How to slowly but surely accumulate more cryptocurrency with less effort and with little worry. This is the last part three of the series. Here Part 1 and Part 2.
Recovering from misplaced but completed limit orders
Bought too early or too late? Part 1 and Part 2 of this article series respectively provide the technical and moral insight into how and why to collect cryptocurrency.
But what to do if you find the price sagging or rising? I present three ways out.
This third part is about adjusting when things don’t go quite as you expected. Whereas the second part of this article series is about your motives and beliefs and how they can work for — and against you. Hoping to keep you from getting involved with crypto currency if you don’t really believe in it (as in you think you’ll get rich quickly).
The first part was about a strategy to get cryptos smoothly: swinging through the fibonacci halfpipe. Why the first part of the article? Because it answers the question I’ve been getting at times over the past eight years: how do you invest?!
The idea is that if you have read the first two parts of this article you have not been discouraged by me and probably understand this spreadsheet.
In the spreadsheet, you enter the amount at the top and so you can place the orders at what you think is going to be the lowest price and the highest within now and 3 to 6 months for example, choose number of steps, make fixed intervals between the current price and to both extremes and enter the corresponding limit orders at your exchange.
Notice:
You need euro to be able to buy
and need the cryptocurrency at hand, to be able to sell.
So you have double the amount of "value" standing out on your exchange.
If you set up a halfpipe.Practice in late 2019 on bitcoin on the exchange Kraken
Conversation on Whatsapp:
[12:31, 20/03/2020] Henk van Cann: I had a Fibonacci series set up to 3500 and it nicely just ticked off the 4000 limit.
[12:33, 20/03/2020] Henk van Cann: My choice is: set up a Fibo series that goes really low in Euro (I put in orders like ‘1000 euro for 1 bitcoin’). If it goes up then you can grab a stop-loss at some point. If bitcoin continues to fluctuate against the euro, you can always cancel your order and take back your euros. If it actually drops below 1500 euro for 1 bitcoin -> bingo!
[12:33, 20/03/2020] Henk van Cann: 1000 euro for 1 bitcoin was my lowest click point
[12:36, 20/03/2020] Henk van Cann: A little example of how I assisted my cousin in correcting ‘buying too early’ to a more natural Fibonacci progression. It is complicated, but if you look at how the sheet is put together (by hoovering over the cells) you can possibly learn something from that.
12:37, 20/03/2020] Corine: I’ve already looked into it and understand the main points. But not quite good enough yet to apply it myself. Now I have €750 on 5000 eu/BTC and 1750 on 3500 eu/BTC. This sheet is going to help, thanks.
Henk van Cann: You can change the sheet whenever you want. And put in the resulting orders in your exchange by hand.
12:42, 20/03/2020] Corine: Put in 5k last weeks (at too high prices, considered afterwards). For the coming weeks I’ve given myself another 5k budget to spend.
12:44, 20/03/2020] Henk van Cann: Hold on to those BTCs and burn the euros in your mind. Then set your budget to 10,000 Euro, fill in the amounts already spent and choose a course for the rest of the budget. This is how you could correct towards the original Fibo range.
Suppose you sink through the lowest click or fly through the highest click
Panic? No way! We had just said goodbye to our euros! It doesn’t bother us and we think calmly.
You can choose:
- Extend the Fibonacci; as the series is endlessly extendable provided you have cash!
- Set up a new Fibonacci series, provided you have some cash
- Do nothing, enjoy life and wait for the tide to turn.
What does this mean? We are still on course to get more cryptos. No panic sales, because you can’t demonstrate more clearly that you don’t believe in crypto than to panic sell on a downward trend. Because you then turn out to be more attached to your euros that you were when you “burned” them, plus and possibly worse: you believe in changing back to euros. Why is this even worse? Because you think that euros are a store of value! While you see before your eyes that power strongholds are diluting your money.
Turn off the TV and the radio. The main-stream media will tell all kind of horror stories what will happen to bitcoin. Think for yourself. If you don’t, you possibly deserve no better than to walk out of your short-lived adventure with cryptos penniless. Your euros were already worth nothing and now you also have the impertinence to put them above crypto currencies. You sure have the audacity.
In doing so, you’ve probably put yourself tens of percent of your euros into your own disbelief and you still have 70% left. While you were doing this, the ECB and FED may have already printed another 10% (because they only need a calendar month or so to do that these days) and you’ve lost another 3.5%.
