As of 6/16/2019, Bitcoin has rallied over $1000 in just a few days. This is straight gambling, but enough people are jumping in to make it pop. If you don’t have excess cash to risk, stay out.
What is making this thing move? No one knows, but I doubt it is governments or the Russians. I think it is the exchanges themselves. Those guys make all the money because they charge a 1.49% transaction fee for everything (buying or selling).
There were some strange transactions on specific days that started this rally. In an article with Goldman Sachs back in May 2019, they claimed the Bitcoin market was dominated by only 10 large holders (those with wallets of $1 billion or more). If this is true, then those holders control the market. To stabilize the Bitcoin market, we really need large banks and funds to invest in Bitcoin to stop these large private holders from executing the “pump and dump” or “rinse and repeat” tactics they have been using for years.
Either way, here is what I noticed on the Bitcoin chart over the last year.
1 year ago, after the big run-up, the price started to converge. It converged around $6300 and then fell off a cliff. That was in November 2018. I’m sure some market manipulator was the cause for this and spooked the markets for several months until early April 2019. I have seen this before in the stock market and the best strategy is to cut your losses and take a wait-and-see approach. That wait-and-see approach was simply to check the price of Bitcoin every couple of days or once a week and wait for a big volume increase in purchases which would increase the price rapidly. This is called momentum buying. It means some big player starts the rally by buying a large amount. This bumps the price up more than all prior activity. Smaller buyers notice the price increase and make their purchases which pushes the price up even higher. As long as the big player stays in, they will create a support line. If they pull out, the price drops like a rock. Luckily, they decided to stay in starting in May 2019. In order to make the decision to buy, I usually wait a few days to see if this is a “pump and dump” tactic. This means the original market mover has no interest in staying in the market and wants to make a quick buck, so they will sell the majority or all of their stake a few days (sometimes just hours) after the bulk purchase.
When the price jumped from around $3600 on March 25 to $4600 on April 1, I still held off. No one knows if this is fake or real and it has been only a week. After a week, the price rose to $4900 on April 3. At this point, I had to start acting fast. I opened a new bank account dedicated for transacting Bitcoin and linked in to Coinbase. After funding the account, transferring the money and waiting a week, I was able to buy Bitcoin on April 6 for around $5200.
Now I am holding Bitcoin and need to watch it in case the original purchaser decides to dump their stake and we lose value.
Strategies to reduce risk:
Strategy 1: Since I can’t control the market, I need to monitor the market and look for patterns in the buying/selling behavior. Here is what I noticed:
During the last 30 days, I noticed there were large run-ups and run-downs that appeared to happen in a pattern.
|May 18 @ 3pm: Beginning of large run-up||$7286||Saturday|
|May 19 @ 5am: Run-up complete||$8089||11% increase; Sunday|
|May 19 @ 5pm: Run-down starts||$8178||Sunday|
|May 20 @ 7am: Run-down complete||$7771||5% decrease; Monday|
|May 22 @ 11am: Run-down starts||$7938||Wednesday|
|May 23 @ 3am: Run-down complete||$7560||5% decrease; Thursday|
|May 26 @ 7am: Run-up starts||$7956||Sunday|
|May 26 @ 7pm: Run-up complete||$8856||11% increase: Sunday|
|May 30 @ 9am: Run-down starts||$8749||Sunday|
|May 30 @ 11pm: Run-down complete||$8209||6.5% decrease; Sunday|
|June 3 @ 3pm: Run-down starts||$8523||Wednesday|
|June 4 @ 3pm: Run-down complete||$7620||11% decrease; Thursday|
You can already see the pattern. People are pushing the price up over the weekend and dropping the price in the middle of the week. The increases and decreases are very controlled. 11% up, 5% down. This would be illegal if it occurred in the stock market.
So the weekend is where you make the money and mid-week is where you lose money.
Only June 9 (Sunday), the pattern changed.
|June 9 @ 7pm: Run-up starts||7611||Sunday|
|June 10 @ 7am: Run-up complete||7980||5% increase; Monday|
|June 11 @ 3am: Run-down starts||7947||Tuesday|
|June 11 @ 9am: Run-down complete||7788||2% decrease; Tuesday (short profit taking)|
As of June 11, through 16, the price has steadily risen. This tells me more people jumped in and the market manipulators that created the pattern above, could not sustain the pattern because the market became larger than they could control.
Strategy 2: Once I realized a 50% gain, I sold 50%. This protects my principle. I took that 50% out of Bitcoin and converted back to cash.
Don’t treat this like day trading because the transaction costs are really high (1.49% per transaction).