Bitcoin and Crypto Market Updates (Oct 23rd)

After the weekend consolidation, Bitcoin is starting the week with a fresh new push towards the main horizontal resistance. As you know $31,000 is the real deal, this resistance has been suppressing the price since April, rejecting every attempt of breakout through it.

Let's see this time, in my opinion, needs a little bit of consolidation on the 29K-30K range before going for it. As you can see the RSI is reaching exhaustion levels, so I would remain cautious in the short term, but the mid and long term is definitely looking better and better day by day.

Most importantly Bitcoin is proving that it's value doesn't rely just on the ETF news. But the most exciting part is how well most of the altcoins are catching up with this movement, we will dig into it later:

Checking into the Mid Caps Index, we can see an even better scenario, it managed to catch up with Bitcoin and push even more, reaching the mid-term resistance at the $9 which is probably the most relevant range for the yearly perspective. If manages to break and consolidate over this one, will be absolutely primed for the bull reversal:

Eyes on the DEX Index, soaring for a few days, recovering the local horizontal support and scratching the breakout over the main downtrend resistance...

Reddit's Token Program Termination Sparks Controversy Amidst Allegations of Insider Trading

In a development reminiscent of other "rug-pull" cases in the crypto world, Reddit recently shuttered its blockchain-based community points program on October 17, citing scalability issues. This led to a sharp devaluation of native tokens across various subreddits, sparking concerns within the crypto community. What makes this situation more troubling is the suspicion that certain subreddit moderators may have offloaded their tokens just before the official announcement.

This situation draws parallels with other rug-pull cases where the value of tokens suddenly collapses due to unscrupulous actions. Similar to other incidents, a moderator named u/Mcgillby sold over 100,000 MOON tokens for over $23,000 in Ether on Arbitrum Nova, while u/Rider_of_the_storm moved 345,422 MOON tokens valued at $69,000 to an exchange address just moments before Reddit's statement. On-chain data also implies that at least three cryptocurrency subreddit administrators liquidated their tokens shortly before the public announcement.

These events echo the concerns raised in past rug-pull cases, where token values plummet due to questionable actions or insider information, eroding trust within the crypto community and highlighting the need for transparency and oversight in the cryptocurrency space.

Elon Musk Offers Wikipedia $1 Billion for a Name Change

In a recent post on his social media platform X (formerly Twitter), Elon Musk offered Wikipedia a whopping one billion dollars, but with a rather unusual condition. He proposed that Wikipedia change its name to "Dickipedia," seemingly in the "interests of accuracy." This offer followed Musk's criticism of the Wikimedia Foundation's fundraising appeals, where he questioned the need for such large sums, suggesting that you could fit the entire text of Wikipedia on a smartphone.

In response to the proposal, a user suggested that Wikipedia could change its name back after accepting the money, to which Musk amusingly responded that it would need to keep the X-rated name for at least a year, demonstrating his signature candidness.

This isn't the first time Musk and Wikipedia have crossed paths. Earlier this year, Wikipedia co-founder Jimmy Wales criticized Musk for allegedly complying with Turkish government censorship of content on X. Musk's response at the time was to ask if critics preferred Twitter to be throttled entirely or if limiting access to certain tweets was the better option, causing a public exchange between the two.

Musk's latest proposition to Wikipedia certainly adds another quirky chapter to his history of candid and sometimes controversial interactions on social media.

SEC Drops Charges Against Ripple Executives in XRP Lawsuit

The U.S. Securities and Exchange Commission (SEC) has dropped its charges against Ripple Labs' top executives, Brad Garlinghouse and Chris Larsen, in their ongoing lawsuit. The SEC will no longer pursue claims that the executives aided in violating securities laws with XRP transactions. Despite this, the SEC will continue its case against Ripple. The legal battle began when the SEC sued Ripple in 2020 for an alleged unregistered securities offering involving XRP.

This decision follows a partial win for Ripple in July, where the court ruled that XRP sales on public exchanges weren't unregistered securities offerings, but sales to hedge funds and sophisticated buyers were. Garlinghouse and Larsen, who have criticized the SEC, argue that the agency is pursuing the wrong targets. The next step is to determine the appropriate penalty for Ripple, amid a broader debate about cryptocurrency regulation.

FTX Exchange's Bold Proposal: 90% Asset Refund Amidst Bankruptcy Chaos!

Bankrupt crypto exchange FTX has introduced a plan to refund up to 90% of distributable assets to customers, which will be formally filed in a U.S. bankruptcy court by December 16, 2023. However, it's important to note that this 90% figure refers to the funds FTX has managed to recover, not the total amount lost by customers during the exchange's collapse. FTX customers can expect to receive 90% of the funds FTX is able to distribute to creditors.

The proposal includes a provision that customers who withdrew over $250,000 from FTX in the nine days before its collapse can pay a 15% fee on those funds to avoid potential clawback attempts. According to Travis Kling, founder of Ikigai Asset Management and an FTX creditor, this suggests an expected 85% or higher recovery for customers.

A significant factor to consider is the opportunity cost for customers. If this plan proceeds, customers are likely to receive 85% of the dollar value of their cryptocurrency held on FTX as of November 2022, even if the value of those assets has nearly doubled in the time since. The final terms of this proposal are still subject to negotiation between FTX and its creditors, and approval from a U.S. bankruptcy court is required for confirmation, which could potentially happen in the second quarter of 2024.

