Be forewarned…this article is not going to be about technicals. As a professional trader sometimes story-telling is the best way to understand someone else’s trade or get in your own (as elaborated on in my last post on “Engineering a Trade“). So why did BTC/USD have that huge spike to 19,000 and that huge correction back down? What’s happening with BitCoin?
What’s Going On With BitCoin?
I’ve heard around 100 speculative answers to the question so far. Make this 101, as of course, I have no way of fully verifying this thesis. But as a trader, the answers I’ve read have made absolutely no sense from a trader’s standpoint. Maybe I’m slow.
However, I do have an answer for what might have really gone on in that spike and then rapid crash in price. Also, an answer to why things have continued this pattern until the CME put the BTC futures live.
The answer as to what’s going on..to me at least, as a trader, is a pretty simple one when you try to tell the story.
The Dimon Dump
One of my favorite iBank CEO’s, Jamie Dimon of J.P. Morgan, came out and hated on BTC. This lead to a massive price drop. However, the price rebounded and we eventually got word that $JPM $GS and other big investment banks had their traders aqcuiring BTC after the ‘Dimon Drop’.
After Dimon’s words pulled BTC back to 10k per coin, we suddenly got alerts that trading desks around the U.S., (including $JPM $GS $MS and others) were starting to get their feet wet in trading BTC. This would lead to a spike to the currency up to $19,000 per coin before it fell back down.
So what’s going on here? Why did BTC rise so high, dip so low, and then start to come back again?
The Story of BTC
Nobody except a select few know who Satoshi Nakamoto is. There are plenty of working hypothesis. The translations and dates all have historical biases. Most recently, I read of Satoshi being the Nobel Prize winner John Nash as being the real Satoshi. I’ve done my own research as well, which as the storyteller I am, leads back to the CIA (of which Nash was an agent for).
Regardless, there is no way of knowing who the real “Satoshi” is. After BTC hit markets, Nash died in a car accident….somewhat akin to how General Geroge Patton died in an accident after he wanted to go after the Red Army and end an issue with Russia. That was before the cold war when the power of Patton was still known, and before Eisenhower alerted the American people to beware the military-industrial powers.
So how do I profit off of BTC right now?
It is my belief that the Dimon Drop led a lot of trading desks to pick up that which was being sold.
So how does this tie into the futures? As a trader, I have a simple answer, though it might be incorrect.
But ever since BTC futures became tradeable there seems to be a simple pattern. BitCoin rises throughout the week, then drops over the weekend, and then starts to come back after the weekend is over.
As a trader with enough coin to manipulate the markets, what I would do is simple. During the week I’d sell my coins to buyers for a profit. Then I’d short the coin futures Friday, and on Monday (minus holiday weekends) I’d start to sell my coins at a profit, shoving the price down, and then cover my shorts cheap.
That would mean I would make money selling the coins and on exercising my short future contracts. Let’s take a simple chart look.
While it’s too early on in the history of BTC futures, looking at that chart and being a profressional trader leads me to one explanation…
During the week they slowly buy more coins to give a bullish feel to the crypto. Then on Friday they buy puts or short the futures. During the weekend they let it drop…so that their shorts turn into profit. Then they cover Monday and slowly buy up more BTC from the dillisouned. Rinse and repeat the end.
So what does mean for a trader?
For the time being, long BTC/USD during the week,take your profit, short it into the weekend and then cover your short for more profit.
I could be wrong…but the storyteller side of me and my testing this strategy have worked great so far, so just keep an eye out.