The significance of a cryptocurrency index.
  • Feature: Update on Cryptocurrencies as of August 15th by Van K. Tharp Ph.D.
  • Workshops: 5 London Events, October
  • Tips: Sunset for Fiat Currency? by R.J. Hixson
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#903 August 16, 2018
London Workshops
Watch An Extensive Overview of This Course

Instructor, RJ Hixson explains the objectives of the How To Develop A Winning Trading System That Fit You workshop in this video.

Feature Article

Update on Cryptocurrencies
As of August 15th
Van K. Tharp Ph.D.
DR's Photo
In May 2018 Bloomberg announced that they had formed a cryptocurrency index which is significant for a few reasons. First, Bloomberg only caters to institutional clients so their index is their first step to widespread institutional involvement. Secondly, either in 2018 or early 2019 we will see ETFs for both BTC and ETH. Chances are that Bloomberg’s index will form the basis for a cryptoasset index based ETF in the next two years. In that same time period, we are also going to see the SEC end its war with ICOs and end its argument that anyone raising capital with the promise of a profit is selling a security. In addition, the SEC will allow regulated exchanges for cryptoassets to open sometime in the next two years. After that, institutions will move significant assets into the cryptoasset markets and the eventual market cap will probably be in the neighborhood of 20 trillion dollars.

So let’s take a look at the Bloomberg's new Galaxy Crypto Index. The index tracks ten major cryptoassets: Bitcoin (BTC), Bitcoin Cash (BCH), Ethereum (ETH), Ethereum Classic (ETC), Litecoin (LTC), EOS (EOS), Ripple (XRP), and three privacy coins DASH (DASH), Z-Coin (ZEC), and Monero (XRM). They started the index in May at 1000. It reached a high of 1020.73 on May 4th but the index shows a clear downtrend and it’s probably dangerous to invest in the asset class until we at least have two months of stable prices. Here is a graph of the index to date -

Chart 1
Bitwise also has opened a fund you can actually invest in and it's based on their HOLD 10 Private Index. The only difference between this index and the Bloomberg Index is that the Bloomberg Index holds Ethereum Classic (ETC) while the Hold 10 has Stellar (XLM) instead.

The table below shows Bitcoin, a 1st generation crypto asset, plus two second-generation crypto assets ETH and NEO, and two third generation crypto assets (Iota and Skycoin). BTC is basically just a ledger whereas Ethereum and Neo both enable smart contract execution on the ledger. Finally, IOTA and Skycoin are important because they combine smart contracts with huge scalability and zero transaction cost. Just because a crypto is third generation, however, doesn’t mean it will survive and dominate earlier generation cryptos. I’ve also added the prices for these coins on Jan 15, 2017 to put the current crash into perspective.
Chart 2
Date of the All-Time High Closes
*Dec 16, 2017 ** Jan 13, 2018 ***Jan 15, 2018 **** Dec 8, 2017 ***** Dec 29, 2017

I have also added a second table which includes the market cap for cryptoassets, the percentage of Bitcoin of the total market cap, the percent of market cap for the top five cryptocurrencies, and the number of cryptocurrencies listed.
Chart 2
* Bitcoin was as high as 90% of the market cap of all cryptos at the beginning of 2017 to as low as 32% at the top of the market. Part of the difference is that there are now over 1,500 cryptocurrencies.
** This was the peak of the crypto market in terms of market cap. Data via Tama Churchouse, Asia West Investor email on 4/11/18

The data in both of these tables comes from

Notice that the market cap on June 15 has fallen 69.25% since January 8th when we first started doing the crypto monthly update.

Yahoo Finance now lists prices for about 100 cryptocurrencies so I can run some of my normal studies on the data. I’m only looking at those coins that Yahoo lists which have at least 100 days of data – which does not include every crypto in the top 100 list by market cap.
Chart 2
No crypto has a Market SQN score (100 days) over 1.0 and only the top five have positive scores. Cryptos are generally hated right now and big money is trying to take the market over by scaring other people out. Generally, they are doing a good job because this is a very strong bear market. When the institutions believe they have sufficient control and size of the market, they will let the price rise and you can expect to see the first Bitcoin ETF. People will get excited about cryptoassets again at that time.