For the crypto world, a quick retreat of weak hands is healthy. In short: another set of weak hands gone forever.
Just one example from early 2021: believing that Elon Musk can single-handedly do anything about the core of Bitcoin innovation is a joke. Even the original creator of the Bitcoin protocol can’t do that. If you believe this and sell quickly, then you have stepped into Musk’s questionable investment strategy that raises many questions about his morals and ethical conduct and may come as a surprise but it mostly says something about his company.
To Elon from Henk: Dear Elon, Do you need to rob half the world to create your crappy cars? Or are you just going to make good products on your own? What fiasco are you diverting attention from, dear Elon? :)
Back to you. You believe in crypto (no?!) and have said goodbye to your euros. You know that you need to put money on an exchange to do something and when that’s done, you want to get out with your crypto and/or euros and “get them under your control”.
You also know that you need some controlled calm safe practice to be able to drive a car hard and agile later. This is no different in the crypto space. On an exchange this means you have practiced with funding, withdrawal, buy and sell orders limit orders. Maybe even Stop loss as well. You practise with small amounts; in terms of a few euros at a time. Then you have practiced agility. Now let’s head over to the real thing.
Suppose Bitcoin was at 50K/BTC like sometime in spring 2021. And you’ve set limit orders, in a Fibonacci quarter-pipe down (to buy crypto with euros).
Suppose you bought:
125 € at 30K/btc
125 € at 29K/btc
250 € at 28K/btc
Then it threatens to break through the 27K/btc at the moment you happen to look.
What are your options? Sell that crypto anyway?
We were going to stay calm, remember… We can (and this is a repeat of above ) :
- Extend the Fibonacci (as the series is endlessly extendable provided you have cash!
- Set up a new Fibonacci series, provided you still have some cash.
- Do nothing, enjoy life and wait for the tide to turn.
Alternative response 1: Extend Fibonacci sequence
Then the extensions are as follows:
375 € at 27K/BTC
625 € at 26K/BTC
Suppose that even the 26K is reached, then despite the fact that you bought too early at 30K/btc, you still bought the whole series at the second to last click: 27K/BTC and so you bought 1.5K/27K is about 0.055 BTC and the best part is: after the lowest point, the BTC price only needs to rise one interval and you are back at the same level of purchase value. One more tranche on top of that and you will already make a book profit on the entire invested amount. What we can do with this book profit is the subject of the next section.
But first: where do we actually stand in the halfpipe at the moment? And why am I talking about purchase value and book profit and soon also book loss? And not about profit and loss? To make you feel good?!
I use this wording to make you realize better that once you buy crypto, you do so for eternity. Should you ever sell at all, there should be a good reason:
- to consume and enjoy
- or spread your store of value more (I’m not saying spread it “better”, because I’m not an expert in this).
To return to the subject of limit orders: in this example we are ‘hanging on’ in the left half quarter, the buy quarter. We just came back from the steep part of the halfpipe. On the way up, we’ve spent our euros. Now we’re sliding back to the initial price it had, when we set our orders at 0.055 BTC (in fact, that’s “up” with regard to the price).
Alternative response 2: Establish a new Fibo series
Do you still have some money left, like 350 euros extra (but not quite the 1000 euros extra in the previous example of extending the series)?
Then you put up a new one a lot lower in the price scale, for example:
50 € at 15K/btc
50 € at 13K/btc
100 € on 11K/btc
150 € at 9K/btc
And if the price makes it all the way down, you could be a happy bitcoin buyer: about 0.033 BTC for 350 euros.
Which brings your total to 0.05 BTC for 850 euros, your average entry with your 850 euros then has been around 17,000 euros per BTC. Compare that to the strategy to extend the series: in this case the entry would have been 27,000 euros per BTC with 1500 euros!
So it’s a measured choice and listening to your gut to set some limit orders up a certain way. Happy ride up!
Alternative response 3: Do nothing
This also works just fine. You get happier without “candles” and charts. I did nothing for 2 years as bitcoin came down in price from 12,000/BTC to 3200/BTC. How can I stack crypto like this?
- Doing nothing at all, of course, does not work. Doing nothing is a possibility if your expectations haven’t quite been met. Also called ‘sit still when you get shaved’.
