The Low-Risk Way to Make Big Profits From Altcoin Volatility

The Low-Risk Way to Make Big Profits From Altcoin Volatility

Do you remember the lollipop and rainbow fantasies of your childhood? I do.

In my childhood dreams, I’d get everything I wanted without any effort on my part. Things would come easily. And I’d always be happy.

As children, for the most part, this is our reality. The experience of life as a very young child does little to prepare us for the harsh realities of life.

For the most part as children, we’re sheltered from anything other than the tyranny of a strict bedtime and some limits on our personal conduct.

This fantasy all ended for me at the age of eight when I was placed in a group home and later in foster care.

To say this was jarring is an understatement. I wasn’t mentally or physically prepared for the violence, loneliness and injustice I would experience over the remainder of my childhood.

I would imagine that many new bitcoiners have experienced similar emotions as bitcoin dropped 24% from its high of $74,000 to a recent low of $56,500.

I wish I could tell you it will get better. But we’re grown-ups now. And grown-ups have to live in reality.

Taking a quick look at the bitcoin charts suggests we’re oversold right now. (As I write this, it’s Friday, May 3.) And we should run back up to the $62,000-64,000 range. But if we can’t break above that level, we’ll likely see a move down to $52,000.

If $52,000 doesn’t hold, don’t be shocked to see an intraday low somewhere between $42,000 and $45,000.

Let me be very clear: I don’t know if bitcoin will trade that low. But I do know it’s possible.

And just like when I was an eight-year-old kid about to enter my first group home… I’m going to do for you what I wish someone had done for me: Give you a realistic appraisal of what could happen and how to prepare yourself for it.

Two Strategies: Long-Term Stack Vs. Short-Term Stack

First things first, when investing in bitcoin I recommend having two separate accounts/wallets.

One account/wallet should be for what I call your “core” stack. The other is for your “trading” stack.

The core stack is the bitcoin you hold for the long term. You don’t trade, panic sell or borrow against your core stack in any way.

I’m on record looking for bitcoin to hit a minimum of $150,000 over the next 18 months. That’s when I would suggest taking profits on at least 50% of your core stack.

I’ve forecast bitcoin to trade at $700,000 by the end of the decade. Your core stack is to take advantage of bitcoin’s long term value appreciation.

Hear me when I tell you this: It’s a mistake to try and time your core stack.

You’re committing financial self-harm if you’re thinking, “Well Teeka said bitcoin might hit $42,000, why don’t I sell now and buy back in later.”

As I’ve stated I can’t guarantee bitcoin will drop that much. Always remember, bitcoin is like life, highly unpredictable over the short term.

Here’s what I mean…

What happens if we have a sudden break in the banking system and the world flocks to bitcoin and it doubles in price like it did in March 2023 when we saw three of the four largest U.S. bank failures in history (First Republic, Silicon Valley, and Signature)?

No one could foresee that. That’s why I don’t mess with the core stack even when I expect a significant sell off.

I just leave it alone because the risk of missing the run is far more dangerous to my long-term financial health than dealing with some paper losses for a few weeks or months.

Does that make sense?

The next account I recommend you have is a “trading” stack. The trading stack allows you to take advantage of the volatility inherent within the bitcoin and altcoin markets. (Altcoins is the name given to cryptos other than bitcoin.)

In a recent article, I explained how to layer into bitcoin on weakness. (You can read it right here.) Today I want to take that idea a step further and share with you how I use the same idea to trade altcoins.

How To Buy On Weakness Without Getting Burned

Buying on price weakness during a bull market can be an amazing way to rack up a steady piggy bank of profits while you wait for your core stack profits to come to fruition.

In the past, a big mistake I have made when buying on weakness has been buying too early and buying too big.

What I’ve learned to do is scale in from a small initial position and steadily increase my position as the price drops further.

You want to put the most amount of money to work when the price is at its weakest. Most folks do the opposite and put the largest amount of money in when the price is at its strongest.

So how do we reverse that??

The approach I’m about to share with you won’t have you making the most amount of money under every single trading condition.

Just like in business – where it’s a mistake to try to be everything to everyone – in trading it’s a mistake to try and catch every single type of trading move.

When it comes to trading positions, I look to make the most money I can from the most extreme market moves – if and when they present themselves.

If an extreme market move doesn’t present itself, then this approach will underperform other short-term trading strategies like mean reversion trading. (Reversion to the mean simply means asset prices will return to their averages over time.)

It bears repeating: When buying on weakness you want to have the most amount of money available to invest when things look their worst. Most folks do it the other way around. They commit the most amount of money when things look the best.

