Bitcoin Market Update

Since the BTC market is trading down about 35% in the past few days I thought I would write a quick blurb about my thoughts and personal trades.

I am buying small amounts at these prices and also anticipating the price will go down more from here. I made a withdrawal from an exchange in June of this year for a decent amount of dollars but it never came through. I asked to have the withdrawal canceled so I have the ability to buy right away. In Canada at least it can be difficult to move dollars to and from exchanges. I always keep a balance of cash in my bank account and stock brokerage accounts so that in the case where they go bankrupt I will have enough to pay taxes and live until I can move other assets around.

My thought is that BTC is a good thing to have as a long term investment. I think the chance of it becoming much more valuable in the next few years is higher than the chance it won’t.

The market tends to cycle through extreme peaks and valleys. Looking back you can see this between $0.30 – $30, $10 – $1000, $250 – 20,000.00. Being in a downtrend now I wanted to see how the current price relative to the last peak compares historically so I put a new report together.

The red line chart shows the relative level from the last peak. When the value is 0 that is an all time high. You can see that of all past data that I have collected only 8.7% of it has been been at a price level lower relative to the peak than is it currently. You can also see several trend reversals below our current level.

I think it’s reasonable for the price to go down lower so that it matches the same past levels but then hopefully it will continue in another uptrend.

Here is another chart I like to look at. It plots the relative rate of change. Currently the rate of decline in price is so fast that only 1.31% of the past data has exceeded it. I use this chart to sell when the rate of price rise approaches the previous maximums. When the rate of decline is low like it is now I buy small amounts regularly.

These charts are available at http://algomega.com. I plan on implementing email notifications of significant market opportunities as a service later on if there is any interest.

 

Update: Down From Peak with Time

Part of my interest in making charts to visualize relationships of price metrics over time is to find possible indicators that somewhat accurately measure the scenarios that correspond with with beginning of a bull run in order to buy and conversely the end of a run in order to sell.

In this case I have a drop from peak by time chart for use as a possible buy signal. The hypothesis is that the market runs up until it’s overvalued and people jump in and drive the price into a peak then it corrects and sags for a long period until everyone is convinced that the price has bottomed before people slowly start to reinvest. So I have added the time from the last peak as a multiplayer to the ‘down from peak’ value. This is because if the market is cyclical between under and overvalues states, the longer the market remains in a valley state the less likely it is to remain there. I suspect that people look at the price charts and recognize the undervalued state to buy in.

This report does accurately show the bottom price in 2015 as the black line is very high. The chart isn’t scaled very well in that it doesn’t show a consistent result between different cycles so I will keep thinking about this.

 

I don’t have much data for Ethereum, Litecoin and Dash but the charts are pretty interesting as well.

 

Update 2 – Nov 25, 2018

Just noting that after another day the price has dropped again and the rate of decline over thirty days is so fast that only 0.42% of past history or 11 days have been faster than this and only 2.92% of past history (76 days) has ever been lower from the last peak down from 9% two days ago.

Life Insurance and Emergency Prep

noah

Here is a summary of some plans and strategy i’m using for general life related insurance and risk hedging.

I have a twenty year old adopted daughter living with me while she originally moved back in with me to finish school but she dropped out and is just working. Unfortunately for her she isn’t able to earn enough to live in this city so I subsidize her housing and food. If something was to happen to me she would have extended family to help her if she needed and she would inherit my assets and be financially ok. My current concern in that scenario is that she wouldn’t know how to manage or maintain investments and loose the benefit of financial independence. I will impart what I can over time but ultimately her choices will be up to her.

I also have two small dogs that come from a past relationship and I love them. They have been by my side for ten years are the most important part of my life so I want to make sure they are safe and healthy. I bought a Nest Protect smoke detector because it has a feature that will notify me if there is a fire. This would at least give me a better chance to rescue them if I was out but nearby.

