Weekly Update August 15th

August 15, 2022

Welcome to our Weekly newsletter!

Overnight futures causing a bit of an issue and the Price Action looked a bit predatory.

BTC – Heatmap

When I say predatory this is what I’m referring to…. The MM / Big players used out of hours trading to push up price liquidating shorts before pulling back for the true down move. You can see here on the heatmap we had a rise and at around 4 in the morning we produced that shooting star looking candle – Classic short liquidation Wick

Looking on multiple TF’s we have negative divergence coming in. Highlighted best on the 4H chart…

Also looking at USDT.D we can see here that the chart is fighting for support here and creating positive divergence.

Legacy markets – Had to do a lot of TA here this morning just to see what’s possible in terms of a retracement / bear market rally and we’re still in the thick of it here guys… Overall I don’t think we’ve stepped out of true bear market rally territory. Michael Burry had some good tweets this morning highlighting this…

TOTAL 3 – So this is everything excluding btc and eth – Chart looks like its coming into the late stages of a bearish rising wedge. – I’d say this is negated above 456 level.

SUMMARY – I think it’s a good time to step back here, not have to much exposure and wait for the divergences to work themselves out. Its been a good few weeks with some great setups – I think its time to take a breather, preserve capital and see how things unfold from here. My plan remains unchanged, keep longing healthy looking TA setups on the crypto side and add to my short exposure on the stock indexes. So far a plan that’s been working really well.

Tornado Cash Sanctioned by US Treasury Department

The US Treasury Department has banned all Americans from using Tornado Cash, a decentralised crypto mixing service. The sanctions will prohibit all US persons and entities from interacting with the protocol or even any of the associated Ethereum addresses tied to Tornado Cash. A senior US official stated that “Tornado Cash has been the go-to mixer for cybercriminals looking to launder the proceeds of crime, as well as helping to enable hackers, including those currently under U.S. sanctions, to launder the proceeds of their cybercrimes by covering up the origin and transfer of this illicit virtual currency”. It is no secret that Tornado Cash has been used frequently by users engaging in illicit activity, but the sanctions once again serve as a stark reminder as to why the decentralised nature of crypto is so important.

Ethereum’s Goerli Testnet Successfully Completes Merge Test

The Goerli Network, which is an Ethereum Testnet has successfully completed its ‘Merge’ and is officially a Proof of Stake (PoS) network. There were no issues with the PoS implementation, suggesting that the Ethereum mainnet should be ready to undergo its own Merge event without any further delays. The Ethereum Merge is likely to be the biggest event in the projects history and will move the project closer to the long term scalability, security and environmental goals as a network. Exciting times and maybe some fireworks between now and then.

US CPI Data Comes in at 8.5%, Below Expectations of 8.7%

Consumer Price Indicator (CPI) is used to track the prices that consumers pay for a variety of goods and services compared to a year ago today. On Tuesday we had the CPI data for July which came in at 8.5% lower than the anticipated 8.7%. Excluding volatile food and energy prices, core CPI rose 5.9% annually and 0.3% monthly, compared with respective estimates of 6.1% and 0.5%. These numbers indicate that the measures taken in recent months are having an effect on easing inflation, even though 8.5% is still outrageously high. Regardless, the market reacted very well across both stocks and crypto with a green candles across the board!

Elon Musk Sold $6.9 Billion in Tesla Stock Over the Past Week

Tesla CEO, Elon Musk sold $6.9 Billion in shares this week. The reasoning for the sale centred around his potential (forced) acquisition of Twitter, he tweeted on Tuesday saying “In the (hopefully unlikely) event that Twitter forces this deal to close *and* some equity partners don't come through, it is important to avoid an emergency sale of Tesla stock”. Elon and Twitter are currently embroiled in a legal battle after Elon withdrew his very public acquisition offer of Twitter earlier this year. The sales bring Musk’s total Tesla stock sales to $32 Billion in less than one year, wow.

Curve Hacked With ‘Front End Exploit’ on Their Website

The DeFi protocol Curve.Finance was hacked and lost $570K in a front end exploit of the projects website - bizarrely given some of the exploits we have seen in the last couple of years, this is actually a very small amount to lose. The hacker exploited the website by appearing to have changed the DNS entry for the protocol and redirecting users to a fake clone website and approving a malicious contract. Fortunately the smart contract was uncompromised meaning the team could easily find and revert the issue quickly. In a time where DeFi protocols security has been massively questioned, this wasn’t ideal for one of Ethereum’s blue chip DeFi projects.

BlackRock to Offer Bitcoin Trust for Institutional Client

The world's largest asset manager BlackRock will offer Bitcoin services to its institutional clients due to high demand. BlackRock currently manages over $10 TRILLION in assets for clients worldwide and will be adding a Bitcoin private trust. The company said “Despite the steep downturn in the digital asset market, we are still seeing substantial interest from some institutional clients in how to efficiently and cost-effectively access these assets using our technology and product capabilities”.

As you can guess it’s very important to be part of a community of traders and investors like you. Such a group of people can help to remain balanced and make objective and solid analysis by discussing the different angles of each assumption.

In our CryptoRand Group community on Discord there are hundreds of traders willing to discuss and evaluate the most trending information in order to be able to use that to define a what is the best markets approach. Join us!

We humans are emotional beings and sometimes our emotions can clutter our minds if we don’t know how to manage them properly. Traders and investors of crypto markets are specially vulnerable due to the exposure to high volatility that often leads to fear of missing out (FOMO) and panic selling.

