So, there you have it – buy on the rumour, sell on the fact!

sgt_markets_observations_tony_160124

And the fact is, a BTC ETF is not the same as Bitcoin.

 

After all the hype, all we heard were tears. Not only from those who expected BTC to rocket but also from those trading in options, who, I understand, took a big hit.

 

I read a lot of reports after the collapse about people taking profits just before the market dropped 8%. I question these claims because it's impossible for everyone to have sold at the top.

 

I didn't have a dog in the race purely because of the risk BTC represents at the higher levels. I want to buy more cryptocurrency, but I prefer to buy it when it's weak than when it nears a rally's end.

 

An Ethereum ETF will be launched soon. Hopefully, that will fare better.

 

In other news, everyone is still discussing inflation and interest rates. Will the Fed and other central bankers get it right?

 

We have as much chance of central bankers getting it right as we have of seeing Kamala Harris become the next American President! (If you want to have a gamble, put a few bucks on Michelle Obama running and winning.)

 

I believe we are going to see another round of inflation this year because these things come in waves. So, if that proves to be the case, for the central bankers, it will be a matter of wrong if we do, wrong if we don't!

 

Should this be the case, credit will prove more challenging to find, and the economic recovery everyone is hoping for might not materialize. That will not be good for many, especially those in commercial real estate.

 

Those of us looking to make money from speculation in financial markets will have ample opportunity to increase our bank balances. But, as I discussed in my last report, some of the best opportunities will be found outside of the more fashionable and popular products.

 

I don't know about bonds and other government policy-reliant financial instruments. Also, I prefer to avoid buying into our nervous equity markets, which seem defined by a diminishing number of influential globalist corporations, especially those known as the Magnificent Seven: Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla.

 

Hi-tech innovation is the future, but the concentration of wealth and influence in a crucial but narrow sector of society could be a concern. These corporations are all open to similar industrial and legislative threats. Tech giants are consistently under scrutiny for antitrust concerns, data privacy, and tax practices. We should expect this scrutiny to expand when these companies increase their influence over our societies and economies.

 

From an investment point of view, I have always been a big proponent of owning a diversified portfolio. And as a speculator, I like to move my capital into various sectors, keeping my perspective fresh. If you keep trading in the sectors or instruments, that is hard to do.

 

There can be no question that there will be some exciting moves this year to exploit and just as many pitfalls to avoid. One of these pitfalls will be chasing markets on the rise and getting caught holding the baby when the market turns. For this reason, the most successful speculators this year will be those who adopt a contrarian attitude towards the markets.

 

Contrarians look to sell strong markets and buy instruments when values are depressed. Contrarians are not traders looking for good investments; they are active traders looking to make quick profits by going against the prevailing trends. Adopting a contrarian investment stance is only for some and is rarely successful for casual or less experienced investors. However, there are many benefits for those who know how to incorporate such a stance into their trading program.

 

You must be patient and carefully pick the time and level you enter your position. You need to adhere to your stop-loss levels rigorously. Using various technical analysis tools to refine your entry and exit levels would be best. These are things all traders should do before entering a trade. Still, the reality is that too many of today's speculators need more experience and competence to carry out such research. As a result, much of today's retail speculative trading relies on opinions posted across social media platforms by people with varying levels of experience and knowledge.

 

We saw a clear indication of this last week when many of those who were talking of BTC "going to the moon" on Wednesday wrote—after the collapse—that they had taken profits before the drop. I hope they did, and I must say, considering how many people got stopped out on the collapse, some may well have gotten out with a small profit. The thing is, I don't recall any of these "BTC is going through the roof" merchants advising their "followers" to place protective stops because we were in a situation of "buy on the rumour, sell on the fact," which meant the market had a massive potential to correct after the announcement of SEC approval of the ETF.

 

I don't particularly appreciate seeing smaller investors lose money and used as cannon fodder. There has always been a situation when more prominent investors and investment houses give out mixed signals on the market to maximize the profits on their books. Now we see "influencers" on social media are happy to parrot what the big boys want said. That is doing a disservice to the investment industry.

 

I know many people do not like the idea of old-fashioned brokers, and the term has been replaced by liquidity providers, with small speculating clients now coming under the banner of self-directed traders. But I fail to comprehend how investors are better served or have better returns when left to fend for themselves in a world of ill-qualified social media opinion-makers.

 

I would rather pay someone a few extra bucks per trade and get qualified opinions from someone with skin in the game than save a few dollars and rely on noisy nobodies who say something one day and then go quiet or disappear when everything goes wrong.

 

If you give an opinion on any market, you will only sometimes be right. But you owe it to those you have influenced to explain why you were wrong and learn from your mistakes. Anyone who gives an opinion has a responsibility to those who listen, and while being responsible is very old-fashioned and something many keyboard warriors dodge. Explaining why your recommendation lost someone money is never comfortable, but it does spur you to do better next time.

 

On the other hand, if someone follows your recommendation and loses, and the next thing they hear from you is how you took a profit just before the market turned but didn't tell them, your credibility goes out of the window.

 

Speculating in financial markets is not a gambling or a game with prizes. If you want to gamble, go to a casino and place a bet on a roulette wheel. If you are lucky enough to pick the correct number, you will receive 30 times what you staked in seconds!

 

Financial markets are about information and data; the more you have, the more chance you have of succeeding. None of us have all the information or data, which is why we all lose money—some occasionally, some of us more regularly.

 

The last thing people want is lots of faulty data and opinions from people who have no interest in whether we win or lose. When such opinion drowns out qualified commentary and research, that is when the contrarian trader makes his money.

 

This year, there will be a lot of noise, which is why I will be concentrating on looking for opportunities to exploit as a contrarian trader, and will do my best to keep everyone aware of what I see.

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