In my market model, I have a different listing for the top 15 and the bottom 15 cryptoassets. The table above uses Yahoo data and the table below uses data. In the next few months, we expect to integrate this information, but for now I’ll just report both sets of data separately.
Chart 2
We have also classified the coins by type. We expect to improve in time this very preliminary version.
Chart 2
Last month, there were some green and yellow symbols these tables – but all of those turned out to be part of the dead cat bounce. Now, everything is red and brown. Remember the Bloomberg Index hit an all-time low yesterday (August 15th).

If I were monitoring the market type, I’m sure cryptos would be bear volatile. The purpose of this report is just to give you a status quo of the cryptoasset markets, not to predict. The market type right now is definitely bear and that might continue for a while.
Earlier this month my executive assistant opened up her own crypto portfolio with a small amount of money. We are not in the recommendation business so I’m not going to tell you what I recommended her to buy. We can, however, easily use the Hold 10 Index as a proxy. Right now, that is down but over the next few months, we will track that portfolio.

Bottom Line

  1. I don’t know what Bitcoin is going to do in the next six months. In fact, I don’t even like BTC because it is too slow to send, too expensive to send, and it it’s currently using up $1.5 billion dollars’ worth of our energy to produce. All this for a coin with a market cap right now of $109 billion.
  2. I don’t know if the second and third generation crypto assets (Iota and Sky) will be the primary vehicles of the future. If they survive, I’m sure there will be lots of changes through forks.
  3. I am convinced that blockchain technology is absolutely here to stay and that the revolution taking place will be the biggest in my lifetime. It will change everything.
  4. 2018 is currently a difficult year for cryptoassets because their legal status is unclear. To some agencies, they are a security. To the IRS (and to most other national taxing authorities), they are property which means a tax event occurs as soon as you sell any. For example, if you were to use a bitcoin debit card to buy coffee, you would have just created a tax event. Cryptoassets need the $600 exclusion rule that applies to FOREX before they can become a major alternative to other currencies.
  5. In addition, while crypto projects are in their infancy and all of these small companies have to deal with the SEC, any broad adoption explosion will be difficult if not impossible. Huge legal questions hamper innovation.
  6. There will be ETFs for both BTC and ETH sometime in 2019. When that happens, the underlying coin prices will explode and the crypto market in general will take off big time.
  7. I’ve offered to help my staff create their own crypto portfolio but most are too reluctant to do anything. Only my personal executive assistant and one other staff member have set up one.
  8. Right now, however, is not the best time to set up a cryptoasset portfolio. Big money hasn’t gotten enough control yet.
  9. Finally, many of the best traders/investors in the world became that way because of a huge edge and because they were the in the right place at the right time. Cryptoassets offer that kind of edge and that kind of opportunity.

Until the September 15th crypto update, this is Van Tharp.
Learn Van's motivation behind his workshops in the video below. Then come see him in person this October in London.
video - what we teach

Trading Tip

Sunset for Fiat Currency?
by R.J. Hixson
Van's Photo

In its early days, Bitcoin attracted many for its promise of transactional freedom from governmental or institutional control. Indeed, some of those wanted to avoid governmental oversight because their transactions were illegal (think Silk Road) or because they were evading taxes (think money laundering). That illicit association kept a lot of investors and institutions away from bitcoin and other cryptoassets for many years. In 2018, however, billions of dollars are flowing into cryptoassets, infrastructure projects, and the crypto ecosystem. What do entrepreneurs and institutions see on the far side of the current bear market?

The Implied Promise

First, let’s go back. Back before nation states and republics when the rules emanated from a person – a king, a queen, or a lord. Those in power kept their power in large part through a primary instrument - the sword. If you didn’t do as the king wished or decreed, armed soldiers took care of the dirty work. Crude perhaps but effective none the less.

