The No. 1 Killer of Cryptocurrency Portfolios

Greed kills. In fact, it’s the No. 1 way to destroy your portfolio. 

For weeks, cryptocurrencies have staged quite a rally. Bitcoin exploded to nearly $14,000. Litecoin was above $140. Ethereum was above $350. Ripple soared above 50 cents. All as institutions rushed in on FOMO, and on excitement surrounding Facebook’s decision to launch a coin of its own. Retail investors chased coins higher.

Obscene greed became to creep into the cryptocurrency space.

Yet, no one seemed to have paid much attention to it.  But it was very clear, at least for us. For example, here’s a one-year chart of Bitcoin (BTC) with Bollinger Bands (2,20), relative strength (RSI), and Full Stochastics (Full STO). 

Notice was happened up to 80% of the time when BTC challenges its upper Bollinger Band. At the same time, RSI was well above its 70-line with Full STO overbought above its 80-line. Up to 80% of the time when these indicators align in overbought territory, we see a pivot lower.

In fact, we’re seeing it again right now, as BTC collapses more than $900 in a single day.

Granted, it’s pulling back in part thanks to cooling trade war tensions. But if you look at a history of the BTC, you’ll see that each time these three indicators align in overbought territory, the coin begins to pivot and pull back many times.

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We can see it in Ethereum, for example.

Again, using a one-year chart with Bollinger Band, RSI, and Full STO, look at what happens many times when each aligns in overbought territory.

Whether you’re trading cryptocurrencies, stocks, ETFs, or major indices, one of the best ways to know exactly when to get in or out is by paying attention to herd mentality via technical analysis. After all, fear and greed remain the strongest catalysts in the market. If you know how to capitalize on both, the better off you are.

Remember, as even Warren Buffett will tell you, “Be fearful when others are greedy.”

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