatile.
Buy and HODL.
The good traders
GameKyuubi was wrong about only one thing: There aren’t any good traders.
There are lots of us who believe we are good traders. But we aren’t. Of course, some of the loudest voices on Reddit regularly remind us about how well they time the market. Except when they don’t time the market well.
A paper published last October by the Haas School of Business at UC Berkeley entitled “Do Day Traders Rationally Learn About Their Ability?” used nearly 15 years of stock market day trading data to conclude that all day traders are irrational, the vast majority of day traders lose money, and even when day traders are successful, they “irrationally attribute success disproportionately to their ability rather than luck.”
This sounds exactly like the crypto trader. Any post you see mocking HODL is likely someone who thinks they are really smart because they made money by trading crypto last year.
Of course, their success was due to their unique trading ability and not the fact that the entire market rose like a rocket.
Still, empirically, even in volatile assets like bitcoin, carefully choosing an asset and holding long-term positions has proven to offer the best return.
Warren Buffett, the most successful investor of modern times, has often said that he only invests in what he knows. His preferred holding period: forever. With that model, his company, Berkshire Hathaway, has averaged a 19 percent annual return since 1965 which means it has risen more than 1 million percent.
Theoretical models that assume participants know when markets will move against them can offer better returns but, in practice, market movements cannot be reliably predicted so even when people like Bernie Madoff try to make us think that they’ve figured it out, they haven’t.
Long-term investment in quality assets remains the only reliable investment strategy.
Simply put, HODLing works.
For those not interested in limiting their activity to HODLing, there are two new and useful ideas that have begun bouncing around that really do advance cryptocurrencies: #BUIDL and #SPEDN.
BUIDL has been used to help remind us that, in the words of a CypherPunk’s Manifesto, “Cypherpunks write code.” In order for the blockchain to really be useful and valuable, we need to build stuff on it. Watching the price go up and down either as a trader or a HODLer does nothing to make bitcoin work better.
We need to create some of the promised applications that can really change the world. To date, the blockchain community has fallen short in this regard outside of the areas of payments but there are some real wins.
Just this weekend, Voatz, a Medici Ventures portfolio company is running party county convention voting in Utah, state convention voting in Michigan and state primary voting for overseas and military voters in West Virginia, all on a blockchain platform.
Blockchain voting is a simple application, but it is one that can bring a much-needed security and transparency to elections. And we are doing it now.
SPEDN is a nod to the many of us who realize that, for bitcoin to be useful, we need to be able to spend it to buy things. And I mean everything. It really doesn’t matter whether it is through second-layer solutions like lightning or forks like bitcoin cash; we need more ways to use cryptocurrencies in real-world transactions.
A focus here, rather than complaining about HODLers would be helpful. We need many more merchants to accept cryptocurrency before it becomes useful. Options to spend bitcoin remain severely limited in most areas and this will ultimately limit bitcoin’s value.
As for me, I will HODL until I can buy useful stuff and SPEDN.
This year has seen intense regulatory pressure on cryptocurrencies and its time we stop pretending that HODL was stupid. It isn’t and it wasn’t. Anyone who doesn’t like the HODL mentality needs to give HODLers something else they can do with their bitcoins.
Trading is no solution for intelligent people. What we need are new ways to use cryptocurrency.
We need BUIDLers and merchants who will let us be SPEDNers.
Hard hats via Shutterstock
The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.
Very surprisingly, George Soros – well known billionaire, has decided to take a U-turn and commence cryptocurrency trading. The announcement was reported on just three months after Mr. Soros stated that cryptos are a standard “typical bubble”.
According to the report by Bloomberg, it has been confirmed that internal approval to trade digital currency-assets has been received in the past few months by Adam Fisher who is in charge of overseeing macro investing in the firm.
In January 2018, during the World Economic Forum – Soros added that cryptos were supported on some kind of misunderstanding and it is not possible for them to act as actual currencies because of the showcased volatility. He continued that criminal activities could find great use of the coins:
“As long as you have dictatorships on the rise you will have a different ending, because the rulers in those countries will turn to Bitcoin to build a nest egg abroad,” he said.
Many famous and leading figures do believe that cryptocurrencies having the anonymity side set at a high bar makes it difficult to track their path-movements, which is why authorities in a global-range have commenced regulatory developments and set up laws to restrict the usage of cryptos.
Accordingly, countries like South Korea and China tanked cryptocurrencies, and the market continues the same shaky trend with many feeling the investor-community confidence dropping. However Soros’ move might be a catalyst of optimism while keeping in mind the fact that the prices are at a dreamy low of buying and stepping-in in the huge game of cryptos.
Trade safe and do not overtrade!