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Crypto Currencies – Introduction
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Crypto Currencies – Introduction

by The MoleJanuary 4, 2018

This is the first installment of an ongoing educational series that will cover the basics of crypto currencies as well as a multitude of challenges involved and the knowledge required in trading this new asset class successfully over the long term.

When it comes to bitcoin and crypto currencies in general there are three groups of people on earth right now. Group A: The ones who got in early, are deeply immersed and involved in the crypto movement (due to either ideological reasons or just plain old greed), have managed to bank quite a bit of coin, and are now running like hell just to keep up. This group is in small part comprised of the nerdy pencil protector types (and I say that as a compliment) and other early visionaries who are prolific in the space and continue to actively spearhead various crypto related projects.

You may see some of them post pertinent tutorials and recurring articles to promote or defend their respective slice of the crypto universe. As such you can expect them to be deeply vested in several crypto currencies either via personal investment (e.g. coin purchase and through an ICOs) or just good old fashioned sweat equity, which means they represent the hearts and minds behind the movement and of course the technology.

However a much larger portion of group A is comprised of the types of people who simply have a knack for sniffing out the next big thing. They may actually bank on crypto turning into a bubble and many are driven by the greater fool mentality. We are talking speculators like us, gambler types, and anyone who just can’t say no to a good old fashioned get rich quick scheme. Although difficult to quantify I would estimate they represent over 90% of group A. And bless their souls, because without their greed fueled support the entire crypto space most likely would have wobbled and imploded ignominiously in late 2016 when a $66 Million hack of Bitfinex was only the latest in a series of crypto disasters that managed to wipe out the assets of literally tens of thousands of early investors. But just like after the notorious Mt. Gox incident in 2014 (with nearly half a billion Dollars stolen) everyone just dusted themselves off and continued to press on.

Group B: Those are the ones who blissfully slept through the early adopter phase but then suddenly watched crypto valuations explode, first in 2013 (I’m looking at you China!) and then again throughout 2017. Not wanting to be left out they are now running like hell just to catch up. Although being late to the party they know a good thing when they see it and frankly couldn’t care less about the underlying ideology or vision of a global financial future that may have driven many of the early supporters. Most of them ended up buying into Bitcoin or one of the major Altcoins sometime after June 2017, either after a dip, if they were somewhat clever, or near the top in December 2017 whilst panicking to be left out (I actually know a few). The latter are in fact the weak hands who will be first to soil themselves and head to the hills during the next significant sell off. Which is where we come in but more on that later in this series.

Incredibly financial institutions are on the trailing end of this group, with a few exceptions of course (e.g. Peter Thiel or Fred Wilson over at AVC). After initially dismissing crypto currencies for years on end many firms hastily scrambled to embrace all things crypto when it became clear that the proverbial bus had long left the station. It’s the last money in with the Cboe and CME futures just having come online in December. However the deep pockets of institutional firms, as always, will end up fueling the next phase of the great bubble, which in my mind has already begun.

Last and unfortunately least there’s Group C: The vast majority of people out there who remain blissfully unaware that a global currency revolution is taking place. They are either confused by it all, simply don’t care, or are convinced that crypto currencies are destined to fail. This article’s aim is to help guide the perspectives of the confused, but will not attempt to convince the latter two. In the words of Heidi Klum: You are either in, or you are out.

Trading Versus Investing

Now when it comes to investing into Bitcoin (BTC) specifically you better be already in group A or one of the early dip buyers in group B. Because getting long any financial asset that has increased by over 2,000% in a single year would be considered suicidal even amongst the most stone cold and experienced professional traders I’ve ever had the pleasure of meeting in my life. And without doubt the period between 2017 through 2019 will one day be referred to as the great crypto bubble, and things will most likely get a lot wilder from here, even thwarting the irrational exuberance and excesses preceding the 2008 financial crisis. So let’s be crystal clear about what we are all getting ourselves into here.

So if you’re mainly interested in investing and not trading crypto currencies then you are better off waiting for a massive dip (which will invariably present itself sooner or later) or get in early with some of the up and coming altcoins which are still valued in pennies or perhaps single digits. From a pure trading perspective everything with liquidity is fair game as long as you are able to detach yourself from the daily noise and drama of the crypto universe. We’ll cover the proper mental mindset for trading crypto currencies in a separate installment which will derive in some parts from what I posted a few years back about maintaining a strict information diet.

