Sunday, June 7, 2015

Thoughts on the 'True Value' of Bitcoin

As of today (June 7, 2015) Bitcoin sits around $226, a major drop from its peak value of over $1000.  I've seen a lot of talk about how this means bitcoin has failed as a viable currency and a lot of investors have lost hope.  To clear the record, I have never recommended investing in any cryptocurrency.  I think Bitcoin is about as viable of an investment as EUR, USD, or CNY.  Currency has historically been a very poor investment.  I have also never speculated on the value of Bitcoin in intervals longer than a month.


Here is the reason why, just because Bitcoin is the future doesn't mean it's worth anything.  I'm sure fanboys are at this point shuttering and immediately scrolling to the bottom of this article to write nasty comments, but I don't want those of you still reading to mistake my position as one against the Bitcoin protocol.  I still without a doubt believe cryptocurrency is the future.  If you want a little more background on my thoughts please read A Vision of the Future for Bitcoin and Cryptocurrency.

I've said before that I believe cryptocurrency is the next logical abstraction of currency.  The same way trade notes superseded gold, and fiat superseded trade notes.  The nuance to understanding the fall in Bitcoins value is understanding that just because one form of currency replaced the other does not mean the currency replaced was less valuable.  Even thought fiat eventually replaced gold as our preferred transactional currently we're not trading in thousands of gold coins for single dollar bills.

This parallel summarizes my view on those who claim Bitcoin will be worth some untold millions per coin someday.  It's ridiculous, I don't speculate over the course of years and Bitcoin could still be worth thousands per coin.  I don't know, and I don't claim to but I can tell you for certain that Bitcoin will not be worth X amount simply because it will replace the dollar.


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Friday, April 18, 2014

You Wanted Rock Bottom, You Got It. April Speculation.

Forex can be a painful environment sometimes.  Whereas stock traders have a number of different mathematical ways to derive the 'true value' of an investment the world of forex is a bit more perplexing.  It's a battlefield; every inch of ground is a war fought between high frequency traders, scalpers, swing trader, and any other number of strange techniques, often times movements seem to happen for next to no reason at all, but there is one constant unavoidable property.

The Law of Retracement

Forex markets never touch a support they don't intend to test again and we've been living on borrowed time since December.  What is initially seen as purely a result of panicked selling some time later becomes an inevitable support target.




I'd hypothesize that this property has something to do with the underlying psychology that drives forex markets.  Even though the crash results from panic, having seen the market crash to these lows before traders don't feel comfortable buying in turbulent markets till we hit the lowest low we know is possible.

Whatever the reason ~419 is the number that's been in the back of all of our minds for the last few months now, and we've hit it.  

So What Now?

Don't assume that because we're below sea level we have to go to the top of Mt. Everest, all this means is 'the debt is payed'.  I doubt we'll go much lower, as a scalper/channel trader my overall strategy doesn't change much with the trend but I've got a policy about not pissing in the wind.  Don't short in an uptrend, and don't long in a downtrend, so what this should mean for short/medium interval traders like myself is its time to close short position and wait.  For swing and long interval traders this might mean its time to start looking for a long entry.

A Good Entry Target would be below ~419 or close to it with stops just outside of the average true range.  To give an example, my long entry for a position I plan on sitting on for a couple of weeks was 399, and my stop for this position is ~370, but I warn you now this is not a position you want to gamble on.  I know I said this is rock bottom but the risk on long positions is still very high.  CryptoForex doesn't have regulations to protect your positions from flashcrashes and mass panic.

Take Profit Targets will be dodgy, and I highly recommend managing positions according to Ruien's (Ryan Sanden) 3 bar trailing stop method.



If the market does flip over into a rally we can expect some significant resistance in the upper 500's and an absolute impasse in the upper 600's.  The small upside to this crippling downtrend is we now have everything between 300 and 1000 mapped for just about all resistances and supports.





Sunday, March 16, 2014

crypto-php-api: Glue code for your PHP crypto trading robot

I've open sourced some of my PHP trading robot's code. You can find the repository at https://github.com/sectioaurea/crypto-php-api. I hope it is useful for anyone setting up a price monitor or trading robot in PHP. Originally, I used some of this code in a web monitor to watch certain markets.

What you'll find currently: modules to help you get prices from BTC-e and Cryptsy, and the API connector glue which every bot uses. Although the API connector glue code was sourced from Pastebin and broker docs, the orderbook depth traversal code is entirely original and solved an important problem for me: slippage.

If you've programmed a trading robot, or done a lot of trading by hand, you know the top order in the book is not always large enough to fill a trade. I wrote a function to step down the list of orders until the desired size is met, then calculate the overall price of the trade per unit.

What is missing:
- My proprietary trading engine
- The main control loop, which still is hardcoded to call my trading engine.

What will be added:
- The main control loop, once it's refactored to not call the proprietary trading engine.

Enjoy!