Сrypto-currency analyst SG Kinsmann shared his rules of trade with bitcoin, ether and other digital currencies.

I’m not a professional trader, but I quite succeeded with my first transaction on the crypto-currency market in June 2014. During this time, my portfolio has grown eight times. The average cost of bitcoins (Bitcoin), purchased during the period from June 2014 to December 2015, was $ 540. It turns out that they brought me an income of 360%, having risen 4.6 times over this time.

Rule 1: Make bitcoin the basis of the portfolio

Bitcoin is the first and largest crypto currency. It was and always will be the basis of the crypto-currency portfolio.

Some journalists claim that a speculative bubble has formed on the bitcoin market. However, they are mistaken for a number of reasons:


Since the appearance of bitcoin, its value and market capitalization has grown enormously. If you exclude other crypto-currencies, bitcoin showed the fastest growth among all asset classes in the period from 2009 to June 2017 (except for 2014). He outstripped all world currencies, stocks, commodities, bonds, stock funds and real estate. By definition, financial bubbles are short-lived, they do not swell for eight years.

As a result, the market capitalization of bitcoin increased to $ 40 billion and it rightfully took a place of honor in the global table of prospective assets.

Trading volumes

Trading volumes are inextricably linked to the liquidity of the asset. The higher it is, the easier it is to sell or buy (even in conditions of market turmoil). In addition, liquidity helps to reduce the spread between the price of buying and selling and reduces trade costs. Avoiding assets with low liquidity should be avoided, since in the conditions of the crisis disposal of them can be very costly. Bitcoin has world-class liquidity, which is confirmed by the analytical site Blocklink .

The trading volumes of bitcoin are not inferior to those of the largest American stocks. Quotes of bitcoins will remain unstable in the future, but the crypto currency is experiencing a period of rapid long-term growth, and these impressive volumes will not evaporate overnight.

The ratio of trading volumes to capitalization

The high liquidity of bitcoin is even more striking if we consider the ratio of trade volumes to market capitalization (the higher it is, the better).

Transaction costs

Transaction costs increase with each month, which reflects the high demand for bitcoins. In other words, the number of payments is increasing, not just the number of transactions on exchanges.

Rule 2: Act strongly – everything is just beginning!

Over the past 30 years, we have experienced several real estate bubbles, as well as a dot-com bubble of the late 1990s. Human nature is such that all at first relate to the new very carefully, gradually relaxing and even reaching to recklessness. Observations show that it is better to behave in the opposite, intuitive way: fearlessly investing in new technologies at the dawn of their formation, and press on the brakes when the growth cycle is nearing completion. Therefore, risk – everything is just beginning!

Rule 3: Keep track of the ten largest crypto-currencies

Until May 18 of this year there was a small share of ether (Ethereum) (ETH / USD) in my portfolio and there was absolutely no ripple. I did not like these crypto-currencies, and I did not want to have anything to do with them. As a result, I missed a significant profit.

May 18, 2017 came upon me enlightenment. And worked out a new rule: to keep in the portfolio the 10 largest crypto-currencies, regardless of my opinion about their merits.

In just a month, this approach proved itself well – from the beginning of the year to June 20, the portfolio grew by 281% (compared to 106% in May). In just one month, I managed to outrun currencies such as bitcoin and monero (XMR / USD), and I did my best to catch up with the global crypto-active market.

Rule 4: Choose currencies wisely

I decided that it would be up to me to choose the largest currencies and determine their share in the portfolio. From the very beginning it was clear that the ripple is in a protracted bearish trend in comparison with bitcoin, and I quickly reduced its share in the portfolio.

Also I do not have positions for NEM and IOTA , although they occupy 8 and 10 lines in the list of the ten largest crypto-currencies. I will monitor them and add them to the portfolio if they keep their positions.

In addition, in the past few weeks I sold part of the airtime at a price of $ 350-360, because, according to some indications, a bubble bubbled on the market of this crypto currency.

