Have crypto assets inherited shared character?

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By Chris Coney

Back when I was still learning to trade stocks, one of the concepts I was taught was to “share character”.

It is the idea that the price action of a certain stock has unique characteristics, bordering on a personality.

The split character manifests itself in certain repeating patterns common to this particular stock chart.

I saw this as very similar to getting to know a person. Once I know a person’s character, I can predict with a high degree of probability what they will do in certain scenarios.

While this may sound like a general description of technical analysis as a whole, split character is a type of analysis specific to a single asset.

In other words, it lets you focus on a single asset, so you can study its behavior closely to learn about its distinctive patterns and traits.

And when I moved into currency trading, I found that the concept of actionability still applied. I noticed that Cable (the insiders nickname for GBP/USD) had some character once I traded it for a while.

This was an extremely valuable discovery for me because not only could I use technical analysis to determine the odds of one price move over another…but I could also further improve the accuracy of this prediction by learning about the character of the asset.

Cryptographic character

Back in 2016, when I started posting daily YouTube videos analyzing and summarizing developments in the crypto space, there wasn’t much character in individual crypto assets.

The crypto rose or fell as if it were a unified asset.

Now that the market is more developed, some assets are starting to show their own character.

Take this side-by-side comparison of Bitcoin (BTC, Tech/Adoption Grade “A-”) and Ethereum (ETH, Tech/Adoption Grade “B”) for example:

Side-by-side comparison of Bitcoin (left) and Ethereum (right). Click here to see full size image.

There is a bit of correlation here, which means the chart patterns look pretty similar. Although Bitcoin’s recent rally may be more intense, the general pattern is the same.

Now take this chart comparing Bitcoin with QuickSwap (FAST, not yet rated):

Side-by-side comparison of Bitcoin (left) and QuickSwap (right). Click here to view full size image.

With these two graphs, it is easy to spot the differences. QuickSwap showed no response to the huge rally we’ve seen recently in Bitcoin and Ethereum.

Even if we take QuickSwap in isolation, it has this particular trait where it consistently prints big, high wicks (see yellow arrows):

By the way, the most likely explanation for this is that in the beginning, QuickSwap offered a lot of rewards in its own name. This means that there are likely many holders looking for opportunities to sell them whenever the price goes up.

While that may explain this particular trait, it has nothing to do with what I want to say today.

Even though character can be explainable in the way I showed above, most of the time there is no single explanation as to why an asset behaves the way it does.

In the same way, there is no simple explanation as to why a person has a certain character.

Conclusion

During one of my forex training courses, the trainer suggested that we specialize in one or two trading pairs.

The reason for this is what I have already explained above: knowing the character of an asset gives you a probabilistic advantage in addition to the advantage that a good technical analysis already gives you.

In fact, most trading companies and hedge funds have one or more traders who are appointed to exclusively trade one currency pair.

They spend all day watching the GBP/USD chart and any associated forces that might affect the price.

This kind of specialty is hard to beat.

So what do I suggest? What’s the big takeaway here?

That’s it: keep your crypto asset portfolios small.

Hold and trade a handful of assets, not 50. Get to know these assets using fundamental and technical analysis.

Study their charts so carefully that if they start to form a particular pattern, your brain will think, “This looks like June 2020.”

The brain is a pattern recognition system and repetition is the mother of learning.

So, continued exposure to the same set of charts will ingrain these patterns in your mind to the point where your mind will automatically start drawing your attention to certain emerging patterns.

This way you can stay ahead of the game and help keep your feet on the ground when prices fluctuate.

It’s like getting to know a person deeply, it’s a commitment, but it’s worth it.

But that’s all I have for you today. Let me know about any emerging patterns you’ve noticed in your favorite cryptos by tweeting @WeissCrypto.

I’ll see you back here next week with another update.

Until there,

Chris Coney

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