The secondary instrument of control was through the currency. Those in power controlled what coins were used, how they were created, and how many there were. Transactions – and ultimately taxation – had to occur in the approved currency of the land in order to make everything work – at least for those in power. If or when subjects weren’t compliant in this regard, they were visited by men with swords.

Fast forward several centuries to the time of the American colonies under the Kingdom of Great Britain. In good part because of King George’s arbitrary taxation policies, American colonists declared their independence from the crown and fought a long war to remain independent. After that war, several founding fathers published a series of papers to convince the American citizenry to adopt the proposed constitution. Even with ample examples through my many years of history courses, the Federalist papers were able to finally distill a core idea for me about the essence of government – that government is power. The clarification informed me greatly as to how the founding fathers thought about their recent situation and how they were thinking about the future federal government. The same idea can help us today understand in part what is happening in the world – and specifically for cryptoassets.

Source of Money

Where does money come from? From the central governments or from their appointed central banks. People often refer to government-issued money as fiat currency. Fiat comes from the Latin root “let it be done” by decree, order, or resolution. Governments create money which is then distributed by itself or through the largest banks in the land - a highly centralized, top-down approach - a very good model for centralizing power.

Now, for the first time in history – a somewhat dramatic but arguably true statement, the ability to create and distribute money on a mass scale does not have to be a top-down phenomenon – it can be bottom up or fully decentralized. Cryptoasset promoters often point out the decentralized creation methods for many coins. Not as many have focused on the distribution aspect but some are looking to that as well now as seen with the idea of small scale air drops. While full crypto decentralization may be possible in theory, a truly decentralized cryptoasset hasn’t shown up just yet.

For now, cryptoassets are less centralized than government based money but they still have strong centers. Think about Bitcoin and the role of miners. In its early days, “anyone” could mine bitcoin but as the network and processes have evolved, the function of mining has centralized to a relatively few large entities. Miners are neither bad nor conniving but self-interested and efficient. Satoshi foresaw this and while miners have centralized some of the power for Bitcoin, no one entity has overtaken it. Various other cryptoasset originators have been considering ways to enable broader decentralization. In addition, people are now starting to think about distribution of their coins/tokens – a largely unexplored area still. For example, what if everyone (or some large group) were granted some new cryptoasset that was fully exchangeable?

Questions like that illustrate why cryptoassets offer entirely new ways of how we create, distribute, and use money. Thinking innovatively, however, can be very challenging because we tend to frame cryptoassets thinking into our well-developed industrial-era models for economics and business. Cryptoassets, or more specifically blockchain technology, will have far-reaching effects on many industries and will likely completely transform or even kill the business models of some very large companies. Envisioning such outcomes requires some imagination and a systems thinking approach. Van will be sure to focus in on the systems nature of cryptos specifically in his upcoming November Systems Thinking Workshop.

The End of Fiat?

Are we watching the sunset of centralized fiat currencies before our eyes? Well . . . let me point to a story the Wall Street Journal ran last week about a Bitcoin investor who spent several years tracking down coins he had lost in the famous 2014 Mt. Gox hack. He had been attracted by Bitcoin’s promise of being able to avoid governments, banks, and crooks. Instead, he has found himself deeply entangled with all three for the last several years.

That’s just the way things work – for now. Systems have inertia and are meant to sustain themselves – but they yield to massive improvements. Transferring money across borders used to be expensive and take a long time. With cryptoassets, however, it’s cheap and takes minutes – if not seconds. Applying this kind of thinking, we can imagine how cryptoassets could replace fiat currency in many ways. How and when? Nobody knows – and it will happen in some ways we can probably imagine already and in other ways we can’t conceive right now. Systems thinking enables us to consider myriad ways to apply blockchain technology far beyond the traditional uses of traditional money.

In any case, the sun may not have set yet for the power that fiat currencies yield centralized power ... but maybe we are starting to notice their twilight.


