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"Coining it! A trading perspective on Bitcoin

On July 17th 2014, Aidan Doyle gave first ever live professional Bitcoin Trading Seminar at Bitcoin Center New York City, USA. As a result of first US regulatory proposals now being released by New York State, the presentation was repeated & recorded on July 22nd for subsequent TV broadcast.Viewers may also wish to download the free Ebook "Coining It! A Traders perspective on Bitcoin" on which this presentation is based by visiting: https://files.secureserver.net/0soBPx...

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"Coining it! A trading perspective on Bitcoin

  1. 1. A Publication of Bellwether Capital Management, LP COINING IT! A TRADING PERSPECTIVE ON BITCOIN Written by Aidan Doyle
  2. 2. ABOUT THE AUTHOR • Aidan Doyle is President & CEO of New York based financial services company Bellwether Capital Management, LP, and Head Trader at New York City Bitcoin Center, the world’s first physical Digital Currency Exchange, as well as being host, producer, & creator of the financial commentary TV shows, "This Week In Forex" and "Today On The Street" • Mr. Doyle has been a registered stockbroker and active trader since the late 1980s both in London and New York, along the way working with a veritable who's who of the financial community. Mr. Doyle is also a frequent contributor to worldwide financial media, a renowned public speaker and producer/presenter of the educational DVD "Understanding Managed Futures.“ You may contact Aidan Doyle directly at aidandoyle@live.com, subscribe to his Blog here or connect with him by clicking on any of the Social Network buttons shown below. August, 2014
  3. 3. TABLE OF CONTENTS • Risk Disclosure Statement • Overview • Meet the Market Players • What moves the Market? • Finding an Exchange • Creating your Trading Plan • Your Trading Model • Entry and Exit Points • Position Management • Account Security • Bitcoin Arbitrage • Education • Special Areas of Concern • Putting it all together • Good Luck and Video Link • Free Newsletter and Sharing Links August, 2014
  4. 4. RISK DISCLOSURE STATEMENT • This brief presentation is provided for informational purposes only and does not disclose all the risks and other significant aspects of trading in Bitcoin and similar digital currencies and should not be construed as specific investment advice. • All views and opinions expressed herein are solely those of Aidan Doyle. Data and other information included here is believed to be accurate at time of compilation. Neither Aidan Doyle, Bellwether Capital Management, LP, nor Bitcoin Center, New York City can be held responsible for action taken on any opinions, and views expressed in this presentation. • In light of the risks, you should undertake such transactions only if you understand the nature of the contracts (and contractual relationships) into which you are entering and the extent of your exposure to risk. • Trading in Bitcoin and similar digital currencies involves considerable risks and is not suitable for many members of the public. You should carefully consider whether this type of trading is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances. August, 2014
  5. 5. OVERVIEW • Bitcoin (aka: BTC) because of it’s decentralized nature and lack of similarity to any other financial instrument or asset class, has little to no correlation factor to traditional financial markets. BTC has no P/E, no yield, no Net Book Value and does not belong to any index or group against which it can be meaningfully benchmarked, pegged or compared. • So how do you trade Bitcoin? What criteria or data can be used to make develop a trading strategy.? • The following content ,which is also the subject of a televised presentation, is a general overview of the areas and practices that at a minimum, in the opinion of the author require attention by active traders in Bitcoin. • Please note this presentation assumes the viewer has some knowledge of Bitcoin both as a payment processor and a unit of currency. If Bitcoin is totally new to you, it is suggested that you acquaint yourselves with the basics, then come back to this Ebook. For you convenience, some learning resources are listed on our Education page – – “Throughout this Ebook, when you see the “Poison” icon, Be afraid, be very afraid. This means “Poison for Traders!” August, 2014
  6. 6. Meet the Market Players At any given time, the market participants (buyers and sellers) of Bitcoin are usually made up of the following individuals and/or groups: * Retail consumers * Merchants * Speculators * Hoarders * Institutional Investors * Insiders: Here it is important to not that. as a result of how Bitcoin came into creation and the ongoing mining process, there exist holders of indeterminable amounts of Bitcoin: For example: Satoshi Nakomoto, The Winklevoss Twins, Ross Ulbricht, Etc. Anticipating the motivation, behavior and collective psychology of these groups under various market conditions will be a big factor in determining your success in trading the Bitcoin Market. August, 2014
