Picking the right coins and why your definition of an “altseason” is probably wrong
By CryptOrangutang on ALTCOIN MAGAZINE
The following article was supposed to be a series of tweets in a larger thread, but it turned out much bigger than I initially planned. Because of that, I am uploading it here in the form of “tweets” i.e. shorter paragraphs. Enjoy the read 🐵
A thread on picking the right coins and why your definition of an altseason is probably wrong. It’s a long one, but I highly recommend the lecture of it.
Let’s start with the latter. If you are still waiting for the alt season to start, because “this isn’t it yet, you will know when it comes” or because you think we already started a bull trend, I highly recommend staying within this thread.
Last two “true” altseasons were during spring/summer of 2017 and at the turn of 2017/2018, mainly in January. First one was happening on an established BTC uptrend, at the start of the crypto mania, with a market cap of barely 30B. The market was tiny and relatively unknown.
The second alt season was happening during the peak of the crypto mania just after BTC visited 20k. Biggest volume, hype, interest we ever witnessed. All alt BTC pairs were bottomed out and ready to explode. Even your uber driver knew this.
The pumps during those periods were life-changing — coins were doing 5/10x daily and wouldn’t stop for weeks. Dead coins were flying together with quality projects, not much really mattered, you could literally throw darts and 10x your portfolio. Once in a lifetime opportunity.
Now, the current market condition is drastically different and therefore there are 2 points I would like to make: we probably won’t ever see another alt season as we did before and if we do, the chances of it happening now are slim to none. Let me elaborate.
The number of coins
The number of projects grew exponentially in the last 12–18 months. The pumps spread between 701 coins in March 2017 would now appear on over 2132 (CMC only, more besides that). That is not including locked ICO tokens.
With more and more coins appearing on the market daily, it’s obvious that not all are going to experience exponential gains. Catching a big gainer in a sea of projects will require TA/FA skills or else you will get stuck in an eternal range (more on that later).
Different market phase
You simply cannot compare well-established trend or a euphoria stage of it to a year-long downtrend where we are yet to make a single higher high in over 14 months. The overall sentiment is still negative and has people on the sidelines.
I am not judging the sentiment by CT, where the majority either is already retired/set for years or rekt enough to not even care about BTC going to 0. Take a peek outside to FB or other normie platforms where investing now is still met with hostility.
It’s a different level of confidence in investors when you are more certain about BTC direction because all alts follow its path anyway (sudden drop here would probably erase a full month of gains. We’ve seen good looking market before — it crashed like it’s nothing).
Many coins are already done
What I mean by that is that the majority of older coins won’t ever reach their ATH again. It’s a lot easier to have 10x across the board on new assets where it’s all price discovery than to do it fighting through heavy resistance and bagholders.
I explain it in my article but long-story-short — The price is the result of speculatory potential based on promises and momentum — both of which are very hard to regain once the initial hype dies out and people realize the project is far from picture-perfect as it is presented.
The only coins that are going to come back to the ATH (not to mistake with simply pumping on good news) are those that will exceed previous expectations and continue delivering. You can guess the success rate of that based on recent ICO letdowns (ex. $SPHTX).
To sum it up quickly — there is currently not enough momentum on the market and even if it was, the amount of coins and their price history makes it unlikely that you will profit from buying a random dead shitcoin during an “altseason”. And since we mention dead coins…
Just because something got absolutely rekt and stopped making lower lows, doesn’t mean it’s a good investment opp. In crypto no coin will just go to 0 — but it sure can stay forever in that range because nobody cares about it or it’s stuck on a single illiquid exchange.
Based on what I talked about before — FA/TA need to come in place when picking up the right coins during alt rallies like the current one. There are 3 factors that I consider important — volume, catalyst, momentum.
Volume
Volume precedes the price and is the best indicator of an ongoing accumulation. This is what differs a winner from hundreds of setups and what evaluates the strength of the new trend. An established bottom range is often not enough if it’s not supported by volume.
The volume also helps decide whether the recent move was a simple p&d or if the trend shows an actual strength. A lot of recent moves came out of nowhere and almost instantly retraced while other coins continue to form HTF uptrend.