September 2018 - US
The How to Develop Winning Systems Workshop teaches you what you need to know to develop your own system. The material you will learn is not market or time-frame specific. So whether you trade stocks, futures, currencies, gold, etc., or whether you place 50 trades per day or 50 trades per year, you will learn all of the components that work in any system. With this knowledge you can both modify existing systems to fit you or the market type better, or master your own system development. Two locations to choose from, Cary, NC in September and London, England in October!
Peak Performance 202 is SOLD OUT! Look for the next event January 2019.
October 2018 - LONDON, ENGLAND
Do any of the following sound like you?

  • Are you always looking for a new trading system? Or, are you always trying to improve the one you have?
  • Do you find your trade setups never quite fit all of your criteria so you have trouble entering trades?
  • Do you get anxious about the market or get anxious about risking your money so that you have trouble pulling the trigger?
  • Do you get excited and ignore your rules or do you get distracted and fail to follow your system's rules?
  • Does a losing trade take your energy away from the next trade or conversely, does a winning trade make you confident about the next trade?
  • Is your trading (or your life?) ruled by fear, anger, greed, or shame?
  • Are you constantly losing money?
  • Do you lack a strong plan to guide your trading or do you fail to follow the plan you created?
  • Do you have a performance ceiling where you fall apart or stop doing well consistently? Does your account reach a certain size and then it plateaus or you start losing money at that point?

If you answered yes to any of these questions, then you are experiencing some form of self-sabotage. But don’t worry, these are some very common patterns for traders and you can overcome them in order to reach your potential. This workshop will help you identify and resolve the underlying conflicts causing these patterns — as well as leave you with the tools to address conflicts that come up in the future for you.

It's been Van Tharp's cornerstone workshop for over three decades. Read more to learn the benefits you will walk away with.

Peak Performance is also a very important workshop to put on your calendar if you want to qualify for and apply to the Super Trader Program.
The How to Develop Winning Systems Workshop teaches you what you need to know to develop your own system. The material you will learn is not market or time-frame specific. So whether you trade stocks, futures, currencies, gold, etc., or whether you place 50 trades per day or 50 trades per year, you will learn all of the components that work in any system. With this knowledge you can both modify existing systems to fit you or the market type better, or master your own system development.
The Theory: All You Need to Know About Forex

Gabriel will spend most of the workshop teaching his trend-following systems. The first half day is spent to go over the specifics of trading the Forex market and cover such topics as:

  • Why trade Forex?
  • What are the advantages and drawbacks of trading Forex versus other instruments?
  • What are the main market characteristics, and who are the Forex market participants?
  • What methods work best in the Forex market?
  • All you need to know about Forex trading sessions and the currency pairs.
  • How are Forex chart characteristics different than stocks or futures?
  • What do you look for in a Forex broker? What do you avoid?
  • Why Forex may actually be the best market for new traders to learn trading.
  • What are the trading edges that work in Forex?
  • The Method

Gabriel teaches three specific trading systems. All three are trend-based; you can see the price action patterns in the price charts. His systems can be traded in various timeframes and can be traded across a wide range of currency pairs. Attendees of Gabriel’s workshops enjoy swing trading the systems using primarily 5-min ,15-min, 60-min and daily candle charts. The trades tend to evolve over a timeframe of anywhere from several hours to a couple of days (or even weeks, in the case of strong trends).

Two additional days of live forex trading side-by-side with Gabriel is available as well for hands on trading experience.
In this workshop, you begin to build your plan that includes specific, actionable steps you can begin as soon as you get back home. Here are some of the benefits of attending the workshop:

  • Assess your beliefs about trading about yourself so you can leverage your useful beliefs and eliminate the ones that are holding you back.
  • Learn how to steer your entire system development process through your objectives.
  • Find the key ingredient that most traders and investors are missing in their objectives that will make you thrive financially.
  • Create a business plan with 3 trading strategies compatible with the big picture so your trading results are consistently profitable.
  • Learn the 8 critical areas of contingency planning that most traders find out about the hard way (i.e., the expensive way). Developing plans for contingencies minimizes the risks to your trading business that could otherwise wipe you out.
  • Discover how to leverage the strengths of your personality type and minimize your personal challenges to improve your trading.
  • Learn how to cultivate the most important attitude required for successful trading.
November 2018 - US

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