Due to the November crash we didn't make any trades. I received some questions from several customers about the 10% pump on 28 November and why we are still in fiat. As this is a recurring question I'll explain this more below.
If you haven't seen it, please check out our new WhaleMonitor
These are real-time fills of +5 BTC fills on both CoinBase Pro and Binance. On our twitter we share the whale buys and sells over 50 BTC, which accounts for around $200K orders.
Normally these big fills will go unnoticed if you aren't staring the whole day at the chart. However, they may describe the sentiment among whales (whales are the rich playing with crypto) and how price develops based on their actions.
Remember that on Binance a sell is done into USDT, a stable coin pegged to the USD. So a sell into USDT is very likely to buy into BTC again. On CoinBase, since they provide a fiat on- and off-ramp, some are cashing out.
We do not use the WhaleMonitor as an indicator, but we might in the future. For now it's fascinating to watch seeing these big orders fighting eachother. Yes, I'm a huge data and charts nerd 🤓 Leave me alone.
I'm working on the tailored monthly updates for everyone in the managed fund. Haven't finished it yet so you will receive them starting from January 2019.
As I mentioned before some of you asked about the state of the strategy during the pump on November 28, and why we're still in fiat. I'd thought to explain the inner workings of the strategy a bit more in depth. I should have done this earlier but you know how that goes haha.
The long term strategy, JW_V4, is developed based on multi-year backtests. When you see the backtest charts and trades they are basically instant, without all the emotions we have in between. That 5% loss, you won't feel because you can see in the next 2 trades it makes a 26% profit. However, in real life, you feel the 5% loss, because you don't know there will be a 26% profit next. You feel unsure and start to wonder if this actually works. The 2-year backtests seem so long now.
The crash this month is unprecedented. Never in Bitcoin history did the price fall so hard in such a short time frame. During a price drop our strategy needs time to adjust and it will take a while before a buy triggers again. If we take a look at the crashes after the bull run below, you can see the trade after the first peak was even a losing trade, and it only entered around 80-90% from that bottom to its top.
The subsequent trades, entered earlier but still around 60% and 20% after the low before. It enters subsequent trades quicker because the crashes and recoveries are less volatile.
I already hear you thinking, so why no enter earlier? That's what I thought too, and it's easy to fall into this trap because you focus only on the trades that happened before. But if you look at the chart you can see it also didn't enter into the smaller peaks before. Those would have ended in losses and increased your risk and exposure in a market that is going down strongly. It might be more profitable, but our drawdowns would be higher and increase our exposure. The reason why we weren't in the November crash is because we focus so much on limited exposure. JW_V4 is a risk managed first strategy, so it trades in profits for less drawdown and less exposure.
I heavily backtested these scenario's and this one right now, always comes out on top based on a risk/reward analysis. If you want to make money long-term you have to create odds in your favor. Once odds are in your favor, you will always win. Always. That's how casino's operate and make money.
Don't feel bad we miss out on pumps, heck worst case is that it buys in closely to the price before the crash. If you think we missed in an opportunity sure, but we also missed the emotional swings that came with it, and if we make a small profit afterwards, I'm good with that. Remember that the bot doesn't buy based on FOMO.
So there's that, I wanted to address this properly because it's important to understand how the strategy works, as I guess it's all a bit of magic for you right now. I will go into technical details in a future post.