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February 1, 2018

 

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Crypto Market Commentary

The gaping maw

Market crash following Bitcoin to 8,000

 

Let’s state the obvious:

Markets are irrational. Why?

Because humans are irrational.

Many studies by psychologists have shown that people are not rational. The most significant lapses of logic are:

Extrapolating the present into the future.

Giving more weight to recent spectacular or personal experiences in assessing the probability of events occurring.

Emotional commitment to bubbles, thus helping to perpetuate them. 

Overconfidence.

Too slow in adjusting expectations.

Selective use of information.

Wishful thinking.

Myopic loss aversion.

 

As if individual irrationality is not enough, it is amplified and strengthened by “crowd psychology”. Collective behaviour in investment markets can manifest in several ways:

Behaviour that can be contagious (panic!)

Pressure for conformity. 

A general belief that grows and spreads.

 

Sound familiar to what we’re experiencing?

Here’s 5 investor strategies to stay ahead of crowd psychology:

Understand emotions. You need to understand markets are not only driven by fundamentals, but also by the unstable behaviour of the crowd.

Consider how you react. Know how susceptible you are to outside influence, lapses in logic, and how often you “follow the crowd”.

The right strategy. Pick a strategy that can withstand crises such as today and can consistently align with your goals and risk tolerance. Our Tier system can help with that.  

Discipline. Take the plan you made, and stick to it. Prices surging and you want to be more aggressive? Too bad, stick to your plan. Sell off making your eyes water and consider a defensive approach? Too bad, stick to your plan.

A contrarian approach. Trade on a contrarian basis. Sell when people are celebrating bull markets and buy when people are lamenting bear markets. Be warned this isn’t bulletproof — just because the market is acting irrationally to the up or downside, does not mean it can’t get more so.

 

So this brings us to the events of today.

 

Bitcoin’s 5th bubble is popping. But, just like every time before, people are still entering this space every day. Even when crowd psychology is clearly flowing one way, new investors are appearing and buying into crypto.


Here is what I think triggered the most recent crash:

 

Unchecked rise throughout Q4 2017 led to a typical case of profit taking. This was negatively compounded by two thing:

 

  1. Futures opening up, causing uncertainty mixed with bullish sentiments.
  2. End of the year taxes making people wait until the first week of January to sell instead of the last week of December.

 

Spice up this brewing storm with a whole lot of fear, uncertainty, and doubt. The amount of stories we’ve seen over the past month that were misrepresented, misreported, or just completely overblown is unprecedented. It is very fair to accuse larger powers of manipulating the market to accumulate cheaper coins. Everyone loves an unregulated market until it starts acting like an unregulated market.

 

Cut through all the miasma and minutiae and there are some important and much needed subjects being addressed by this correction:

 

  1. Mainstream new money getting a taste of crypto. Of course people who bought in at 19,000 are going to swear off crypto as a scam during this correction, but for a brief moment, critically around Thanksgiving time in America, Bitcoin had national prominence. People cared about it. People talked about it. People understood it in some capacity. That cannot be understated. The correction provided a healthy dose of realism to this new asset class for the new investors.
  2. The largest Ponzi scheme coin Bitconnect going down like the Titanic, symbolically annihilating their rich and poor customers alike. This was the only way Bitconnect was going to end, and this may have been the best time for it to happen. In the short term it is a very bad look for crypto, but it needed to happen and benefits the long term validity of crypto.
  3. The largest likely fraudulent coin, Tether, has been a subject of debate like never before. While Tether is more like a dormant volcano with no indication if it will blow up tomorrow or a year from now, it is reassuring that people are starting to realize the potential powder keg it represents. Either it blows up or we slowly reduce usage until it becomes less of a threat, but regardless the anticipation is being priced in.
  4. The “flippening”, as it’s known in the crypto community is the event in which Bitcoin and Ethereum flip places as #1 and #2. Just today Ethereum at one point represented 70% of Bitcoin’s market cap. There’s a whole host of questions, debates, and concerns over what will happen if Ethereum becomes the new king. Likely the most relevant is, “can it handle it?” At this point, likely no. If Cryptokitties was enough to stress the entire network, and the reason Bitcoin has fallen from favor because of scalability issues, what sense does it make to replace one stressed network for another? Both have scalability solutions, Lightning Network / Segwit and Sharding respectively, but those solutions are going to take time to fully implement. This causes uncertainty and uncomfortable questions that the market is currently incapable of handling.

