Trade Update Mon 04 Jan 2021

Bitcoin's melt-up over the weekend to a $34,000 level brought the crypto frenzy to what I consider an unstable state .  I used the early liquidity in ARB , which opened at a new high up 27% to clear 42p, to exit the final one third of my trade position and close this trade. A reversion to mean will occur at some stage and to my mind, the downside risk now outweighs the upside gain in the short term. I may re-enter this trade at a price point near to the 8 EMA around 27-28p if that occurs in the short term  and will set an alert and place an order to buy at 27p.

I anticipate a fairly sharp pullback in BTC but may well be proven wrong: the rationale for my decision is below which is rooted less in the overreaching of my profit target (which was  a very conservative 17p+) and more in the technicals and sentiment indicators below. The age old problem being when markets or instruments get frothy, it becomes increasingly difficult to predict price when irrational exuberance becomes a major driver

The support for this comes from

1. BTC's RSI is now at levels last seen in 2013 when the crypto currency underwent a major correction falling from $1200 to below $400 in 4 trading days: while volatility has calmed down significantly since the wild west days of the currency, these levels strongly suggest a pullback is in order
2. Hype and hysteria about bitcoin and cryptos are above all time highs with record levels of Twitter and social media quotes in recent days: these are contrarian indicators
3. I like to refer to sentiment indicators to put numeric estimations on extremes of sentiment which again are mean reverting: below is the Crypto Fear and Greed Index which stands at 94 at pixel : its second highest level since records started in 2018. The last highest value was 95 in June 2019 after which BTC fell from a high of $14000 to an eventual  low of below $4000 in early 2020 preceding this current bull run

I've added an updating indicator below as a record of the current sentiment : a plot of the historical data is available from here 

I also opened an investment position in ARB in a longer term portfolio to maintain exposure and shift to longer term capital with broader horizons, this allows me to maintain some exposure to cryptoassest and BTC which seems firmly set to be the digital gold standard.

Update Tues 05 Jan 2021.

Post Covid and in these days of crypto frenzy there's a new even shorter timescale, crypto speed .. it broadly refers to price action where exponential advances occur in a matter of hours or days .. I have to admit that I am extremely impressed by the advance of ARB since yesterday's high tof 47p to today's intraday high of 63.5p: a further 50%.  Given that 7 trading days ago it was 16p, that is an increase of almost 300%. While I'd love to have held out more of my position for longer, the trick sometimes with trading is to manage entry and exit of positions by scaling either in or in this case out. . I had blown through any of my profit targets and exceeded even my wildest targets over the timescales of this trade: ARB is not hugely liquid and unwinding a position was proving tricky. Finally BTC did take a very sudden plunge yesterday moving from $34000 to $28000 in  a few hours with a $4000 spike down in 30 minutes: given the overstretched RSI and Extreme Greed Sentiment Index, it seemed reasonable that a correction was in order and ARB follows BTC in lock step. That was my bias and all the data seemed to confirm it so I sold and took pretty hefty profits.   I did add a smaller position in a long term investment portfolio as ARB provides not just exposure to bitcoin, nut to other digital currencies . This allows me to participate with reinvested capital from my trading profits, retaining exposure while not being too concerned about intermediate price volatility and pullbacks

Part of the psychology of my position management was predicated on bitcoin's unscrupulous past:  its relatively low liquidity and historical lumpy price action has often seen huge drops in price with little warning.  I'm not so sure those days are over and so I am more than content with my outcome even if it could have been better

That dip in BTC seems to have been bought in record time and the crypto currency is back above $32000 today suggesting that there is demand for any supply even at this lofty levels. The RSI is now at 81 as opposed to above 90 so some of the froth has been blown off and it may even be consolidating before making another move north

Today ARB also announced its December Operational results which at 95 BTC was lower than expected but given the rise in BTC price, its margin and profitability was  greatly improved. Finally, from being much overlooked and forgotten, ARB is now very much a story stock with smaller buyers flocking to absorb the fairly hefty sells that have been occurring over these past few  days

No matter how long I have been trading, I continue to learn and adapt. I also need these periodic reminders that the unexpected is often both extraordinary and hugely profitable.

Given the gains I made on this trade, I am more than happy with the monetary rewards which had grown to an uncomfortable percentage of my trading account: maintaining reinvested profits in ARB an investment portfolio allows me to retain some exposure, short circuit the inevitable FOMO and looks set to continue to produce gains even if they are less exponential than the past few weeks   This after all is crypto stuff and I still have a healthy respect for its wild side

I do expect ARB to pullback and checks its 8 EMA... it's only a matter of time though what price the 8 EMA is at may change!

A great trade and one of the biggest profits I have