How to scan the market 12.01.2021

Bitcoin and the Alt-market had pulled back yesterday. Today is the day of trend-reversals, how fast will we see new highs in this market?

3 reasons why new traders or investors fail

Here are some “Do not do” while starting out trading or investing.

Trading and investing is not easy; it takes time and can be nerve-wracking. Keeping a calm mind and doing what you are supposed to do are crucial to success while exchanging. However, human psychology often does not work like that. We tend to act out of impulse reactions and emotional bursts that disrupt our understanding of reality. Bending reality and telling yourself that you are doing the right thing has nothing to do with investing and especially trading. So, how can you combat that? How can you stop being emotional? How can you improve your decision making? Trading or investing with an approach will help you become better at what you do. Plan your trade and trade your plan. Find the edge and learn from your mistakes. Investing and trading are about reducing the probabilities of your exchange going negative. Learn how to minimize those risks, and you will improve.

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Now let us explore why so many newcomers stop trading after a few months after losing most of their money and having bad experiences. Here are 3 reasons:

  1. Underestimating their risk — Risk is the factor of success but also a failure. Often you hear the saying “higher risk, higher reward,” but that is misleading for newcomers. Many believe that trading or investing is a quick money scheme that gets them rich quickly. But it is the exact opposite. The longer you try to stay in the market, the higher your probability is to succeed in what you are doing. Jumping on penny stocks or cryptocurrencies that promise fast return rarely works out. Most people believe they become rich by spending their life savings on something that has not even a proof of concept yet is just idiotic, I think. Many trading critics argue that trading is compared to gambling, and it sure is if you only bet on something that has no real value and is not delivering yet. Do not just become an investor or a trader for the belief of retiring tomorrow because the market will spit you out with empty pockets. Be wise and use an approach to reduce your risk by setting up stop-loss and having a strategy, for example.
  2. Over leveraging — People get caught up by things like margin trading to get more money out of their trade. While having the idea of doubling your money at every 10% increase, it is also a swift way to the get-wrecked city. I see it all the time. Margin trading is very lucrative if you can do it. However, newcomers should not use it. This is a mix of my own experience and of what people have been telling me. You will lose more money while investing with margin than making any. Also, a common assumption is that many believe they need to buy into something with a tremendous amount of money at the same time. Do not be like that. Buy at 3 different points in time to average out the volatility and profit from low-value entries. Just throwing your money on the table as if you would go all-in in poker has nothing to do with investing. Stop believing the “get rich scheme” will get you there. Over-leveraging shows that people do not understand to handle their risk.
  3. Analysis paralysis — Getting every piece of information on a project won’t help you be a better trader or investor. You must understand that the more you know about a company, the more subjective your action becomes regarding projects you want to buy. It makes sense to get the fundamentals on a project. It makes a lot of sense to keep sticking to an analysis process and go through them with a consistent approach. Do not become too emotional about something, and if something seems to be too good to be true, don’t enter. It normally is. Being fascinated is good, but it should come naturally, do not let yourself be talked into something that you wouldn’t use or like. If so, you could not stand behind it as much as you should. Check on the team behind the project. Are these people worth having diner with? How do they handle the company? Checking information’s like these are essential and subjective enough to get your blood flowing for an investment opportunity. Every bit of information that is unnecessary usually is not necessary, do not get caught up by those small details.

There are many more reasons why newcomers might struggle in the beginning. I have been through many of these reasons, and I have learned from these experiences that becoming a better investor or trader is about how well you speak the language of the market you are trying to trade. Learn about your market and approach it the way it suits best for you. You will start to understand risk and control it, and you will not get caught up in analysis paralysis because you don’t have to anymore.

Trading is my passion.

I switched to trading cryptos because of the volatility and the returns it brought me. If you want to learn more about it, check out my website or my Youtube.

How trading cryptocurrencies changed my life

Do not worry. I will not tell you how I became a millionaire by speculating or investing in the right penny-stock or shitcoin that shot me to the moon. The reality is, I am still working a 9 to 5 job, and I am a student. Trading changed my life differently. It opened doors in my mind that I have never walked through before in my life, which has left a permanent change in my state of mind.
Learning a new skill involves commitment, and it often returns more than you could have expected to get. The same was it for me with trading. So, what did trading teach me that I did not know before?

