Trading the ETH / BTC Ratio
I recently submitted this post on the Torum community clan "Lander's Trading Community". If you would like to join Torum and see the original post, please consider using my referral link here: https://www.torum.com/signup?referral_code=flarnrules
This trading strategy applys two concepts, and can be broken down into 10 steps.
Concept 1:
BTC and ETH are going to increase in value in the long run to many multiples of their current price. Of course, many on here think that basic concept to be true, but I'd like to reiterate that these two assets are probably the lowest risk of complete collapse to $0 valuation. BTC more so than ETH, just because BTC is now seen as a pure store of value "digital gold", but ETH is very well on it's way to being seen as a pure store of value with significant utility attached to it, like "digital oil".
Concept 2:
The ETH / BTC trading pair has tended to fluctuate between 2.5% and 10%. In other words, over the past couple years, 1 ETH has always been worth about 2.5% to 10% of 1 BTC. This can be useful if you want to stack SATS through trading, without the fear of losing out on overall market increases. As the market increases, you will still either be 100% in BTC or ETH, which generally drive the market anyways. As the market decreases, you can meticulously and in a low risk manner, stack those sats for the next bull run.
ETH and BTC are natural trading partners. These are my deposit addresses in NEXO. Feel free to send me some sats if you are so inclined.
General trading strategy in 10 steps:
First, create a coinbase pro account, or an account similar with low trading fees, and an account where you can create different wallets. This is important to isolate the trading strategy, as it keeps trading activity bounded to a single starting point of capital so you can track performance over time.
Create an ETH/BTC trading wallet.
Fund that wallet with a specific round number of capital. Let's say $100 / $500 / $1,000 USD or stable coin. This is optional, but for me it optimizes my trading strategy because it gives me a straightforward benchmark to remember in my head.
Buy either ETH or BTC with ALL of the funds in that account, based on your thoughts of what direction the ratio will go. For example, right now the ratio is about 3.6%. As I suggested earlier, the pair fluctuates between 2.5% and 10%. Since 3.6% is on the low end of that pattern, I personally would buy ETH, since I think ETH is likely to increase in value relative to BTC.
WAIT, and keep an eye on the pattern. Maybe check once or twice per day. Just see how the pattern goes up or down.
After some WAITING, go ahead and set your first LIMIT SELL (if you bought ETH) or your first LIMIT BUY (if you bought BTC). Pick a level that's a decent gain, but don't be too greedy! Maybe 10%. Maybe 20%.
WAIT some more. Check the pattern a couple times per day. Maybe don't check it at all for a week.
If the price fluctuates past your LIMIT SELL (if you bought ETH) or your LIMIT BUY (if you bought BTC) then you just took profit, but in another appreciating asset! Nice job.Now, in order to complete the cycle, you must do the reverse of steps 5, 6, 7 and 8. Set a LIMIT BUY (if you initially bought ETH and traded it for BTC). Set a LIMIT SELL (if you initially bought BTC and traded it for ETH).
WAIT some more. If the price passes your LIMIT BUY or LIMIT SELL, you have officially returned back to the original asset you purchased, but now you have more of it!
REPEAT steps 1-9 over and over, over the course of the next 10 years.
Thoughts
From my perspective, the above 10 step process, over the next 10 years, exposes you to two appreciating assets, but grows your stake in those assets over time. Please note, this is not financial advise. I will be attempting this trading strategy some time soon, and I'll try my best to post frequent updates on my performance!
Thanks for reading! Post any questions, comments, opinions or improvements in the comments. Best wishes and happy crypto trading.
PS: Last but not least, always remember to NEVER invest more than you can afford to lose 100%. Even with BTC and ETH, while they feel like a guaranteed investment in the long run, if they drop in value by 40% and you needed that money... you could be in some trouble!