Some lessons learnt from day trading in cryptocurrencies

Yong Jun Yuan, The Business Times, 6 December 2021

Ivan Xu, 25-year-old computing and information systems major, strongly believes in the cryptocurrency ecosystem and what it hopes to achieve

CRYPTOCURRENCIES have been a polarising topic among investors ever since they gained mainstream attention.

On one hand, some believe that cryptocurrencies are purely speculative and cannot be used reliably as a store of value or a unit of account. Others, however, maintain that these pieces of virtual code hold immense potential as we begin to live more of our lives online.

Personally, I have always viewed the concept of cryptocurrencies as a libertarian's fevered dream come to life, where value is based on the hope that money may one day be free from the shackles of centralised authorities.

So, I was particularly intrigued when I saw a former primary school classmate of mine on Instagram sharing trading tips on cryptocurrencies this year. If Crypto.com advertises that "Fortune favours the brave", then he must be the bravest of them all.

Easy come, easy go

Ivan Xu, a 25-year-old computing and information systems major, strongly believes in the cryptocurrency ecosystem and what it hopes to achieve.

The recent graduate has eschewed the typical route of finding a job immediately and instead, spent the last 10 months day trading in cryptocurrency, which he said is currently in its bull market phase.

While he was initially more of an observer of the market, having read up on crypto news since he was in secondary school, he decided to finally take the plunge after companies like Tesla and MicroStrategy began buying Bitcoin earlier this year.

Roughly every four years, Bitcoin miners receive half the amount of Bitcoin as reward after every 210,000 blocks are mined. As cryptocurrency prices have generally rallied before and after the "halving", which last happened in May 2020, Xu believes that the market will peak at the start of 2022 before easing off again.

“Right now, I want to take this opportunity to fully focus on crypto... to fully utilise this period and maximise my gains,” he says.

But he also cautioned that day trading cryptocurrency is not for the faint of heart. When cryptocurrency prices collapsed around the world in May due to negative news from Elon Musk and China, he remembers losing half of the capital he initially started with. Since then, he has managed to triple his initial capital.

"I don't advise that people go full time into trading in crypto because the volatility is really up there as compared to stocks. But, that doesn't change the fact that money is easily made in crypto," Xu says.

Putting a value on the virtual

Still, I was curious about how he valued these cryptocurrencies and how he could begin to put a price on objects that do not seem to have real world use cases.

Xu believes that real world use cases are already emerging and as interest grows, so too will the value of cryptocurrencies.

Pointing to El Salvador's adoption of Bitcoin as legal tender and Meta's (formerly known as Facebook) plans for the metaverse, he believes that cryptocurrencies will play a very important role in the future, and their value will only rise as more people need these currencies to transact on digital platforms.

"Definitely, more people are looking into the cryptocurrency space and as more people come in, the supply is only going down and that in itself will push the price of cryptocurrencies up even more," he says.

In deciding which cryptocurrencies to track, he focuses on those that play a meaningful role in building up the ecosystem.

An example of this is SAND, the in-game token of 3D video game The Sandbox that allows players to buy land and assets within the game. Launched in "alpha" on Nov 29, the game has partnerships with companies like Adidas and Atari. Players can even visit Snoop Dogg's mansion in the game and attend virtual concerts.

"These kinds of coins which are used in the metaverse are taking off now because people actually see a huge potential in the metaverse in the near future," Xu says, adding that Meta's focus on the metaverse sparked a lot of interest as well.

Meta had announced in October that it would help build the metaverse. Founder Mark Zuckerberg described it as "an embodied internet where you're in the experience, not just looking at it".

Another cryptocurrency Xu tracks is Harmony's One token. Harmony is a blockchain that facilitates the transfer of data between other blockchains like Ethereum and Binance, within which the One token is used to pay to carry out these functions.

Beware the siren call of the shills

Currently, Xu tracks 20 to 30 such cryptocurrencies daily. Although he has joined the interest groups of these cryptocurrencies on Telegram, many of the groups have toxic "shills" who encourage people to buy in even at a cryptocurrency's peak, something that he feels strongly against. Xu believes investors should aim to buy dips as much as possible.

Above all, he says that he has also learnt to better control his emotions when trading.

Initially, Xu found himself swayed by his optimism towards certain cryptocurrencies, which would subconsciously skew his own technical analysis to be overly optimistic.

However, he soon found other users on Telegram groups that put out accurate technical analysis. He started befriending them and checking his analysis with them to see if he was on the right track. They also made book recommendations, such as Trading For A Living by Dr Alexander Elder, which he has read 4 times this year to remind himself to leave his emotions aside when trading.

"If your analysis originally deemed that (the cryptocurrency) will go up but it breaks through your support level, a lot of people are going to remain super bullish about it. But for me, I feel that people should just discard their feelings when they do technical analysis," Xu says.

Yet, he does not see crypto trading as a full-time career either as he believes in finding salaried work. When cryptocurrencies fall back into bear market territory next year, he says he will sell his crypto holdings and return to the workforce, content that he has tried his best to grow his money with the time and opportunity he has now.

Perhaps I am more of a conservative investor who likes to see the physical value in my investments but I may only ever be comfortable placing my money in Tether, or USDT, a stablecoin that tracks the US dollar.

After Xu does technical analysis on all his cryptocurrencies each morning, he will sell off those that have hit their limits or breached their support levels. Before he decides on where to redeploy his funds, they go right back to USDT too.

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