Finding Opportunity In Bitcoin's Reckoning

What a difference a year makes. Or, in the case of Bitcoin, the first weeks of a new year.

Since approaching an all-time high of almost $20,000 in mid-December 2017, the household name in cryptocurrency has lost nearly half of its value in just 30 days—and even giving up more than $30 billion in market value in just a 24 hour span. The sell-off is a pronounced reaction to the crypto frenzy that occured late in 2017 and drove the price of the currency up 700 percent over a six-month period.

I don’t think this is the end of bitcoin, but I also can’t say whether the price of the currency isn’t going to fall further, particularly as gravity and government regulators catch up with the cryptos’ meteoric rise. What I am sure of is that there is still a lot of unanticipated alpha in crypto stocks, and day traders should prepare themselves to take the current volatility in these assets as an opportunity to adapt.

I don’t say this as a contrarian — although it’s best not to follow the herd — but as someone with a lot of hands-on experience with market psychology. Even in 2018, there are still stocks primed to move on crypto and blockchain news.

Point in case, I had winning trade with Ameri Holdings Inc AMRH several days ago after the price spiked 300 percent on blockchain-related company news. However, I also nearly lost $4.5k on that trade because of a late fill and my own commitment to coming out of the trade in the black. I was driven to enter and hold that position because it was something I had trained myself to do in situations where a stock in a strong market is spiking up on the open on a running trend.

Like me, other traders are approaching these positions with similar mindset of capturing these drastic moves. They have been trained on it, particularly in this bull market.  However, introducing the volatility of an ongoing correction in crypto is bound to fuel the fear and greed on the market.

Traders who can adapt to the new intermarket climate are those that stand to benefit the most. Trading volume and the order book provide strong indications about how these moves can play out in the event of news or volatility in the crypto space. Quickly identifying and scalping these changes as they spike and rebound will open up more — but narrower — opportunities to trade.
Disclosure: Warrior Trading is an editorial partner of Benzinga.