10 TIPS for trading Bitcoin - What I learned after 6 years

Here are key points of the way I approach Bitcoin, that I feel are unique and worth mentioning.

1. The vast majority of bitcoins movement is caused by stop loss orders cascading one into the next, and performing pre-determined chain reactions as they are filled. The market is dominated by futures trading; and this has a major effect on the spot price of Bitcoin. A trader using $100 for a long at 100x is leaving in the form of his stop loss; a $10,000 limit sell order that fills ONLY if price crosses over / below. Unique to limit orders that fill automatically if price is at a premium or discount, stop losses stay in tact until price passes them. Retail traders and those placing orders are only crawling the market along until it begins hitting those stop losses. That’s why bitcoin volatility comes at odd times - the reality is, it’s not caused by human engagement. It’s caused by the decisions traders have made in the past.

2. Exchanges and market makers profit off of liquidation fees and interest on leverage. Stop loss placement is protected information for a reason; the exchanges and market markets communicate this information, to allow themselves to benefit and you to commit more money to the market.

3. The Bitcoin chart works on trendlines that cut through - this is often when we see as price consolidation. Bitcoin easily weaves inside and outside of these trendlines due to stop losses sending price to fill the order chains. The invalidations are simply a phenomenon of futures trading prominence. Eventually, one side catches just like a normal trendline - in an abnormal relationship because price is never neatly contained inside or outside - that’s what makes bitcoin prediction so difficult.

4. DXY is still the best predictor of Bitcoin volatility and as to which direction listed in point 3 will execute. Especially when DXY is approaching a major pivot or direction change, Bitcoin reacts very well with moves to liquidate the opposite side before DXY has a lengthy downward or upward movement (Bitcoin generally moves in opposition).

5. Market manipulation is subtle and occurs with consolidation. Price is contained and controlled, by MM placing counter orders to balance the price moving too far into a particular direction. The consolidation periods attract futures positions for their stop loss orders - and that’s the function that makes moving Bitcoin in the favour of the exchanges / MM in a way that benefits them and also in a way that’s legitimate - as it’s in fact caused by traders own choices. The counter balancing / controlled consolidation is a practice that on paper “prevents manipulation” and “increases liquidity to reduce volatility”. Quite clever.

6. Since stop loss orders are limits placed in the chart that don’t fill automatically if price is above or below - we can analyze the open gaps on the chart along with consolidation periods to develop a good sense of the stop loss orders in the chart and where price is likely to move.

7. Stop Loss orders helps us to predict not only direction, but also the speed and distance Bitcoin will move. The more stop losses; the greater the speed of the compounding movement and cascading effects. The longer the consolidation periods, and the larger the gaps are that price has not recovered; the more stop losses are in place. In other words, the movement of Bitcoin is predetermined and thought of like a chain of explosives that are fused together. As soon as that first stop loss triggers, the more exponentially the speed increases as the orders are already in place - and hence why we see many large wicks in Bitcoin.

8. The fiat conversion of Bitcoin is very fluid and not a firm metric for Bitcoins health. Liquidity can move in and out of the balloon of Bitcoin extremely fast. The finite quantity of Bitcoin and its scarcity and quantity, is not relative to the fiat conversion. One bitcoin is one bitcoin - whether it is at $10 or $100,000. The fiat evaluation of Bitcoin is more-so determined by the “online casino” of sorts that takes place inside the container of Bitcoin; giving us a volatile, moving fiat conversion that ultimately is not relative to the value of Bitcoin as it’s own entity - it’s only relative if Bitcoin is converted back into fiat.

9. There are several hard limitations that stock and equities share that Bitcoin does not. Company share values are limited by the anchors they have in the real world - IE employees and wages, product sales, infrastructure, supply / demand. The evaluation of these companies is not nearly as fluid as Bitcoin for these reasons. The companies are directly related and tied to the system of the economy. Bitcoin, on the other hand, does not have these reality anchors that provide floors and ceilings to price movement.

10. There is a degree of human intentionality behind Bitcoins chart and movement. In other words, more so than any other asset, its price projection is planned by human design. The market is funded upon liquidity from retail traders, predominantly in futures markets. The business of exchange leveraging is astronomical, and Market Makers control the great majority of liquidity via their automated systems and order placement services. Join that information with the profit structure and beneficiaries of our liquidations; and we can base a logical conclusion that there is a sole vested interest in the way Bitcoin’s price moves. That is; in favour of liquidating the common Joe and Jane. This allows us a unique advantage to be able to strategize with a business-focused mindset, more so that any other asset class. This is largely due to the lack of regulations and available information with international crypto exchange platforms and Market Makers.