Written by Zach Le

Founding Partner, Sutler Ventures
September 3 2019

The Effects of Margin Trading on Altcoins

Alt season (2)

 

disclaimer

 

Bitcoin has reclaimed the $10,000 price level.  It is unclear if we will retest the 2019 high of $14,000 or the CME gap around $8,800, but there is a high probability that the year low of $3,000 is the floor.

This leaves many alts holders wondering...when moon?

 

moon

 

I see a lot of articles discussing the signs of alt market rally. Unfortunately, the rally has yet to materialize as crucial alts/BTC support levels fail to hold. Many analysts and market technicians can give you a more detailed explanation, based on a variety of data points, as to why this is the case. I’m not an expert at those things. To me, the reason is simple: more sellers than buyers.

I was taught that volume dictates price. This knowledge was passed on to me by a seasoned market maker a long time ago. I’m sure many people view this as a very prehistoric and simplistic view on price action, and I agree. Trading has evolved, the market has evolved, but retail traders are still the same. In my opinion, crypto is still a predominantly retail based movement and the upcoming bull cycle will be driven by the people. Institutions are all in the game now, but they are still setting up infrastructure. This gives us one to two more cycles before they take it all over. If the assumptions above hold true, then the next step is to understand retail crypto sentiment.

The general mindset of a large portion of retail traders is to generate the most returns in the shortest amount of time by chasing volatility. Everyone wants to get rich quick. For awhile, altcoins were the best way to get that 50%+ gain in a day. However, that is no longer the case with the introduction of leveraged products. Now, a 10% move in bitcoin can easily translate to 100%+ move. A trader can get more returns trading BTC and large caps on margin than they would trading mid to low cap altcoins. As a result, margin trading has become the preferred method for retail traders to generate returns. Therefore, everyone dumps their alts to trade BTC on margin.

Without the retail trading volume, the mid to low cap altcoin market have become a graveyard for pump and dumps. In my opinion, margin trading is one of the main reasons why the altcoin market continues to slide further and BTC dominance continues to trend up. The plus side to all of this is that margin trading is beginning to expand into alts. Just give it some time for the market to catch on. Soon we’ll be asking… "When margin listing?"

 

altseason

Could alt season be right around the corner?
Source: charts.woobull.com

Topics: Crypto, Bitcoin, Cryptocurrency, Trading, Altcoins, Alt season, BTC, Retail investors, Margin trading, Bull market