As we continue to endure this correction, reflect on how many of the points above were not addressed during the bull run in November and December. At the time, the market was only concerned with Bitcoin’s next ATH, what new coins to invest in, and how high their portfolios could rise. With this correction, we are taking the time to address the biggest issues in crypto today and as such this is an extremely healthy correction that is necessary for growth.

But of course, the market won’t see it like that.

Why?

Because markets are irrational.

 

As we mentioned, we are on the road right now so today’s and Sunday’s newsletter will be shorter and later. Our apoligies. Thanks for understanding.

 

If you missed our class “Introduction to Cryptocurrency Trading” that we held on Saturday, it’s available now in our Premium Member’s Home as an archived class for those that purchase it. You can view more about it and watch the class today by visiting this link here.

 

Offense – Adding Trades

Offensive Actions for the next trading day: 

  • Nothing specific for tomorrow; please see comments in holdings below.

Defense – Managing Risk

Defensive Actions for the next trading day: 

  • Nothing specific for tomorrow; please see comments in holdings below.

Current Portfolio

How to read this portfolio: Ticker: Contains the ticker code for the coin. You can search this ticker in Coinmarketcap to learn more about the coin. The color denotes the risk tier by our evaluation. Dark Red = T1, Dark Green = T2, Dark Blue = T3, Light Blue = T4 (Colors in the Ticker column do not interact with the colors in the other columns) Cost Basis = Our average purchase price for this coin. Current price = The average price of the coin based on the exchanges it is listed on. Strategy = What we plan to do with this coin. Staking is receiving dividends for that coin. Master node is also staking, but with a higher return rate for having a (large) number of that coin. Stop = Our exit point, if it exists What do the colors mean? The colors in the ticker column represent the risk profile of that coin. The colors in the other columns reflect what sector(s) that coin belongs to. Some coins belong to multiple sectors, which is indicated by multiple colors. The colors correspond to our 7 categories in the graphic below.
No new holdings.

Tier 2

OMG

OmiseGO is a public Ethereum-based financial technology for use in mainstream digital wallets, that enables real-time, peer-to-peer value exchange and payment services agnostically across jurisdictions and organizational silos, and across both fiat money and decentralized currencies. Designed to enable financial inclusion and disrupt existing institutions, access will be made available to everyone via the OmiseGO network and digital wallet framework.

 

 ELF

Based in Singapore, aelf is a crosschain blockchain protocol that intends to become the new internet infrastructure to support the next generation of digital businesses. The team and its advisors have been advising numerous blockchain projects in the past and they see a few industries who could be the early adopters of aelf: financial services, insurance, digital identity and IPs, smart city, and internet of things. Aelf will actively identify new business opportunities and dApps to be part of the aelf ecosystem. Below are some of the things that they are planning to do: Interoperate with existing dApps on existing chains Nurture new start-ups ideas Educate and transform established companies to be blockchain savvy As a “third generation” blockchain, aelf strives to provide a breakthrough in 3 areas: performance, resource segregation, and governance structure. We will explore these features in more detail below.

 Tier 3

REQ

SUB

Tier 4

XBY

BNTY

TAU

WISH

TRAC

ReadySetCrypto’s 7 Categories Of CryptoCurrency

Tier 1 coins are those coins which we have considerable assets invested, are firm believers in the project direction and execution, and have very little reason to sell within short to mid term. These are coins which we risk evaluated to be very solid, and have a high probability of existence duration.   

