It can be a dangerous thing to assume too-close parallels between one historical market period and another.
For instance, drawing a one-to-one correspondence between the dot-com markets of the late 90s–2000s and today’s crypto markets can lead to dangerous oversimplification … yet parallels there are.
For those of us who are in this market for the long haul, this is the time to test different approaches, make small bets when appropriate, and form hypotheses we can test when the opportunity arises.
Like the dot-com cycle, 2018 has shaken many a hopeful investor. The Crypto Currencies 30 Index (CCI30) has dropped more than 75% this year and almost 20% during the first part of September.
Yet waiting on the sidelines need not be our only option. Nor is going all-in on the crypto equivalent of pets.com. Instead, we’re patiently searching for another, albeit no doubt different, Amazon or Apple.
To that end, when we first introduced Crypto by TradeSmith, we provided the most common crypto pair reported, using the U.S. dollar (USD).
A couple months ago, we added the ability to track your positions with additional pairings using the most popular cryptocurrencies (BTC, LTC and ETH). At the time, we told you we would be researching possibilities that would take advantage of local pairings data and relative strength differentials.
One of the things we noticed was coins in the Crypto State Indicator (CSI) Green Zone in both USD and BTC pairings seemed to be performing nicely after the identified entry.
Digging in deeper, we discovered a strategy that produced an average return four times higher than that of Bitcoin alone.
Let’s take a quick look at how that might work.
Our first rule is that to qualify, a coin must be in the Crypto State Indicator (CSI) Green Zone and be in an upward trend for both USD and BTC pairs.
Additionally, the Volatility Quotient (VQ) needs to be under 80%. Once the trades are entered, we use the normal CSI Stop signal as our exit.
Here’s a list of some of the more successful trades using this strategy.
The Bytecoin (BCN) trade was outstanding. This trade lasted more than three years before finally stopping out earlier this year.
While these results are exciting, it’s the strategy itself that shows the most promise in helping you become a better investor.
Just remember, this is still the “Wild West” and you need to have an extra level of scrutiny when selecting a crypto asset to invest in. Don’t buy a crypto you aren’t comfortable with, and try to make sure the use case, leadership team, and white paper specifications all make sense.