Market analysis, insights and trading ideas on various markets and products!

Spencer Li

3 Major Catalysts for Cryptocurrencies in the Future

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Since the highs in December 2017, Bitcoin and most cryptocurrencies have seen a sharp decline, and agile traders/investors have mostly exited to await better buying opportunities.

This includes myself, and after cashing out my profits in early 2018 (after the double top reversal), I have started to accumulate small amounts of Bitcoin for my long-term portfolio when prices are low.

Despite the volatility, I am still optimistic for the long-term potential of Blockchain and Cryptocurrencies, hence it is important to know which catalysts will likely move prices in the future.

1. Increased Regulation

At first glance, this might seem like a bad thing, as many countries around the world (China, Australia, Taiwan, Philippines, US, etc) start to clamp down on Crypto-related activities, or impose some kind of restrictions and controls. And prices reacted to such news of regulation negatively as expected, with a prolonged downtrend lasting several months.

However, what most people don’t realise is that such regulation is actually a good thing in the long run, and necessary for Cryptocurrencies to become more “mainstream” and widely adopted. Which means that while we can expected prices to fall, it is also a good catalyst to enable us to buy these assets at lower prices in the future. Timing is key.

2. Institutional Funds

Once their is sufficient regulation and prices are low enough, institutional investors (hedge funds, asset managers, etc) are likely to come into the market. This is where the big moves are going to come from, as we saw from the dotcom boom. And recently, we have heard some news/rumours that big names like George Soros, Rothschild, Rockefeller, etc are starting to come into the market.

If we look at the graph below, we can see that a major trend is usually driven by institutional investors, which means that despite the meteoric rise of Cryptocurrencies over the past few months, it is still nowhere near a bubble, since the “real big money” from institutional investors have not started to pour in yet.

Imagine a future where fund managers and pension funds all include Cryptocurrencies as one of the asset classes in their portfolios, together with stocks, bonds, gold, etc. This will definitely create a huge demand for it, and push up prices faster than we have ever seen.

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3. Scale & adoption

One major debate is whether Bitcoin (and other cryptocurrencies) can serve its purpose as a global currency with a stable store of value, and cheap & fast transactions. Currently, it is not there yet, and how fast it can get there will depend on how well the product can be improved. The volatility will naturally decrease over time as the market cap increases, but the speed and cost of transactions will depend on innovations and improvements from developers.

 

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Spencer Li

Cryptocurrencies & The 50-Year Kondratiev Wave Cycle

Most Famous Spots Big Wave Surfing 04

“In economics, Kondratiev waves (also called supercycles, great surges, long waves, K-waves or the long economic cycle) are hypothesized cycle-like phenomena in the modern world economy. It is stated that the period of a wave ranges from forty to sixty years, the cycles consist of alternating intervals between high sectoral growth and intervals of relatively slow growth.” – Wikipedia

Cryptocurrencies & The 50-Year Kondratiev Wave Cycle

 

After the global financial crisis in 2008, the market bottomed in 2009, and since then we saw the start of a new major cycle, which could last till 2050/60. This means that we are still in the early stages (fast growth stage) of a big long-term trend. This trend consists of not just cryptocurrencies, but also things like blockchain, AI, VR/AR, machine learning, etc.

 

Will it Crash Like the Dot Com Bubble?

In every phase of innovation, it will start off with radical innovation, where a new technology is introduced. This will be a period of experimentation and flux, as many new products come into the market. Cryptocurrencies are currently in this stage, which is why prices are so volatile.

As you might be aware, there are 3 main types of coins: currency, platform, and applications. Some people also include a 4th type called privacy coins, like Monero and Zcash, which are meant to allow completely anonymous transactions. Some examples of currency coins include Bitcoin, Litecoin & Bitcoin Cash, and their main purpose is to serve as a virtual currency. However, Bitcoin behaves more like an asset rather than a currency now, since people are buying it for capital appreciation rather than to use it for transactions. Platform coins refer to ones like Ethereum, which do not directly provide a function to the consumer, but allow applications to be built on their platform. Lastly, applications are like the iphone apps, which serves a particular function for the end user.

After the market has gone on long enough to enter the bubble stage, the next phase of innovation is the “shake out” phase, where the market gets rid of “useless” or bloated/weak products. This will typically be the part associated with a market crash, but it is also possible that the bubble deflates slowly instead of bursting.

In an early stage boom, the application coins will tend to proliferate, and there will be a lot of them. This means that this class of coins would be the most risky to invest in, because a lot of them will be the first to die out when the market crashes.

 

The 50-Year Kondratiev Wave Cycle

 

After the dust settles, the ones who survive will likely become the dominant players (Facebook, apple, Amazon), and it is worth noting that the best products/technology may not necessarily be the ones that survive, rather it is the one with the widest adoption. Do keep this in mind when building your Crypto portfolio and deciding which coins to invest and hold for the long-term.

After the crash, the trend may take a while to resume, but it will be more majestic than before. The next phase involves incremental innovations, where products are further refined, such as improvements in the products, or new applications for existing products, etc.

So Should I Buy Now?

Although we know we are at the early stages of a mega-trend, we also have to keep in mind the “shake out” phase which has not occurred yet.

If you are willing to hold through that and capture the subsequent big upside, then you will not need to worry so much about timing the market now. But if you prefer to take a more cautious approach, you can wait till the “shake out” is over before entering the market.

And lastly, if you prefer the best of both worlds, you can use swing trading to capture the short/medium-term moves in the market, while waiting for the “shake out”, and then going all-in when the dust settles. Whichever approach you choose, just make sure you don’t miss out on this 50-year wave, because it is literally once in a lifetime. 😀

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Spencer Li

5 Unconventional Ways You Can Make Money From Bitcoin (And Other Cryptocurrencies)

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Firstly, what is Bitcoin and how does it work?

