Trust your gut when trading crypto

As with just about everything else, the Internet offers a mountain of advice about trading cryptocurrency. There are trading experts with their own websites, YouTube channels where you can pick up tips in and plenty of other ways in which you’ll be bombarded with ideas if you do a Google search that says something like ‘How to trade crytpocurrency’.

You might find yourself following one or two of these ‘experts’, which may also mean you follow their trade strategies and this makes you feel safer and more expert yourself. But, is this rally the best way to go about it? In my experience it’s the wrong way, because it doesn’t encourage people to rely on their gut feelings and their personal view of the market.

By listening to your gut, I don’t mean basing your decisions on emotions. It’s not a case of waking up and thinking, ‘I feel good today, I think I’ll buy some bitcoin, sell some ethereum’; it is about using your intuition.

Analysing the market, which is extremely complex, will never bring you to the perfect trading sweet spot. Looking for patterns to base your trades on will eventually become self-defeating. Instead, simply gain experience and while you are doing that, your subconscious mind is storing away knowledge about the patterns that provide you with good results. Your intuition has access to this knowledge, whereas your conscious mind is blocked from directly accessing the subconscious.

But, using your intuition requires practice. Therefore, do trades on your own using your strategy, not one that has come from an expert you found online. In this way you’ll be able to follow where you’re right and wrong in your trading. You’ll also have a much greater feeling of achievement, because it was you who made a successful trade based on your own knowledge, not that of someone else.

I’d also add that making your own decisions keeps you closer to an assessment of risk that is right for you. Another person may have a completely different set of life circumstances, which means they assess risk differently. If you are going to take advice from others, be sure to follow channels that are more educational than directive, so you can learn the common patterns and indicators for yourself.

Finally, once you start a trading strategy, it pays to stick with it, because your first instinct is based on your intuition, so don’t second-guess yourself; that’s when trouble begins.

How big banks could decentralise money

One effect of the emergence of cryptocurrency is that it has made a lot of people rethink our relationship with currency generally, and with the big banking institutions.

For example, in June 2018, Switzerland held a “sovereign money” referendum in which Swiss citizens rejected by a ratio of three to one a proposal to end fractional reserve banking and give sole money-creation authority to the Swiss National Bank. Cryptocurrency wasn’t mentioned in the proposals, but it was on many people’s minds during this vote.

Why? Because the fact that cryptocurrency exists means that there is a very real possibility that global economies will “disintermediate banks from money” as Michael J. Casey suggests, and he also claims that the leaders of this change will not be the activists one typically associates with bitcoin and other crypto assets, it will be the central banks themselves.

They will initiate the move towards a true “money of the people”, because they will have to in order to “remain relevant in a post-crisis, post-trust, digitally connected global economy.”

A non-governmental currency

This might be an anarchist’s dream situation, but for those who want money removed from government control, the move to digital currencies will encourage more competition worldwide by opening the door more non-governmental digital currencies. Plus, when smart contracts are used to manage exchange rate volatility, it is likely that we will find that the people and businesses involved in international trade will no longer need to rely on the dollar, Euro or British pound as the cross-border currencies of choice.

There hasn’t been much enthusiasm for a central bank-issued digital currency (CBDC), largely because the banks didn’t really like the idea. The Bank of England has done research into the concept, but BoE governor, Mark Carney then warned about financial instability if his bank supplied digital wallets to every citizen, because this would then give the man in the street the same right as regulated commercial banks to hold reserves at a national bank.

Inefficient banks

Basically, traditional banks are the problem and not just for cryptocurrencies; they are inefficient with respect to fiat money as well. Their technical, social and regulatory infrastructure is past its sell by date and it’s a costly system. Banks maintain centralised, non-interoperable databases on outdated, mainframes. They rely on multiple intermediaries to process payments, plus ledgers that have to be reconciled against each other using time-consuming fraud-prevention mechanisms.

Banking solutions

There are solutions though: one is to gradually introduce CBDC stating with non-bank financial institutions and cascading it down through corporations and smaller business to individuals. A central bank set CBDC interest rate would also help and could be part of managing the money supply. It is more likely that this will happen first in the developing world where there is a greater need and appetite for something like a fiat digital currency that offers protection from inflation. In the developed world, the banks may take longer to get their heads around the concept of moving away from decades old systems, but they will have to respond somehow, because the crypto genie is out of the bottle.

 

 

 

 

 

The barriers to DEX adoption

There is a lot of talk about the decentralised exchange (DEX) concept and the attendant benefits and problems. The primary benefit of a DEX is that it cuts out the middlemen in all kinds of transactions, which tends to lower costs and speed up processes. In addition, there is no single, central entity that can impose regulations on a DEX on a sudden whim; this might include banning cryptocurrencies for example, or the DEX itself. This is quite important when you look at countries where exchanges and currencies have been banned, or their use restricted.

