Does anyone use crypto trading software

Zeva · February 22, 2022, 9:23pm

I’d like to get into crypto, however not sure the best way to proceed. Is there any way to capture volatility, I’m thinking software like CryptoHopper, there’s also Panda Analytics (see Crypto Science channel on youtube, here’s the link https://www.youtube.com/channel/UCEOzBYS2kLxOXJ2AtD0V3IQ to the channel, but this video in particular Crypto Portfolio Rebalancing: Make more money this market cycle! - YouTube) where he discusses rebalancing in what appears to be a quick method- rebalancing say weekly or fornightly and runs back-tests.

To me, this seems apparent, obvious to use something like this (are there others, better tools?) that provide some level of automation.

Interested to hear!

Of course, I am only interested in coins with large market caps and that are liquid…so the top 20 or 30. Not into may-bes, nor speculation, but want to use the techniques that any financial professional would use…on crypto.

FIREstarter · February 22, 2022, 9:56pm

There are several things to note here:

guys/girls who do YT videos on how to rebalance crypto portfolios to make money are bullshit. If they really had an edge, they would be more than stupid to shout it out to the world
volatility can really get you f**ked. Look at the bitcoin 15m chart from yesterday to get an idea. If you are on the wrong side of a trade, your stop losses might not even get triggered while the price shots up/down
if it would be as easy as using a simple software like CryptoHopper, don’t you think anybody would do it? CryptoHopper is earning money by selling shovels (in this case the software, which costs a certain amount monthly)
back-tests in crypto are not really working, from my humble point of view. Newbies think that you can run back-tests and then know how something will react in the future. Hint: it doesn’t work.
I’m pretty sure there are smarter people (no offense) in this area who are trying to earn money by trading cryptos. Usually, they use price action and resistance/support areas. Still, for the big coins, I’m pretty sure investment banks already have professional bots running to liquidate shorts etc.

I’m not saying that there’s no one out there who can benefit from the high volatility in crypto, but I doubt that you can find those people on Youtube or emulate their success by buying a cheap software.

Zeva · February 22, 2022, 10:02pm

I understand your POV and yeah, there are smarter people than me on this. Although I’m not considering volatility. Majority of the Yt videos are BS, agreed.

But I’d like to know that back tests show no correlation. Do you have further specifics, by chance?

I am not talking the type of trading referred to at Point 5. I refer to passive style.

FIREstarter · February 22, 2022, 10:12pm

I don’t have more detailed information, but I can tell you from experience that most technical analysis in crypto is just plain-stupid. So even if you run backtests with data for 3 or 5 years, there’s no magic crystal ball telling you that it will work out the same way this time again.

Also, it doesn’t really make sense to run back-tests with data from 3 years ago. We have way more money in the crypto market now than back in 2017 or 2018.

Most of the guys I’ve seen doing technical analysis and future predictions about price of BTC (which is harder to manipulate because of sheer market cap) are clueless. They’ll predict that we’ll see 20k BTC soon while the market goes down, and then 5 minutes later they get surprised by a big green candle.
So, from my humble point of view, it’s hard to impossible to really predict anything in the crypto market.

Not sure what you mean with passive style.

Zeva · February 22, 2022, 10:21pm

I understand what you are saying and agree. 100%

What I refer to, is investing like in a passive ETF style and to keep it simple, no gearing, margin lending etc therefore if a coin shoots up one day, crashes the next…it makes no difference.

The specific video I noted, on crypto science uses Panda Analytics, he gives a good overview of the strategy. Here’s the link Panda Analytics - Panda Index Builder. I think its free or low cost, the point being that you rebalance every say week (bc you are investing passive ETF style) whatever gains you’ve made great, whatever has underperformed, also OK BUT you keep to liquid, known, top 20 or top 30 coins.

A more simple vision, in effect.

FIREstarter · February 23, 2022, 5:05am

There are several flaws with the approach you mentioned. I watched the video you linked in your first post, because I don’t like to dismiss ideas if I haven’t checked them thoroughly.

Flaw #1: the guy picked dates when Crypto was in full bull market (01.01.2017 until 01.02.2018 and 01.12.2020 until 20.04.2021) This is important, because the strategy consists of buy and hold while rebalancing. It wouldn’t have worked if you started to invest in December 2017 and bought every month until March 2020.

Flaw #2: he picks the top 10 / 20 / 30 coins in his backtests. THE problem is: you only know in hindsight which coins are the best 10/20/30 performing coins. You can do the check easily yourself: look at the coins from the video. He talks about top 10 coins (while showing a top 20 portfolio…) Look at those top 20 coins from 27.04.2021 (when the video was released). You’ll find the following coins:
BTC, ETH, BNB, ADA, XRP, LTC, LINK, BCH, XLM, THETA, ATOM, VET, XMR, EOS, TRX, IOT, XEM, NEO, DASH, DCR

Open coinmarketcap today, sort by market cap, and you’ll see different coins in the top 20. Because I’m interested in back-tests, I did it:
grafik

So out of the top 20 coins from 27.04.2021, only 9 of them would still be in the top 20 today.

