In my previous article on Bitcoins, I said that before I trade any asset, I seek to
1. Understand dealer counterparty risk and trade it.
2. Identify/create correlated/synthetic asset classes and arbitrage their divergence.
Gradually, I am starting to identify correlated assets for Bitcoin specifically and cryptos generally. This will give me increased confidence to try and time the BTC market.
FUNFACT: Do you know that every January since 2013, BTC sold off massively?
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For those of you who trade Bitcoin BTC, one thing that will help your trading is to track the trading volumes of bitcoin at BTC China, the world’s largest bitcoin exchange as well as the foreign reserves of China.
If Chinese foreign reserves are reducing and BTCChina’s trading volumes are increasing, buy BTC.
Remember how I said that BTC crashed when Chinese government said they were investigating BTCChina? You see why now, right?
Bitcoin is negatively correlated with the foreign reserves right now.
Read the two articles below, they should shed more light.
Meanwhile the move by the CBN to ban banks from trading virtual currencies is at best uninformed. It is a vague ban that can be easily circumvented. The PBOC (China’s central bank) did something similar in December 2013. It didn’t take BTCChina up to a month to read, interpret and circumvent the law.
(On 18 December 2013, BTCChina announced that it was temporarily suspending acceptance of Chinese yuan deposits, attributing the decision to government regulations, following a 5 December statement from the People’s Bank of China (PBOC). On 30 January 2014, the exchange resumed accepting yuan deposits, after further studying the PBOC statement and other rules. While the PBOC prohibited banks from trading in Bitcoin, BTCChina explained that they were accepting yuan into their corporate bank account, and transferring that money to their customer accounts, before it was traded for bitcoins.)
PS: I still don’t personally trade BTC, BTC is best as a long term investment. I prefer Forex trading. It is way easier and straightforward than BTC trading, in my honest opinion.
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