I heard you have some BTC, and you are looking to scale-out this cycle. Oh, you have never heard the term “scale-out”? It basically means you are done hodling your bags and plan to flip them into a tax obligation as the market rallies to the upside.
The premise is simple: set your bidding (or asking) price, and the number units you are willing to trade with. Think Bitcoin is going to $600,000? Why wait — throw it up on the order book with a $600,000 price tag and when the market is ready, Mike Saylor will buy it from you.
But what if BTC doesn’t make it to $600,000? What if the market careers up to $590,000 and stalls? Surely it is going to top out at least near $500,000, right? Right? […] Maybe you aren’t sure. Alice in accounting said that she doesn’t expect Bitcoin to go much further than $200,000 this cycle. And you heard her friend, Bob, thinks that it will get rejected off the $70,000 level, forming a macro “double top”, whatever that is.
Okay, let’s back up. You have collected a few bitcoins over the years, so think carefully about how you might want to take profits on them. Let’s put one of your Bitcoins up for sale for $600,000 (hopefully we get there). I guess it would be sad if Bob was right, and the market turned around at only $70,000 — but how upset are you going to be if you sold nothing there, and hodled your bag back down to $12,000? Maybe, sell one of your Bitcoins at $70,000? It’s up to you — but you should know that Bob lost it all shorting $DOGE. Are you really going to listen to that hack?
One Bitcoin left. Alice thinks $200,000 is reasonable, and her job is literally counting money; we should consider her opinion. Ok, so if all your price targets are met to the upside, you will sell:
1 BTC @ $70,000
1 BTC @ $200,000
1 BTC @ $600,000
Total: 3 BTC @ $290,000 (average)
That’s going to wreak havoc on your OCD. You know, if you bump up that first number just a little, you can get the total to be a much nicer looking, even $300,000?
1 BTC @ $100,000
1 BTC @ $200,000
1 BTC @ $600,000
Total: 3 BTC @ $300,000 (average)
Wait, does that mean you should just put all 3 BTC in the book at $300,000? I mean, you would get the same result overall, and you wouldn’t even need BTC to go to $600,000 anymore.
1 BTC @ $300,000
1 BTC @ $300,000
1 BTC @ $300,000
Total: 3 BTC @ $300,000 (average)
Ah, but now you won’t get anything unless BTC makes it all the way to $300,000. I guess that’s the risk you are taking, putting all your chips down at exactly one price point. We should think about systematizing this. For example, what if you put 1 BTC at $300,000, and 1 BTC 20% below, and 1 BTC 20% above?
1 BTC @ $250,000
1 BTC @ $300,000 (i.e. $250,000 + 20%)
1 BTC @ $360,000 (i.e. $300,000 + 20%)
Total: 3 BTC @ $303,333.3333…. (average)
That’s weird. The steps seem right: $250k -> (+ 20%) -> $300k -> (+ 20%) -> $360k, but the average price is $303k, not $300k (your OCD be damned). It’s like a different kind of average price. They should really give it its own name.
Anyway, does this feel better? Would you be happy if you only got to sell 1 BTC at $250,000? What if the price only went to $299,999.99! Can you imagine! Just one more cent and you might have sold one more BTC at the top. If only you had more BTC — then you could put a bunch of orders in the book, instead of only three.
Oh! BTC is actually composed of 100,000,000 satoshis. So then, why don’t you split those BTC up and spread them out a little more? Then you don’t have to worry about missing the next price step so much. Something like:
0.5 BTC @ $250,000
0.5 BTC @ $268,913 (i.e. $250,000 + 7.57%)
0.5 BTC @ $289,258 (i.e. $268,913 + 7.57%)
0.5 BTC @ $311,141 (i.e. $289,258 + 7.57%)
0.5 BTC @ $334,680 (i.e. $311,141 + 7.57%)
0.5 BTC @ $360,000 (i.e. $334,680 + 7.57%)
Total: 3 BTC @ $303,333.3333…. (average)
So if BTC gets all the way to the target of $360,000, there is no difference — you still get an average price of $303k and change. At least now you will be better off if whales start dumping at $299,999.99, because you will have already sold half your BTC before then. But, wait a second. What if the market turns around at $268,912.99? Then you only get to sell 0.5 BTC. You could split it up further, I guess. After all, you have three hundred million satoshis. Potentially, you could set up three hundred million limit orders:
0.00000001 BTC @ $250,000.000000000
0.00000001 BTC @ $250,000.000000304 (i.e. $250,000.000000000 + 0.0000000012%)
(Repeat this three hundred million times. I’ll wait.)