NEO

NEO ($NEO) is classified as a Dividend and Platform coin. As our largest holding, we believe NEO has the potential to become a dominant smart contract and DApp platform in 2018. It’s four most compelling features are:

  • An innovative consensus algorithm which will allow for greater TPS (transactions per second) over its competitors.
  • A dividend structure for holders, incentivizing coin retention and network stability / diversity.
  • SE Asia location, enabling NEO to break into markets more easily than competitors.
  • Agnostic smart contract language, allowing for smart contract developers to use existing mainstream programming languages, which allows for cheaper smart contract implementation as compared to Ethereum who’s proprietary smart contract language, Solidity, can be a barrier to integration.

NEO is best acquired through Binance. Storing NEO on the Binance exchange will result in a GAS distribution once a month on the first. We recommend the NEON wallet for safe storage. GAS will be distributed on the NEON wallet daily.  

WaltonChain

WaltonChain ($WTC) is classified as a Dividend and Utility coin. Waltonchain is on the cutting edge of using RFID hardware to enable supply chain management 2.0. We believe Walton has the potential to become a dominant IoT blockchain solution Waltonchain is the only truly decentralized platform combining blockchain with the Internet of Things (IoT) via patent pending RFID (Radio Frequency Identification) technology. The custom RFID chips are able to digitally sign and verify transactions at the integrated circuit level, automatically and instantly reading and writing data to the chain without human intervention. This unique implementation of blockchain + IoT facilitates the true interconnection of all things in the real world with the virtual world, creating a genuine, trustworthy and traceable business ecosystem with complete data sharing and absolute information transparency. Walton has two major competitive advantages:

  • A recently confirmed (to be signed) partnership with China Mobile’s IoT Alliance. China Mobile is the largest mobile telecommunications service in the world as well as the world’s largest mobile phone operator by total number of subscribers. Walton’s Management system is set to be implemented through mobile communication networks, and China Mobile is the largest one. Waltonchain is positioning themselves to be the single connector of the entire Internet of Things initiative put forward by the China Mobile IoT Alliance.
  • They implement the blockchain through the RFIDs at the foundational layer. Their technology is patent-pending and gives Waltonchain a solid claim as the only blockchain that connects the physical world with the virtual world with truly reliable data. This is because all other IoT solutions tag items through API, and this means all the data is first passed through a centralized intermediate, a potential point of vulnerability.

Ethereum

Ethereum ($ETH) is an open blockchain Platform that lets anyone build and use decentralized applications that run on blockchain technology. Like Bitcoin, no one controls or owns Ethereum – it is an open-source project built by many people around the world. But unlike the Bitcoin protocol, Ethereum was designed to be adaptable and flexible. It is easy to create new applications on the Ethereum platform, and with the Homestead release, it is now safe for anyone to use those applications.

Tier 2 coins are those coins which have performed extremely well, we have a large amount of assets with, and we believe will continue to operate with high marks. What separates these coins from our Tier 1 status is a flaw or they haven’t yet proven their defining feature, though we believe they will.

 

OmiseGO

OmiseGO ($OMG) is classified as a Dividend and Utility coin. OmiseGO is a Southeast Asia-based company creating an e-wallet that will make transfer of assets and currencies possible. Merchants and users of the wallet can transfer whatever asset or currency they desire. For example, you could use your ethereum, bitcoin, international fiat, or even your airline points to buy groceries using the e-wallet app on your mobile phone. Transfers can happen across borders, or even while traveling abroad. Unlike Western Union or PayPal for example, the fees are almost negligible, and the transfer is instant. Because it’s based on a blockchain, there are no intermediary banks necessary and users don’t need bank accounts to access those funds. This is especially good for migrant workers who send money home and often don’t have bank accounts and are forced to use expensive wire services instead.

