May 23, 2020

Trading Bitcoin and Cryptocurrencies: 2017 vs 2020

A thought about different markets over time and the toolset required to trade them.

Trading Bitcoin and Cryptocurrencies: 2017 vs 2020

I started my own adventure trading cryptocurrencies in May 2017 in the beginning of what would be considered one of the greatest bull markets of all time. I wasn’t in at the beginning or bought bitcoin at 10$ or something but still did extremely well in a short period of time due to the fact that I had entered at a most opportune moment. Years later I can look back and understand that buying the absolute bottom or top is not necessary to profit from a trending market. Unfortunately for many, that bull market ended with bitcoin hitting $19.000 in late December 2017, the moment the most people ever had bought their first Satoshis. Since then, Bitcoin has remained in a downtrend while still retaining its signature brand of volatility providing us with opportunities to make money on both the up and downside of price action. That brings us to where we are now and many (myself included) have compared 2020 to 2016/2017 as a similar place in a larger trend cycle, meaning another bull market like 2017 could be brewing.

Bitcoin's price history since 2010

Will 2020 see a bull market with equal or greater profits seen than 2017?

For 2020 to exceed the performance of 2017 it will come down to a couple simple key factors, first of which being can the market attract more players and money than in 2017? Remember, at the height of the run coinbase was the #1 downloaded app for apple for multiple days, bittrex closed enrollment to new users due to demand, and people were selling their Binance and Bittrex accounts for thousands of dollars. This certainly had all the characteristics of a climax/top and I would be very surprised to see that much capital flow into the market that quickly again unless something significant were to change in terms of adoption. 2017 was the year of the ICO where people would throw thousands/millions at teams with a white paper just to dump their tokens on exchange listing for crazy gains. It was pure greed and not sustainable.

In the past there had been crashes, but nothing compares to 2018 due to the sheer amount of participants burnt as well as the media spotlight. A meltdown like Mtgox occurred with 99.5% of society not having a clue. After 2017, Bitcoin had become a household name in a matter of months and then quickly turned bearish, leaving most of the public to think it was just a Ponzi scheme or scam. Family members were burnt on icos and outright scams like Bitconnect. A lot of these people are flat out not coming back. For alt coin performance in 2020 to resemble anything like 2017 we will need some sort of adoption and use case for these tokens aside from just gambling. The good news is that since the ICO bubble has popped the constant flow of new worthless coins diluting the market has flattened so in theory we would want to see the remaining capital slowly allocate itself to the tokens that have some actual potential of accomplishing something aside from netting the founders lambos.

Bitconnect scam promotional livestream

Personally, I no longer have much faith in any of these altcoins until one of them can prove that a decentralized project will work and be adopted by society while also having an actual need for a token. Believe me, I did all the “research” and understand why people may think they need decentralization but lets face it, it just hasn’t worked thus far. The best thing we have to show for it after 700 billion dollars is crypto kitties. Cmon son….That being said, this does not mean you can’t make money off of them. After the spectacular and hilarious failure of Bitconnect I figured that we would never see people fall for something like that again but after seeing history repeat itself enough times in 2019, I knew it would come again and of course it did in the form of HEX, a Ponzi so blatant that it had to pump LOL. I think it did a 38x. Instead of wasting my time doing research trying to find a needle in a haystack of shit (like chainlink for instance), I spent the past years trading and understanding technical analysis and will rely on that to help me get in and out of these coins with no emotional attachment.

What about Bitcoin though?

While I don’t see nearly as much excitement or genuine confidence in Altcoins, I must say Bitcoin has a very strong narrative working in it’s favor at the moment. Due to the Global effort of central banks to stabilize the economy, their commitment to printing trillions of dollars to prop up stock prices and bailout corporations is on full display. My expectation is that although things have seemed to stabilize at the moment, we are not out of the woods yet with Covid and will potentially experience at least one more extended lockdown, most likely around when flu season normally hits us. This in turn is likely to be met with more selloffs and unemployment that will require additional printing .

Federal Reserve Chairman Jerome Powell discussing the $2.3 trillion Covid-19 stimulus package

Most people do not understand how currency works but it is a very easy narrative to float out there for Bitcoin. I don’t know about you but when I first discovered Bitcoin I had just watched the Big Short and was all worked up again about how the Banking Crisis went down. I think that same sentiment is alive and well and will only continue to grow. Add the fact that the halvening was just completed and the public will be ready to accept Bitcoin once again. The final piece required would be a technical reversal of downtrend which would start to look very good if we get a break out of the 10500 level. If that were to happen, I would expect money to continue to re enter the market and just like in 2017, when people get a taste of the gains, they will get greedy and look for other assets (shitcoins) to multiply their profits quicker. I’m not certain it will be like 2017 but we can already see altcoins making great runs off their lows and in my opinion there is no reason not to participate as long as you know what you’re doing.

Happy Trading Friends