Thoughts about the market going forward and some notes on liqudity in crypto
Hey, friends.
Today I wanted to give a little update on how I see the market and what’s in store for it going forward.
We’ll also discuss trading and how I trade.
Some very quick updates:
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Some market thoughts
The market has been driven by rumors about spot BTC and ETH ETFs lately.
And IMO this is what currently still holds up the market.
IF you’re frustrated about being chopped up in this market, maybe you should take on your lenses and look at the market at a longer timeframe.
We know the institutions are coming, the halving is only 5 months away. ETF will likely be approved in January.
Maybe the best thing you could do is to buy spot and chill.
Or you can look at an indicator on TradingView called “Heiken Ashi Pivot Blue Candle over Regular Candles”.
The strategy is simple:
Buy when the candlestick is blue.
Sell when the candlestick is dark red.
It works for shorting too (Short on dark red, close on blue). Personally, I don’t short that much, but I am sure this would have worked well in 2022.
It is better for higher timeframes (daily, weekly), but could also work on 4h/1h too.
Obviously the strategy won’t work all the time, and in general you can see it as something that is similar to a moving average strategy or for people who like to trade on a typical system.
Some other tools I use
I use Scalp Scanner to get an overview of the market (open interest, volatility) and especially to look for funding plays:
A Telegram channel that monitors Binance futures movements for scalping purpose, and track a + / - 5% amplitude on 5min candles: https://t.me/BinanceGhoztScalps
A Telegram channel that sends an alert if there’s any Binance Futures pair price that changes more than 2% in a 1-minute candle:
A Telegram channel that sends live liquidation signals from Binance Futures with a minimum size of $50k:
A Telegram channel that sends live liquidation signals from Bybit with a minimum size of $50k: https://t.me/BybitLiquidations
Exciting times ahead.
Personally just spend a lot of time trading these days, and naturally, I am much less active on Twitter.
If you want to join my free private trading group, you can find it here:
Route2FIs Trading TG group: Degen Den
Some thoughts about liquidity
Have you ever thought about how much money is required to move your favorite coin up or down?
Luckily, on CoinGecko we have something called ± 2% Depth Cost.
± 2% Depth Cost: Capital in USD required to move the orderbook by 2% up or down from last traded price.
Let’s take an example with Ethereum.
Go to: https://www.coingecko.com/en/coins/ethereum#markets
For Binance you can see that approx. $15m is needed to move the price of Ethereum up 2%, or from $2,105 to $2,148 on spot.
You have to remember that this is just one order book from one exchange (the biggest however), and that order books changes all the time. So if there’s a $15m buy, but an almost equal size of sell at the same time the price won’t move much. Anyway, it gives you an understanding of what’s needed to move the price.
We first take the last done price for any particular market and then calculate the 2% upper and lower bound. Assuming ETH/USDT for a particular exchange was last traded at $2,105, the 2% upper bound is thus $2,148 and the 2% lower bound is thus $2,062.
We then sum up the amount of ETH sitting in the order book between $2,105 and $2,148 and then multiply it by the order price.
We can find this by dividing $15,275,956 on $2,105 = 7,257 ETH tokens
This is the amount of capital required to move the orderbook up by 2% and we call it +2% Depth.
We next sum up the amount of ETH sitting in the order book between $2,062 and $2,105 and then also multiply it by the order price. This is the amount of capital required to move the orderbook down by 2% and we call it -2% Depth.
A thick orderbook will indicate that there is more liquidity for any trader to come in and buy or sell a particular cryptoasset without much slippage while a thin orderbook will indicate that there is no liquidity for any trader to trade meaningfully.
For the big tokens this is maybe not that interesting, but let’s look at some smaller popular tokens
Rollbit
Only $200k is required to move the price 2%.
Synapse
$60k to move the price up 2% for Synapse.
Lyra
$20k for 2% on Lyra (a DEX).
Okay, these were all examples, but it is important to know about and to understand why bigger accounts shouldn’t shill small caps.
And what’s a small cap? Maybe behind 10m?
My point is: the smaller mcap, the easier for the influencer to shill and dump on their following.
Always be careful if you see threads from people talking about their new small cap bags. Assume that they either are paid off by the team to shill or that they got vested tokens and it is in their best interest to shill it as much as possible so that the price goes up.
Some Tweets/Threads That I Liked This Week
Ansem featured in the 1000x podcast: https://x.com/kwaker_oats_/status/1727776403641246024
A good thread from David Holt about what to do if you are sidelined or feel FOMO in the market:
https://x.com/IDrawCharts/status/1727087406845776316
A narrative list from Smart Gambling:
https://x.com/SmartGamblinggg/status/1725772384731586713
Great thread about crypto trading and why it is smart to have a trading journal:
https://x.com/thedefivillain/status/1725172295205826762
Okay, that’s it for today.
See you again next week (or maybe I’ll see you in the order book) ;)
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