There are actually over a thousand crypto currencies in circulation at the time of this writing and the list continues to grow, therefore market selection will be a recurring task unlike in forex where you’re usually best off to stick with the top five food groups: EUR/USD, AUD/USD, USD/JPY, GBP/USD, and AUD/CAD. Although trading crypto has a lot more in common with trading forex some the basic lessons learned trading stocks are somewhat applicable here. For one when selecting cryptos for trading purposes we’ll put a lot of focus on liquidity/volume and market capitalization. Which obviously is less of a concern when it comes to investing in one of the nascent altcoins that may have potential to eventually make it into the top ten. However never forget that crypto currencies are the ultimate momentum play, to quote Ryan Selkis the founder of CoinDesk.

No Nerdy Stuff

The one thing I will not be covering here are the underlying technical aspects of bitcoin, e.g. the inner workings of the blockchain, and various pertinent concepts like cryptographic hashes, digital signatures, merkle trees, etc. First up I would probably bore you to tears and secondly these days you actually have to try hard to avoid the onslaught of great tutorials and youtube videos already circulating online. Google may not be your friend but shall prove to be useful. If you are technically inclined I would however recommend that you go right to the source to where it all started and read Satoshi Nakamoto’s white paper over at bitcoin.org. It’s well written and with the exception of a few dicey paragraphs should be appreciated by a non-technical audience.

Initial Coin Offerings

The second topic we won’t be covering here either are ICOs for the simple reason that the right time to pick up a few tokens was back in 2015 and 2016 when nobody in their right mind would poke them with a ten foot pole. Genius and outlier investments are always recognized in hindsight – and clearly ICOs are no exception. There’s a lot of hot money sloshing around right now eager to drop into the next BTC or ETH but in the foreseeable future large gains post ICO will most likely be restricted to insiders. The right time to think about ICOs again will be when everyone else declares them as dead and a failed experiment.

Top 10 Crypto Currencies

Now, having set the stage let’s introduce the top ten crypto currencies in circulation at this time and provide a bit of background on each of them. Although we are technical traders and thus don’t really care about fundamentals we still need to understand what makes each currency tick under the hood.

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Further Running

You may have noticed that we haven’t covered a good number of crypto currencies which are either currently receiving a lot of media attention or are the favorites of some of most prolific crypto insiders, e.g. we hear a lot about Monero (XMR) or Zcash (ZEC) right now. From an investing perspective those two may be attractive candidates after a significant shake out but from a pure trading perspective they are currently only small blips on the horizon based on market capitalization and daily trading volume.

Next time we’ll be covering various crypto exchanges and the challenges involved in opening an account and becoming a participant in the Wild Westworld of crypto trading.


About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at various social media waterholes below.
  • Julie

    BAC A previous thread I stated possible one more leg up (wedging) which is occurring. BAC going up into an upper trend line with RSI triple negative divergences Also negative divergence MACD I have a very small short probe from Friday. Will add to short with a bearish close below today’s low closely matching the conversion line (8) at 29.96 Looking for a breakout point failure. JULIE https://uploads.disquscdn.com/images/8c80063b0c87cec8814e38b90f8e7eabeda27de5617406b81184f1eb6e1325b5.png

  • Julie

    Mole Great Crypto info. Thanks Chief !
    JULIE

  • http://evilspeculator.com Sir Mole III

    You bet. Study it well as we’ll built on it step by step.

  • topedge

    thank you for this.

  • Trouzzer_Snake

    Thanks Mole! Great break down, can’t wait for the next installment! I’m a big fan of IOTA and have been building a position. DASH is next..

  • BobbyLow

    Gold horse is still running hard after a minor fall back yesterday. Oil horse is still running but looks a little tired. Remain long on both. 🙂

  • Julie

    Hi BL Gonna buy DUST with a positive and bullish close above 23.01 which is the conversion line (8) on the 4 hr chart (red line) Positve divergence MACD 3,9,16 and oversold daily https://uploads.disquscdn.com/images/906661a1c26660ae8deb98e77d7c5c93f0f71148b8393ecd4dae8b6d83a54e13.png JULIE

  • Julie

    GDX I have important resistance at 24.12 and a support 23.40. Today’s low 23.39 one cent below the important support and a bounce. IMO the October high very important resistance matching another resistance 23,84
    GDX Levels 24.12
    23.95
    23.84
    23.76
    23.67
    23.57
    23.40
    JULIE

  • BobbyLow

    It might be time Julie.

