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Bitcoin - Forex Combo Strategy: RIP Cryptopia
Written by: PaxForex analytics dept - Wednesday, 15 May 2019 0 comments
Welcome to this week’s exciting update to my Bitcoin - Forex Combo Strategy. It has been quite a great week for everyone long Bitcoin and many other cryptocurrencies as institutional investors have pushed the price to above $8,000. The powerful push to the upside since last week’s update “Bitcoin - Forex Combo Strategy: Ethereum 2.0” has caused me to book some profits and reshuffle my overall cryptocurrency portfolio quite a bit. I will discuss it in more detail in a bit. I am not sure how many of you are familiar with the cryptocurrency exchange Cryptopia, but it is based in New Zealand and was hacked in January. The exchange lost roughly $15 million and while this amount may not appear as big as other hacks, for example the roughly $40 million Binanance hack I mentioned last week, this is a rather significant hack as it targeted many so called bag hodlers.
Cryptopia was proud to list a great number of altcoins and was on course to become a key cryptocurrency exchange. Before the hack occurred , the exchange had over 457 coins listed and over 1.4 million traders registered. Unfortunately the firm was unable to recover from the hack and appointed Grant Thornton as liquidators. Cryptopia pointed out that the exchange made attempts to return to profitability by cutting costs, but ultimately liquidation was the only solution. Analysts who followed the developments since the hack pointed out that Crypopia would go out of business. The primary reason was the slow process to get back to business following the hack. In comparison, Binance was barely impacted by their hack and moved along smoothly as it addressed and patched security issues while making sure all traders would be reimbursed 100%.
Another big problem Cryptopia was unable to handle is to secure its crypto assets. The exchange stated back in April that “We are 50% through securing all 457 coins listed to new private keys. Please remember to cancel any unwanted open orders as markets are being re-enabled one by one, and please take the time to refresh your 2FA, API key and password if you haven't already.” The exchange was also forced to postpone restarting their services, even partial services, several times. This all pointed towards management being overwhelmed by the hack. While some may point out that dealing with an altcoin hack could be more severe, it took Cryptopia three months to resume normal operability for Bitcoin, Ethereum and other main coins.
The situation was so severe that exchange founders Adam Clark and Rob Dawson returned in order to get the exchange back on track. This was further complicated as the New Zealand police didn’t allow Cryptopia back into its offices for one month as its digital forensic team was conducting its investigation directly on site. A bad situation got worse fast, but clients who lost funds may have to be a lot more patient. David Ruscoe from Grant Thornton added “We realise Cryptopia’s customers will want to have this matter resolved as soon as possible. We will conduct a thorough investigation, working with several different stakeholders including management and shareholders, to find the solution that is in the best interests of customers and stakeholders.”
After Binance was hacked, its CEO Zhao Changpeng supported the idea of a Bitcoin blockchain reorganization in order to penalize hackers and unlock Bitcoins. There is little support for such a reorganization and Adam Beck, the CEO of Blockstream, gave the perfect reasoning why Zhao’s idea is a bad one. He pointed out that “You just have to accept that Bitcoin is final because a whole bunch of factors which we can get into, but it’s basically, you know, all of the infrastructure is set up to automatically just continue consuming and finalizing transactions. And there’s a lot of inertia and equipment that’s just running away, mining transactions, so it’s very hard.”
He further added that “The software is not designed to undo things. The infrastructure isn’t designed to undo it. And there’s all kinds of side-effects if you did. And the side-effects are both technical and economic. In game theory, if you can undo something, the attacker can do other things. And people who disagree with the reorg can do other things. People are very incentivized to see it not happen because they’ve seen other coins have this happen and suffer a great loss of credibility as a result. And there are also geopolitical issues that, you know, you would establish a precedent that would erode one of the major benefits of Bitcoin, being censorship-resistance, which ties back to this kind of finality of the network.”
