Trader Who Earned USD 11m Shares Trading Techniques, Offers Advice
A bitcoin (BTC) trader has shared the story about how he earned over USD 11 million, and offered some technical advice for beginner traders.
The trader told his story in an interview with bitFlyer Japan, a trading platform, which described him as one of "the most famous" of the "prominent traders who are actively publishing information," per an emailed release.
The man, known as Mr. European, started investing back in 2011 during his university days. Back then, he used his part-time job paychecks to pay for Japanese stocks and forex (foreign exchange market) trading investments.
However, the timing of these first investments was also significant. As Mr. European said, this was around the time of the Great East Japan Earthquake, the Nikkei average was low, and the exchange rate was around 80 JPY/USD.
Mr. European said,
"It was almost profitable. Thanks to the market at the time, I got a good start. Once my career started, I had more money and I wanted to take on more investments."
Three years later, in 2014, he made his crypto bow. He was introduced to and bought some bitcoin (BTC) when it cost around USD 265 per coin.
In 2015, he started using bitFlyer, and this was the point where he decided to invest some USD 50,000 in the world's number one cryptocurrency.
2016 saw the price near USD 1,000, while by the end of 2017, it had surpassed USD 20,000.
"I didn't sell it every time, so I don't really know the maximum potential amount of my assets. I sold at the end of the bubble in 2017, though. I paid about JPY 500 million (c. USD 4.7 million) in taxes and got about JPY 600 million (c. USD 5.6 million) in cash. So, you could say I had at least JPY 1.2 billion (c. USD 11.25 million) in profit."
As for his crypto trading techniques, he said he focuses on three indicators above all when looking at market prices:
- The Grayscale Bitcoin Trust (GBTC) chart, compiled by the US-based bitcoin investment trust Grayscale: it enables investors to closely watch trade volume trends. GBTC has a premium (divergence rate), which makes GBTC more expensive than actual bitcoin, and while regulations prevent purchasing actual BTC, if institutional investors buy GBTC, strong trends can be observed. Mr. European stated, "However, you have to consider your position when the premium is too high. That’s when you look at GBTC."
- The 200-day average movement line: a concept that originated from stocks and is used by many traders over the world - the line gets its name from the fact that 200 days is approximately the number of days in a year one can trade on a traditional market. However, as crypto moves the entire year, perhaps a 365-day line would be better.
- Hashrate, the computational power of a network: if a trader considers where mining becomes profitable, they can use current hashrates to see if they are gaining profits or taking losses.
When it comes to good techniques for beginner, Mr. European explained,
"Do you mean a method that uses foreign funding rates that anyone can use and get good results? I think this is still a simple category. You can get a feeling of when it is overheating by looking at the funding rates of foreign derivative exchanges. When it is overbought or oversold, do the opposite."
Meanwhile, Mr. European is concerned that recent bitcoin price movements are too slow. But he also says BTC prices are becoming more clearly correlated with stocks.
"Bitcoin may have been put into large-fund portfolios with other assets like stocks and other assets. When a stock is sold, the value of the stock in the portfolio goes down and the value of bitcoin goes up relatively, and vice versa. If there is a lot of fund rebalancing like this, drops in stocks could see bitcoin drop as well."
Lastly, the world's top cryptocurrency has not been able to escape the effects of the COVID-19 pandemic either. "Bitcoin isn't particularly compatible with a pandemic, but other financial assets are lowering in price, so some may choose it as their investment avenue," said Mr. European.
He added, however, "It seems that people who have never shown interest in cryptoassets are beginning to change their opinion."
Furthermore, while central bank digital currencies (CBDCs) are not crypto, he said, these could serve as "a tailwind for bitcoin once people become comfortable with digital currencies. I doubt that the digitization will be undone. We won’t go back to analog currencies."