    We have different styles As a “Trend/MOMO” player, I need more proof that price is actually is moving in a particular direction before I make a move. And I prefer to stay in a move until I get thrown out.

    Your OSI and MACD can work too. Any given lens is like a corrective eye glass prescription that helps us read a tape. Most prescriptions are different. I know a lot of traders use Support/Resistance but I don’t. But whatever works for an individual is cool.

  • Julie

    BAC failure at upper trend line in chart below IMO wedge complete Adding to short probe
    JULIE

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    Time. Check.

    I’m under the influence, so I’ll refrain from comment.
    😉

    http://www.melandrose.com/istarimages/mp/91523-9390_d.jpg
    Cheers!

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    Yes. it might be time.
    as a (dynamic) range player, today was a day to ‘pull it’.
    my 2 grams.
    http://stockcharts.com/h-sc/ui?s=GLD&p=D&yr=1&mn=0&dy=0&id=p96224562914

  • BobbyLow

    BTW, even with a different “prescription” , put /CL, USO, UCO or any Oil ETF of your choice on your Daily Chart. From about the middle of September (I’m currently using 12 Period Simple Bollinger Bands.) After looking at it, is there any time that Oil doesn’t look like it began an uptrend in about the middle of September and still is in it? (Other than a slight dip in October and another slight dip in December)

    As far as Gold goes, put Gold on the same Daily and look at what happened from December 22 at $1,279 on. It’s been like a rocket ship since then and is at $1,323 as of the latest print. Now to be fair I chickened out and closed my gold position before Christmas. In hindsight this was stupid because I was Long. I also trade a much faster chart but the principle is the same. It’s not rocket science. Something is either trending or it’s not regardless of the time frame. It’s all the same and not complicated. IMNSHO 🙂

  • Julie

    Hi GG No Driving OK !
    JULIE

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    well, it was 3 miles to get home, and 40mph.
    Much safer than Options.
    =P

  • Julie

    F My only screwed up trade….. Down approx. 2.7 https://uploads.disquscdn.com/images/80311771f17b6185f293b27f50645e243f721cb1029e0cccdc1151a4812bafcf.png % in a short probe (very small position) Now going up into an upper trend line overbought. 13.15 a very strong resistance with today’s high 13.04 Volume should be stronger. JULIE

  • Julie

    GG News Eve I had a few shots of McCallens Scotch. I usually have a glass of red wine daily and nothing else. My husband very rarely drinks. The McCallens is over two years in the supboard and half full.
    JULIE

  • BobbyLow

    Have a good night GG.

    BTW, we got about 4 or 5 Inches of snow last night and I know that’s not alot but we usually don’t get anything but a dusting during most winters. On top of the snow, the cold artic air is going to hang around for 3 more days and secondary roads don’t get plowed. It’s going to suck outside in a frozen winter wonderland for awhile longer. 🙁

  • http://evilspeculator.com Sir Mole III

    Brilliant – good man (or woman)!

  • http://evilspeculator.com Sir Mole III
  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    thanks BL!

    on the bright side, you are a lucky bastard who has an excuse to reflect & brew plans for the New Year.

    May you have plenty of fuel, and warm drinks.
    https://ak2.picdn.net/shutterstock/videos/12189632/thumb/1.jpg
    -GG

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    why does everyone I know from Oregon drink Scotch?
    oh yeah, it’s the weather. LOL.

    https://img.thewhiskyexchange.com/900/lgvob.16yov2.jpg

  • http://www.linkedin.com/in/sharondsessions/ Sharon

    Virginia Beach is totally snow socked in. Had a hard time just getting to my car to rescue some vitamins that I bought yesterday but didn’t take into the house when I came home. Yucky, quite deep even in my winter boots. Won’t clear until Monday when the temperature moves above freezing and apartment complex isn’t clearing the interior driving roads. Glad to have plenty to eat and drink in my house. https://uploads.disquscdn.com/images/4095b51987af8598c7cfaad53d0efb089aa009a1ba6bf32f1016858c441a1faa.jpg

  • http://evilspeculator.com Sir Mole III

    I don’t envy you guys. 68 Fahrenheit today at sunset with spikes into the low 70s during the day. Got to love Valencia during winter.

