Elliott Waves on Bitcoin – Credible Crypto Trade.config

What is Trade.config?

The Trade.config series goes inside the minds of traders to learn their strategies, preferred tools, habits and mindsets for success – to download their “configuration file”.

Each Trade.config post is an interview with a top trader. Our goal is to give all traders the benefit of each others’ experiences. After all, there isn’t enough time in the day (and money in the account) to make every mistake yourself.

No part of this piece is financial or investment advice, and all opinions shared within belong solely to the interviewee and do not necessarily reflect the opinions of Cryptowatch or any associated entities. Full disclaimer here.

Trader Name: Credible Crypto

Trading Style:   Longer timeframes - Elliott Wave 
Assets Traded:   BTC and ETH, hold XRP and LINK
 Time Trading:   Several years, crypto since 2017
 Monitor Size:   27 inch iMac
 Nearly Broke:   Never. Saved first, spent second
Date Recorded:   December 23rd, 2019
 Follow me on:   Twitter and YouTube

How did you get started trading?

Prior to the 2017 bull market in crypto, I was casually investing in equities while running a few businesses I started in years prior. I had success investing, which drew me in to trading a bit more actively instead of just buying and holding. However, the price action and movement was quite slow – not conducive to day trading. By 2017, I had heard about Bitcoin several times already when I got a text out of the blue from a friend’s brother asking me whether he should invest in it. I told him no, it’s a scam. A few weeks prior, I had heard the price was around $1,000, so I innocuously asked him what the price was – and he said $2,000.

Given that I kept hearing about it and the price just doubled in a few weeks, I decided to take a deeper look at the asset. The first thing I noticed was the volatility as opposed to traditional equities markets. Everything moved fast and traded 24/7.

I watched the markets for a bit and finally entered around $3,000. What really drew me in for the long term was selling around $11,000 on the run up, based on a new indicator which I didn’t understand well. After watching the price shoot past $11,000 to $20,000, I asked myself what I did wrong to miss that rise, so I could avoid making that mistake again. At that point I started putting time in every day towards understanding cryptocurrency and how these markets function. It became a second job for me: five or six hours per day for months on end to understand my mistake and learn how to trade these markets.

You mentioned becoming interested in Bitcoin because of the price action – were you ever interested in it from a fundamental perspective?

I’m a very cautious guy by nature – which you probably do not expect to hear from a crypto trader. However, with all my investments and ventures, I generally take a more cautious approach. So in 2017, I did thorough research on the fundamentals of Bitcoin which initially convinced me to make my first investment.

I also hold a few other coins long term because I have a belief in the fundamentals behind them.

What is your approach to analyzing the market?

Currently, I focus on a method that gets a lot of hate online – Elliott Wave Analysis. To keep things simple, it is a method for analyzing price trends across various timeframes. It helps me understand whether we are in a bearish or a bullish cycle. Then I use a few other indicators to narrow down entry and exit points.

When and why did you start using Elliott Wave Analysis?

When I first started trading, I wanted to ramp up quickly and was willing to pay to accelerate my learning. So, I joined a paid group in order to have a constant sounding board for my questions and ideas. For maybe four months, I learned from the group, but the methods taught in that group were not giving me answers to the questions I had. I did a bit of research on other techniques and discovered Elliott Wave. After experimenting with it for some time and sharing my analysis with the group, I found it to be far more useful for me than the tools many in the group were using.

Paid groups have a bad reputation – but it sounds like you found value in them?

Time is money, quite literally. If you can spend money to save time, at some point it becomes worth it. For me, I am always scrounging for more time, so it made sense to pay a monthly fee to avoid long hours of googling, watching YouTube, and reading books to instead have information hand-delivered to me from someone who was already skilled in analyzing these markets.

You can learn everything a paid group can teach you for free, guaranteed. However, you might spend 10x the amount of time finding it. Joining a paid group allowed me to spend much more time actually trading instead of hunting for and reading resources on various techniques.

Obviously, there is a difference between groups that just share trading signals and those that help accelerate learning. That is an important distinction to make.

Which assets are you regularly trading? Is there anything you would never trade?

I trade Bitcoin and Ethereum primarily, on higher time frames. Bitcoin leads the market and tells me the direction we’re headed. I prefer not to trade altcoins because they are a gamble – if Bitcoin tanks or pops, most of those will tank or pop regardless of how the chart looks.

See how Bitcoin correlates with other assets using Cryptowatch’s Correlations tool. 

I accumulate the “blue chips” of the sector – the high market cap coins which I’ve researched and seen survive for several years. I hold four coins long term: BTC, ETH, XRP, and a bit of LINK. I won’t invest in any coin for the long term without doing deep research. The significant upside potential of just the major coins dissuades me from considering investments in smaller, riskier coins.

You recently announced that you bought a big chunk of XRP, which is clearly a controversial asset – what’s your thinking behind holding that long term?

There are two ways I think about that investment. First, I still believe that the crypto market — even after the 2017 bull run — is very undervalued and in its early speculative stages. From that perspective alone, we will see a new influx of speculators at some point. They will likely enter the market with Bitcoin, but many of them will then turn to the next few largest coins by market cap. If you look at the coins in the top 10 over the years, you’ll see that only a few have held top spots over time: Bitcoin, Ethereum, Litecoin, XRP. So although everyone seems to hate XRP and say nobody wants to buy it, someone out there obviously thinks differently. The question then becomes, when new speculators enter the market, will XRP move along with the entire market as it has the last six years, or for some reason will it tank and die? Just based on the information we have, it seems to me like it will rise with the rest of the market. Looking at BTC, it also seems more likely to rise to $14k again than dip to $3k again – and if it pops, it’s likely to carry the market with it.

