Bitcoin Drops 6% and I Open a New Collateralized Position | Here Are My Buy Targets

in hive-167922 •  last month 

Bitcoin and the rest of the crypto space (for the most part) have been trading in a range. We're waiting to see this consolidation period end and see either a major explosion to the upside or to the downside in Bitcoin and the rest of the crypto market.

To the initiated, a 6% drop in Bitcoin is nothing to sweat. Perhaps a buying opportunity if you feel that it's a short term pullback before the major run up or perhaps an oh shit moment where you look to exit before a larger drop comes.

Wherever you sit on that spectrum, the fundamentals of Bitcoin haven't changed. Not even a little. In fact, the rest of the world is strengthening Bitcoin's use case, and I believe that what we're seeing is the perfect stage for the crypto industry to continue to mature in the public's mind.

Collateralized BTC

Thanks to some DeFi services and even some of the centralized custodial options, we now have a lot of opportunities to collateralize some of our crypto and use it to either margin trade on these digital assets that we know and love or to even collateralize our bags and hedge our risk in equities or some other market that isn't tied to Bitcoin.

I spent the day setting up a new collateralization product through a company called Blockfi. I'm in the process of writing a review about Blockfi and their collateralized loan product, and I've grown to enjoy the way they've set it up.

Yes, Blockfi is centralized and yes, I'm aware of "Not my keys, not my crypto".

That's why I'm using BlockFi to collateralize a portion of my BTC bags and not all of them. I can't stress enough caution when using tools like this.

In the chart above, I added a little box at the bottom at the $4900 price level. This is the price where I would get margin called on my Bitcoin collateral position.

The great thing about BlockFi (as compared to DeFi services) is that I'll have 72 hours to deposit more collateral -- should we see BTC suddenly drop to $4900.

Of course, there are many trade offs to DeFi versus "CeFi" but I believe this 72 hour grace period to be a benefit of centralized services.

It's interesting to note how important margin calls and margin levels are in crypto (and in equities, for that matter). The Black Thursday event that happened back in March when crypto crashed was largely due to people getting margin called and liquidated.

New Buy Levels for BTC

I keep reiterating this every time I post a chart: I am not a technical analyst and I know very little about charting. I just use some simple tools and mostly my gut to decide where to buy and where to sell. I've picked up a few tips and tricks during our LEO roundtable podcast when it comes to TA, but I am by no means any sort of knowledgable resource on the subject.

With that in mind, I set some buy levels (and bids over on Bittrex) at the following price levels:

  1. $8700
  2. $8050
  3. $7250

The general idea here is that if we see a BTC pullback to $7k (which many have been calling for), I'll average in and get a sizable amount of BTC back that I had sold above $9800.

We have two scenarios here:

  1. either we pull back to $7000 and I get filled
  2. or this is just a short-term pull back before the rally beyond $10k

Either way, I have plenty of BTC now and will only be happier to accumulate some more if the price drops. I win in either scenario and I think that is the mark of a well placed investment versus a trade. No matter what happens (referring back to my previous post), I'll be directionally correct over the long-term time horizon.. which is all that matters to me. I think 99.999% of crypto users believe that BTC will be worth more in 5 years than it is today.

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I have never got deep into the various types of trading. I probably should start expanding my knowledge in this area.

Yeah it's fun stuff. I wouldn't classify myself as a trader as I tend to invest for the long-term and go heavy on the things that I believe in for the next 5+ years (i.e. btc, hive, square, tesla, etc.).

Trading with small amounts of capital is just a way for me to have fun and stay engaged above all else

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I just opened a Blockfi account myself. I have a lot of my crypto in the Celsius Network and even though I like them I do not want to put everything in one provider, especially a centralized entity. Another part of my STeem is due and I am converting it to BTC, will put it in that account to see how it performs

Their withdrawal fees are high though... 0.0025 BTC if you take out more then once per month, that is a lot higher then a regular bank and BTC fees are not that steep

Blockfi is great. I haven't used Celsius, but will definitely check it out.

Personally, I'm split up with some in MakerDAO and some in BlockFi (in terms of collateral positions).

There are some pros and cons to Blockfi.. one is definitely the withdrawal limitations. Luckily, I don't need to withdrawal more than 1x a month so I can skirt that fee.

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check out my last post, new DEFI project that came out 2 days ago... big backing, might be worth a gamble

Waiting for that Blockfi review :)

:) I'm excited to post that. It's been an interesting process to sign up, play with the interest-bearing accounts and now initiate a collateralized loan.

Main downside is that the minimum loan is $5k and I had to post 1.5 BTC as collateral. I personally don't enjoy having that much in a centralized custodian, but I'll dive into the pros and cons in my post

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With a little TA in your back pocket, I'm starting to see that you are becoming an even more dangerous trader/investor...sign me up for your future hedge fund token:)

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haha, I like having it in my back pocket. I'm not relying on it to make decisions completely, but I enjoy feeling at least slightly more informed when it comes to timing

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