The best way to lose money in the markets is to sell when you are scared and buy/hold when you are happy with your profits.
So it was for me a couple of days ago when bitcoin (BTC) was $9,500. I so wanted to close out 25% of my BTC and leave myself to run the rest, having taken out the cost of my position in cash and thereby run the rest as free carry. You can spin all sorts of narrative why that’s a smart idea or why that’s a dumb one, but the fall was the impetus and the desire to flee a normal human emotion. It is an instinct that traders and especially investors need to control.
Luckily, I’ve been playing the high risk game long enough to wait. When I want to sell an investment solely because it has dumped I wait at least two or three days before making such a move. If and when bitcoin hits $13,500, I will want to load up on more but I will likewise stop myself from buying into bullishness.
So I did nothing with my bitcoin and this happens:
Bitcoin jumped again on Monday
Once again doing nothing is the best move you can make with a good position.
So in my model, this is China and this is down to the trade war.
When bitcoin jumps, something bad has just happened in the U.S./China trade talks. We don’t know what it is, but soon enough we will find out.
Well today we get a Trump tweet and up BTC goes again. Yesterday, what happened? I guess whatever it was that made bitcoin pop, also left the U.S. president even more incandescent than normal.
This is still a theory, but it keeps on playing out. So what to do? In the short term the question is, is the China situation going to continue for long?
Continuation of the trade war means BTC up. The longer the war runs, the higher bitcoin will go.
For me it’s likely that the trade war is going to run and run. Both sides can’t buckle and like most wars, sides are prepared to take big losses, not to lose. This means holding through a rollercoaster ride of developments.
If we are in for a trade war of attrition, bitcoin will be above £20,000 by Christmas or sooner.
What we also have here if this theory is right is a gift to the extra greedy. When bitcoin flies, short the Dow, because when BTC flies, for no apparent reason, it is a high probability that something Dow slapping will come out of the trade war in a day or two’s time. While information may flow more slowly in the U.S., whatever goes wrong will nonetheless hit the U.S. equities market soon enough, but meanwhile the bad news will hit the Asia bitcoin market much sooner, about as long as it takes for the participants to get out of their meetings and past the revolving doors.
BTC down on Monday, should also give Dow up on a Tuesday and vice versa. Bitcoin is the gift that keeps on giving to traders.
Gold and the whole platinum group metals (PGM) will follow but at a much more refined and subdued pace; bitcoin delivering another leading signal to the stacker community or any trader that wants to play the dangerous game of levered commodities.
Signals like this don’t come by very often and can’t last for long, but while the stakes are in trillion dollar scale, quite a few million dollar crumbs are going to be left lying around the table.
I am the CEO of stocks and investment website ADVFN . As well as running Europe and South America’s leading financial market website I am a prolific financial writer. I wrote a stock column for WIRED – which described me as a ‘Market Maven’ – and am a regular columnist for numerous financial publications around the world. I have written for titles including: Working Money, Active Trader, SFO and Technical Analysis of Stocks & Commodities in the US and have written for pretty much every UK national newspaper. In the last few years I have become a financial thriller writer and have just had my first non-fiction title published: 101 ways to pick stock market winners. Find me here on US Amazon. You’ll also see me regularly on CNBC, CNN, SKY, Business News Network and the BBC giving my take on the markets.
Intelligent Investing is a contributor page dedicated to the insights and ideas of Forbes Investor Team. Forbes Investor Team is comprised of thought leaders in the areas of money, investing and markets.
Now, the U.K.’s financial services watchdog has warned potential investors that bitcoin and cryptocurrencies have “no intrinsic value,” with some taking the caution as a signal the country could be moving towards a bitcoin ban.
“This is a small, complex and evolving market covering a broad range of activities,” said Christopher Woolard, executive director of strategy and competition at the U.K. Financial Conduct Authority (FCA), which oversees London’s huge banking industry.
“Today’s guidance will help clarify which crypto-asset activities fall inside our regulatory perimeter,” Woolard added, with the FCA warning: “Consumers should be cautious when investing in such crypto-assets and should ensure they understand and can bear the risks involved with assets that have no intrinsic value.”
The FCA branding bitcoin and cryptocurrencies as without “intrinsic value” is likely to rile many bitcoin believers who have long argued blockchain technology, which underpins bitcoin and most other cryptocurrencies, gives the digital tokens value.