One of the best things that helps prevent emotions from taking control of your trading decisions is to develop a plan and have a solid strategy that involves risk management.

What is FOMO?

It is a very popular acronym or jargon used to define the fear of not wanting to miss a particular event. In the context of trading, it will mean fear of not investing in a particular asset that is performing well or trending in socials. Many people are worried that they will lose the opportunity to get profits when seeing some assets make drastic increases suddenly, the volatility of crypto can make a x10 in just minutes and make you feel bad for not being involved. But the truth is that there is always a new different opportunity waiting for you.

At those times, when some assets pump hard, the community will be in a very high FOMO state. Consequently, a lot of people will enter the market and buy the asset at the wrong time, being exposed to potential losses if the asset suffers a major correction. FOMO can happen to anyone, but it often happens to new investors who are looking for quick profits and don’t pay attention to the technicals or fundamentals involved.

Is perfectly fine to be buying assets that are currently popular or in a rise. However, you should consider if the reason behind your purchase is correct. Ask yourself if you are buying based solely on emotion instead on the conclusion of solid analysis?

Trading the emotions

Markets are the reflection of its participants emotions, positive emotions as optimism and hope would push prices higher and negative emotions would impact prices making them go down.

All market participants go through the same emotions, which is why having a clear understanding of the 14 stages of the psychology of a market cycle is a must for any cryptocurrency trader to become successful.

Although no individual opinion is completely dominant, the overall market sentiment is what drives financial shifts.

In terms of market conditions, the fear and greed index is a good indicator to see the market sentiment. Emotional conditions and expectations of each individual form the market sentiment which sums up the emotions of the majority of traders.

Are you a FOMO trader?

FOMO can have a variety of causes and here are the common ones:

Impatience

When you do not want to wait for the setup and just want to get into a trade because you fear that the price might run away.

No long-term perspective

When you do not understand that there will be hundreds and thousands of new trades waiting for you. Many amateurs put way too much importance on one trade alone and want to force this trade to win whatever it takes.

High expectations

When you think that you need to double your account by next month and you are missing out if you do not make a lot of money as soon as possible. This leads to higher risk and large position sizes.

No rules

When you do not have a system or rules, to begin with, then FOMO is your default mode, always jumping in and out of the market, not really knowing what you are doing.

Lack of confidence

After a few losing trades, many traders will try to play catch up and then enter random trades just to get into the market and hopefully somehow generate a profit.

Overconfidence

When you come from a winning streak and feel invincible and then take random trades or too large positions because you think we can “feel” what the market is going to do.

How to avoid trading with FOMO?

Feeling FOMO is normal, and doesn’t have to be necessarily bad as long as it’s controlled. There are some strategies that can help you avoid suffering its negative effects such as panic selling.

Define goals and targets.

Developing and sticking to a trading plan that works for you is the best method, plain and simple. A trading plan should outline the kind of conditions that make a setup tradeable as well as your objectives and the risk that you are willing to take on each trade. Ideally this plan contains short, medium, and long-term goals and targets that you want to achieve.

Have a strategy.

Always define entities, exits and profit taking areas before intending to participate in any market. Have a robust risk management strategy and be disciplined. If you are able to control your risks, you should participate in any markets without letting emotions take control. The same way when you define a plan, sudden market movement or volatility shouldnt have an impact on you.

When you are in a trade, the market will do whatever it wants to do; it could go up, down, or even sideways. As such, market movements are completely out of your control, assume that and don't panic.

Portfolio diversification.

One of the main principles of investing in any industry is diversification. By spreading your assets, you minimise the risk of losing all your money at once by being exposed to different kinds of markets. In crypto there are different sectors where you can diversify, and if you want a more secure approach, there are markets outside crypto where you can diversify as well (real estate, metals, stocks, bonds, etc).

With diversification, while one particular asset could be in a downtrend, another asset could be trending upwards, helping keep your portfolio afloat. This can make you more careful and calmer when making investment decisions and help prevent panic selling at a loss.

Keep a journal.

Keeping a trading journal to record everything you do as a trader, including strategy development, risk management, feelings, and every step of the process can also be a very effective tool to avoid FOMO and panic selling. It can help to have a clear understanding of where mistakes were made in the past to prevent them from happening in the future. The more details you provide to yourself about your trading experience, the better insights you will have to grow your account and maintain your capital.

Knowing yourself better and how you reacted in the past is key to being able to control your emotions and trading actions in the future and help to become better and more profitable.

DCA Strategy.

Dollar-cost averaging (DCA) is another popular strategy that helps reduce your risk exposure by investing set amounts at certain price levels. When you invest slowly over time, rather than all at once, you reduce your exposure to market volatility.

However, the key to DCA success, and trading or investing in general, is that you have to be disciplined and consistent in following your plan and not be tempted by rumours or misleading information. DCA removes the emotional side of buying crypto assets because your investment process is scheduled regardless of prices and market trends.

Find reliable sources.

Clickbait content like this is often biased because the creators have an agenda to influence your decision. Thus, creating a sense of FOMO. You need to look for information that is conveyed in a neutral, critical manner that explains various risks to the reader. Balanced information like this won’t be easy to find but can be the difference between a feeling of FOMO and measured optimism.

For new investors with little knowledge of the community and the asset, this is a textbook situation for suffering losses. In short, do your own research (DYOR).