Frequently Asked Questions

Trading and Investing are two different approaches with the same goal in mind: to achieve success in the financial markets. Both approaches require active interaction with the markets. Investing looks to achieve large returns over long-term holding of an asset, generally with a time span of at least five years. Trading, by contrast, is far more active and harnesses market volatility on a monthly, weekly, daily or even hourly basis to take more frequent, but typically smaller, profits on those individual positions.

Investing, as stated above, is a more passive approach to achieving the end goal of profit, where trading is a more active approach. The goal of trading is to out-perform the returns of investing, and on a much shorter time frame. Whereas Investors may typically be content with a 10-15% annual return, traders might seek to achieve that on a monthly basis. As such, successful trading can easily be a full-time occupation and an opportunity to live a financially independent lifestyle in the now, whereas investing takes a long-term approach and is generally a side project for those generating their active income from another source.

At Cracking Cryptocurrency we are committed to harnessing the volatility of the Cryptocurrency and FOREX Markets to provide a sustainable income for those who wish to achieve a lifestyle of financial independence. Successful traders need volatility for opportunity, and there is no market more volatile than Cryptocurrency. Whereas long-term investing in Cryptocurrency has had mixed results, our entire company is a testament to the success of a systems approach to short-term volatility to secure profitable returns from the marketplace.

However, the Cracking Cryptocurrency community also emphasizes a successful investment strategy. Our job is to see and predict the short and long-term trends associated with our industry. As such, we are very committed to the long-term vision of decentralized finance and decentralized money, and fully back the long-term fundamentals of currencies like Bitcoin.

We advocate those who desire to maximize long-term success to approach the markets not with an "all-or-nothing" mindset as it concerns Trading or Investing, but encourage employing both as two forks of a comprehensive and profitable strategy. As such it’s important to segregate one’s investment and trading capital into two different "baskets" as it were. The reasons for this are practical and psychological.

One’s trading portfolio should be allocated in a very different fashion than one’s investment capital. Whereas the former may experience dramatic changes in holding and capital distribution, one’s investment portfolio should remain relatively stable over the course of months and years. Therefore, segregating these two accounts increases the likelihood that one will successfully execute the ‘buy and hold’ approach with their investments on the one hand, and on the other will not be tempted to employ a "passive" approach with their trading capital where the hard and fast rule is to ‘cut losers quickly’. Students learn all this and more as members of our community and participants in our educational program.

It isn’t illegal for an American to trade Contracts for Difference, or synthetic contracts, which BitMEX/ByBit Markets essentially are. The risk comes from the American regulators (CFTC) going after the trader’s counterparty, in this case the exchange. So the burden and risk lies on the exchange, not on the trader.

Click here for more information and taxation implications for BitMEX/ByBit Trading Profits.

When shorting Bitcoin with the end goal of acquiring profit in USD, one must keep in mind one key factor. If you hold Bitcoin, you are long Bitcoin. If you hold any Bitcoin, whether it be on an exchange or in a personal wallet, that Bitcoin is long and is exposing you to USD risk.

Therefore, you will need to know the exact amount of Bitcoin you own and it’s USD value to be able to short for USD profit. Otherwise, you will likely only be gaining BTC value and potentially losing USD value.

To short for profit, you will first need to put yourself in a cash neutral situation. To do this, calculate the dollar value of your Bitcoin holdings, and go short that number of contracts Bitcoin futures, whether that be on ByBit, BitMEX, Deribit, or elsewhere.

Now, you are no longer long Bitcoin, as you have neutralized your long exposure with an equal amount of short contracts, effectively putting you ‘flat’, just as if you were sitting in USD.
Now that you are cash neutral, you can calculate the proper position size for your short position based on your equity and the distance to your stop loss, per the Cracking Cryptocurrency methodology.

After a successful short trade, all of your profit (minus fees) will be USD profit on top of your existing account balance, which will not be affected by Bitcoin’s price moving up or moving down because it is flat.

You can also utilize other exchanges such as Bittrex, BitFinex, and Kraken to short Bitcoin with USD or other fiat margin as well.

It means opening a Short position at 1x leverage and is done to reduce your risk of holding an asset. For example, if you’re holding 10 btc on Bitmex or Bybit and price is $10,000 USD/BTC and you are not sure if the price will go $500 dollars up or down, then you can open a 1x leverage short with 100% of your balance, you won't lose USD value of your holding.