  • Risk to reward awareness – Not everything that shines must be gold. Trading taught me many things, but the most crucial thing it taught me is to be aware if something is worth my effort, time, and money, and if it is not. It gave me the confidence to sit out on things I have no expertise in. I used to be the person that tried to know everything, but trading showed me that focus is better than anything. I also used to be that guy that wanted to do everything or even buy everything. Trading taught me to do the opposite. Moreover, I used to fall for the “too good to be true” trap, but that has changed. Understanding that taking a risk is to understand probabilities made me much more aware of how to portion my resources and energy to help me stay healthy.
  • Money handling – I used to spend my money on all sorts of things that I did not need. Most of that stuff I am selling on eBay nowadays. Money is a resource; precise allocation of that resources is a tough thing to do. Trading showed me that I should never invest more than I can afford to lose. This mentality is applicable too, and helps me to stay focused and do the right thing.
  • Handling the loss of money – To spend money is easy. To make money is the hard part. Learning to deal with money means losing money. The faster you get used to the fact that you must pay for your experience, the faster you will learn how the markets work.
  • Understanding consistency – Trading successfully is a hard thing to do. The only way you reach your goal of becoming a day trader is by being consistent about your approach, and you make sure that whenever you approach the markets, you are in your zone, and you use your approach repeatedly. By replicating your approach, you become more and more successful the more often you turn up to trade.
  • Understanding business – Cryptocurrencies helped me develop various business ideas that are good and do not require much prior knowledge. However, more importantly, it showed me what works in business regards and what does not. I always thought “fake it till you make it” was an actual thing, but hard work is the essential key.
  • My fundamental understanding of how economics work or what economics should be has changed – Bitcoin and other cryptocurrencies play with the idea to exchange the conventional monetary system through a monetary system that offers deflation and increasing value. I could go on talking about that for ages. Find more arguments in my prior articles.

My 9 to 5 job does not fulfill me, and unfortunately, it does not fill my pockets either. Cryptocurrencies offer an exciting solution to actual real-life problems and cause a shift in mentality. Keep an open mind about cryptocurrencies, and be sure to learn what they are and what they do. This will help you broaden your horizon and become more aware of new potential business ideas with low competition and, practically speaking, no barriers to entry.
Thanks to crypto, I have to businesses today, and they really showed me what I want in life. If it wasn’t for crypto, I might have never started to be interested in this stuff.

How to scan the market 08.01.2020

Bitcoin smashing through 40k but rejecting it. The market holds it’s ground and picks up some good trend patterns on the lower time frames. Will we see some new highs till tomorrow?

The battle against fiat-based consumerism – Bitcoin

Many economic discussions lead to the emergency argument of inflation. Inflationist argues that through inflation only, more significant demise can be avoided because if sound money is not temporarily abandoned, economic and social demise will be far greater than the actions of inflation. But if thought about that argument, it boils down that it is just a choice of a lesser or greater evil.  

The liberal doctrines and policies of the nineteenth century were a product of a classical economy and were propagated into that time’s political minds. Many understood that a nation’s freedom is dependent on the ability to exchange. The private sector played a vital role since the ownership and production means were under less control of the government. Society came up with institutions because of the need to catch fraudsters and domestic gangsters that would not bend to society’s fixed rules. 

However, a new problem came up, institutions became strongly influenced by governments, and the western societies had to endure governments trying to erode social liberties and freedom through social or economic institutions. 

It is paramount to understand that sound money’s function directly protects your social liberties against the government. Sound money, commonly referred to as hard money, protects freedom and independence because of its properties. So, what defines sound money? 

  1. Hard to produce – No money printer enables you to press as much money as you need. Gold needs to be mined, for example. 
  2. The medium of exchange – Is widely accepted, and demand for the currency is of high importance. 
  3. Store of value – It should be a store of value that is not much affected by price volatility. Money should appreciate in value. 
  4. It is developed on the free market – Money is chosen because of its utility of the user and not because someone dictates it. 

How does sound money protect you from the government? Having an independent store of value that cannot be inflated quickly protects you and your financial value from counterfeiters trying to inflate money. Money that can be inflated is far more likely to lose its value over time than the money that can not be inflated. The more inflation a currency suffers from, the consumer is far more likely to be incentivized to consume rather than to save money. This leaves the public exposed with no savings, and when a scenario of demise happens, only the government will be able to help those affected most by it. Inflation exposes human liberties and independence to the government imposing inflation.

Since today’s fiat currencies have that inflationist property and are effectively speaking no store of value, they cannot be adequately classified as money. They represent an imposed medium of exchange that has a decreasing backing value and is very easy to produce, not matching the criteria defined for sound money before.

How does Bitcoin come into play? 

Bitcoin’s value lies within the fact that it reminded us of how money should be; therefore, Bitcoins value is considered subjective, giving it value because of the need for an alternative. Inflationist policies have been invented to deal with economic hardship. Still, since economists of today have forgotten that inflations should only be a financial tool and not an economic system, we have been living under the fiat standard for nearly a century now with no sign of stopping inflation. Bitcoin brings an opportunity the Weimar Republic did not have. Bitcoin gives the chance of a sound store of value that promises long-term appreciation due to its limited supply. And since we live in a time where inflation is more than just scary, the demand for Bitcoin starts to pick up because of the realization that this is a valuable alternative. Bitcoins properties of a limited supply (can not be produced more off), its ability to be a medium of exchange, and its store of value are all the reasons why Bitcoin has been chosen by the free market as the alternative to fiat. 

So how does Bitcoin battle consumerism? 

As people see that the appreciation of value has long-term effects on their financial life. People tend to understand the importance of having a medium of exchange that offers all the investment properties an investment should have. Since Bitcoin is a medium of exchange but also an investment, it is the opposite of fiat. There is no need for a bachelor’s in finance to understand to invest. There is no need to have a bachelor’s in banking to understand the simplicity of how Bitcoin is exchanged. Bitcoin showed me and many more than the current fiat system is rusty, and Bitcoin offers a solution to this problem. This has a massive impact on consumerism, since the time-preference shifts as soon as you invest in Bitcoin, you understand that having more value in the long-term is far better than having something now. 