  • Julie

    Hi Sharon. Be safe Check this out Mountain Lion kitten Montana winter ! Beautiful
    JULIE https://uploads.disquscdn.com/images/65fa9833f47be5bb995a0b705969cce44d68642d7d21040071288b19a41811ab.png

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • http://www.captainboom.com/ captainboom

    -6 F on the thermometer at my place in Michigan this morning. It’s been snowing a bit almost every day, due to the ‘lake effect’ of cold air coming over Lake Michigan. Skiing has been amazing 🙂

  • BobbyLow

    I’m down below you in NC and it was 9 Degrees F this AM. We must be breaking cold temperature records here. If the latest forecast is correct we have two more days to go. This artic cold needs to go back and stay in the Artic where it belongs.

  • HD

    @mary nice call on BTC $1000+ from your bullish comments yesterday! Kudos

  • HD

    2 economic type fundamental news items, 2017 was Lowest job growth in 7 years. US trade deficit largest in 6 years. #MAGA

  • Mary

    Thank you HD. I actually used something I learned from Scott Phillips’ Price Action course.

  • Mary

    BTW it looks like it’s gonna pop to the upside again.

  • Julie

    BAC pulling back added to short yesterday. F another story just like SPX a gap up to start the day and confirmed by volume. F is a very small short probe and down approx. 4.3% GDX (DUST) triangulating
    JULIE

  • Julie

    F The Bollinger band squeeze was a breakout to the upside. CCI(20) now over 300 which is considered unsustainable. We will see. Will now compute additional levels as 13.15 level achieved
    JULIE

  • Mark Shinnick

    Thanks Mario, Janet, ect..

  • Mark Shinnick
  • Mark Shinnick

    …you need more practice 🙂

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    nice chart. (above)

    I’m going to remove the Obama.
    political trolling.

  • Mark Shinnick

    Humm….what he is saying appears technically true.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • Mark Shinnick

    Ok, see you all down the road. Bye.

  • BobbyLow

    Hope you’re joking.

  • Julie

    SPX 2741.49 is a level to watch
    JULIE

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    perhaps I over reacted. I’m going to take some leave.
    You’re a Mod.
    see ya’round.

  • BobbyLow

    No problem GG. Hope you’re OK.

  • Julie

    GG There it is SPX up into the 21,4 Keltner F just shy
    JULIE

  • BobbyLow

    Strange day indeed. Dow is ramping it’s way to 80 Bgillion with no end in sight.

    Opened a short in Oil and reduced long position in Gold. Don’t feel great about either position. Maybe that’s a good thing but probably not. 🙂

    Have a good weekend everyone.

  • Julie

    You too BL GE targets I had 18.70 — 18.92 — 19.12 A gap up this a.m to 18.88 (4 cents shy of 18.92).and pulling back. Took profits yesterday. F has given me fits a very small short probe but never the less … Down approx. 4.5%. IBD recommends covering a short if down 4%. Will see how Monday goes as F is following SPX and 2741.49 is a very important level and if SPX corrects at this level F will probably follow Again BL Have A Great Weekend
    JULIE

  • Julie

    F RSI (2) at 98 What the Hell !
    JULIE

  • Julie

    Everyone Have A Great Weekend !
    JULIE

  • Julie

    SPX Weekly chart RSI at 71.83. Advance 5.68% in 5 days with an RSI(2) at 98 daily chart which usually portends a pullback. https://uploads.disquscdn.com/images/1fe4355816f0b471b9f18135421fc90dfdc263cbf5852706aced547886bab6b6.png Up into a resistance zone (price clearing slightly) and weekly upper Bollinger band. MACD at an overbought level where a pullback should occur . CCI(20) negative divergence. Next resistance level approx. 14 if F does not fail here JULIE

  • Julie
  • http://evilspeculator.com Sir Mole III

    You too darling. Stay warm!

  • http://evilspeculator.com Sir Mole III

    And the ramp is accompanied with zero participation – extremely strange tape… seems all purely bot driven at this point. What does it mean anymore….

    https://uploads.disquscdn.com/images/30ed55e2f14354d3a21a36bcb7cdf0115719397eb89907ec335e80b8884182bc.png

  • http://evilspeculator.com Sir Mole III

    Well, Mark just cancelled his subscription, so your political quibbling cost me and the blog a subscriber. Moderators are supposed to keep the trolls away but are not charged to enforce political ideologies here on Evil Speculator.

    This is exactly why I don’t want political discourse here as it only leads to useless conflict and everyone wasting time arguing about things we all have zero control over.