0.00000001 BTC @ $359,999.999562428 (i.e. $359,999.999124857 + 0.0000000012%)
0.00000001 BTC @ $360,000.000000000 (i.e. $359,999.999562428 + 0.0000000012%)
Total: 3 BTC @ $303,333.3333….
Perfect! Now you won’t miss a beat. Try to be fast, though. If you can set up 1 order per second, it will only take you 9.5 years to get everything ready. I’m sure the BTC markets will wait for you. It’s a shame you are only using an antiquated blockchain and centralized exchanges. If you were autistic enough to be on Ethereum, you could set up exactly this in roughly the time it takes to quote Mike Saylor’s investment thesis, “buy Bitcoin”.
On Carbon DeFi this is called a “range order” — it’s like an infinite number of limit orders. You just tell it the start ($250,000) and end ($360,000) prices and put your tokens up for sale. Yes, you’re right! It’s exactly like DDOSing eBay with hundreds of millions of Beanie Babies listings. Except Carbon DeFi is built to handle continuous pricing — so while billions of limit orders would tank your t̶o̶t̶t̶e̶r̶i̶n̶g̶ booming centralized exchange, it is not a problem for DEXes. Although, occasionally a few dozen cartoon JPEGS of cats can gridlock the entire Ethereum network. Blockchains are weird.
Yes, you can modify your position on Carbon DeFi very easily. When the market starts creeping up to your price targets, you can choose to keep moving them away forever and never sell anything. Or, you can panic after lunch with Bob and choose to sell everything right now at whatever price your favorite TA guy tweets about. You can take some out and keep hodling it, put more in, move the price range — all from a UI that even your zoomer offspring would find appealing.
You’ll be fine. Have fun with it!
Hello! I’m the Moai Monitor, your digital guide here to distill complex ideas into clear insights below.
This article is a satirical and somewhat technical piece on cryptocurrency trading strategies, specifically focusing on Bitcoin (BTC). It uses humor and sarcasm to discuss the complexities and uncertainties of setting price targets for selling Bitcoin.
The article starts by discussing the concept of “scaling out” of a position, which means selling off assets (in this case, Bitcoin) in increments at different price points. It humorously references the unpredictability of Bitcoin’s price, poking fun at the wide range of predictions from different people.
The writer uses a hypothetical scenario where a Bitcoin holder sets various ambitious price targets ($70,000, $200,000, and $600,000) for selling their Bitcoins. This reflects the real dilemma faced by traders in setting realistic yet profitable price targets. The writer also plays with the idea of averaging the selling price and aligning it with a neat figure ($300,000) for the sake of satisfying one’s OCD (Obsessive-Compulsive Disorder). This part satirizes how traders might overthink or overcomplicate their strategies for psychological satisfaction.
The dilemma of setting trading targets, as illustrated in the article, is indeed a significant concept in the world of trading, particularly in the volatile and unpredictable cryptocurrency markets.
Predicting Market Movements: One of the core challenges in trading is the difficulty of accurately predicting market movements. Cryptocurrency markets, known for their high volatility, exacerbate this challenge. Setting trading targets requires a trader to anticipate future price levels, which is inherently uncertain.
Balancing Greed and Fear: The article touches on the emotional aspects of trading — greed and fear. Traders often struggle with the decision of when to sell: too early, and they might miss out on potential gains (greed); too late, and they might lose their profits or even incur losses (fear). Setting and sticking to predetermined targets can help manage these emotions.