The second point is on percentage ROI – the closer we get into the bottom of the market, the higher the multiple of your possible return. XRP is the exception among top coins in that it’s still sitting at the bottom of the market, while others have rebounded a bit from their bottoms. This means it likely has a higher ROI from current levels than other large cap coins, hence why I prefer it compared to other “blue chips” from an ROI perspective.

This is not to mention the fundamental research I’ve done. I see a lot of misinformation on Twitter – that Ripple dumps on their holders, that Ripple is centralized – it’s not what it seems, which has made me confident enough to make this investment. I found this all just by googling and reading. It seems like most people would rather stay inside their filter bubbles than do their own research. Whenever I’m investing, I want to know the negatives to that investment so I can be confident in what I buy, so I dug in to those negative claims. 

To give you an example, we see a lot of chatter about Ripple dumping XRP and keeping the price down. However, if you look at Ripple’s quarterly reports, you will see that a billion XRP is released from escrow every month from a smart contract to Ripple. Ripple sells a portion of that on the open market and to institutional buyers, with the remainder going back to escrow for another 5 years. Ripple has publicly stated that their methodology for deciding how much to sell is based on trading volume on exchanges, which is a public metric anyone can go and validate. Thus far Ripple has adhered to their stated methodology when selling XRP.

Even if Ripple were to deviate from this and sell the full 1 billion XRP suddenly one month, that would be about 2% of the supply, and the deviation from their publicly stated methodology of sales would risk causing a selloff that would tank the value of the huge amount of XRP that they themselves (Ripple) still currently hold (the other 49% or so that is still locked in escrow). They would essentially be shooting themselves in the foot, and an action like this is not one that any self-interested party would take.  Also, if you look at the inflation rate of XRP based on the $66M worth (about 200M XRP) they sold in to the market over Q3 2019, it’s lower than the rate of Bitcoin and Ethereum inflation. So I see a lot of misinformation out there.

What tools are you using to monitor the market?

I have a TradingView Pro account primarily to save more charts, but I pay attention to fundamentals as well. I do pay attention to news and some other analysts on Twitter to see other opinions, although they sometimes get in my head. Overall, I believe that markets ultimately follow long term cycles, where news events may affect short term volatility but do not play a major role in market movements on higher time frames. We see huge run-ups when there’s no news, and flat markets during lots of positive news, so I tend to disregard news. For my trading decisions, I rely primarily on technical analysis such as my Elliott Wave analysis, and typically do not trade on news.

What other analysts do you follow?

I do follow some shorter timeframe price action traders since my analysis is typically on longer timeframes. I want to learn a bit more about short timeframe analysis as I find it complements my analysis. In addition to those, I follow a few Elliott Wave analysts just to check my own work. A few analysts I follow are: @irncrypt @traderkoz @blockchainblitz @cryptotrooper_

What’s a not-well-known indicator you rely on?

This one is well known, but I see many traders misusing it: RSI. When I first started trading, I used it but did not know how to interpret it. A lot of misinformation about RSI makes it tough to use correctly, but once I learned the proper techniques it became the only momentum indicator I really use. I experimented with EMAs, Stochastic RSI, and MACD but only found noise.

Are there any habits that have helped you improve your trading?

Absolutely. When I first started trading seriously, as if it was a full time job, I set goals for myself to make a certain amount of dollars per month. I found those goals negatively affected my trading because they made me rush into positions to hit my numbers. They added a lot of unnecessary stress. I am lucky enough to have a few businesses I started years ago that afford me the ability to not have to rely on trading for an income, which lowers my stress levels significantly. As a result, I can approach trading with more patience – trading less but making more money.  

To me, alleviating stress and pressure from trading is key –stress can alter your game such that you can struggle to be profitable even with perfect analysis because the stress messes with your head. Higher time frames help me with this: not sitting at the computer all day is less stressful for me.

What’s the hardest lesson you’ve learned about trading?

My biggest loss led to my hardest lesson, and it originated in overconfidence in my analysis which led to me disregarding my risk management on a very large position. This was before I had nailed down my risk management rules, before I realized the importance of them. What ended up happening was a massive squeeze in the other direction. After that big loss, my psychology changed – immediately I thought to myself “What’s the best way to make this money back?” which led me to think I should go big again just one more time to get back to normal. 

That spiral is hard to escape – you have to step back and relax. Big losses like that taught me the importance of sticking to set risk management and position sizing rules. If you can stick to your own rules, you can start to hit consistent wins and ensure no loss knocks you back too hard.

What is the most common mistake other traders are making?

It’s 100% risk management. There is no way you can succeed without understanding risk management. Just based on chance, hitting too many bad trades in a row with large position sizes can knock your portfolio down significantly, making it much harder to come back. Even if you only hit 30% of your trades, but you have impeccable risk management and only take high risk-reward ratio setups, it’s very hard to lose. Unfortunately, we all want to make money and we want to make it fast, so it’s tempting to bet too much when you’re very confident in your analysis.

What’s the best trade you ever made?

When I first got into crypto, one of my first investments was in XRP at 22 cents. I didn’t sell a single coin until we got to $2.22 – so I 10x’d my initial investment. The amount I bought was quite significant (I had not mastered my risk management) so I did make a lot from that trade. Those were early days for me.

Keeping up with Credible Crypto

Follow CredibleCrypto on Twitter at CredibleCrypto, check out his analysis on YouTube, and see his writing on Medium. He’s just getting started on Medium but will be posting more there soon. 


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