    Not happy and I’ll be taking a few days off.

  • http://evilspeculator.com Sir Mole III

    Mark was a long term sub and a prolific contributor in the comment section, as such his departure is a big loss for the blog, period. It’s easy to dismiss him leaving with ‘there will always be other subs’ but the truth is that the blogging business has become pretty harsh with social media massively draining attention away from quality blog content. I’ve been working my ass off to keep up the quality, to maintain an even keel, and improve the offering/services on a constant basis. But let’s not forget that I’m not running a charity operation and as such I do not appreciate seeing paying subscribers leave for reasons that could be easily avoided by just sticking with the topic at hand: TRADING AND BANKING COIN.

    Quite frankly I don’t care about the political orientation of my readers or subscribers for one single reason: Because I do not care about the political orientation of anyone taking the other side of my trade either. Evil Speculator simply is not the place for political discussions and I have worked hard to not have it turn into ZeroHedge or the Slope. Which actually cost me a lot of advertising revenues to be honest and it was a big price to pay in exchange for creating an island of productivity and constructive discourse. So seeing long term supporters leave over bullshit political squabbling really pisses me off as I am unjustly punished for the action or opinions of others. I’m not saying this to be finger pointing – we all have varying political orientations based on our upbringing or personal experiences. All I ask is that we keep them for ourselves on the blog and instead focus on helping each other profit and maintain a consistent edge.

    This really ruined my weekend to be honest as put a lot of effort into what I do – five to six days per week for almost a decade now – over 4000 posts as you may remember. The Thursday post alone took me seven hours to put together and thus I have little patience or mind for dealing with futile conflict in the comment section. I would much prefer to instead embrace and work toward the amazing opportunities that now lay ahead of us as crypto currencies will invariably will end up revolutionizing modern finance as we know it. There are literally fortunes to be made and that’s what we all should focus on.

  • http://evilspeculator.com Sir Mole III

    One thing I should ask: I am a staunch supporter of constitutionally guaranteed free speech, which is why I became an American in the first place. Moderators should only delete comments by trolls who are attempting to disrupt our discourse here or comments which are clear personal attacks.

  • https://scottphillipstrading.com/trade-setup Scott Phillips

    After poo-pooing the cryptocurrency space for a long time now (despite having some small holdings for years) I decided to start actively trading alts 2 weeks ago,.

    Verdict is in. It’s like playing chess against down syndrome people.

    Easiest shit you will ever do. I made 33 trades in the last 2 weeks. 33/33 profitable.

    To be clear, I’ve never in my life had 33 consecutive winning trades. This is a legitimate gold rush and you should all be getting in on it, despite the endemic fraud and bullshit going on in the space.

    The only setup you need is breakouts. Thats all, literally. Buy every breakout, I’ve never seen ONE that didn’t work. If you really wanted to stretch buy pullbacks on uptrends as well.

    Current holdings – https://snag.gy/IyVNg5.jpg

  • kim

    my thoughts also, also in the game

  • Floyd

    I have been a long term lurker here. I have never had the capital to use to trade, so I have not subscribed, but I really enjoy following along. However, I got into cryptos in May and have almost made enough now to have some decent capital to do some real trading. Plus, I will say that I think there is an absolute fortune to be made. Even a complete novice as me can see breakout patterns and trend lines and these hold true such a high percentage of the time with cryptos. At least they have in the past and recently. So, I am really excited to see to this blog post and am looking forward to the future posts. I am hoping to subscribe soon and start banking more crypto!

  • http://evilspeculator.com Sir Mole III

    Yup, which is why I’m going to drag ’em kicking and screaming into the 21st century.

  • http://evilspeculator.com Sir Mole III

    I just want to humbly throw in that the break out pattern will at some point – well break. Too many serious players are joining the game now, so enjoy it while it lasts.

  • https://scottphillipstrading.com/trade-setup Scott Phillips

    It cannot possibly last. I’ve tripled an account in 18 days, with 35 out of 35 winning trades. Never seen anything so stupid actually work.

  • Floyd

    In this spirit, have you thought of adding cryptocurrency as a payment option for subscription?

  • http://evilspeculator.com Sir Mole III

    Yeah, I actually set up crypto donations two years ago but then turned it off thinking that nobody would bother. On the payment module front I would have to reach out to the support guys there but I doubt many of you cats would want to pay via crypto coins.