I’m writing this article on March 14th as we are getting ready to go to South Africa (JFK in NY, to Doha Qatar, to Johannesburg, SA starting on Monday). As a result, I will update the article tomorrow if anything significant happens overnight.
All sorts of people have said cancel this trip and don’t go. But I don’t have the fear that most people have. For example, we will be in Botswana for most of the trip and in Zimbabwe for one day to visit Victoria Falls. I have to worry more about contracting Malaria, Yellow Fever (rare), and Cholera in these places. I’d rather have COVID 19 over any of those and I’m not worried. Much of the world, however, has a massive fear about COVID 19 which is unlike anything I’ve ever seen before. It’s dominating the news. I really don’t understand the mass hysteria of buying rolls and rolls of toilet paper though it’s not different from the massive fear dominating markets right now.
This morning my wife was pleading with me to cancel and my Inner Guidance was saying, “Don’t act from fear, just go with the flow. You will be fine and if you are not meant to go, it will be easy to cancel.” I responded by saying I would go to South Africa. Minutes later, I noticed that Qatar had 300 cases of COVID 19 and I looked up the population of Qatar and found it was only 2.6 million people. My first thought was Qatar could be closed down by the time we were supposed to get back there around April 13. Within a few minutes after that, I received notice from two people saying that South Africa had just closed its borders to US Citizens. Going with the flow was easy and I hadn’t started packing yet. Today I’ll be on the phone trying to cancel things and get as much in refunds as possible.
Market Summary
Last month on February 14th, the Bloomberg Galaxy Crypto Index was at 525.32. Today, a month later we’ve had close to a 50% drop in the price of BTC and the total market cap of cryptos has dropped by about $120 Billion. If this doesn’t prove the impact of mass psychology, then nothing does. I’ve never seen a fear level as high as I’ve seen it over the last month.
Cryptos have been impacted by a massive Ponzi scheme that happened in China where people were conned to putting BTC and ETH into a massively high yielding investment. The Chinese government closed them down, but not before they got away with 1.8B in BTC and about 6.4M in ETH. They were unloading it as fast as they could through big trading desks. Those desks knew exactly what they were up against so they continually lowered their bid. Since BTC went below $5,000, I’m sure they’ve sold it all, however, when the COVID-19 scare for investors globally has also hit cryptos. Cryptos have not been correlated with the stock market and shouldn’t care the least about what stocks are doing but we have a massive liquidity crisis. A lot of people are trading on margin and have had to liquidate everything, including their crypto. I’d expect cryptos to come back before anything else.
Below is a chart of the Bloomberg Galaxy Crypto Index. It’s now (March 14th) at 241.61 and that’s after reaching a low on the day of 176.75. As I mentioned above, last month it was at 525.32. Look at the massive drop over the just past two days. The BGCI doesn’t include weekend prices even though crypto assets trade 24/7.
As you might know, we’re running a trading contest for part 2 of Trading Genius 2: Systems Thinking. It has been interesting reviewing the strategies people are submitting. One entry showed an example of how many people typically think. His strategy was to buy a crypto called LINK (which at the time was the strongest crypto) and hold it for six months – with no other exit strategy. After the markets (and LINK) dropped over the next two days, he withdrew that strategy. So he was going to hold the position for a full six months but two days later he dropped the strategy. It shows how little thought many people give to their strategies and why most people lose money in the markets.
I personally think this has set up a massive buying opportunity, but not until cryptos start on uptrend.
The following table below tracks the price of five major cryptoassets across three generations of the technology now along with Bloomberg’s index:
- Bitcoin, a 1st generation crypto asset,
- ETH and NEO, 2nd generation cryptos, and
- Iota, a 3rd generation crypto
- Holo (HOT) – I replaced Skycoin because it is pretty dead and there probably won’t ever be a market in it for US Investors.
- BGCI Index – I’ve also started including BGCI prices in the table.
Date of the All-Time High Closes
*Dec 16, 2017 ** Jan 13, 2018 ***Jan 15, 2018 **** Dec 8, 2017 ***** May 29, 2019 # Jan 5, 2017
Look at the drop in everything. BTC is down 46% in a month (the biggest monthly drop in the table). But it was dwarfed by some of the other cryptos in the table. HOT and NEO were down by 60% each.
The following table tracks the amount of money in stable coins in the top 100 or which have a market cap of over $100 million. The percentage of the total crypto market cap indicates one measure of health for the crypto market.
Notice that the entire market cap dropped nearly 50%. And even the money in stable coins went down by a billion dollars. This suggest that most of the liquidations went to fiat currency.
* Bitcoin was as high as 90% of the market cap of all cryptos at the beginning of 2017 to as low as 32% at the top of the market. Part of the difference is that there are now nearly 2,000 cryptocurrencies so the number keeps going up even though the market cap goes down. ** This was the peak of the crypto market in terms of market cap. Data via Tama Churchouse, Asia West Investor email on 4/11/18
This month we are following 120 cryptos. Those include most of the top 75 cryptoassets in terms of market cap, but there are still some in that group for which we cannot get data.
The table above shows all the rankings of cryptos in Feb (when we had five that were strong bull) versus this month when we have none. Last month we had 33 that were bullish vs 6 this month. And last month we had 5 that were very bearish vs just 21 this month.
The following chart shows the 15 top and bottom cryptoassets.
Last month BTC ranked 55th with a Market SQN® rating of 0.48. Amazingly, it still ranks 58th, but now it has a bearish score of -0.19.
Update for Super Trader Crypto System
Last month I said BTC was in a bull market based upon our ST system criteria and that we were long. That trade was stopped out on March 8th. My belief at the time was that can’t be real! What’s going on? It was our third loss in the system and the biggest decline of all at 14%. Now it looks like that was a great exit.
Since January 2, 2012, when BTC was at $5, our $1,000 investment is up to $1.832M. That system is up 1,832 times our original investment. Buy and hold would be up 1,067 times.
The system I reference here is is one of the five cryptosystems Super Traders can learn but we trade BTC with the other systems so I’m willing to show you the performance and I will continue to track it in this update.
I have no idea where this market is going, but my guess is that Cryptos will remain uncorrelated with the rest of the market and will be much higher by the end of the year.
We have given those of you who took the Trading Genius 2 workshop the bonus gift of another workshop day and a trading contest. That contest was supposed to start on Wednesday, March 18th, but I won’t start it until at least a third of the people in the workshop have submitted their entries. The top prize is $2500 in gifts. RJ Hixson, Ken Long, and I will all be participating. If you watched Trading Genius 2, I encourage you to submit an entry (not trading real money; just paper trading) because you will learn a lot about yourself and your beliefs. I’ll give you a hint about how I’ll be trading – I’m not going to buy anything that isn’t going up at the time and I will have an exit rule for each position. If you didn’t watch Trading Genius 2: Systems Thinking, you can sign up now. You can even submit your system after the first day the contest starts. CLICK HERE for details.
We have also just released our last Bear Market Workshop as a video-on-demand so that you’ll better understand how to cope with this market. CLICK HERE for details.
The following charts show the change in prices, market type and volatility for BTC for the past year.
