Now that the crypto market has shown some relative strength, it is time to dip your toes back in the water and try to outperform your USDT, BTC, and ETH.
Instead of trading on leverage with USDT and risking liquidation (nobody seems to understand risk management anymore, 3AC, Celsius, and friends.) Better just to keep your risk capital in spot and simply try to compound your stack by trading against BTC and ETH.
Coinrotator is designed for exactly this compounding spot strategy.
What does compounding your spot without leverage looks like?
Accumulating Spot Through Trading Altcoins
Start with 1 BTC or 13.69 ETH on July 24th (we’ll come back to this date later).
Buy 1BTC/13.69 ETH of APE/BTC or APE/ETH
APE/BTC APE/ETH Price rises by 15%
SELL 1BTC/13.69ETH for 1.15BTC or 15.74 ETH
Subtract the difference from BTCUSD or ETHUSD (depending on your accumulation strategy) from the day you opened and closed the APE trade. Let’s say for arguments sake the return against USD for BTC or ETH was the same at 7%
After deduction the Total Return against BTC or ETH is 7.5%
The Major Benefits of this Spot Only Strategy
^No liquidation risk from using margin.
^Altcoins are more volatile than BTC and ETH so when you are on the right side of the trend, you will profit more than just holding them against USD.
^Large cap altcoins will mean revert eventually (if you are in too early or late, chances are you can revert your ALTs back into BTC or ETH without loss of return at some point in the near future).
Anatomy of a Spot Altcoin Trade
Recently APE had a really nice move to the upside.
2022 has been extremely challenging for bullish scenarios. Since the end of March, making money buying crypto has been, ahem, difficult.
BTC hasn’t really been in an UP trend according to CoinRotator.App until just a few weeks ago. On July 10th an UP trend alert was seen in the channels.
We redeployed USDT into BTC in early and mid-July, partially based on the excessive selling due to the liquidation events mentioned earlier and the less hawkish tone set by the FED. We were looking for some Altcoins which had not only bullish Up trends but also a newsworthy narrative.
Highly personal charting approach ahead
Once the signal appears on CoinRotator we never blindly enter any altcoin trade. There are many reasons for this but the most important are as follows:
>Altcoins are much less liquid and susceptible to price gaps.
>A very wide range candle often marks the short-term top of a trend.
>Altcoins are dependent on the movements of BTC 85% of the time.
Once a list of candidates is created from CoinRotator we scale down to the 45minute chart on Tradingview.
We check for coins trending above the 4hr SuperTrend
Then wait for a light pullback but price doesn’t close below the 4hr trend
Once price resumes its uptrend we enter by swapping BTC or ETH for the targeted Alt.
The trade looks something like this:
We’ll hold this trade for more than a day if it suits our time horizon. In the case of this trade, it still seemed mkts were shaky so we took partial profits as soon as we saw some bullish momentum.
An easier setup is simply to track the daily Supertrend and wait for a profitable close against the trend to exit partially with a stop loss moved to break even or simply exit all at this point.
In the case of APEBTC this scenario hasn’t fully played out yet. Today, August 5th 2022 is the first potential bearish close in profit since the initial Uptrend signal issued on July 22nd 2022.
The most conservative play on this is to exit on the first red candle (bearish close) in profit (10% profit is the minimum threshold in our experience as it overcomes slippage, commissions and the USDT spread you are trying to overcome).
The chart would look something like this:
When an Altcoin Trade Goes Against You
The most liberating aspect of this approach to Altcoin trading is the perceptual shift where you no longer compare your performance to USD. Perhaps this doesn’t suit your long-term goals and that is fine, but for a lot of “crypto maxis”, this is the healthier mindset.
There is however one major caveat: you can’t go all in on any altcoin. If you want to keep your net worth in crypto you must apply the Lindy effect or you more than likely will suffer tremendous loss at some point.
LUNA maxis will understand this risk all too well.
Trading can be really fun and profitable when you keep your risk at manageable levels. CoinRotator takes a very stoic approach to crypto trading. Of course, we suffer losses just like everyone else.
We were lucky enough to escape the LUNA trade at 80 but still did not protect ourselves well enough on UST. Effectively we exited the remainder of the UST position at .75 cents taking a 25% haircut on our stablecoin reserves.
One trade that required quite bit of patience but eventually paid off in excess was OP (Optimism layer 2). An initial Uptrend alerted on July 19th, it took more than 9 days to achieve a significant return.
This trade was taken on perpetual futures as we already had a significant amount of OP from the airdrop. We finally took profits at 1.98 yesterday achieving an 1,800% ROI.
That’s how we are currently trading the altcoin market using CoinRotator these days.
YMMV, there are loads of approaches and no one size fits everyone.
In fact, most people are better suited to just holding some battle-tested alts (which means something with a bullish monthly chart and only ETH and BTC qualify there).
Otherwise, you need a way to screen alts for strong Uptrends and that’s why we built our toolbox, to help identify these opportunities.