NAVCoin

NAVcoin ($NAV) is a Privacy coin with upcoming Platform features. NAVcoin has been around for 3 years. It is not minable, instead being based on a Proof of Stake system in which stakers earn 5% annual returns. Theoretically this means there could be 5% inflation on the supply, however, that would require every coin holder to stake, so likely there will be very marginal inflation between 1 and 3% year over year. It is a currency originally based off of Bitcoin version 0.13, which should tell you it’s got a good foundation from which to build its feature set. Being based off Bitcoin, it currently is a method of transaction, with notable upgrades in the form of Segwit (with possible lightning network integration in the future) and 30 transaction times with extremely marginal fees. That’s great but a lot of coins have that going for them, so thankfully we’re just getting started with the real interesting pieces of NAV. The first and currently only implemented feature, NavTech is a unique dual blockchain technology. Essentially, NAV runs on these two blockchains in order to completely disconnect the sending wallet (your wallet), to the receiving wallet (where the money is getting sent). Think of it like a VPN, NavTech completely strips the sender’s details so the transaction is completely anonymous. The anonymous transaction space has really gotten big lately, with Monero’s recent price action and Ethereum’s implementation of ZKSnarks being two big examples that come to mind.Moving on to the roadmap, there are two big upcoming features for NAV:

  • The first is Polymorph, which is a really cool blend of Nav’s anonymous transactions and Changeally’s instant exchange. What this means is that, for example, I wanted to pay someone in Bitcoin but I wanted to do it anonymously. Polymorph would take my bitcoin, turn it into navcoin in order to be processed and sent anonymously using the Navtech dual blockchain, then turned back into bitcoin at the to be sent to the receiving wallet. This will certainly set NAV apart, as it guarantees anonymous transaction for all of the coins on changeally. This is huge for exposure, and a great opportunity for NAVcoin to gain trust, which is absolutely critical anonymous transaction coins.  
  • The second big upcoming feature is ADApps, or Anonymized Decentralized Apps. This is also a huge potential win for Nav as there is already a huge amount of interest in the crypto space surrounding Dapps, such as Ethereum and Omni. Adding in the anonymous layer would attract projects that would value the anonymity. Nav is still in the planning stages for this project so it could still be awhile before it comes to fruition, but we should see the whitepaper for it soon, and if they could be first to market with ADapps that could prove to be a killer feature for them as it would give them first access to the interested demographics.

ICON

Simply put, ICON ($ICX) is a massive scale blockchain Platform that allows

  • Decentralized Application (DAPPS) – Build DAPPS on ICON Platform like on Ethereum and NEO. Yes, soon, you will see ICOs happening on ICON platform for different DAPPS
  • Interchain (Interoperability with Blockchains) – Allows different blockchains connecting to one another through their protocol. ICON is fully compatible with traditional blockchains like Bitcoin and Ethereum and in future can bridge other public blockchains such as Qtum, NEO and many others to achieve their mission statement – “Hyperconnect the world”
  • Artificial Intelligence (AI) – Use of AI to ensure all nodes contributing to ICON Republic/platform are rewarded fairly and not to have certain powers over distribution policies. AI will continue to learn a variety of variables to determine optimal distribution policies and achieve complete decentralization.
  • Decentralized Exchange (DEX) – ICON will integrate different DEX protocols on their platform to facilitate exchange of ICX and other future ICON platform currencies. Bancor protocol will be their first DEX protocol when mainent launches this month end and Kyber and others will follow. Not just throwing Kyber’s name out there, it was confirmed they are working with each other, official partnership yet to be announced.

Ripple

Ripple ($XRP) is a real-time Payment protocol for anything of value. It’s a shared public database, with a built-in distributed currency exchange, that operates as the worlds first universal translator for money. Ripple is currency agnostic and has a foreign exchange component built right into the protocol. Ripple acts as a pathfinding algorithm to find the best route for a dollar to become a euro or airline miles to become Bitcoin. It will look at all the orders in the global order book. The case for XRP comes down to the following: 1) Payment systems work best with bridge assets to focus liquidity. 2) There are good reasons to expect a cryptocurrency to be the most popular bridge asset. 3) There are good reasons to expect that cryptocurrency to be XRP.

  • Open, decentralized payments will have lots and lots of assets, including national currencies of all kinds and cryptos. A significant fraction of payments will be among assets that aren’t the most popular. Using intermediary assets to settle those payments concentrates liquidity and reduces spreads.
  • National currencies are always tied to jurisdictions and can’t be universal. Systems built around them will never be as open and inclusive as systems that aren’t.
  • XRP settles faster than any other major crypto. It higher transaction rates than other major cryptos. It is beat by others only by the amount of liquidity available today. And, most importantly, XRP has a company that is devoted to making sure XRP succeeds for this specific use case.