Flaw #3: you need to know the top 10/20/30 coins BEFOREHAND, not in hindsight. In his video, he’s showing the top 20 coins (MC) on 27.04.2021. He starts his backtesting on 01.01.2017. Back then, other coins were hyped. I would have to check my old Excel sheets and notes again, but I remember things like ETC and BSV. Not sure where I can check which coins had the largest MCs back then (yes, I could check manually for every coin on Coinmarketcap, but that’s not the idea). Some of the coins you can see in the video (e.g. LINK) didn’t even exist in 2017, or with a tiny MC.

Flaw #4: of course coins other than BTC/ETH have more potential to grow when you are in a bull market. The MC of BTC and ETH is pretty huge (together they account for 60.2% of total crypto market today), so the potential for growth is limited. Unless some really big fish decide to invest more into crypto market (e.g. investment banks).

Flaw #5: pandaanalytics is no longer working. I tried with different browsers to create a portfolio, but the page just goes blank. Which is also one of the comments under the video.

Summary: if you actually want to backtest properly, you need to find out the top 10/20/30 coins
at the date when you start the backtest, because you don’t know which coins will be
top 10/20/30 in 4 years. Which brings us back to the crystal ball voodoo.

To give you an idea, how the portfolio from the video would have performed, you can check the following table:

If you invested 1k USD on 27.04.2021, you would have ended up with:

526$ when holding the top 10 coins (without rebalancing, for simplicity)
837$ when holding BTC/ETH (without rebalancing)
688$ when holding only BTC

I’m sure it’s not better if you check top 20 or top 30 coins from 27.04.2021.
So, coming back to what I said yesterday already: back-testing is great, but if you hand-pick the dates and also don’t consider that you can’t pick the top 10/20/30 coins of the future, it might be better to just stick with BTC/ETH if you want to have exposure to crypto.

Zeva · February 24, 2022, 2:35pm

Wow, I truly appreciate your thoughtful analysis,thank you so much!.

I was wondering too, if there was something in my logic that I was missing, as I too, don’t like to dismiss something, and in this case, I learned alot from you, so again, thank you.

Yeah, nobody can see the future, but this gives me something, that I was thinking about - now I can eliminate this option. Trouble with crypto, is it’s just so volatile, and I was thinking that ETF style index investing seems to work well for the majority of passive investors (historically, anyway), the same strategy should work in crypto, albeit on some small collection of coins. It’s a pity Panda Analytics doesn’t work - I couldn’t connect to it either (but I am kind of new to crypto, anyway), but I know the fundamentals of portfolio management from previous studies, many years ago.

FIREstarter · February 24, 2022, 3:16pm

It might work out well if you stick to BTC and ETH, as I said before. For other coins, it’s hard to predict which coins will be top 10 in the next years. You can make some bets with small pocket money. Also, make sure you don’t buy BTC/ETH when it is close to ATHs. Or when your hairdresser tells you about BTC

What’s really important: it’s way more risky compared to a broad stock ETF (especially if we are talking about a world ETF like VT). If you are considering to invest some money in cryptos, I propose the following guidelines:

important: before buying crypto, make sure to invest money you can afford in a broad stock market ETF like VT
don’t invest more than 10% of your net worth in crypto (better 5%)
be prepared for an increase in emotional reactions due to the high volatility
be prepared to loose ALL of your money invested in crypto
95 or 98% of people should just stick to BTC/ETH if they want to have exposure to crypto
always be sceptical if someone tells you about “the next gem”, “the next big thing” etc in crypto. Those are most likely people trying to get your money, because they pump something first and then dump after you (and others bought)
if you want to be one of the 2%, be prepared to spend a lot of time on CT (crypto twitter) and in telegram groups. Be warned that this is addictive, and in no way it’s a guarantee that you will be able to make money.
99% of people in CT are dumping on you

As you can see from my table above, you would have fared much better sticking to a 50/50 BTC/ETH portfolio than sticking to top 10 coins. Check for @Bojack: he invested in BTC/ETH in 2020 almost at the bottom, and made quite some good amount of money. Another word of warning: back then nobody knew what’s going to happen, so it was a risky move. It paid out well though.

Zeva · February 24, 2022, 3:35pm

Yeah, this is something I’ve come to see first hand, crypto twitter is so much pump and dump. I am really disappointed in the quality of the info I am getting there.

FIREstarter · February 24, 2022, 3:41pm

As I’ve said: if you want to be one of the 2%, be prepared to spend lots of time. Mainly in educating yourself and understanding narratives, not time on CT itself.

Zeva · February 24, 2022, 3:46pm

Any sites, websites, yts, pointers? you can direct me to.

FIREstarter · February 24, 2022, 3:48pm

Still learning the stuff myself. Send me a PM, and we can discuss further. I don’t want to recommend something and then people jump blindly into something they’ll regret a few weeks later.