  7. 7. What moves the Market? Outlined below is a list of factors which have potential to move the Bitcoin market: Aggressive buying, Aggressive selling, Perceived positive or negative news Changes in Supply (M1), Daily Transaction Volume, Velocity, Political/Sovereign Adoption, Media Perception, Merchant Adoption, Regulatory Assimilation, Economic Adoption, Proliferation and development of Exchanges and Platforms, Technological advancements, Security concerns, Twitter Hype, Online forum posts, Venture capital investment in industry, destabilization of other national Fiat Currencies, Social Media etc. This list is by no means exhaustive and as a trader you should get in the habit of extrapolating future scenarios and predictives for inclusion in your Trading Model and strategy, which is covered later on in this presentation. August, 2014
  8. 8. Finding an Exchange Simply put, at the time of this presentation, if you wish to buy and or sell Bitcoin, you will need to do so via an online Exchange or a Trading Platform. We are concerning ourselves here predominately with selecting a Trading Platform, although it is important to note that price and order information from different Exchanges should be integrated into your strategy for best execution and arbitrage opportunities (Covered in “Arbitrage” section later on in this presentation) There are many exchanges to choose from but consideration should be given towards the following factors: * Competitive pricing * Fee structure * Access to Margin and Leverage * Position and Order Management Tools * Order Book Transparency * SWAP Capability * Security Footnote: You could also decide to go another route by simply trading OTC (Over- The-Counter) with your own pre-defined community, effectively creating your own exchange marketplace as per NYC Bitcoin Center. August, 2014
  9. 9. Creating your Trading Plan The first and most vitally important part of a Trader’s strategy is construction of and adhering to a Trading Plan. Whether or not you have already have a Bitcoin Trading plan, here are some areas you should consider for inclusion in the creation of your overall strategy. * Skill Assessment * Mental Preparation * Set Goals * Practice disciplined money management * Trade Preparation * Set Exit Rules * Set Entry Rules * Keep Excellent Records •Track and review your performance. “If you don't follow a written trading plan, you court disaster every time you enter the market” August, 2014
  10. 10. Your Trading Model A Trading Model refers to a computer generated forecasting tool that is used to predict future price movements in the Bitcoin market. As a predictive of how changes in circumstances and events may impact future prices, traders are strongly recommended to build a Trading Model. Also the very act of building the model will heighten your understanding of the market itself. Listed here are examples of indicators and data that might be included in a BTC Trading Model. You may remember a few of these from the previous “What Moves The Markets” section. Spot Price, Supply (M1), Daily Transaction Volume, Velocity, Political/Sovereign Adoption, Media Perception, Merchant Adoption, Regulatory Assimilation, Economic Adoption, Venture Capital investment activity in BTC companies & technologies, Etc. You are encouraged to build your own model based on your own views assumptions and criteria, and dynamically modify as necessary. A typical pricing model could be as follows: P = Transaction Volume X 1_____ Velocity Supply (M1) August, 2014
  11. 11. Entry and Exit Points Use of Fundamental and Technical Analysis It is outside the scope of this presentations to examine in depth the pros and cons of fundamental and technical analysis when trading Bitcoin. However, suffice to say that the BTC market keys off predominately more fundamental rather than technical factors due to its lack of relative liquidity and institutional participation. Using simple technical analysis can augument and validate decision making and signal generation in addition to employing fundamental indicators and criteria. Additionally, a rudimentary signal system can be created by monitoring the Exchange Order Books, particularly orders significantly away from Spot Price as these can give indications as to support and resistance. “Beware the Bot. Don’t expect a automated trading alert signal system or Bot to work. They never do. Devise, develop and adapt your own system. After all, you are the trader right?” August, 2014