You can also accomplish this by taking one third of your BTC trading capital, transfer it to a leveraged exchange (if it’s not already there) and use 3x leverage. This is, in effect, the same thing as hedging your entire BTC trading capital with 1x leverage. One bonus to this approach is don’t need to hold all your BTC trading capital on one exchange and can keep the bulk of that asset in cold storage or on the different exchanges you trade on. This may be a more attractive option for individuals with large amounts of BTC or when some of their BTC trading capital is on exchanges that do not offer leveraged trading.

This is mostly done when you are not sure where the market is heading, or if the market is in no trade zone.

1x shorting makes your BTC position neutral or flat. If BTC price increases, your position shows negative ROI but your USD value of portfolio remains the same.

Some people also do it to earn funding fee. When the Funding Rate is positive, Longs pay Shorts. When it is negative, Shorts pay Longs. So people go 1x Short when funding rate is positive.

You are not actually losing dollars on ByBit. One of ByBit’s amazing features is that it displays the USD value of your trades as well as the BTC value of your trades, as opposed to other futures platforms that "trick" you by only displaying the BTC outcome of your trades.

Remember, that when you short the amount of contracts equal to your account balance, you are effectively flat, just as if you had sold your BTC and were sitting in cash. However, if you go short and the market begins moving up, you are, by definition, in a losing trade and must be losing something. Remember that for BTC Futures the margin is always Bitcoin, so therefore in a losing futures trade you are losing Bitcoin. ByBit is calculating the USD value of that loss.
However, remember that in addition to being short, you are also holding the same dollar amount in Bitcoin long. That means, that the dollar loss on ByBit is being canceled out by the increasing value of your spot holdings of Bitcoin.

In other words, the losses incurred on your short are being covered from the profits on your long. Conversely, the reason we hedge is in case price drops, the losses on your spot holdings are being covered by the profits on your short position. We are just looking at the exact same thing in both scenarios, just in reverse.

If you are holding the Bitcoin you are hedging on the exchange, you can easily verify this for yourself. When you open up your initial short hedge, go to the Assets tab and note the USD value of your Bitcoin holdings, write it down somewhere. If the market moves against you, in this case by BTC/USD going up, you should display a loss for the trade in the Trades tab. However if you click over to the Assets tab you will notice that the USD value of your account is still the same as when you first put on the hedge.

The Risk % number represents the total up-front risk of the signal. In this context, the Risk % number is the percent of one’s account balance that will be lost if a trade hits the posted stop-loss. By knowing one’s account balance, and position sizing appropriately (using the provided Position Size Calculator), a trader can know his total downside up front. This is an invaluable tool in managing multiple positions or assessing one’s decisions in the market.

This is a personal decision, mostly due to the familiarity a trader has with their risk management system. Justin has been trading based off of risk per trade in terms of distance to stop loss for years, so is very comfortable with that system. Other analysts may be comfortable with position sizing with Percent of Equity, as that is the system they may have been using for years based on their prior experience in other asset classes. The most important thing for a Member to be aware of is the difference, and to always check in the delivered signal for that information and adjust accordingly to your risk management strategy.

Each posted trade set up comes with following terms:

Ticker: This will tell you the ticker name of the coin, on which that trade is taken.
For example, if the ticker says DOGEBTC, then it means that trade is for Dogecoin in BTC pair. If it's ETHUSDT, then it means that trade is for Ethereum(ETH) on USDT pair.

Timeframe: This tells you what timeframe that trade is on, and how long that trade is valid.

Exchange: This tells you which exchange that trade was taken on.

Direction: This will tell you whether trade is long, short or hedged on that coin.

Entry price: This tells where we bought or sold that coin. A trade may have three entry prices with limit orders in a single trade setup.

TP: These are called Target prices. Every new update will show filled and unfilled targets.

Things to consider before taking a trade:

Every trade is posted with a lot of information. To check the validity of that trade, look at the timeframe of the posted trade and its chart. You should match the chart that we give with the latest chart on TradingView on that specific timeframe. You should only take that trade as long as there is no significant change on the chart until a new candle opens up.

A trade with "x" timeframe is only valid for "x" time. For example, if a trade is posted on a 4 hour timeframe, then you can only take that trade in the next 4 hours, before the new candle closes. Because in a volatile market anything is possible on the next candle, and you will get new values of ATR on each candle close, giving you different trading setup.

Remember that each trader is relying on their objective system. Wins and losses are both part of a naturally profitable system. The danger of subjectively picking and choosing which trades to take will often lead to an outcome where you do not end up choosing a preponderance of winning trades. Be careful to not allow your subjectivity to affect your profitability.