Furthermore, when this type of exchange does not exist, people wishing to invest in cryptocurrencies are subject to government regulations as applied to existing financial markets – so you end up having ‘more of the same’. A decentralised exchange also offers better security. In a DEX each user is in private control of their own funds, so there is no central point for hackers to attack, as they did with Mt Gox.

And, a DEX potentially has the means to facilitate faster and cheaper transactions than a centralised exchange, since there is no third party authenticator. However, this has yet to be tested out on a big scale.

What is stopping DEX adoption?

One of the biggest downsides of DEXs as we currently know them is that they lack the functionality of centralised exchanges. At the moment they only offer the most basic functions and don’t have any of the frills, like a stop-loss mechanism. The other issue that acts against them being more widely used is that they lack they can’t convert to fiat currencies due to existing KYC and AML regulations. If they did, they would become centralised exchanges. So, anyone using a DEX can only use cryptocurrency deposits.

And there are other barriers, at least in the eyes of governments and financial regulators. One of the most difficult to overcome is taxation.  Because a DEX doesn’t have any centralised function, authorities such as taxation and regulation bodies have no power over a DEX. If there was mass adoption of DEXs and they replaced centralised exchanges, hundreds of billions of dollars would be hidden from the view of taxation and regulation bodies. We’ve already seen countries like China and India banning crypto because the governments see this as a major issue.

There are some existing exchanges that claim to be shifting towards a decentralised model, saying that the fact they are currently centralised helps to speed up their development. That idea is one that causes heated debates, because we know that to truly be decentralised these exchanges will have to radically rewrite the platform protocols. But, while there may be barriers to wider adoption of decentralised exchanges right now, this is not to say it will remain this way forever – this is a sector of the blockchain world that will continue to be of interest to everyone involved in it.

 

 

 

The governments that are backing blockchain

Momentum has been growing in the cryptocurrency and blockchain space. After all the arguments over it during 2017, we have arrived at a point where we can see the seeds sown have taken root and the sense of ‘when’ has superseded ’if’ in the question about mass adoption.

During 2018, there has been further debate over it, but we have seen some very positive advances in blockchain use, quite apart from what we might call ‘the usual suspects’ — Facebook and Amazon –solidifying their activities in the new technology sphere.

When these companies use blockchain, it’s a bit like hanging out a neon sign, but when governments start to talk up blockchain, it’s more like a fully illuminated Times Square. Suddenly, everyone sits up and takes notice.

So, which governments are leading the battle charge for blockchain? Well, there are five that are of particular interest, and one or two might surprise you.

United States of America

Interestingly, the USA, where so many blockchain entrepreneurs are based, has been slow out of the starting blocks in relation to blockchain and crypto. According to Cointelegraph, the U.S. Treasury Department is “currently running a pilot program to determine whether Blockchain technology can be utilized for supply chain management,” and federal agencies are exploring the potential for using blockchain technology in government departments.

China

China has blown hot and cold over blockchain. It has been decidedly frosty about ICOs and cryptocurrency, but much warmer about the adoption of blockchain technology by government departments. We are also seeing cities like Nanjing announce billion dollar blockchain funds to support the development of blockchain-based enterprises and it seems clear that China will promote the use of this technology for business purposes.

Spain

In Europe, Spain may not be a crypto hub like its neighbou Gibraltar, but it is doing some interesting things with blockchain in the governmental and banking sectors. The Spanish government is supporting projects like Navibration, a Spain-based technology company aiming to create a social network of audio-guided tours, which will help its massive tourism sector. And BBVA bank, as well as Santander, are both using blockchain technology for loans and international money transfers.

Japan

Japan is crypto friendly and has made bitcoin legal tender. Also, in an effort to reel in even more investment capital, the Tokyo Metropolitan Government Accelerator Program started hosting the “Block Chain Business Camp Tokyo; the goal being to promote blockchain projects that have the potential to improve Tokyo residents’ quality of life.

Australia

This is another country that has been in favour of blockchain technology for some time. According to Cryptovest, “Australia’s federal government has decided to invest A$2.2 million ($1.6 million) in a blockchain initiative as a way to make its key sugar production more competitive, local media reported on Tuesday. Prime Minister Malcolm Turnbull’s coalition backed Sustainable Sugar Project, which targets Queensland, the major sugar export region of Australia.”

There are a significant number of blockchain companies in Australia, and this country is one to keep an eye on, because it could become a major blockchain influencer.