  12. 12. Position Managemnt Depending on which Trading Platform you elect to use, and also through the use of other markets, there are many tools and strategies that can assist you in managing your trading positions. From leveraging your buying power, hedging your exposure, and capping your downside risk, you should be aware of the options available to you. Here are some main examples of the kind of position management tools you may require to successfully execute your trading strategy: * Bitcoin Derivatives (eg: BTC Options) * Margin Trading • Swap Contracts • Stop/Limit order capability • Real-Time Market and Account Analytics August, 2014
  13. 13. Account Security The nature of the Bitcoin system makes the subject of security one that requires special attention, because there no easy way of law enforcement. As a trader in Bitcoin, the following would be considered best practices for safeguarding your assets, privacy and data: * Securing your computer * Creating a secure identity * Securing your Digital Wallet • Backing up information and files • Conducting adequate due diligence when selecting your Trading Exchange. Note: This list is suggestional and should not be taken to as being exhaustive. August, 2014
  14. 14. Bitcoin Arbitrage “In economics and finance,, arbitrage is the practice of taking advantage of a price difference between two or more markets striking a combination of matching deals that capitalize upon the imbalance” Source: Wikipedia. Because of the very nature of Bitcoin as a decentralized currency and the absence of a centralized marketplace, there are arbitrage opportunities that exist between the many different exchanges and trading platforms. For example, matching order books by buying like amounts of BTC on Bitfinex and selling same on Kraken. It is necessary to hold funded accounts and long positions of BTC across all exchanges and platforms in order to do this but is a relatively straightforward strategy. In addition to the above Bitcoin market arbitrage, there are also currency arbitrage opportunities that exist between Bitcoin and other Alt-Currencies. August, 2014
  15. 15. Education So you want to improve your trading by learning more? You would be wise to adopt the caveat “Consider the Source”. In short, examine and question the quality, accuracv and possible agenda of any content that comes your way. Here are some general sources of information that are objective, informative and should improve your trading knowhow: Bitcoin Center, NYC: http://nycbitcoincenter.com/ Bitcoin Foundation: https://bitcoin.org/en/ The Bitcoin Wiki: https://en.bitcoin.it/wiki/Main_Page News & all things BTC: http://www.coindesk.com Also consider additionally reputable news, data and information sources, such as Bloomberg, who now cover Bitcoin at the request of their subscribers. “Steer clear of Youtube, Webinars, online forums and email newsletter promoting advice, trading signals or alerts” August, 2014
  16. 16. Special Areas of Concern Obviously, when trading a new asset class, there will be a myriad of special considerations and problems to consider. Here are two rather unique ones when it comes to Bitcoin: * Trading BTC is unlike most other inline trading inasmuch as you can ONLY trade online. Therefore you are dependent on hardware and network access. Therefore it is suggested you have access at all time to two devices AND two separate internet access options to avoid missing ability to trade in fast moving markets. * Beware of “Going Native” and becoming a Bitcoin “Disciple” This can cloud your judgment and trading rationale. August, 2014
  17. 17. Putting it all together There is no doubt that in comparison to other traditional financial instruments, Bitcoin is mercurial and hard to define. Is it unlike all that have come before it as an asset class but despite it’s differences, there is see nothing in its inherent nature and market behaviour that suggests that it cannot be traded using traditional trading techniques along with sound judgement. The instrument and ecosystem may be vastly different, but as traders, it is important to recognize that the marketplace which Bitcoin occupies has as all the participants, characteristics and component parts of other financial markets that have come before and will probably come after it. Thus, by following your business plan, doing your homework and remaining disciplined, one can successfully trade in Bitcoin. It is hoped that these pages were of some assistance. August, 2014
  18. 18. INSERT IMAGES GOOD LUCK TRADING BITCOIN! “ Don’t forget to watch the Video! The 30-minute video “Coining It! A trading perspective on Bitcoin” based on this presentation can be viewed on Youtube by clicking here. August, 2014
  19. 19. TO BE KEPT UP TO DATE ON MORE PUBLICATIONS LIKE THIS ONE, SIGN UP FOR THE FREE NEWSLETTER BELOW!ALSO, IF YOU FOUND THIS EBOOK USEFUL, WHY NOT SHARE IT FREE WITH OTHERS? Share on Facebook | Share on Twitter | Share on Linkedin | Share by Email SIGN UP August, 2014

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