Five Trading Strategies to Build BTC Wealth During Altcoin Downtrends
During a remarkable year for Bitcoin, and especially the past six months, many altcoins have seen an ever-dwindling BTC price. In response, many traders have shifted their focus to prioritizing dollar profits rather than Bitcoin.
While it is much easier to be USD-profitable while Bitcoin surges, there are still a number of strategies traders employ to continue to accumulate BTC, even while most alts have struggled to keep up with Bitcoin’s massive surge. Here are five strategies that allow traders to continue to profit while altcoins are red across the board.
TRADING ON SMALL EXCHANGES
In past altcoin bear trends, those coins that are traded on major exchanges like Bittrex, Poloniex, and (now) Binance have tended to be much more affected by Bitcoin price surges than those that are not. Perhaps this is due to the fact that fewer new and inexperienced traders have accounts on places like Cryptopia or Bleutrade, or it simply could be that less liquid markets have slower, and therefore dulled, reactions to changes in the BTC price.
Raiblocks (XRB), which is primarily traded on BitGrail and Mercatox, is a great example of such a coin. Before and after the overall market explosion, prior to its recent surge, Raiblocks was traded almost entirely between 1,500 and 2,000 Satoshi. While there are hundreds of coins that are traded on these major exchanges, there are hundreds of others that are not. By transferring BTC to these coins in preparation for an altcoin bloodbath, traders can come out unscathed or far ahead.
SWING TRADING
The beauty of crypto’s volatility is that when a coin moves sideways, it’s still moving a lot. In the past several months, when altcoins experienced an extended downtrend, many such coins were moving sideways for weeks or months at a time. It is not at all uncommon for these sideways markets to still see price fluctuations of 10% or 20% daily. In these markets, resistance and support levels become clearly defined, which makes it simple to buy the local low and sell the local top.
If the difference between the 24-hour high and low is 20% every day, it takes four days to double your money, and less than two weeks to be up 10 times. Of course, this is a perfect scenario and not always possible, but savvy traders can consistently see huge returns on the coins they swing trade.
SHORTING ALTCOINS
There are a number of coins that follow patterns directly inverse to Bitcoin. Bitcoin Cash (BCH) is one of the clearest, most obvious examples of this. In anticipation of, or during, a Bitcoin surge, there are large profits to be reaped by shorting the coins that will inevitable suffer. Bitcoin Cash, along with Ethereum, Litecoin, and several others, can be traded on BitMEX, which offers futures and leveraged trading on Bitcoin and a handful of altcoins. Poloniex also offers leveraged trading for 11 coins. By shorting coins through these leveraged trades, traders can earn massive BTC returns during Bitcoin’s bull trends.
ARBITRAGE
Arbitrage is wonderful because it is perhaps the safest form of trading, as it involves taking advantage of existing discrepancies across markets. When coins are traded at different rates on different exchanges, guaranteed profits can be made by buying the cheaper coin on exchange A and selling it at a premium on exchange B. When altcoins are suffering, huge arbitrage opportunities emerge when coins are panic dumped on one exchange but not on others. The inverse is also true: if a coin experiences a pump on one exchange but not on others, there is profit to be had.
BTFD
Buy The F—ing Dip (BTFD) refers to purchasing coins that are largely oversold, usually as a result of a panic dump. Even when a coin is experiencing a free fall, bounces will inevitably emerge. By purchasing coins at the bottom of their plunges, traders can earn sizable returns as the coins partially rebound immediately afterward. When a trader holds most of his or her cryptocurrency portfolio in Bitcoin and waits to BTFD, he or she can experience huge returns while protecting him or herself from extended periods of bleeding and downtrend.