ShuttleCast 4 Recap: Crypto Trading Strategies from a Binance Top Trader

Say Crypto, and the first thing that comes to people’s mind is trading. The stories of Bitcoin billionaires, and the dreams of buying a Lamborghini with profits from trading or hodling long are etched into every crypto community member’s mind. These colorful images have got both seasoned as well as newbies hooked on to the industry.

While industry veterans have already figured out crypto trading and even made a small fortune out of it, those who are new to cryptocurrencies are still trying to get a hang of the ropes. In the latest ShuttleCast episode, the CEO and founder of ShuttleOne Zhuang decided to deal with the question that hangs over the heads of every crypto investor.

Content covered in ShuttleCase episode 4:

- What drives the crypto market

- Crypto fundamentals and investors mistakes

- Taking advantage of crypto volatility

Understanding Crypto Trading Strategies

The best way to understand crypto trading strategies is by understanding the fundamental forces governing the crypto industry. While crypto trading is one of the first things a crypto investor does to book some profits along the way, they rarely take the time to understand the very asset they are putting their money on. If you ask seasoned crypto traders about the entire crypto trading process, some equate digital asset trading with that of stocks and equities, meanwhile others say that it is a completely different ballgame.

According to Zhuang, both of them are right in their own ways. He says that trading crypto assets is the same, yet different from traditional trading. In fact, he states that there is no right or wrong way to trade as long as the users are buying low and selling high. However, what matters is their goal, especially when someone wants to trade long or just hodl indefinitely hoping for the price to go up.

Take a Step Back, Look at Crypto Trading in Perspective

Some people find crypto trading to be easy while others struggle to figure out the best way to trade. If you want to understand crypto trading, then take a step back and look at it in perspective. Try to find out what drives the crypto market, its underlying fundamentals and the theories surrounding it.

A strong proponent of conducting one’s own research and understanding everything there is about the asset before committing funds to it, here are a few pointers to the new traders. Try to answer the following questions for your prospective project:

- What is the crypto asset is all about:, how it is issued, its use cases and more.

- Supply and Demand mechanism: Whether the token is an inflationary or a deflationary asset and any mint and burn mechanisms in place to regulate its supply in the market..

All these factors help traders evaluate the viability of such tokens as short term or long-term investments, or whether they are only good to book profits through day trading.

One common mistake when it came to trading cryptocurrencies that seasoned traders usually make: They don’t understand the fundamentals of crypto assets and base their trading decisions on hearsay and word of mouth. While trading based on noise about a particular token is a widely practiced trading strategy, the associated risks when practiced without sound knowledge of the token fundamentals.

“I would like to highlight that I always personally felt that the fundamental lack of knowledge of how any crypto token works will eventually become the downfall of those trading crypto assets.” - Zhuang, ShuttleOne CEO.

Volatility, a Risk as well as a Reward

Invest only what you can afford to lose, and not to risk life savings by hedging it against crypto tokens.

An example of the market trends and how crypto market capitalization surged from around $500 billion in 2018 to $3 trillion in 2021 when Bitcoin hit its peak valuation of $64000. Since then, the valuation has come down to around $2 trillion.

Volatility is not a bad thing as it also opens plenty of profit-making opportunities for crypto traders. It enables them to buy low and sell high during such turbulent events.

Here are two scenarios to explain how easy it is to leverage volatility to make profits. The first scenario is where one purchases a token at $1 to witness its price increase to $5 and the second where a token purchased at $1 falls to $0.5 and rises to $2 as the person continues to hold on to it. Both are highly likely scenarios that are quite common in the crypto markets, which resulted in profits.

While the first scenario is straightforward, registering a profit in the second scenario is possible only by pure luck or with a thorough understanding of that particular token’s fundamentals. Armed with such understanding, the trader will be in a position to decide whether he should continue to hold or sell at the first sight of price fall to cut his losses.

Connection Between Crypto Price Action and Fundamentals

During the session, Zhuang offered multiple real-world examples to show that the underlying fundamentals will play a huge role in determining the valuation of the token. Regarding the token minting process, he compared the project tokens issued during the ICO boom between 2016-18 with Bitcoin. The emission of bitcoin through mining and the cap on total supply at 21 million makes it a deflationary currency. The value of such a token is readily reflected by its price trend over the years. On the other hand, many projects that adopted the ICO route to raise funds issued a large number of tokens without any real use case or utility. While many bought into these tokens due to FOMO or pure speculation, their value eventually plummeted soon after with no takers.

On the other hand, the utility of Ether on Ethereum protocol as a prerequisite for participation in any decentralized applications or DeFi solutions has driven its value multiple folds in recent times. Further, Ethereum’s implementation of a burn mechanism to remove a certain portion of the gas fees from each transaction out of circulation has further driven ETH’s value as it is expected to increase the deman

Differences Between Crypto and Traditional Financial Instruments

The fundamental difference between traditional finance and cryptocurrencies is better distribution. Cryptocurrencies work on permissionless protocols like DEXs which enable wider distribution and can be easily accessed across multiple centralized and decentralized exchange platforms; it encourages more participation from traders and investors from around the world.

Meanwhile traditional instruments like stocks and equities can be accessed only on a handful of exchanges. Even then, not everyone can invest in these traditional assets due to certain regulatory requirements or geographical barriers.

The difference in distribution enables cryptos to register a rapid rise in terms of value, which is sometimes more than the traditional space.

Zhuang’s Personal Trading Strategy

Zhuang has been involved in the crypto industry for a long time, with his active trading experience stretching beyond 5 years. In this episode, he offers some insights into his personal trading strategies. He talks about Swing trading and how it allows the traders to earn profits irrespective of the market movement, which he calls market neutral strategy.

Watch the full episode of ShuttleCast here to find out what is a market neutral strategy:

Inspired by the embracement of market volatility, ShuttleOne’s latest multichain dashboard Metachain focuses on Trade Arbitrage - a cross-chain trading tool that allow you to trade on various exchanges at once, detect the arbitrage profit and easily take profit. This tool brings “Buy Low, Sell High” dream to reality.

Soon to be launched in April 2022, Metachain is a dream to reality tool for crypto traders.

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.

You may also like