- What works logically is to start to the left (swing trading) on the Fibonacci half-pipe and als end to the left.
- Taking profits in crypto away from the stock market. SO DON’T TAKE AWAY PROFITS IN EUROS.
Example A “situation well estimated”
- To the left, step 1 -> In the example above, you’ve bet on a new Fibo series with bitcoin and bought a total of 0.05 btc for 850 euros, average price 17K/BTC. Since the price is currently at 22K/BTC and you expect a rise and a fall you bet your 0.05 BTC to sell from 30K/BTC.
- To the right, step 2 -> You managed to sell your 0.05BTC for 1800 €. On average for 36K/BTC. Your insight, your feeling and it worked well because….
- To the left, step 3 -> You buy back your bitcoin for 24K/BTC on average: 0.075 Bitcoin!
Some ideas for “grabbing” crypto profits:
- Take 0.025 btc out of the risk sphere of the exchange on your own wallet and redeploy the lion’s share 0.05 BTC for a ride to the right. You could do that when bitcoin has risen again.
- Alternative: Remove 0.075 bitcoin from the risky environment of the exchange on your own wallet. This is more obvious if the bitcoin price (relative to Euro) continues to fall.
Example B “situation misjudged”
- To the left, step 1 -> In the example above, you’ve bet on a new Fibo series with bitcoin and bought a total of 0.05 btc for 850 euros, average price 17K/BTC. Since the price is currently at 22K/BTC and you expect a rise followed by a fall you bet your 0.05 BTC to sell from 30K/BTC.
However, bitcoin is not reaching 30K/BTC. In fact, it has dropped to 15K/BTC! You should have sold earlier or ? … now buy extra if you can. Sit still when you get shaved also helps. After all, you’re not losing bitcoin. 0.05 btc is still 0.05 btc.
“Half misjudged”
- To the right, step 2 -> You managed to sell your 0.05BTC for 1800. On average for 36K/BTC. Your insight, your gut feel, and it didn’t really work out after all, because….
The bitcoin has risen to 50K/btc. The joy is short-lived: you sold way too early! And… you’re looking at euros, which the central bank (ECB) is also continuously and wildly printing, which most top cryptocurrencies can’t do.
What to do?
- Take the pain. Deposit additional euros and buy back the bitcoin you had. To be precise, top up your 1800 euros with 700 euros (note and to rub it in a bit: this is close to your original deposit). With this money, you buy back your 0.05 BTC in total (for 2500 euros).
- Alternative: Hope for better times to buy. But in doing so, look at the statistics of the past eleven years. Some people sold their thousands of bitcoins in 2013 temporarily for a hundred euros each, planning to get back in when the price would get lower… it never happened.
From these examples, you could draw an important lesson: never sell your crypto if you don’t really have to. Don’t get into cryptocurrencies if you don’t really believe in them.
And this sums up this article series quite nicely in my opinion. The first part is about a strategy for getting cryptos smoothly. The second part is about your motivations and beliefs and how they can work for — and against you. This third part is about making adjustments when things don’t go quite as you expected.
And one for the road…
Second real advice
If you don’t have a lot of euros to change to crypto, then get paid in cryptocurrencies for your work. Offer your client or employer an incentive discount to pay you in cryptocurrencies.
You could also instantly convert your wages into cryptocurrencies by yourself. Last idea is to put a little crypto on a wallet and pay with Lightning Network or change a little to euros or dollars as soon as you need to.
Conclusion of this article series
This third and last part gave you a few hints to adjust your strategy in building up a cryptocurrencies portfolio even if unexpected things happen.
The preceding second part urged you to refrain from investing in cryptocurrencies if you’re not willing to put in the effort to understand the fundamentals or simply don’t really believe in them.
In a Fibonacci halfpipe, you don’t have to look back at your purchases and sales very often, you’ll easily know your average purchase or sale price, and you slowly but surely stack a crypto collection. That’s what part one presented technically and part three elaborated on, with a recovery mechanism and examples.
Once you’ve accumulated cryptocurrency on an exchange, pull it in and keep the keys safe. Because this five-year old wisdom of Andreas Antonopoulos is always just around the corner: Not your keys, not your coins.
Part 1— Ride the Fibonacci halfpipe and accumulate crypto
Part 2— Study and don’t rely blindly on marketing
Part 3 — Recovering from misplaced but completed limit orders
