Buy bitcoin as a trade not an investment

I thought I’d walk through a trade I put on this week. To be clear, this is a short-term tactical trade, not an investment. Meaning I’m looking to capture a short-term rebound in crypto.

To be sure, the risk profile of the entire market has changed thanks to Putin’s invasion of Ukraine. We’ve navigated through a massive fear trade, which can signal a bottom in risk assets. If you want to learn more about fear trades, checkout this post.

Furthermore, history suggests that conflicts like the Russian/Ukraine war usually signal a buying opportunity in risky assets. This hypothesis proved correct in the past, namely Vietnam, Gulf war and Iraq war.

So, we have a situation where investor’s are panicking. Fear is to the moon. I always fall back on the Wall Street proverb, “buy weakness and sell strength.” That’s what I’m doing here.

Why I like Bitcoin as a trade?

Bitcoin did not make a new low along with stocks
Weaponization of the financial system
Not tied to debt
Clearly defined stop-loss level

Indeed, the process involved when purchasing Bitcoin and storing in a private wallet is not easy. You will need a fair amount of technical knowledge. Since buying Bitcoin and being your own custodian is a royal pain, using a proxy for this trade makes sense. The ability to enter and exit quickly is top priority.

Bitcoin proxy – Purpose Bitcoin ETF (BTCC – TSX)

I have never traded BTCC before, so I will be looking into how well the ETF tracks the actual price of Bitcoin. The financial industry terms this process tracking error. Surely, due to the speed at which Bitcoin prices move, I will analyze tracking error as a post mortem process.

Risk Parameters

Entry price – $8.90
Stop loss – $8.20
Take profit – $10.00
max loss – (7.8%)
target gain – 12%

It’s worth expanding on the weaponization of the financial system noted above. Clearly, the G7 have been targeting the finances of Russian oligarchs, corporations and the entire economy. However, the Canadian government recently targeted their own citizens with similar measures. Anyone who supported the trucker protest in Canada is being treated exactly like Putin and his cronies. It’s not fair. And I believe it will drive capital towards the crypto space as individual liberties are slowly taken away regardless of where you live.

Conclusion

All in all, I will post the results of this trade and ongoing commentary. I hope you will find this helpful. My goal is to spell out the reasons for the trade and clearly layout the risk management parameters. In this case, I’m targeting a 12% return over the next 3-4 weeks.

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