In simple terms, Bitcoin is a cryptocurrency, which is essentially a currency that is not owned by any particular group or person. It allows fast and cheap transactions, and the more people start to use it, the more its value increases. In fact, if you had bought $5 worth of Bitcoins 7 years ago, it would now be worth $4-5M.

And bitcoin could still be in its infancy, since its number of transactions are only a fraction of what the banks and other financial institutions are currently doing. Which means there is a huge potential for more upside. So, how can we get a share of the pie?

1. Investing in Bitcoins

This is the most common way for retail investors to get in on the action, by simply opening an account and purchasing the coins. Some of the common platforms are Coinbase and Coinhako, and it is not hard to open an account and take a nibble. The challenge here is making sure you do not end up buying at the high, so take advantage of price dips (usually happens when there is some negative news about cryptocurrencies) to accumulate more coins.

2. Trading Bitcoin Derivatives

If you are more interested in profiting from the short-term movements in Bitcoin, then you can use derivative instruments that track the price of Bitcoin, for example products like CFDs (contract for differences). The price of the derivative will track the price of Bitcoin, moving up and down in sync with the actual price of Bitcoin, so by buying or selling the derivative, you can profit from the price moves in Bitcoin without actually buying or owning Bitcoin. To do this well, you will need to know how to read charts and price action.

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3. Lending out Bitcoins

Lending is perhaps the oldest way to use money to make money. Basically, you loan out money to a relevant party and they pay you back, with interest. Interest rates will vary with the risk involved. If you get collateral in exchange for your loan, interest rates will be low. No collateral means higher risks, but it also means higher interest rates. So if you have already purchased some Bitcoins, you can loan them out for some extra interest instead of just keeping them in your account.

4. Bitcoin Mining

Bitcoins are created through solving complex algorithms that create blocks that are added to the public ledger. The public ledger is the history of all transactions conducted through bitcoin. Basically, miners build the public ledger and allow the whole bitcoin system to function. As they create new blocks, miners are rewarded with new Bitcoins. This encourages more miners to get in on the action, which allows the Bitcoin community to grow. In the past, people could use their home computers to mine Bitcoins, but over time mining has become more difficult as the algorithms have become more complex. Now, you’ll either have to buy a specially built mining rig, or join up with a Bitcoin mining pool that harnesses the power of multiple computers.

5. Bitcoin Arbitrage

This is perhaps the least common way of making money from Bitcoins due to its difficulty level. If you have started dabbling in Bitcoins, you might have noticed that the prices of Bitcoins can vary a lot across different exchanges. For example, if the Bitcoins in Singapore are cheaper than the ones in China, you could buy some Bitcoins here, transfer them to China, and cash them out over there. The challenge however would be bringing your money back to Singapore, and also you would need a bank account in China. But some people have managed to come up with creative solutions around theses problems.

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Spencer Li

Picking the Bottom for Bitcoin & Ethereum – When to Buy?

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Recently, Bitcoin prices have crossed $4,800, and year-to-date, its price has surged nearly 400%, making it one of the best investments for the year. And it is not alone.

Other cryptocurrencies, such as Ethereum, have also been making new highs, and many more new products are hitting the market every day.

Which is why many of my friends, followers, and students have been asking me a lot about theses products, and most importantly, “when is a good time to buy?”

 

Sharing live on #cryptocurrencies like #bitcoin and #ethereum ? Are you ready for the next big thing? #visionaryinvesting

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When I first started trading, I was mainly doing stocks and CFDs, and I developed my “15 minutes a day” price action strategies for these. And as I expanded to new markets, I was pleasantly surprised to find that the same strategies worked perfectly well. To date, I have used them successfully on forex, futures, options, and most recently, on cryptocurrencies.

This means that for a new product like Bitcoin, which behaves very similarly to IPO stocks or some less popular penny stocks, its behavior can be best understood by studying its underlying price behaviour.

Many people who take one look at its prior meteoric rise will immediately come to the conclusion that is it near its high and too late to buy. But many people probably thought the same way about Apple and Tesla’s stock a few years back.

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Hands-on analysis and study of Bitcoin chart for precise timing (at my new cafe)

 

This means that there is potential for cryptocurrencies to go much higher, but how do we time our entry into something that is moving so fast?

Turns out we do have the perfect strategy for that, which is similar to the strategy we use to enter fast-moving counters in times of a strong trend. In fact, I pointed this out using the chart of Bitcoin during my last few workshops, and also at Invest Fair.

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Snippet from the “Synapse Network” private forum (posted 24 August 2017)

 

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Bitcoin chart today (04 September 2017)

 

How far can this trend continue to run?

To be honest, no one can really tell, but all I know is that whenever there is a good buying opportunity, I will continue to add more positions to ride this strong trend until it ends. And when it does, I will get ready to short it down as well. 😀

But that is a story for another post.

Till then, trade safe, and aim big. Cheers!

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Spencer Li

An Exciting Week of Trades – AUD/CHF, EUR/USD, NZD/USD, etc!

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Last week, we had some pretty decent trades in, netting close to US$2,000 in profits for a handful of quick trades, riding on the strength of the USD after the FOMC.


An Exciting Week of Trades

An Exciting Week of Trades 2

An Exciting Week of Trades 3

 

Also took the chance to check out my new house:

 

For those who are keen to join our private network for timely trade calls, you can reserve your spot here, but do so early, as we only allow 20 new people to join each quarter!
Register: https://synapsetrading.com/the-synapse-program/

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