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Trading Lesson: Decrypting the Cryptic Cryptos

03/13/2018 3:30 pm EST

Focus: CRYPTOCURRENCY

Jake Bernstein

Publisher, The Jake Bernstein Online Weekly Capital Markets Report and Analysis

What is this fascination with cryptocurrencies? Why have they become such a fad? Or more cogently, are they a fad? Will the crypto currency craze go down in history as one of the greatest bubbles of all time, asks  Jake Bernstein of Jake Bernstein on Futures.

Does that sound like a bunch of double talk to you? Indeed, it does to me.

By now you have read all the warnings, you have been exposed to the often outrageous claims, and you’ve been bombarded with the almighty blockchain.

It’s heresy to say that you don’t understand the entire crypto thing but almost worse to say that you don’t own or have never traded bitcoin (BTCUSD).

Will it indeed be comparable to the Dutch tulip mania?

Clearly, we do not know the answers at this juncture. However, let’s review what we do know because it’s always a good idea to trade and invest based on the known knowns while at the same time examining the unknown knowns. In fact, that sounds like a bunch of doubletalk as well!

So here are some points to consider - some things that I think about in the middle of the night that sometimes keep me awake about the cryptocurrencies.

  • In my 50 years of trading and investing I have never seen a craze as pervasive, as volatile, or as potentially rewarding as the cryptocurrency situation today.
  • In my 50 years of trading and investing I’ve never seen claims about profitable outcomes as extreme as they are today with regard to cryptocurrencies.
  • Unfortunately, most of the new investors piling into these virtual markets have no understanding of trading, second and no knowledge of cryptocurrency structure, and virtually no idea of how volatility can work for them or against them.
  • My initial conclusion based on the volatility and technical behavior of these markets strongly suggests that they can be traded effectively using traditional technical analysis.
  • Fundamentals: what are they? What are the forces that drive these markets? Are they constant or so ephemeral that it becomes a crapshoot to determine how to respond and what to respond to?
  • Given the growing level of sophistication that internet thieves have achieved I am deeply concerned about the security of my money. Every trader or investor in crypto needs to understand how to protect the funds in their account from being hacked away.
  • Indicators: which indicators have worked best within the limited time we have had to evaluate their efficacy?
  • Which of the many are right for you?
  • How to get started? Should you jump right into bitcoin, the most expensive of the cryptos? I recommend starting with litecoin (LTCUSD). It’s not as volatile, it’s lower risk, and you can get started for a relatively small amount of money.

I have made many cryptocurrency trades and I look forward to sharing my experiences with you in subsequent articles.

Best of trading.

Jake Bernstein

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