The ether demonstrates a good dynamics if we apply the same estimation methods to it as to bitcoin, but it is still somewhat inferior to the latter.

The ether appeared in August 2015-well after the 8-year-old bitcoin. The explosive growth in 2017 fits perfectly into the time frame of the bubble.

There is an important difference between the two currencies. The air is associated with a legal entity registered in Switzerland, but the bitcoine is completely decentralized. If governments decide to put an end to the crypto currency economy, they can easily close the air, but in the case of bitcoin it will be much more difficult.

Rule 5: Fix a portion of the profits

Anyone who survived the bubble knows this. I witnessed a speculative price increase in the London real estate market in 1984-1988, a bubble of Internet companies in the US in the 2000s, another bubble in the London real estate market in 2002-2008, speculative growth in the real estate market of Bulgaria sea ​​and ski resorts) in 2004-2008.

In all cases, I received a huge paper profit, which evaporated in a few months. On the real estate market in Bulgaria, paper profit exceeded 2 million euros. In none of these cases did I manage to close positions on time.

Rule 6: Buy on the drawdowns

I like this idea profit cryptocurrency, because I sincerely believe in bitcoin. Twitter is often called upon to buy on drawdowns, and this is somewhat puzzling.

However, I found a solution. Buy on the drawdowns due to marginal funds. The advantages of this approach is that you do not need to replenish a trading account, you simply use the already available lever.

However, it is possible to use marginal funds only in certain cases. First of all, you need to choose the right time. Trader Beetcoin conducted an excellent analysis on Twitter and concluded that it should be bought no earlier than 48 hours after the start of the decline – you need to understand whether it is a drawdown, or the beginning of a large-scale fall.

Do not sell on falls

This lesson I learned even before the advent of crypto currency. In 2008, in the midst of the financial crisis, I panicked and got rid of an apartment in London, expecting interest rates to rise and the subsequent collapse in the real estate market. No one then thought about the quantitative easing and support of banks that found themselves in a deplorable situation. Since then, this apartment has risen in price three times.

However, a couple of years later I managed to cheaply buy an excellent apartment in Belfast. It cost me £ 135,000, although at the peak of the boom it cost 350,000.

If the bear market has started, take it as a reality and get rid of currencies without regret.

Rule 7: Do not trade too much. Block coins in your wallet

How to protect yourself from excessive trade? I found a solution: I bring coins out of reach.

One way is to translate them into a hardware wallet. Another way is to put on a term deposit on the sites Poloniex or Cryptopia (only suitable for dotcoins (Dotcoin)).

Rule 8: Reduce losses, allow profits to grow

It is literally quite difficult to comply with this rule. In my portfolio, I focus on changing prices for seven days, making the decision to rebalance. I ignore shorter time intervals.

Rule 9: Avoid the ICO

I am skeptical about the fever of initial coin placement (ICO) and only participated in one, Humaniq.

It is much easier and more profitable to keep aired in the portfolio, rather than participate in an imperfect, crazy placement process within the ICO.

In this case, ICO or coins, recently released on stock exchanges, can be an excellent investment. The trader with the nickname Beetcoin surprisingly successfully played on the new issue of IOTA. He turned the initial investment of 10 bitcoins into more than 200. For a while, Beetcoin bought up IOTA privately before the crypto currency appeared on the Bitfinexexchange . In other words, he was ahead of the crowd.

Rule 10: Be extremely careful with the lever

In some cases, the financial lever can work – one guy has made more than $ 6 million, buying the air with a lever since December 2016.

It is worth remembering that trading with a financial lever is a very risky business. Many traders went bankrupt, trading in this way, although this could be avoided by placing stop-loss with a limit on the price (Stop-Limit), rather than the usual stop-orders.

Recently it became known that large players on the market often specifically cause the triggering of these orders. This is not only stupid, but also makes us think about the moral principles of these people and exchanges that condone their actions. This practice will end badly.