I think that a blockchain reorganization is indeed a bad idea because it will not discourage hackers from doing what they do. The case of Cryptopia, while not entirely a surprise after its January hack, has dealt a blow to altcoin hodlers. It also shows that in order to operate an exchange, being prepared for the worst is one of the most important aspects of running it. The intentions at Cryptopia were good, I have no doubt about it, but it appears that everything was rushed to market in order to jump on the bandwagon. Hackers realized it and took advantage of it. The liquidation of Cryptopia makes perfect sense and with that, rest in piece. I hope important lessons have been learned along the way for the next breed of decentralized exchanges.
my cryptocurrency portfolio. Yesterday, on May 14th 2019, I decided to book some profits in my Bitcoin portfolio and I sold half my portfolio at $8,200. To be more exact, I sold the 50 Bitcoins which I bought at $6,160 and the 50 Bitcoins which I bought at $4,100. I realized a profit of $307,000. I also took a short position in Bitcoin at $8,200 and sold 200 for a total of $1,640,000. I kept my 100 Bitcoins which I bought at $3,500. Earlier today, May 15th 2019, I sold my entire Ripple portfolio at $0.4000 and booked a profit of $615,000. I added a short position in Ethereum at $220, shorting 10,000 Ether for a total consideration of $2,200,000. The three images show my cryptocurrency trades.
Gold accelerated to the upside as trade tensions between the US and China intensified and price action is now trying to retake and maintain the psychologically important $1,300 level. It has traded above it on an intra-day level, but we need another solid push higher in order to extend to the upside. I am confident with my 100 lots Gold positions, bought at $1,275 for a margin requirement of 127,367 with a pip value of $100. The image below shows the rise in Gold.
Last week I finished with three open forex positions, I closed one for a big profit, added a second entry to one of my positions and one remained unchanged. I closed my 600 lots short position in the GBPCHF at 1.3000 today, May 15th 2019. My 200 lots short position resulted in a profit of 300 pips or $589,815 and my 400 lots short position in a profit of 400 pips or $1,572,836. This has been the most profitable forex trade in my trading career. Also today, I added to my 200 lots AUDUSD long position which I took on April 26th 2019 at 0.7025 for a margin requirement of $28,158 and with a pip value of $2,000.00 by buying 400 lots at 0.6925. The margin requirement was $55,366 with a pip value of $4,000.00. My two long positions in the NZDUSD, 200 lots bought at 0.6650 for a margin requirement of $26,600 and with a pip value of $2,000 and 400 lots bought at 0.6530 for a margin requirement of $53,199 and with a pip value of $4,000, remains unchanged and open. I am not planning to add more US Dollar short positions or Australian and New Zealand Dollar long positions to my forex portfolio until I trade out of my current US Dollar trades. The three images show the updates to my forex portfolio.
On May 10th 2019 I bought 200 lots in the CADJPY at 81.500 according to this trading recommendation “CADJPY Fundamental Analysis – May 10th 2019”. The margin requirement was $29,674 with a pip value of $1,830.78. Yesterday, May 14th 2019, I sold 200 lots in the EURGBP at 0.8680 for a margin requirement of $44,734 with a pip value of $2,568.48. The trading recommendation can be found at “EURGBP Fundamental Analysis – May 14th 2019”. The two images below show the new net additions to my forex portfolio.
Here is the summary of my Bitcoin - Forex Combo portfolio: I hodl 100 Bitcoins worth $791,926 and have a 200 Bitcoins short position worth $1,679,656. I have a 10,000 Ethereum short position worth $2,049,100, a 100 lots Gold position worth $372,967 with a total cash portfolio worth $6,756,207. In addition I have the following forex positions on my portfolio: a 600 lots AUDUSD long position worth -$128,476, a 600 lots NZDUSD long position worth -$4,201, a 200 lots CADJPY long position worth -$38,065 and a 200 lots EURGBP short position worth -$42,594. My total Bitcoin - Forex Combo portfolio is worth $11,436,520, up $2,079,954 from last week and at a new all-time high. The past two weeks I saw an explosion in my value thanks to a combination of forex related trades plus the spike in cryptocurrency prices. The result was the best trading week in my career. I am expecting that we could see a move lower in cryptocurrency prices as institutional traders will take a breather. This is usually the time retail traders get into their positions and often signals a market reversal. Use my Bitcoin - Forex Combo Strategy and open your own PaxForex Trading Account now so that you can increase your earnings with this one-two-three- punch!