Derisking in Trading

In the world of trading, mastering risk is a must for anyone willing to achieve success. Whether you're a seasoned trader or just dipping your toes into the markets, comprehending the risk-to-reward ratio and the art of derisking is paramount. Today we will see the tip of those concepts and give you some different strategies that might help you in your journey.

The R:R Ratio: The trader’s compass

Before we dive into derisking, let's talk about the risk-to-reward ratio, most known as R:R. This fundamental concept helps us evaluate the potential gain against the possible loss in a trade. In essence, it's our compass in the trading landscape. A common rule is to aim for a minimum risk-to-reward ratio of 1:2, meaning the potential reward is at least twice the potential risk. But in crypto, many aim at a minimum of 1:3 given its volatility. Despite the R:R you choose for your strategy; ensure that, over the long run, profitable trades outweigh losing ones, because not every trade will be a winner.

The following table helps you visualise real quick, what’s the winrate you need with different R:R trades to be profitable.

Derisking: The Real Safety Net

Many would have thought that the Stop Loss is the Safety for traders, but the SL alone could end up being the spider net of many traders instead of the safety one that promises to be. Let me clarify that for you here while we explore the significance of derisking in trading. Derisking is the practice of reducing the risk exposure in an existing trade, especially when the market allows you to do so.

Here's why it matters: as markets are unpredictable, protecting your capital is paramount. And yes, the SL is the first line of defence you place in order to protect your capital, but after you place it, there is even more you can do to reduce your risk to the max, and even make it disappear! Yeah, derisking ultimate goal is just that, reduce the money you are exposed to lose to absolute zero when markets give you the opportunity.

There are different ways for you to derisk your position, but I consider these three strategies to be the best ones:

1. Moving the Stop Loss to Break Even: This strategy is the most common one and involves adjusting your stop loss order to your entry price or slightly above it. By doing this, you're essentially protecting your initial capital. If the trade goes against you, at worst, you break even.
   Even when your capital is protected, this derisking strategy has the inconvenience of moving your invalidation point for your setup to a place that doesn’t correspond with your initial Technical Analysis, and sometimes the price might revisit your entry point multiple times before moving in your favour but not going as far as your technical level of invalidation.

Example:
Imagine you enter a trade in NVIDIA at $200 per share. You set your initial stop loss at $170. This means you're risking $30 per share. As the trade progresses, the stock price rises to $250 per share. To derisk, you adjust your stop loss to $200, your entry price. Now, if the trade takes a downturn, you won't lose any capital, as you've secured your initial investment.

Be mentally prepared to not FOMO back into the trade when your break-even stop has been triggered and you see that the price starts rallying to your target. It’s part of the game!

2. Taking Profits to Match the Risk: Another smart move is to lock in profits equal to the risk initially taken. This one is a bit trickier than the previous one and requires some basic maths, but allows you to stay risk-free without moving your technical invalidation. Let’s see it with an example:

Suppose you're trading Bitcoin, and you entered a long position of 1BTC size at $30,000, with a risk of $1,000 placing your SL below 29k. As the market moves in your favour, the price of Bitcoin climbs to $32,000 (where R:R would be 1:2). At this point, you can rip off just a 1/3rd of your position (0.33BTC in this case), and the remaining 2/3rds of your position would be running at risk-free.
Even if the trade reverses now going back at $29k, you've already banked the risk amount of your SL! Anything you might have banked more than the 1/3rd would end up in profits even after the SL triggers.

Do some maths and you will see it!

3. Opening a Hedge Trade in the Opposite Direction: Sometimes, market conditions change. To derisk, you can open a trade in the opposite direction, essentially hedging your position. If your initial trade loses, the second one might offset the losses, but the goal of any edge isn’t really to make a profit even if that’s very possible, but to compensate for a move against your initial trade until the market goes back to your direction.

Let's say you're trading EUR/USD in the forex market. You initially enter a long position, expecting the euro to strengthen against the US dollar. However, some economic news takes a toll on the euro's value, and you're concerned about potential losses. To derisk, you can open a short position of equal size, selling euros against the US dollar. If the euro weakens, your short trade will cover for the losses incurred in your long trade, allowing you to maintain a balanced risk exposure.

This approach comes with potential opportunity as you could at some point decide if you let one or the other run to offset any losses and take a profit.

The Psychology of Derisking

Trading isn't just about numbers; it's also about psychology. Derisking can offer peace of mind, allowing you to trade with discipline and emotional stability. It's a prudent way to handle uncertainty in the market.

In summary, understanding risk in trading and mastering the risk-to-reward ratio is pivotal to long-term success. Derisking is your safety net, a tool that protects your capital when market conditions allow. By adopting strategies like moving your stop loss to break even, securing profits matching your risk, opening an edge trade, or taking any measures that allow you to better protect your capital you'll be better prepared to navigate the dynamic world of trading.

Remember, a well-considered approach to risk management can be your most valuable asset in the trading arena. I hope this article emphasises the importance of safeguarding your capital and maintaining a disciplined approach in the volatile world of trading.

If you liked it and you would like a more personal approach towards your trading, we invite you to join our community for free in Discord! See you there and stay tuned for next Monday's release!