Catalyst
When most charts look exactly the same, the catalysts greatly help in determining the next mover. It can be anything — product launch, event, airdrop — basically anything that will shift the market’s interest onto the coin.
As usually do not forget to sell the coin before the planned event — in still uncertain market conditions the retracement can be a lot more rapid, especially if the already established trend was not strong.
Momentum
My favourite “metric” as it requires you to adapt to the market constantly. By momentum, I mean buying the coins that are currently “hot” — both on a micro and macro scale.
Macro
I distinguish here 2 main groups. The first one is the coins on the most popular exchange which is currently Binance. You could put a dead cryptopia shitcoin there and it still would pump. Once it was Poloniex, then Bittrex, now CZ’s child. Time to adapt.
The second group are the new coins with some noise around their release. Doesn’t matter if it’s a new PoW gem or another launchpad ICO — if there is talk about it, there will be action as well. There is a reason why most of the biggest recent gainers were all relatively new coins.
An excellent example of that is FTM — a coin that was released several months ago but the positive attention it maintained during its bottoming out phase lead to an explosive recovery the moment we turned around. Hype is everything in a speculation-driven market.
Micro
Coins that feed on the momentum on other similar investments — for example security tokens (RVN and POLY moving together) or exchange coins (HT, BTMX, BNB, KCS). Finding and getting ahead of the trend can be as profitable as scouting through 200 charts.
If none of the above is met when picking up a coin, you will very likely suffer an opportunity cost and in some cases also a potential loss due to very small liquidity. Below I present some Binance charts from the past month and their counterparts from Bittrex.
Not only did binance result in much more explosive PA — some of the alts that are only available on Bittrex even managed to reach new lows. And before you say some of the dead Bittrex coins did pump — I consider entering illiquid shitcoins with no accumulation signs as gambling.
Also, don’t you dare comparing your 50% shitcoin gains with the same done on bigger exchanges — in most cases that pump comes with super thin books and overall lack of volume, while the same rise on Binance is met with appropriate liquidity.
To sum up this thread with something, I would like to give my course of action going forward. First, I will recommend the following list with an exception of points 7–9 which I wholeheartedly disagree with (reasoning below)
Diversification
Going into as many altcoins as possible (especially on the same exchange) makes no sense, because the market moves in waves. Most market cycles are very similar and when the pump/dump occurs — it affects all the coins in a very similar manner.
Also, catching all the possible pumps doesn’t matter if you spread yourself too thin — this way you are going to catch the biggest gainers with a fraction of your regular position, which normally would nail you a X0% on your overall portfolio.
If you want to lower your risk, diversify into different market caps and preferably different markets — microcaps tend to act as a separate market that is not really affected by BTC PA the same way as high and mid caps are.
„Losses are temporary until you’ve made a trade” + ‘HODL no matter what”
This is the approach that got most people rekt in 2018. This is again a place where I would point to my previous article so I will include a small summary and comment regarding the current outlook.
Nothing changed since weeks ago when I said that the current course of action is to flip alts, not hold. For all the reasons given before, as long as we have the current market structure, I do not believe we will see a magnitude of a regular alt season where it’s worth holding.
On HTF majority of alts look beautiful — as you would expect after 95% retracements and a month of positive PA. It’s hard not to call the current BTC structure bullish with several taps on the resistance as well so I understand where the current CT sentiment comes from.
RVN did 8x in a month while ENJ did 7x in a less than 2 week. I am not saying don’t buy alts — I am saying stay away from storing them away until we get more confirmation. Not playing alts here is stupid — but so is going full bulltard under the resistance.
Instead of overexposing yourself before a crucial market decision (volatility is close to recent lows, it will soon result in a big move) I would much rather not hold any fresh positions that will shit the bed no matter where BTC decides to move (initial sell-off even if it pumps).
I am not worried about missing the generational bottom and I am not worried about being cautious when CT folks mock others for being bearish when they themselves were sitting all-in at 6k. What matters is securing the capital, not catching that additional 10%.
Worst case scenario I will be buying a more established uptrend, missing some part of the move. Best case I will be rebuying it on a better entry or simply staying away in case of a crash.
Thanks for reading my article. If you want to find more of my work follow me on the following channels and if you are interested in learning more about crypto — check out my book on trading cryptocurrencies. Cheers!
