Get the Knife a Hard Fork is Upon Us - 7pm EST

August 1st UTC time or July 31 7PM EST - Bitcoin forks!

How do we play it?

I recently decided not to provide too much technical analysis of cryptocurrencies on steemit as it is not my place to foment the crowd of cryptophiles. However, this is a special occasion, it's exciting and a massive amount of wealth will either be created or evaporate. With exchanges closing deposits and withdrawals and the blockchain requiring additional confirmations for security, everyone is locked in to the position they chose at this point, there is no going back now.

The proposed fork to create a second coin, Bitcoin Cash, or BCC was approved and will occur tonight at 7pm est. A large majority of investors, speculators and gamblers have put their bitcoins into cold storage or jumped on the exchanges that will be supporting trading right away. Bitcoin cash is currently set to open between $300 and $400.

Liquidity Crunch

By pulling Bitcoins off of the exchanges and locking them into wallets while the blockchain faces a bottle neck from the activity, a situation where there is little to no liquidity in bitcoin has occurred. For example this is demonstrated through the margin lending rates on poloniex which recently jumped from 0.03% interest to as high as 5% - there is limited supply. Liquidity (volume) is essential for trading, it determines the spread, the bid and ask or buy and sell, and is required to get out of a trade fast. This is the single biggest reason i have a bearish lean on this binary event. A binary event is simply, 50/50 odds, yes or no, up or down.

So if it is 50/50 why am I bearish?

The predictive nature of technical analysis gives us an edge going into the event if we know what to look for (see Technical Analysis below). Ultimately the hard fork of bitcoin has created what is referred to as a Lemming trade. A group of investors with herd mentality has followed eachothers advice and the sage wisdom of online gurus. They may have a solid technical understanding of the event - but do they have a solid grasp of trading and investing. I don't believe in Hold On For Dear Life. HODL doesn't make money - strategy, rules and risk management do.

This herd mentality i am observing has led me to take contrarian position against sentiment, but I am not betting against bitcoin either. I will hold a position in btc through the event but I have diversified. To be truly free of risk, one may have considered going to cash, USD. To give you an example, Apple reports earnings tomorrow morning - why would I expose myself to the risk that Wall Street sells them off. There is always tomorrow and that is my mentality with crypto events.

So What happens When You Take Liquidity Away?

At 7pm I expect extreme volatility on bitcoin. A push higher could really pave the way for new highs - but - I suspect there will be massive sell orders on both bitcoin and BCC that out pace eachother and cause it to crash - or what may feel like crashing. So what happens when you take liquidity away, same thing that happens when everyone heads to the fire exit at the same time.

How I will play the event

I actually am still full in bitcoin. I do indeed have experience trading and investing - I am not always right, but I always have a strategy, a contingency and an exit plan.

In my case, as I am not so risk averse, I have stayed in bitcoin and started several margin positions on the alternate crypto currencies that have had no reprieve from the cyclical bear market downtrend - particularly interesting to me is Ethereum and Monero.

Simply, Ethereum tested trendline support 3 times. The support guided it up from mere dollars and was resistance, into the hundreds. This sort of action can be referred to as back testing, a sort of check on the price action. It is the result of profit taking and ultimately determines if the price has been fairly valued so far. If Ethereum holds the trendline, it will set what is known as a higher low on a broader time frame - this would be bullish and demonstrate price progression.

Like Ethereum, Monero is testing trendline support and so far holding. The difference is that Monero has maintained an uptrend through the bear market, setting higher lows, but has yet to set a new all time high. This is a more speculative play for the event, but suggests strength during market weakness.




I have started positions on margin in both of these crypto currencies and will add to them on breakout or take the loss immediately if the charts say to. Part of my margin funds are actually in Ethereum which are a longer term hold anyway.

What About Bitcoin?

Bitcoin is in a broader pennant formation and currently faces resistance at approximately 2775 - going on 24 hours now BTCUSD has been in a $50 trading range, there are few buyers and few sellers. The top resistance of the broader pennant, red trendline resistance is approximately 2919 in my previous article I made note of the following:

I am observing a broader pennant formation with the appex somewhere towards the end of the year. Pennants are triangular and do not denote direction, just a trading range and an estimation of when this will be breached in a bullish or bearish manner.

In the immediate term going into the event Bitcoin is forming a bull flag into rectangular consolidation after V bottom. If bitcoin fails to continue to break higher we are looking at an M top - this would be the least desirable result for investors. M tops result in swift, volatile and steep declines.

What I believe is more likely, we see a failure/false breakout of the bull flag and a back test of that lower, red, trend-line, somewhere around $2200.

Long story short, I am bearish bitcoin and expect a short squeeze on ethereum and monero. This concludes my analysis and strategy going into the hard fork. Afterwards I will discuss how I traded and why.

Addition - Just found this link to monitor the forking

We don't believe in Hold On For Dear Life - We never chase - We only buy pullbacks - We use strategy - Risk Management and Capital Preservation are primary.

Ensure you understand the risks associated with Using margin and the terms and conditions at your respective exchanges.

I wish everyone luck and I look forward to your comments!

<3 @satchmo