Normally when we invest in a crypto-currency, we’re “long-term” holders.
That’s how you avoid losing your cool when the inevitable volatility kicks in — and that’s how you maximize your profits.
But we recently came across a new study, and its results inspired us to look at the volatility in the crypto markets in a new light…
More specifically, this study helped us identify a short-term crypto trading strategy that helps us profit from market volatility in cryptos, over and over again.
And today, we’re going to share it with you...
Long-Term Profits
With our typical “crypto playbook,” we start by doing deep, fundamental research on a specific coin or token.
Then we take a large position and hold onto it for months or even years.
This is precisely what we did last April after recommending Ethereum to you at $40 per share: we slowly built up a sizeable position in it, then we held on.
And despite the volatility in the price of Ethereum, we’ve done very well:
We’re currently sitting on a profit of roughly 2,173%.
That’s like turning a $5,000 investment into $108,650...
Or a $10,000 investment into nearly a quarter of a million dollars.
Keeping Your Cool
The thing is, even though buying & holding makes sense logically, it can be tough to handle emotionally — especially with cryptos.
You see, cryptos are highly volatile.
Even though their overall direction over the past few years has been “up and to the right,” they bounce around far more wildly than your typical investments.
So if you want to give yourself the chance to earn big gains in this market, learning how to tame your emotions is critical.
But thanks to a recent study from market research firm, DataTrek, now we’ve found a way to use volatility to our advantage...
More specifically, we’ve found a way to profit from it.
Cryptos vs. Stocks
For the past few years, crypto-currencies like Bitcoin and Ethereum have been “non-correlated assets.”
Meaning, when the stock market would go in one direction, cryptos would go in another.
Having non-correlated assets in your portfolio is a smart strategy. It helps you smooth out the inevitable bumps in the road — and prevents your overall portfolio from losing too much value.
However, as the folks at DataTrek recently discovered, over the past 6 months, Bitcoin has become more tightly correlated to the stock market.
You can see this trend in the data below: as the blue line moves up and to the right, it indicates that Bitcoin and the S&P 500 are more in synch with one another:
(Source: datatrekresearch.com)
But here’s where things get interesting:
Cryptos tend to have a higher “beta” than stocks — meaning they make bigger jumps than stocks in either direction.
For example, for a few weeks beginning in late January, both the S&P and Bitcoin fell off sharply...
But when both markets recovered over the following weeks, the S&P gained just 6%...
While Bitcoin jumped by more than 68%!
Predictable Profit Strategy
So now let’s see what all this means for you...
Since:
- The markets for equities and cryptos are becoming more tightly correlated; and
- One of those markets generates far higher returns than the other...
When the market starts moving in one direction or the other, look for trading opportunities in Bitcoin.
When the market is going up, it’s time to buy Bitcoin...
And when the market is going down, it’s a cue to sell Bitcoin.
So, when the next short-term pullback happens, this is the trading strategy we’ll be executing for our personal accounts.
Keep in mind: we still plan to buy & hold cryptos for the long-term...
But while we’re waiting for our longer-term gains to come in, we believe this strategy is a great way to pocket some short-term profits.
Happy investing.
Best Regards,
Founder
Crowdability.com
