The All-In Bitcoin Strategy
Being all-in in Bitcoin and Ethereum does by no means equate to sitting on my hands. It’s an elaborate strategy that requires full focus and active re-positioning. All in the name of extracting full value whilst reducing risks. Here’s my 2021 all-in strategy revealed in full … In the previous 2021 Bitcoin Series episode I revealed that I’m all-in in Bitcoin and Ethereum. I also outlined, from a gaming theory and a technical point of view, why this isn’t necessarily too risky a move. But why it is in fact a rather sensible one. It’s easy to fixate on the all-in thing. But make no mistake, for this strategy no simple buy and
hold. It is much more elaborate than that and I’ve spent a lot of time and brainpower to set this up. And that’s exactly what we’ll discuss in detail in this episode: the strategy, and its structure, advantages and risk balancing. Let’s now dig into the fun, but before that: the mandatory legal stuff … NOTHING of what I say is financial advice. I’m the local idiot, born with a big mouth and too many chromosomes, so take everything I say solely as entertainment. Just like back in the village … And of course, like and subscribe … or the idiot gets angry.
Although I expect Bitcoin and Ethereum to vastly outperform most stocks in the upcoming 6-10 months, just buying and holding would be a lazy waste of potentials. It would be like getting yourself a Ferrari and then driving it around in first gear and first gear only. Which you’d of course do if it’s a rental ... For being equipped with market knowledge, technical knowledge and crypto knowledge, we sure can extract more horsepowers than that. In this sense, if Bitcoin alone were to 5x throughout this year, any additional super-charged value that we can squeeze out of that run-up would also be leveraged by a factor up to 5. As lucrative as this may sound, not only
do we do this to further increase profits. It’s also designed to cut down on the risks. First of all, let’s begin by explaining the overall concept of the strategy. Apart from ideally gaining significant percentual returns from this cycle’s mark-up alone, the plan is to simultaneously play the strength of Bitcoin and Ethereum against each other, to exploit their internal technical price relations. But not only that. We also look to utilize some, practically speaking, leveraged spice to the mix. This is done via a Bitcoin mining company that is
listed on the US Nasdaq index. And its individual position size will in turn alter as we go. Let’s get into the juicy details. The meat and flesh of this fat ass kobe steak. When looking at the Ethereum/Bitcoin chart we can detect how strong Ethereum is technically in relation to Bitcoin. By closely examining this chart we can tell when to scale into Ethereum and decrease our Bitcoin position, and vice versa.
Starting off on a cyclical level, what’s particularly amazing and what truly caught my attention in the first place is how volatile yet transparent the strength relation between Bitcoin and Ethereum really is. We’re not talking normal 5-15 percent swings here like any fiat currency pair. We’re talking volatility that would make a dare devil stuntman feel nauseous and resort to a paper-turning desk job.
Throughout the first half of 2017 Ethereum outperformed Bitcoin by 2 300 percent, or 24x at most. This means that IF – again this forbidden word – you were to have scaled entirely into Ethereum at that point you would have had 24 times as much money than if you were to have just stuck with your Bitcoin position. Of course, this is highly theoretical. My point here is not the missed out gain itself, but the immense mark-up potentials. For reversely, from its peak to its
very bottom, Ethereum in turn lost 90 percent of its value. What I want to stress is how obvious it is that Ethereum flourishes during mark-ups, and how it got absolutely slaughtered during the mark-down. And given that we’re now in yet another technically confirmed market cycle mark-up we have reason to expect another outperformance, hence making a primarily Ethereum-based portfolio the way to go. This thesis can be further confirmed technically by the higher lows and higher highs. For as it seems, this chart shows that Ethereum may very well lag the movements of Bitcoin as their internal relationship show that Ethereum in relation to Bitcoin has literally just left its accumulation phase. For look here, it’s literally re-testing the two-year long accumulation
phase as support from above. And on top of that, this entire unfolding is also confirmed by the significant trading volumes which are textbook typical for any sustainable accumulational breakout. And given that this accumulational support holds up, Ethereum may very well be on its way of forming a cup formation to further support a strengthen position compared to that of Bitcoin. This final leg of the cup would amount to its technical mark-up.
This late 2019/early 2020 double bottom amounted to a significant high return/low risk opportunity to scale heavily into Ethereum. So too did we get another grand opportunity in late December 2020 as we not only made a perfect close on the horizontal support line, but also made a clear lower bullish red touch on the weekly RSI. And since then, Ethereum has gained roughly 40% in value compared to Bitcoin. This means that if you had 3 000 euros invested in Bitcoin and Bitcoin went up by 100%, for a total of 6 000 euros, then Ethereum would have generated 4 200 euros for a total portfolio of 7 200 euros. And this is EXACTLY what I’m looking to exploit. Not only to maximize run-up profits, but to also soften
any correctional blows as one may suffer more severely than the other. The beautiful part about this approach is that we’ll only need to use the weekly chart for a birds eye perspective. Any scaling in or scaling out from Bitcoin to Ethereum will be infrequent, yet statistically very effective. And as mentioned at the beginning, any extra value that we can extract, especially early on, will ultimately pay off exponentially as both Bitcoin and Ethereum gain in mark-up values.