Tier 3 coins are those coins which we have moderate investments and we believe have a possibility of high performance in the future, but as of yet have not shown enough performance to reduce their risk profile. Tier 3 coins are coins which are moderately risky, but due to our risk analysis of the project and team we believe have minimal chance of failure. 

Tier 4 coins are coins which we have minimal stake in, are highly risky, and we are contributing no more than 2% of our portfolio to. These coins represent the outer fringe of our risk analysis, in that we have little information to work with, have little insight into the coin’s performance, and at the very best we are making an educated guess that they will be successful. If a coin performs well and proves that it has a commitment to its compelling feature, it will be moved to the Tier 3 status.  

 

Fundamental Currency Research

Quite obviously today was not kind to any cryptocurrency.

 

Interestingly, the platforms in the top 10 did remarkably better than the other sectors. Ethereum and NEO had standout performances in the midst of truly dismal losses from their peers.

As we mentioned above, the ETH / BTC flippening is coming closer to becoming a reality. For those not susceptible to the market fear, we are in some truly interesting times and will be a very important chapter of the crypto history yet to be written.

A bear market will eat coins that have unstable foundations. There are bankruptcies, some teams/projects get bought. Others earn their legitimacy, too.

Don’t panic. Just rationalize your portfolio investments:

The question you should be asking yourself is “Are the projects I’m supporting actually solid?” It’s not about market cap, it’s about solving problems in realistic ways. It’s about the team and their drive to accomplish their objectives. Can they survive if we continue this bear market for a year or more? What are the chances of adoption for their project.

It’s hard to answer these questions in crypto. Unless you’re an insider, you usually can’t get a good feel for a project that is relatively unknown because the only materials put out about it are from the team itself. Some projects are better about helping you answer these questions than others. As always, trust your gut, and if something doesn’t feel right, it probably isn’t. It’s your money, make them earn it.

If we truly go through a long and painful bear market, it could be that only the strongest projects will survive. But those that do will go on to be the next Amazon, Facebook, and Google. Let’s find them together.

 

In this section we’ll feature a daily ICO or new coin we think you should check out. Based on your country, you may not be able to participate in the ICO, but you will be able to trade the coin once it is listed on an exchange following its ICO (usually only a couple of weeks). ICOs are where a lot of money in crypto is made. Here’s proof.   That said, we should warn you: ICOs are highly risky endeavours and you need to mitigate any potential losses. Treat it as money you’ve lost the moment you contribute to the ICO. We are not responsible for the ICO’s performance. Today’s featured ICO / New Coin is:

Refereum

Overall, we like both the flipping and long-term potential for this ICO. Our thoughts on buying the tokens for flipping and investing for the long term are as follows:

For flipping Good.

For long-term holding Neutral. Gaing tokens are a very tough market to break into.

What is it? Refereum is a distribution and growth platform that cuts out the marketing middleman, enables higher profits for developers, and directly rewards influencers and gamers to promote and play games.

What is our verdict? This is a very interesting take on a exisitng solution. We will be keen to seewhere they take this model.

 TOKEN SALE: 8 FEB

  • Ticker: RFR
  • Token type: ERC20
  • ICO Token Price: 1 RFR = 0.0100 USD
  • Fundraising Goal: 25,000,000 USD
  • Total Tokens: 5,000,000,000
  • Available for Token Sale: 50%
  • Whitelist: YES (UNTIL 18 JAN, JOIN )
  • Know Your Customer (KYC): YES
  • Accepts: ETH, BTC

Website: https://refereum.com/

Whitepaper: https://refereum.com/RefereumWhitepaper.pdf

Technical Analysis Research

We’re not going to bother with the top ten coin analysis today; it was an across-the-board rout in crypto markets today, for the reasons that Mav talks about above. It doesn’t really matter whether those FUD statements are based on reality or not; perception is what moves markets. Shoot first and ask questions later.