Influence of External Opinions: The article humorously references opinions from ‘Alice in accounting’ and ‘Bob’, who have different, somewhat arbitrary predictions for Bitcoin’s price. This highlights how traders might be influenced by others’ opinions, which can be unreliable or biased, or may not be based on sound analysis. This highlights the importance of developing one’s own informed trading strategy rather than relying on hearsay or following the crowd.
Complexity of Trading Strategies: The article also satirizes the complexity that can be involved in setting trading targets. While a sophisticated strategy can be beneficial, overcomplicating things can lead to analysis paralysis or errors in execution.
Adaptability and Flexibility: The dynamic nature of the market means that traders need to be adaptable. However, constantly changing targets or strategies in reaction to market movements can be a double-edged sword — it can either lead to better outcomes or result in poor decision-making under pressure.
Technological Tools and Platforms: The discussion about Carbon DeFiand range orders points to the evolving technological tools available to traders. These tools can offer more sophisticated ways to set and execute trading strategies.
The laddered order structure mentioned in the article is a geometric sequence, which accumulates a geometric average price as each order is executed. In finance and trading, a geometric sequence or progression is a sequence of numbers where each term after the first is found by multiplying the previous term by a fixed, non-zero number called the ratio. This concept is often used in trading strategies like the one described in the article.
Starting Point: The sequence begins with an initial selling price. In the article, this is $250,000 for 0.5 BTC.
Fixed Ratio: Each subsequent selling price is determined by multiplying the previous price by a fixed ratio. The article suggests a 7.57% increase each time, which is the ratio in this case.
Application in Orders: This leads to a series of orders placed at increasing prices. Each price is 7.57% higher than the last. For example, if the first order is at $250,000, the next would be $250,000 multiplied by 1.0757, and so on.
Advantages in Trading: This strategy can be advantageous in markets with high volatility and unpredictability, like cryptocurrencies. By setting up a laddered, geometric sequence of sell orders, a trader can potentially capture profits at various levels as the price rises, without trying to predict a single ‘top’ price.
Risk Management: Such a strategy also helps in risk management. By not committing to a single exit price, traders can mitigate the risk of missing out on potential gains if the price doesn’t reach their single target price. It also helps in systematically taking profits while still leaving room for upside potential.
Geometric Sequence Formula: Mathematically, a geometric sequence is described by the formula:
The article concludes with a mention of Carbon DeFi, the most recent product from Bancor, highlighting its capability to facilitate a laddered trading strategy efficiently. This part of the article points to the evolving landscape of blockchain trading products and the unique advantages of Carbon DeFi over traditional centralized exchanges.
Range Orders: In traditional centralized exchanges, placing many orders (like a laddered strategy with many incremental steps) can be cumbersome and time-consuming. However, Carbon DeFi is designed to handle such strategies more efficiently. It can automate the process, allowing for the placement of quasi-infinite orders across a range without the need to manually set each one. This feature allows traders to specify a start and end price for their orders, and the system automatically creates a series of orders within this range.
Smart Contracts and Automation: Carbon DeFi leverages blockchain technology and smart contracts. Smart contracts can automate the execution of trades based on predefined criteria, such as the laddered price points in a geometric sequence. This reduces the manual workload and potential for human error.
Accessibility and Flexibility: Carbon DeFi is more accessible and flexible compared to traditional exchanges; it offers a wider range of tools and customizable options for traders, catering to both novice and experienced users.
Decentralization Benefits: Being decentralized, Carbon DeFi is not controlled by any single entity, which can offer advantages in terms of reduced counterparty risk, potentially lower fees, and resistance to censorship.
For further insights, see related discussions in our companion articles: Crypto Trading 101: Scaling In and Out and Maximize Market Gains: Scaling In and Out. These pieces complement the themes explored here, offering extended analysis on cryptocurrency trading and risk management strategies.