And if this is the case, that an Ethereum versus Bitcoin mark-up is technically confirmed, then primarily holding Ethereum is the superior move for now. BUT! And here’s where things get interesting. Despite being predominantly invested in Ethereum at the moment, we also know that it’s technically never a trouble-free ride from point A to point B. Before eventually reaching the 0,080 resistance level, for example, we may expect to face resistance at the 0,053 level first, which we can swing in our favour by decreasing our Ethereum position in favour for Bitcoin. And then scale back to Ethereum again if or when Ethereum were to find support at the 0,043 and 0,036 lines respectively, for an added portfolio value of 20 and 30 percent. Now, for example, that we’re
already precisely at this key support level which constituted the accumulational resistance, would be the ideal time to scale in some more Ethereum. The only issue is that I’m grossly overweighted in Ethereum already as the mid term technical upside is much stronger than that of Bitcoin. There are several practical reasons why Ethereum is more volatile than Bitcoin.
Bitcoin having a 4,5 times larger market cap is one of them. For as we know, the bigger an underlying asset or equity is, the more difficult it is to scale and the slower its growth. This goes on to prove why Bitcoin’s exponential growth gradually decreases the bigger it gets, as discussed in full in this Bitcoin Series episode. Ethereum is also said to be to Bitcoin what silver is to gold. In this sense, and as we’ve already
established, we do NOT want to own Ethereum during the crypto distribution and mark-down phases. For as we can see during the previous such, Ethereum lost a whopping -94 percent of its value at most whereas Bitcoin “only” lost -84%. And do note that I use imaginary quotation marks when saying "only". Equally, from that of Ethereum’s early January 2018 peak it went on to lose 90 percent of its value in relation to Bitcoin. Looking at it this way, shifting to Bitcoin at around this peak and then shifting back to Ethereum again at this technically beautiful accumulation phased double bottom, you would have ten times as many Ethereum today simply by swapping and swapping back again at the right time. And
this based on the weekly chart, which gives you plenty of time to reach this conclusion. So, how then will we play this technically? What exactly will we be looking at? Well, first and foremost we’ll utilize naked price action in combination with horizontal support and resistance levels. These are the main event that supply us with accurate information and probable clues on where to expect strength reversals. As we can see, there are three main lines at which we have much historical price action at which the price has greatly respected these very levels.
The internal proportions between those lines are 50% from the first to the second, +40% from the second to the third, and just south of 50% between the third support and resistance line and the fourth. Practically speaking, this means that anyone who owned Bitcoin in December 2019, and who sold them for Ethereum would, by today, have gained more than twice as much in actual profits than if they were to have held their Bitcoins. In this case we’re talking 14 times your money instead of 7 times your money. Of course, I’m not looking for a perfect set-up here. But by reallocating chunks of my holdings at any of these technical levels, it should pay off well in the long run. We’re talking the power of compounded gains here. The next technicals we’ll be looking at are the good old RSI lines as they’re bloody magical. And for those of you who haven’t watched them already, do yourself a solid.
For if you’re serious about your trading, then this trilogy is absolutely mandatory! So far alone they have generated two significant signals. One upper bearish blue signal at which swapping from Ethereum to Bitcoin would have saved you no less than 80 percent! And the second one is the recent one, the lower bullish red line in late December last year, which, as just stated, would have generated an extra 50% in returns. However, to be critical, neither of the lines are confirmed due to lack of data. Especially not the upper bearish blue line, although it is exactly in the expected range for the weekly set-up. The lower bullish red, on the other hand, is another story as it is much more statical at its 40 level. What this means is that the upper bearish blue line in general is much more
discretionary and prone to uniquely set levels, whereas the lower bullish red rarely deviates from its default 40 level. I rarely change that line, neither on the daily nor the weekly. Thirdly we’ll be looking at the EMA ribbons on the daily chart as they have plenty of significant precedence, especially throughout mark-ups and mark-downs. These are basically a compilation of various moving averages, but we will only be using them once or if there is a notable spread, as in them being wide apart. For whenever they contract they provide less support or resistance,
and hence lose in significance. In this case, we’re well into this ribbon spread and a bounce up from this support level is key. If not, I will be looking to scale heavily into Bitcoin instead. And finally, we’ll use the weekly Ichimoku as it too has clear tendencies of providing us with good reliability. These are the main Bitcoin and Ethereum technicals we’ll be looking at this year. For my intention is to NOT sell-off anything at all during this mark-up. I’ve done that mistake before, as mentioned in the previous Bitcoin Series Episode. And I
won’t do it again. There’s enough value to be extracted from moving money internally and that is precisely why this strategy is dynamite. That brings us to our final element: the leveraged sprint that will make us look forward to mark-up corrections ...
