Is it Time to Buy Up Cheap Altcoins - Timing the Market Will Be Critical

in cryptocurrency •  10 months ago

This is not direct financial advice, but I wanted to bring up the topic for investors to consider as we enter this period of volatility. Please research all coins and make your own decisions. This is just something any crypto investor should think about.

Bitcoin has just had an amazing 9 day run from $4200 to $5800. The total market cap during this time frame went up from a low of $143 billion to a high of $165 billion (15% gain), so we know some new money came into cryptocurrency market.

btc-total-marketcap.png

Bitcoin's market cap is up from $70 billion to a high of $96 billion (37% gain), which is a sign that much of this bitcoin run was fueled by capital that came from investors who sold off altcoins.

btc-bitcoin-marketcap.png

At this point, investors have a real decision to make. Stick with Bitcoin through the forks or buy up cheap altcoins?

The Bitcoin Forks

The idea of selling off altcoins to buy bitcoins before the forks is not a bad plan. Obviously this has paid off for people that engaged in this strategy this past week. Even if you transitioned between $4200-$5000, you are up 15-30% on bitcoin and many alts have fallen by 50%.

However, at this point you ask yourself how high will bitcoin go and how low will altcoins go?

While it's possible that BTC will keep going up and altcoins go down, some altcoins will start to recover. And some investors will realize that the gains they make on altcoins could easily outperform the gains from bitcoin plus the forked coins.

With so much volatility, timing is critical, but I'll try to make a logical forecast of potential gains.

Predicting Gains from Bitcoin Gold and Segwit2x

Let's look at Bitcion Segwit2x as I believe this fork will produce the most gain.

Right now you can trade Segwit2x on a futures exchange at Bitfinex, so that market gives us a realistic idea of the value. Its trading at 15% of bitcoins price today.

btc-segwit.png

The futures market is still new so this price has been volatile and certainly doesn't reflect the exact price of 2X after the fork. However, It still gives us a clue of the potential price of B2X. So it's something to keep an eye on when doing analysis.

Where will it be in 4 weeks? Maybe more maybe less, but my guess is 10-30% of bitcoin price.
BitcoinCash provided a 15-30% gain quickly after the fork, so B2X in a similar range seems reasonable.

Bitcoin gold, a much smaller project is going to be substantially lower. There is no futures exchange that I know of. It may not even be 5% of bitcoins price.

The only thing I want to make clear is that this is no risk money. You don’t have to put capital down on these 2 forked coins to benefit. Just holding bitcoin when they fork will allow you to gain the same amount in these coins then sell them on exchanges (or hold them). That is why it is so appealing to buy up bitcoin before these forks.

At the same time, with altcoins being so low, at some point people will start to buy them.

Understanding the Professional Investors

Professional traders help drive the market. For this reason, they are often called smart money. They seem to be a step ahead of the average investor. If most people think something is happening in the markets, the pro’s are on the opposite side of the trade.

It’s important to understand how a professional trader would look at this.

My opinion is that they don’t care about forks and may even see them as a risk. They are looking at potential gains. And the opportunity to sell BTC at highs and diversify into altcoins will be tough for professionals to pass up.

I don’t believe you will be able to wait until the fork then sell your BTC and buy alts at all time lows. I think there will be a transition into altcoins over the next 3-4 weeks that occurs gradually.

I also don’t believe bitcoin will go straight up until mid November. And I would not be surprised if price dropped back below $5000 at some point, especially after such a fast run up.

Opportunities in Strong Altcoins

I think there are some extremely strong coins that are going to rise between now and mid November. You will see 50% gains or more and those gains will outpace what you will gain from BTC and the forked coins.

Certainly I expect many coins to keep going down, so its all about choosing the right coins. Already yesterday we saw some transition into LTC and ETH.

btc-ethereum.png

And some altcoins are still going to get good news this month.

ZenCash was selling near its recent low despite an anticipated release of secure nodes where server admins can generate revenue. Coins that generate dividends for node operators tend have a floor.

Then good news came out about Welto accepting ZEN as a form a payment so ZEN has been rising fast.

btc-zencash.png

Which Coins to Choose?

I don’t want to recommend specific coins as I think it's extremely important you do your research. If you don’t believe in a coin then you will sell if it keeps going down. You have to pick coins you like so you can at least hold through the rest of the year if not longer term.

My only recommendation is to look at top 50 coins with good volume, liquidity and market cap. Smaller market coins that had huge runs are ripe for selloffs, so be careful. At the same time, if you really believe in the coin then this could be a great opportunity to load up.

One Last Word About Bitcoin

This may sound like I’m 100% into altcoins and don’t like Bitcoin. Nothing could be further from the truth. I will always keep a core holding of bitcoin because it's the market leader. It will be the first coin new money investors buy into. And all it takes is one piece of major news and this coin could jump.

For example, let's say Amazon announced it is accepting bitcoin for purchases. You might see BTC jump to $15,000 in a matter of hours. That's why you should always keep a core holding of BTC.

If you make a move from BTC to Altcoins, it should really just be a smaller % of your holdings to try to diversify and capitalize on a buy low sell high strategy. Its also a consideration for someone that is looking to enter new money into the crypto market. They may want to spread some to alts rather than go all in BTC at all time highs.

Make a Plan

I have a feeling too many people believe they can sell all their alts, buy BTC, hold until mid November, sell the forked coins and double their money then buy back altcoins at all time lows.

If that's your plan, then good luck, as that is a crowded trade and if everyone is trying to do that it's not likely to play out as smooth as you think it will.

The next 4 weeks is going to be volatile, so strategy and timing will allow savvy investors to make a lot of money. Consider a plan to buy at specific prices or slowly buy over the next few weeks.

As you analyze the cryptomarkets you need to look at current BTC price and realistic gain from forks compared to your favorite altcoins coins. You may realize your altcoins have a better chance to outperform.

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Good stuff. I enjoyed this write-up as my thinking has been inline with this (confirmation bias at its best).

I would hesitate to say this is "risk free" through the upcoming fork(s). After the returns we saw on and after the BCH fork many may be front-running this trade.

It's clear that the increase in BTC has been aided churn within the ecosystem. On days BTC has been up 10%, alts have been down > 10% vs. BTC so it's not just new money being introduced. Which says to me this has more to do with timing the fork(s) than it does with adaptation by new entrants.

There have been a few alts that have been very resilient to these swaps, so that may be a method of analysis. However, as your title states, timing is everything. To trade effectively you need to be right twice, once when you sell, then when you buy back (then overcome fees).

Good luck.

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Yes, I agree. I really just meant that you don't need to risk capital in the new forked coins. There is also a possibility that something goes wrong with Segwit2x. I think big money investors could be cautious, which means the possibility exists that BTC could sell down sharply before the fork next month. Thanks for commenting and good luck to you too!

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I like your thinking as you seem to be looking at the opposite side of the trade to the bitcoin gold trade.. I guess a contrarian view of sorts :)

Sound logic AND well written, thank you for sharing!

Upvote, resteemed & followed.

Id believe its a good time to buy.

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