FTX functions a little differently from the other margin trading outfits that you’re used to trading on. FTX functions much like an older style brokerage. To use their margin you must have money deposited in the "USD" wallet, through either PAX, TUSD, BUSD, USDC, or HUSD. You may deposit these coins directly or deposit other collateral like BTC or LTC and then sell these to USD on their exchange. Once you have USD in the wallet you can take margin positions on their futures contracts up to 100x leverage.

Continuing the similarity to older brokerages, FTX does not offer isolated margin on its positions. What that means in essence is that, much like using cross margin on Bitmex or Bybit, the account's balance is at risk of being liquidated. Thankfully, FTX has a modern feature called sub accounts that allows you to mitigate this risk and create a child-account with its own margin, separate from your main account, that isolates the margin and the positions. This allows you to not only protect your account when required, but take opposing positions on the same contract without needing an entirely separate, unconnected account! Not a bad trade off.

While there does seem to be a correlation between price increases in Altcoins when Bitcoin Dominance drops, the team has been unable to calculate any sort of reliable algorithm around this metric. Therefore, it falls into the realm of “discretionary trading” if an individual can find a successful correlation that fits their trading strategy.

Market Capitalization depends on circulating supply and last traded price. In a very volatile market, therefore, this number and metric can change dramatically within a week. For trading purposes, again, the team has not found a reliable correlation between these metrics and signals. This again falls into the realm of “discretionary” trading.

For investment purposes, Market Capitalization can often be utilized as a metric for safer vs. riskier investments. However, as cryptocurrency is still in its infancy and represents the “start up” phase of investment cycles, what is a Top 10 Cryptocurrency today by Market Capitalization, can easily be delisted tomorrow. So take these metrics with a grain of salt. For practical purposes, the Cracking Cryptocurrency team relies on their Technical Analysis rather than these fundamental metrics at this point in time.

That depends on the nature of ‘bitcoin being bearish’. Overall, we see a high correlation between ALT/USD valuation and BTC/USD valuation. With very few exceptions in the overall cryptocurrency market cycle, we do not see many situations in which ALT/USD prices increase while BTC/USD price decreases over a noticeable length of time.

In our experience, we notice that ALT/USD prices perform well when BTC/USD price is appreciating. After a positive movement in Bitcoin’s price, we can see money flow into the altcoin sector and outperform Bitcoin briefly. However, once that cycle ends the money flows back into Bitcoin and Bitcoin either takes a leg higher, in which case your money is best held in Bitcoin for that time, or Bitcoin depreciates and Altcoins depreciate much faster.

Therefore, trading Altcoins needs to be nuanced, however in practice, we rely on our algorithmic system just as with any other cryptocurrency or currency pair. In general, it is much easier to trade and think in ALT/USD value and not ALT/BTC value. In practice, access to the margin and liquidity to do that can often be quite challenging, hence the USDT markets.

A general rule of thumb, if Bitcoin is sideways or appreciating rapidly, your eye can be on potential Altcoin trades. If Bitcoin is in a clear downtrend, Altcoins are best avoided, at least at this point in our market.

When measuring your PNL in USD terms and not Satoshis, trading ALT/BTC pairs becomes more complicated. One must always keep an eye on BTC/USD, as that is the underpinning of an Altcoin’s USD valuation.

Based on recent market cycles, we do not see a divergence in Bitcoin performance vs. Altcoin performance. We have noticed the following trends:

1. Bitcoin depreciates: Altcoins depreciate more swiftly, hence ALT/BTC pairs tank faster than BTC/USD.
2. Bitcoin appreciates: Altcoins appreciate but generally not as heavily or as sustained as BTC/USD, hence ALT/BTC depreciates.
3. Bitcoin moves sideways: USD value flows into Altcoins. ALT/USD prices appreciate, hence ALT/BTC prices appreciate because BTC is relatively stable.

With the above situations, in Scenarios 1 and 2, you don’t want to long ALT/BTC pairs. In scenario 3, you can long ALT/BTC pairs but why should you? With BTC relatively stable, longing the ALT/BTC pair and ALT/USD pair is essentially the same.

Therefore, from a USD perspective, it is always easier from a risk management perspective to long an ALT/USD pair over an ALT/BTC pair whenever possible. Some of our best analysts do not look at ALT/BTC pairs, instead they always pay attention to the value of altcoins in USD value for their opportunities to enter and exit.

Now from a practical perspective, access to liquid USD markets can often be challenging to find for Altcoins. Hence the USDT markets offer many exciting possibilities that our analysts and members and take advantage of frequently.