How I’m Preparing For Election Volatility

With the elections being one day away it’s time to face the music and be ready for what may or may not come. The elections represent a global event that occurs only once every four years. Whether you believe it or not it has implications on the market (having other people believe it matters, make it matter).

As of November 2nd, bitcoin has been consistent with its price range of $13.5k-$13.8k. It’s not surprising since over the weekend bitcoin tested $14k and failed once again. That rejection put it in its place as equities traded slightly higher.

Where do I see my portfolio going in the next few months? Slightly lower and then suddenly up. Political and health care uncertainty is putting pressure on equities which is influencing crypto as well (we’re not out of the correlating waters just yet). What I plan to do it the upcoming months is accumulate some bitcoin but more altcoins on the way down. This week Litecoin (LTC) did well but only because it was, as still is, extremely undervalued when compared to bitcoin. I’ll be looking for alts that will have the same effect as LTC.

Looking at the chart below, undervalued tokens like Zcash (ZEC), Tezos (XTZ), and 0x (ZRX) have underperformed as bitcoin continues to gain dominance. These are a few characteristics I will look for when scooping tokens at a discount: (1) sound tokenomics (2) consistent development (3) community support.

CoinDesk 20 performance ranking for October Source: CoinDesk Research

Why altcoins and not bitcoin? Because altcoins will continue to decrease as investors shift to bitcoin. When new investors get comfortable with bitcoin (their first purchase), they’ll look to diversify and look at price mainly. At that point you can be well positioned to benefit from low capitalization that your tokens have compared to bitcoin’s.

Consecutive CME Futures Gaps

One thing I’d like to mention is the futures market and the new gaps created by bitcoin’s fast paced movements. While there’s no comprehensive theory to why traders move to fill CME gaps, historically, most gaps have been filled. During the weekend, the volume of bitcoin tends to drop as the market becomes less active due to no equity markets to use as reference.

The last several months has seen continuous movement upwards without a dip in volume. This led to the formation of four CME gaps in a row. The gaps are found at $13,100, $12,970, $11,505, and $11,100. The $12,970 to $13,100 range is an important area in terms of moving averages and it’s the range most traders will keep an eye on.

Bitcoin CME gaps on price chart. Source: Zack Voell, TradingView.com

Now, there is a lot of optimism for the space due to the potential inflation stimulus might bring (again if people believe it will happen it doesn’t matter if it does). As for the short-term, I can’t shake-off the feeling that we might experience a larger pullback than the one we’ve experienced recently. This would come from massive sell-off from global equities if either political party ask for a recount and refuse to admit defeat. For this reason it might be beneficial to revisit your portfolio and readjust your risk. Once a nice pullback occurs (hopefully down to $11.5k) then you can reposition and accumulate for the upcoming bullrun.

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