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I’m in the process of also putting together supplies for an earthquake or other emergency. This includes food, water, lights and a bag with warm clothes, and cash that I can grab if I need to leave in a hurry.

It’s always a good idea to maintain and check the coverage details of your property or rental insurance policy.

If you have dependents and don’t have financial independence levels of equity and depend on income that would disappear if you died it’s probably a good idea to look into a life insurance policy. Be sure to shop around because there is a big difference between offerings.

Other than that it’s always a good idea to keep an up to date will or let an emergency contact know your wishes should something happen to you. Now let’s hope nothing bad does happen.

Trading Bitcoin Manias

This post describes a trading strategy that I am using with digital currencies specifically Bitcoin. The system I use to trade is available online for free at http://algomega.com. To use it you would need to open an account on an exchange and that can take several weeks to complete.

My expectation of gains is high, 50% per year for the next two to five years. In my eyes this is an opportunity for gains if the market continues it’s volatility and or upward trend. Even as a small portion ones invetments this strategy could add a boost to financial independence.

These high expected returns make a big difference. As a comparison, I met with a financial advisor recently about managing my stock and bond investments. I currently hold self directed accounts and do rebalancing myself. The management fees of the financial advisor in the ballpark of 1.5% meant he would be making 65% of the income I wanted to withdrawal on for living expenses. That is a lot. If Bitcoin does go up by 50% per year it could be used to make gains not possible elsewhere at the same level of risk.

This strategy is based on the assumption that the price of Bitcoin will go up over the next few years. Trading the extreme peaks and valleys reduces the risk of buying at an all time high and also grow a cash reserve hedge. It’s pretty clear that Bitcoin has done well in the past but there have been times where people have bought in at a price that quickly dropped and then it took years to recover. This strategy hopes to reduce the likelihood of this happening by indicating times when not to buy when the market is overbought. This strategy also keeps a cash reserve as a hedge so that if the price was to drop unexpectedly you have some assets remaining to buy in or use for other purposes.

I personally believe that there are several reasons the price rise is likely but I won’t cover them all here. Some of the top reasons include the rapid activity of the developer community, improvements to the software and supporting infrastructure and businesses starting to work with digital currencies, the increasing user adoption rates and the gradually reducing production supply of the currency all play parts in my personal assessment.

The mania is a metric that measures rate of change both up and down over time. When the price rises at a rate that is higher than 99% of the past historical trading data then it is seen as a good indicator to sell a portion of holdings as the price and rate of rise always reverts in the other direction. The same applies to drops in price. When the price falls at a rate that is faster than 99% of the historical data it has always followed a reversal upwards and is a buying opportunity. When everyone is selling cheaply people panic but it has historically been the best time to buy.

The trends measured take into account a long term timeline. This means I look at trends based on the largest frequency of price cycling to reduce the risk of being caught out from an unexpected trend reversal. The long term objective is to accumulate bitcoin and trade when the indicators mark opportunities that only occur a few times per year at all. This makes it a low time commitment strategy.

btc_mania

Here is an example report showing the Bitcoin price (Blue) against the mania (Red and black). You can see that durring the past price spikes the mania levels went above 1.5 and this would have been a good time to sell and definatly not a good time to buy. Durring the downturns when the mania droped below 0.4 the price has over time gone up and this has been a good time to buy in my experience.

A lot of people tend to think that they need to trade daily or weekly on short term trends but this is more work and not something that I do. I originally started out down this road and there is a reason why I don’t do this any more. I wrote a stock and crypto trading bot that used a genetic algorithm to learn an optimal strategy for profitable trading. After letting it run for months and years the bot did make a lot of money but less than simply buying and holding Bitcoin or dollar cost average buys.

This is not financial advice. Any investments you make are at your own risk. The value of Bitcoin or any other digital currency could for unforeseen reasons go to zero. It is important that if you buy into these currencies you are aware and can accept this risk. Only buy an amount that you are comfortable loosing.