To conclude, the long-term economic impact of Bitcoin will be enormous since a significant proportion of the public will realize that their preferred store of value does not need to be complicated stocks or shares but merely some magical internet beans. This shift in psychology is aligned with our intuitive state of mind and is the most logical way to approach this crisis. 

Relevant link:

Why is Bitcoin changing the way we think?

Bitcoin, the majestic internet bean, has caused quite an uproar in the past two years. Who has not heard of the mighty 300% increase in value from March 2020 to December 2020? Bitcoin resonated not only in the public mind, but investors and venture capitalists have also all turned their heads toward the insane revenues taken out of Bitcoin investments. Now even the governments around the world know that Bitcoin is here to stay. So, what is changing? Let me explore further. 

This article will be quite economical. If you like what you read, please let me know so I post more of my thoughts on this. Stick around till the end. I finish this article off with a short story that presents a world using Bitcoin with no alternative. 

High time preference is a side effect of consumerism driven by inflation. 

High time preferences mean that an individual focuses on his well-being in the present. A person having a high-time preference is rather happy to have their product now than in 30 years. But I understand them, it does not work like this anymore, saving has changed. Since our economies have only seen inflation since the invention of fiat currencies, the average consumer knows and feels the rate of inflation decreasing their purchasing power in the future. The average individual has no other alternative than to store their value in inflation-related assets or exchange it against a store of value subject to volatility related to the fiat market.

Moreover, thanks to inflation, the price of products is rising in the long-term, leaving the purchasing power of most of the population exposed to inflationary shifts. As a result, less money is being saved by the average family, more money must be spent on the same amount of goods without getting a significant increase in their wages. Our economies are clearly built on the idea of consumerism and high-time preference. 

Low time preference is the result of appreciation in the price of the chosen store of value. 

Saving is the best way to explain the features of a low time preference, meaning an individual lies emphasis on his future well-being. Since you expect an appreciation of your value in the long-term, you are more reluctant to consume. This is against all the economic principles we have right now. Consumption is the driving factor of our economy, but more and more people realize that their long-term situation will be worse than the more they spend now. The inflationary monetary system incentivizes consumption through inflation. Sounds like a bad deal now, doesn’t it? 

You are right. It is a bad deal in my eyes too. Now let us see how Bitcoin comes into play here and why it has a massive impact on the way we think. 

Bitcoin is changing our time-preference

Thanks to Bitcoin, you and I understand that we had no choice. There was only one option for many years, but this is changing. Bitcoin offers an alternative. It provides you more than just an alternative. Besides its other qualities, it gives you a sound store of value too. The more people keep holding their Bitcoin, the higher the price of Bitcoin will go in the long term. It is intuitive and easy to grasp. All you need to do is hold on to it, and it will eventually fire you to the moon. This is due to the scarce nature of Bitcoin. Since there are only 21 Million Bitcoin out there and there cannot be made more, the price of Bitcoin is directly subjected to the demand for it. So, if demand never leaves because people know that all they must do is wait to get more value in the long-term, Bitcoin will be bound to increase in the future. More and more people understand that economics should work this way, not how the governments think it works. Bitcoin changes the consumer. 

Bitcoin not only implements the need to save, but it also shows the consumer that their way of living has alternatives to choose from. Bitcoin is the best alternative because it offers an appreciating store of value while being a fully functioning monetary system. This offers opportunities. People start to see how real money should work, and by comparing it to what they have been using before, many begin to understand. 

Before we end this, I would like to show you an insight into a short story I am writing: 

In a world of Bitcoin

As the door opens, the room full of venture capitalists goes quiet. A small but steady man walks into the room, everyone greets him simultaneously. “Hi, Boss.” The short men sit into the small leather chair at the end of the table. The man to his left (wearing the same suit as the men to his right, just the tie is different) gets up and addresses first the boss and then starts speaking clearly into the room. 

Men to his left (Red tie) starts speaking: the situation is concerning. After the last appreciation of the market capitalization, we have seen a backslash as two years ago. We are expecting a depreciation of more than 60% in the coming week.

(Hysterical discussions erupt in the background)

Boss: (slams his fists onto the large wooden table) No one could have foreseen something like this. We thought we could correct the cycle of market corrections and break free of the chains of losing money. 

 Men to his right (blue tie): We need to save our money! What are we going to do?

 Red tie: There is no alternative! 

(Hysterical discussions erupt in the background)

If you like to know more about this story, please leave a like or a comment with a short mention that you liked it. Thanks.

To conclude, thanks to Bitcoin’s nature of scarcity and expected appreciation in value, many start to understand how a currency really should work and what a real store of value should be. This increase in interest is directly reflected in the price of Bitcoin. But why is Bitcoin bull-running now during a pandemic? Can I make a living by trading cryptocurrencies? 

 If you ask yourself questions like this, please check out my website. I have plenty of articles and podcasts that provide you with answers to these questions. I am doing a newsletter, too; the first 100 subscribers are free life-long.