Rather than “cashing in” and “securing profits” on the way up, unless we’re closing in on the technical targets I will do nothing else but to re-arrange my all-in position in accordance to Bitcoin and Ethereum’s internal strength. But, my strategy also has one more leg to rest upon. And that is a leveraged position that in turn will alter in size depending on when and where in the mark-up phase it appears. Marathon Patent Group is an American Bitcoin mining company that moves exponentially to that of Bitcoin’s spot price. This has to do with Bitcoin’s price affecting the mining profit margins. Once Bitcoin takes off, the profit margins run amok.
The same applies in reverse whenever Bitcoin enters a mark-down, as the profit margins for mining are significantly decreased, or even ruined altogether. That part comes down to various factors such as electricity prices and so on, and we won’t get any further into it than that. The important thing is that, as it moves exponentially to that of the Bitcoin spot price, a mark-up can provide unparalleled money making opportunities. Since early/mid April 2020 Bitcoin has gone up by roughly 625 percent. Not bad.
BUT! Over the same period of time Marathon Patent Group has gone up by a staggering 10 000 percent! A hundred times your investment. Hence in less than a year alone Marathon has done a sprint and outperformed the Bitcoin spot price by 16x. And given that the Bitcoin mark-up has technically just begun, we may safely expect Marathon to keep on sprinting.
But we can also see from the chart that this company is no long-term buy-and-hold, but rather a dangerous asset for laymen as the price is highly cyclical. If we take a closer look at Marathon we see that it correlates well to the Bitcoin spot price, especially dating back from the 2017 peak after which it has pretty much mirrored every move. And whilst Bitcoin itself went down by roughly 84 percent at most, Marathon responded by losing 99% of its value, which mathematically means it lost roughly another 95% of its value on top of those -84 spot percent. Put simply, this is equivalent to losing 84% of your Bitcoin dollar net worth – and then losing another 95% of whatever you were left with. This makes this company incredibly high risk and dangerous to anyone who doesn’t fully understand what they’re doing. This further highlights the importance
of knowledge that we discussed at length in the previous Bitcoin Series episode. If you haven’t watched it yet, I highly recommend you to do so. For make no mistake: once this mark-up is over, Marathon Patent Group will probably lose 99% of its company valuation all over again. Or to appeal to a more senior audience, “You gotta know when to hold’em, know when to fold’em.” For any market-related knowledge gaps within this stock will soon have you crushed. How then do we best approach such an asset? Well, first of all it’s important to NOT hold this one any longer than the mark-up lasts. But even throughout its ride from the bottom last year it tends to correct quite intensely.
From early August to mid September last year Bitcoin corrected by 20% before proceeding higher. During this power amassing move, which is perfectly healthy and normal, Marathon in turn corrected by -72% at most. Don’t forget that this here is a log scale, so any move, even a significant one, may not come across as fully as frightening as on a numeric scale. But on the contrary, assuming technically that this mark-up were to continue that means we’re likely in for a few spot corrections of -15 to -40 percent, just like in any historical Bitcoin related mark-up. In this sense, I will always hold some Marathon stocks, a minimum of 5% or so. But as they rise in price I will gradually sell it off in increments. These sell-offs will mainly
be based on Bitcoin’s statistically expected moves between its corrections. And once Bitcoin corrects and Marathon dumps disproportionately much, I will buy them back again at hefty rebates. In this sense, my plan is to always hold somewhere between 5% and 15% depending on where in the mark-up cycle we are. As in how recent a correction has been. The more recent, the higher my Marathon allotment. This in turn will be based on statistical estimates. During most of the 2017 mark-up, for example, Bitcoin rallied by 240, 180 and 165 percent respectively just to finish it all off with a 250 percent blow-off top. And as we can see, each time Bitcoin in turn corrected by -40, -40 and -30 percent. I won’t count that -70 percent price decline that followed the parabolic
wave 5 as it wasn’t a correction but a confirmed distribution that preceded the mark-down. My plan here is quite straight-forward. Once we have somewhat distinguished this mark-up’s percentual moves between its corrections – as in roughly in the ball park – I will sell it off in increments and replace the freed money into either Ethereum or Bitcoin, whichever is the technically strongest at the time. Once Bitcoin corrects, and Marathon corrects with the use of a megaphone, I’ll release the some Bitcoin or Ethereum, again depending on whichever is the weakest, and shuffle into some nicely garage sale Marathon correction prices. When it comes to Marathon and my positioning and re-positioning, it will have little or nothing at all to do about Marathon’s individual technicals, but rather about buying whenever Bitcoin corrects, and selling whenever Bitcoin statistically closes in on the next correction. The thing I like the most about this strategy is that it makes me look forward to temporary mark-up corrections as I will then be able to re-enter this heavily leveraged baby at a decreased risk after having already sold most of it off and secured profits between corrections.
As you can tell, being all-in is not at all about sitting on my hands. For I will sure be active in moving my money around in 2021. Having said that I will look into other leveraged Bitcoin options and may eventually decide to spread those 5-15% risks into more Bitcoin-related equities than just Marathon alone. And if you have any suggestions, please let me know in the comment section below.
All advice is greatly appreciated. That was all for now. Thank you and goodbye.
2021-02-22 05:37