If you can reverse that impulse, over time, it will make you crazy rich. Life changing, crazy rich. It sounds easy. But going against what you intuitively believe is impossible for most folks to do.

And because I’m going to ask you to do something so counterintuitive... I suggest you start really small so it’s easier for you to stick with this idea.

When trading altcoins, you must remember that they rise based on whether bitcoin is rising or falling.

If bitcoin drops 10%, the alts might drop 30%. If bitcoin drops 20%, the alts might drop 50%. And if bitcoin drops more than 30%, the alts can drop more than 90%.

This volatility relationship between bitcoin and the alts is called “beta”. The beta shows how an asset moves relative to the overall market. So it’s always measured against a benchmark asset.

For instance, in the stock market the S&P 500 is the benchmark – similar to how bitcoin is the benchmark in crypto. All other performance and volatility of individual stocks and indexes is compared to (“benchmarked” against) the S&P 500.

So a stock with a beta of 2 will be two times more volatile than the S&P 500. That means if the S&P 500 were to drop 5%, a stock with a beta of 2 will generally drop 10%.

In the altcoin crypto world, a beta of 2-plus is the norm. For instance, as I write, bitcoin is down 20% from its high. But Dogecoin (DOGE) has been down as much as 45%.

Currently, bitcoin is bouncing up. It’s risen 6% from its recent trading low but over the same period Dogecoin is up over 11%.

That’s the double edge sword of beta.

Because beta can cut you so hard if you’re on the wrong side of it, it’s important you respect it when taking positions in high beta trades. But if you can harness beta, it can change your life.

When to Time Your Altcoin Trades

As I’ve shown you, when bitcoin takes it on the chin, altcoins get massacred. That’s why I believe it’s a mistake to just look at the individual altcoin charts to decide when to trade them. You should also look at the bitcoin chart.

Since bitcoin has such an outsized influence on the direction of the altcoins, you want to time your entries into altcoin trades based on the levels you expect bitcoin to hit.

So if you expect bitcoin to go down, first figure out where you think it will drop to and use that to time your entry into your altcoin trade.

For instance, I believe bitcoin will rally to $62,000-64,000 then sell off to the $52,000 range. Sure, there’s some money to be made in the alts trading that bounce higher in BTC.

But remember what I wrote earlier? I’m not looking to catch every single move. I want the big moves. So I want to wait for BTC to sell off.

I’m going to time my altcoin trade entries against bitcoin’s price levels not the altcoins price levels.

Does that make sense?

Let’s assume we have $1,000 to put into an altcoin trade…

This happened in April 2021 when bitcoin peaked at $64,000 and then dropped all the way to $28,800 on June 22. That was a 55% drop in a bull market.

So let’s look at what happened to Dogecoin during this period…

Now of course you wouldn’t get the absolute low on your buys. So please keep that in mind. But let’s assume we did and figure out our cost basis.

We bought $200 of Doge at $0.23… Another $200 worth at $0.20… And the final piece of $600 worth also at $0.20.

This would have given us a grand total of 4,869.56 Dogecoin for a cost basis of $0.2053.

When Do You Take Profits on the Altcoin Trade?

You can take profits as your benchmark (in this case bitcoin) starts to rally. Remember this is short term trading — not long-term position holding.

After hitting a low of $30,000 on May 19, BTC rallied 26% higher to $38,000 on June 2. On the same day, DOGE hit a high of $0.46 – a 124% move higher on the trading positions cost basis of $0.2053.

This is how beta can work in your favor. You can see that DOGE went up almost five times the price of bitcoin And by using this strategy, you got to scoop up most of that beta in your favor.

Remember, real life won’t work exactly like this. You won’t get the absolute top or bottom. But by using this technique, you’ll automatically commit most of your money when things look the worst, which is of course when the price paid is the best.

By getting great entry prices, you give yourself lots of wiggle room should trading conditions stay messy. It keeps your trading losses smaller and your profits much bigger.

Be sure to read through this guide a few times and when you put it to work for yourself remember to start small, very small.

The beautiful thing about crypto is it’s infinitely divisible (Well, not infinitely, but down to 0.00000001). So you can trade with as little as $50 and still run this strategy.

Not for life-changing profits, of course. But for your own education and training.

It’s a low stakes, low risk way to learn how to make big money from the markets - by first playing with small money.

Once you gain confidence from this strategy, you can steadily increase your position size and start making real money by training yourself to buy when things look at their absolute worst.

Let the Game Come To You.™

Big T