EDITORIAL – “Cryptocurrency Trading Strategies and Bitcoin Fork” by David Sharper

EDITORIAL – “Cryptocurrency Trading Strategies and Bitcoin Fork” by David Sharper


Weekly Editorial


In my last editorial, I wrote about the volatility of Bitcoin and other cryptocurrencies. To follow that up, I will be shedding light on a few cryptocurrency trading strategies and how you could implement them at the time of the Bitcoin fork. Also, with the impending introduction of Bitcoin Cash I have decided to write about that as the main topic of this week’s editorial in addition to my original topic of cryptocurrency trading strategies. Please note that Seg Wit is exclusively bitcoin right now and that these trading strategies can potentially be used with most cryptocurrencies, not just bitcoin.

In the last few weeks, you have may hear about Seg Wit, short for (Segregated Witness.) Investopedia defines it as “the process by which the block size limit on a blockchain is increased by removing signature data from Bitcoin transactions. When certain parts of a transaction are removed, this frees up space or capacity to add more transactions to the chain.”

If a one of the versions of this policy were put in place it would have began on August 1st 2017. This proposal was offered and then voted against. The potential for one potential consequence of this policy to collapse Bitcoin as we know it was looming. Another possible outcome could have included the system staying the same.

What is happening as of writing is the following. We will be adding a new altcoin in proportion to one’s Bitcoin holdings (this will be occurring soon.)

This is the version of this adaptation is occurring.

Let’s use an example. This will show the difference between what could have occurred and what is happening as of writing. This is the original Seg Wit that everyone was worried about. Tom and Susan each purchase 1 Bitcoin. Susan puts her Bitcoin in a hardware wallet. This means that the “keys” or identifiers associated with her Bitcoin will not be subject to Seg Wit because it is on a private secure wallet.

Tom leaves his Bitcoin on the exchange. He could have either lost all of his Bitcoin, gotten two cryptocurrencies instead of one Bitcoin (1 Bitcoin and one Bitcoin “blank”, or kept his Bitcoin and received one other cryptocurrency.)

Note that this example is not a full explanation but a practical example.

After we have went through much volatility in the market and speculation, we now know that for each person who has one Bitcoin in an exchange account (Bitcoin broker), a certain amount of Bitcoin Cash (an altcoin) will be given to them in addition to their current Bitcoin holding. I believe this is one Bitcoin Cash for every Bitcoin held by an account.

Also, note that with this strategy, if everything goes well, the Bitcoin Cash may end up just being free money for Bitcoin holders. Personally, I don’t know whether or not this new altcoin will be sustained long term or if it will eventually fade out. That is one of the risks of trading and buying cryptocurrencies.

That takes care of why this volatility is occurring and why many people are scared.

Here’s an image of the last two weeks volatility.

Bitcoin-Charts-start EDITORIAL - "Cryptocurrency Trading Strategies and Bitcoin Fork" by David Sharper

Bitcoin Weekly Chart

Take a look at the volatility this week in Bitcoin and how it has been moving based on speculation and volatility.

Let me show you a chart for Bitcoin Cash futures. This is a chart that depicts its movement since July 23rd.

Bitcoin-future EDITORIAL - "Cryptocurrency Trading Strategies and Bitcoin Fork" by David Sharper

It is also extremely volatile and indicates a few large swings.

Now, let’s enter trading strategies in layman’s terms.

One last thing that I would like to include is the following. This email was sent to me by my Bitcoin exchange, Coinbase (certain parts such as personal information were removed.)

(Let me elaborate on this source. This is a Coinbase Customer service email/announcement that I received. As far as I know, everyone else with a Coinbase account received such an email.)

Coinbase-email EDITORIAL - "Cryptocurrency Trading Strategies and Bitcoin Fork" by David Sharper

The reason I included this is because I want to show you why there is so much volatility, one of the biggest Bitcoin brokers is not supporting this move. Also, note that it won’t 100% occur.

Also, note that keeping your Bitcoin on exchanges like Coinbase takes away the potential for the “free money” that Bitcoin cash might end up being.

Okay, back to a few trading strategies. They are organized by their usual length, long-short term.

Long Term

  • Buy and hold

This is a well known strategy used among multiple asset class. Basically the premise is purchasing a cryptocurrency and essentially forgetting about it for an extended period of time. This takes advantage of multi year/long term price move and can potentially catch large uptrends as well.

Generally it is a low maintenance strategy that can be implemented for low amounts of money.

This strategy is also used by a large range of people, from Warren Buffett (Berkshire Hathaway) to the average person (retirement fund.) If the purchase is made during a correction, dip, or recession and sold during a bull market, big move upward, or based on great news for the company/fund then the strategy works.