Mav and I are in a hotel in Medford, OR tonight working on this report, and it took eleven hours and three flights to get here, so we had plenty of time to watch crypto melt down today and formulate some guidance for you. I would actually love to fire up a live member webinar to dole this out live, and I absolutely will do that next week if markets are still as weak as today.

Here’s what I’m going to do….today I’m going to talk about how to DEAL with the Bear, and how to proactively AVOID getting yourself into one. And in the weekend report, I’ll talk about how to use this crushing distribution to work yourself back into positions at what might be bargain prices.

Let me first talk about why I can discuss this topic. In September 2008 I had been out “on my own” as a self-employed trader for about two years; I had done well and was realizing my dream of trading for a living and escaping the corporate rat race. I thought I was prepared for anything; I was not. The financial crisis hit that month and deepened in October 2008. The gloom and doom was absolutely pervasive and I got run over, like most other traders. I had assumed that the “dip would be bought” and was shocked when it kept going. I went through some very difficult times as I realized that I might not be able to provide for my family, after taking a big hit in my trading capital. I learned many crucial lessons from that experience and came out much stronger on the other side.

So I apply those lessons to everything that I trade now, crypto or futures or options or whatever. It does not matter that someone on Reddit coined a cute “hodl” phrase, I’m all about capital preservation as it’s the lifeblood of any investor. No capital, no business. So without further ado, here are eight points to share with you on handling the Bear:

  1. Define your exits BEFORE you enter your position (rule number one of risk mgt)
  2. Risk no more than 2% of your account capital on any one position. (golden rule)
  3. There is no such thing as “support” on the chart in a Bear Market.
  4. The pain to the downside is directly proportional to the euphoria on the upside that preceded it. It’s like a mirror.
  5. The stronger the “whoosh” of capitulation to the downside, the stronger the upside slingshot will be.
  6. Markets are designed to rise over time due to optimism in human behavior. They rarely go to zero unless there is no intrinsic value in the idea to begin with.
  7. At the bottom, all of the news and articles are overwhelmingly negative. It’s dark, oppressive, and if you watch/read news you will be convinced that the crypto market is toast and you’re a fool for investing in it. You will feel that there is no chance of success, and you will want to harvest whatever value that you can out of your assets before they inevitably go to zero.
  8. When the eventual bounce comes, no one will dare enter it. It will be met with skepticism and disbelief. This is why no one is on board for the recovery but the smart money.

I will discuss these a little bit more in today’s video, and again in this weekend’s video, I’ll discuss how one can take advantage of the selling to either enter, or re-establish a position at lower prices.

We had an excellent class this past weekend, Introduction to CryptoCurrency Trading. (Click here for more information and to sign up) This class is really targeted at the Crypto investor who wants to get moving but is somewhat uncertain about what they should do, and how to go about it. Another great candidate would be the recent investor who bought in at the top and is unsure of their actions. While you can’t attend the live class and the Q&A any more, the content is all there and we give you the slide download as well.

I am going to stick with the current list of holds and will not go into “swing” mode until we get a release off the bottom. If we see any coin showing particular strength I’ll detail a short-term swing.

I am doing the majority of my Technical Analysis work on TradingView and Coinigy, and I have a BitFinex app on both my iPad and Android smartphone. All of these charting platforms call a TradingView API. TradingView is the 800 lb. gorilla in the Crypto charting space until the “established” players want to make a go at Crypto, like Ninjatrader, Tradestation, eSignal, Sierra charts, etc. My sense is that TradingView has such a head start that it will be very difficult for the big boys to make a dent in this space for a while. Until that point, TradingView has almost a monopoly in this space. If you have a particular tool that you think is superior, please let me know. You can access the BitFinex and TradingView platforms for free, however there are some paid features that you might want to consider depending on your needs, such as expanded watchlists, different study sets, account alerts, etc. Coinigy is a great tool for determining prices on each exchange, however I may not have access to the full suite of tools on TradingView charts. I am currently not using it as a front-end GUI for my exchanges, which it supports.I also use Blockfolio to give me a quick snapshot of my holdings, and find that it does an excellent job to aggregate all of my holdings into one easy-to-read snapshot of my cryptocurrencies, which are typically located in many different places.

 

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