“It is technically true that cryptocurrencies have no ‘intrinsic value’ when compared to share ownership in actual companies, however there are many examples where a marketplace bestows value on an intangible asset,” Jon Ostler, of comparison site Finder.com, told the U.K.’s Telegraph newspaper. “For example, the brand of ‘bitcoin’ itself has value and although its future place in society is still unclear, it is one of the most likely coins to stay the course.”
It’s thought that Trump’s attacks on bitcoin and crypto were in direct response to Facebook’s libra cryptocurrency project, which, if successful, could undermine the international dominance of the U.S. dollar.
“Although not a ban, [the U.K.’s FCA warning is] a move in that direction,” said Herbert Sim, head of business development from Broctagon Fintech Group. “This lack of enthusiasm is shared by several countries; the U.S. with its scrutiny of libra, and India, who are looking to implement a similar ban on cryptocurrencies which are not state regulated. These movements could end up coming back to bite. The international competition on cryptocurrencies is heating up and there are huge risks in being left behind.”
Meanwhile, the watchdog warned investing in what it called “unregulated crypto-assets” will not be covered by the Financial Services Compensation Scheme, which pays out if the investment collapses.
“It remains possible in the future that if an unregulated token is subject to common acceptance and usage in the U.K. then either the FCA or the Bank of England will reconsider this position in order to ensure that adequate consumer protection exists,” said Tim Dolan, partner at law firm Reed Smith.
Those who have been longtime critics of Bitcoin usually have one key theory in common, which is that governments will eventually ban Bitcoin and cryptocurrency will then cease to exist in any meaningful form. For examples of this point of view, just look at economist Nouriel Roubini and JPMorgan Chase CEO Jamie Dimon.
That said, implementing such a ban is no easy task. After all, Bitcoin was built by cypherpunks as a form of digital money that would be unaffected by the desires of politicians and regulators around the world.
Lately, it appears that lawmakers in the United States are starting to realize the difficulties associated with a potential Bitcoin ban.
Bitcoin Ban Deemed Unlikely During Congressional Hearings
On Tuesday, the U.S. Senate Committee on Banking, Housing and Urban Affairs held a hearing on cryptocurrency and blockchain technology regulation. During that hearing, Senate Banking Committee Chairman Mike Crapo (R-ID) shared his belief that the United States would not be able to succeed in banning Bitcoin.
“If the United States were to decide — and I’m not saying that it should — if the United States were to decide we don’t want cryptocurrency to happen in the United States and tried to ban it, I’m pretty confident we couldn’t succeed in doing that because this is a global innovation,” said Crapo.
This statement came in the form of a question to Jeremy Allaire, who is the co-founder and CEO of global financial services company Circle. In his response, Allaire explained the new reality created by the creation of Bitcoin.
“I think the challenge that we all face with this is some of these cryptocurrencies — they’re literally just a piece of open-source software,” said Allaire. “There’s nothing else. It exists on the internet, it’s open-source software, anyone can implement it, it runs wherever the internet runs, and these have a monetary policy where these assets are algorithmically generated . . . That is a challenge that every government in the world now faces — that money, digital money, will move frictionlessly everywhere in the world at the speed of the internet.”
These remarks made during Tuesday’s hearing follow comments made by U.S. Congressman Patrick McHenry (R-NC) from earlier in the month when he stated “there’s no capacity to kill Bitcoin” during an interview with CNBC.
Back in May, Congressman Brad Sherman (D-CA) claimed that Congress should implement a ban on Bitcoin, but Sherman did not share specific details as to how such a ban could be effectively achieved.
The difficulties associated with implementing a ban on Bitcoin are behind one economist’s theory that the best way to kill the cryptocurrency would be for governments to become more competitive in terms of monetary policy and financial freedom.
I’m a writer who has been following Bitcoin since 2011. I’ve worked all over the Bitcoin media space — from being editor-in-chief at Inside Bitcoins to contributing to Bitcoin Magazine on a regular basis. My work has also been featured in Business Insider, VICE Motherboard, and many other financial and tech media outlets. I’m mostly interested in the use of Bitcoin for transactions that would be censored by the traditional financial system (think darknet markets and ransomware) in addition to the use of bitcoin as an unseizable, digital store of value. Altcoins, appcoins, and ICOs don’t make much sense to me. Find all of my work at kyletorpey.com. Disclosure: I hold some bitcoin.