If purchased at the height of the market and sold at the bottom it doesn’t work.

It all comes down to “Buy low and sell high.”

Bitcoin-charts-green-end EDITORIAL - "Cryptocurrency Trading Strategies and Bitcoin Fork" by David Sharper

This a chart of Bitcoin since it was listed on www.coinmarketcap.com, where I get my charts.

Mid Term

  • Buy and create sell orders (10-20% above purchase price.)

This would be for someone who is open to holding for a while and has a set return rate in mind. They wouldn’t necessarily care if their order was executed then next day or the next month. I say it is mid term because it depends on the movements of the cryptocurrency.

The money invested doesn’t have to be huge in order to do this. Basically someone would sell based on when their desired ROI was accomplished and not based on any time frame or before/after any event.

Short Term

  • Arbitrage

It is a relatively risky and high maintenance strategy that leverages the inconsistency of prices between different exchanges.

An example of its implementation would take place between two exchanges.Let’s say that Exchange A has bitcoin listed for $2,745.00. Exchange B has it listed for 2,775.00. A person buys the Bitcoin from Exchange A and then transfers it to Exchange B for a hypothetical profit of $30.00.

On the other hand, one could make this purchase from Exchange A and Bitcoin could then plummet to $2,705.00. Its volatility is what helps and hurts your potential returns on this strategy.

Adding in the dangers of margin trading to the mix (ex. Someone wants to make $3,000.00 and buys 100 bitcoin at $2,700.00 worth over $270,000.00.) If Bitcoin suddenly went down to 2,600.00 or below via a flash crash or correction or even a broader market downturn, margin calls can occur. A margin call means the company providing margin makes someone sell so that they can redeem a certain portion of their outlay. Even if it went back up later it wouldn’t matter due to the margin call which is a risk those risking large amounts of other people’s funds.

All three strategies have a certain amount of risk and upside.

Much of the wealth that has been created in cryptocurrencies came from the long term buy and hold them forget strategy. The middle term strategy can be used to secure good returns if implemented correctly. Even arbitrage, with all of its risks, has the potential to bring large profits if used correctly.

One real world example occurred this week. Bitcoin Cash futures dropped 50%. For a margin trader this would probably have resulted in a margin call and potential losses of thousands if not more.

I was not planning to mention this now but many people have told me that they want to use a hardware wallet to protect against potential risks.

Although these risks are mostly dampened I still think now would be a good time to discuss the basics of a hardware wallet.

You can also find out more on www.wikicrypto.com.

Hardware wallets are basically a way for you to control your cryptocurrency identifiers/”keys” and keep them off of a less secure online wallet or exchange.

I won’t endorse a wallet here but I would say the Ledger Blueand Trezor, are two leading cryptocurrency hardware wallets. I’m not sure if you can get one before August 1st even if you use a third party with quicker shipping times.

The reason why these wallets are important are because it keeps your information completely private and nearly impossible to hack. Hardware wallets allow you to control your cryptocurrencies while mitigating some of the risks. Many people were transferring their bitcoin to these wallets last week when there was a high chance of bitcoin separating into two chains and therefore two separate coins.

At that point, hardware wallets were one of the only ways to protect someone’s bitcoins from potentially becoming worthless.

Even though these risks are lessened now I still believe that this information is important for you to know in case this happens with bitcoin again and or another cryptocurrency you hold.

The purpose of this editorial is top try to inform you and try to keep you in the know about what is going on right now.


“What I’m trying to say is, I’m not telling you what you should and shouldn’t do, and don’t assume I am. “What I write is not financial advice as I am not licensed in any way or in any jurisdiction. As such, what I write in this column and anywhere else is solely for learning and entertainment only. My mission, instead of advising, is to attempt to inform you, the average person. Also, I will attempt to provide an interesting source for Bitcoin enthusiasts who want to reinforce their knowledge. I look forward to shedding light on the latest in a space which is constantly changing and growing.”

Thanks for reading,

David Sharper

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About Article Author

David Sharper
David Sharper

David Sharper is a Bitcoin enthusiast well versed in finance, social media, politics, and cryptocurrencies. This unique blend of experiences and areas enables David to take a unique approach to cryptocurrencies. As a cryptocurrency consultant and author David has worked with clients looking to invest in, learn about, and launch cryptocurrencies and cryptocurrency businesses. Areas of knowledge include the mining of cryptocurrencies, the basic hardware of crypto currencies, as well as crypto currencies storage and wallet solutions. He is also versed in cryptocurrency exchanges and where cryptocurrencies can be purchased and traded. His goal is to expose Bitcoin and its predecessors to those who are seeking to learn.

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