What a busy week it has been. Prices rallying and headlines pumping. Finding the markets difficult to navigate? Let’s take a step back and discuss:
⏰ The main Headlines of the day
🖐 The use of Decentralised Exchanges (DEXs)
❌ The power of Memory
🌌 And Astrology in the crypto markets!
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⏰ In a Rush?
Here’s 5 things you should know about the crypto markets today:
🖐 All Hands on DEX
Two weeks ago, the total number of DeFi users on the Ethereum blockchain surpassed 3 million, tripling in just over six months. This milestone was facilitated largely through the use of Decentralised Exchanges (DEXs), which have seen consistent user growth despite the recent market drawdown:
The Leaders: Uniswap and PancakeSwap are the largest DEXs by both volume and user base, with a combined market share of nearly 50%. Their smart contracts allow users to swap or provide liquidity for any token that has been created on the blockchains they interact with.
The Optimisers: Prices and fees vary across exchanges, so that’s why aggregators like 1Inch Exchange use an algorithm that scans multiple DEXs for the best prices to trade. According to Dune Analytics, aggregators currently account for ~20% of DEX volume.
CoinMarketCap lists more than 70 DEXs and there are sometimes concerns about the security and transparency of smaller exchanges. DeFi is a hot topic and the execution of Ethereum Improvement Protocol 1559 next week may only further accelerate the influx of money into the ecosystem. So while we think DEXs will continue to play an important part in the future of crypto, we advise caution if you see opportunities that look too good to be true, or want to interact with one of the smaller platforms.
Our Market Meditations are longer format educational segments. Each letter features a Market Meditation which will deep dive and analyse a relevant crypto event, theme or tool.
❌ Are Your Memories False?
Let us travel back in time to 2007 - investors in the stock market were in the midst of a 4 year bull market with prices up over 80% from their lows in 2003. As everyone involved in crypto in the last year has experienced, investors were at peak euphoria. Then the financial crisis occurred and stocks tumbled to lows not seen since the 90s. However, when asked in 2011, the majority of investors believed they had severe reservations about whether to invest in stocks in the months leading to the crash1. This simply does not match with the data from those years either in the form of investor surveys or the price data itself!
This behaviour is attributable to False Memory Syndrome - where an individual remembers an experience occurring in a way that does not match with reality. There are a number of occurrences that can lead to false memories:
Suggestion - where a third party infers details of an event, as with the lost in mall experiment.
Misinformation - where false information about an event combines with real memories to create a false narrative.
Inaccurate perception - where our brain does not perceive an event truthfully, the memory will also be incorrect.
Misattribution - where our brain combine multiple events into one.
Emotions - where negative emotions have a significant impact on how memories are stored2.
This can be disastrous to our investing and trading. We already know how biased our minds can be to protect our own opinions of ourselves. Because of this, we can start to remember events inaccurately and in a way that allows us to avoid admitting any fault. This also feeds into our false sense of overconfidence. For example the investors who believed they had seen warning signs of the financial crash are more likely to believe it will be easy to spot the next. In reality, they will probably make exactly the same mistake again. Ultimately, it stops us learning from our mistakes as we cannot remember events accurately enough to do so.
So how do we avoid being fooled by our own thoughts?
Be aware of the failings of our own mind. Now that we know memories can be inaccurate or outright false, ensure you always find corroborating evidence before making decisions based purely on long term memory.
Keep a trading journal. Be proactive about false memories by recording data and emotions whilst trading and that will act as your truth in the future. For more on this, check out our Trading Journal Guide.
We are all prone to creating false memories. Remember that your mind is not always correct and avoid falling victim to your own memory.
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🌌 Written in the Stars?
Crypto communities can be incredibly diverse. Various personalities emerge from many different backgrounds, including traditional finance, celebrities, libertarians, artists, and even….astrologers?
Astrology was once a highly revered craft; having the skills to interpret it may have gotten you a seat at the table of kings and noblemen. In recent centuries it has been replaced by scientific methods of analysis, thus forcing astrologers to exist on the fringes of society. On a positive note, they no longer endure job hazards from medieval times (such as beheading) when their predictions are incorrect or undesirable.
But is it possible that astrology can reveal the bitcoin price months ahead of time?
That is what Astrologer and cryptocurrency trader, Maren Altman is proposing. Altman, often called 'the crypto witch' has captured the attention of many in the crypto Twitter community this week, thanks to a tweet shared in January 2021 telling her followers to take note of the bitcoin price on May 16th & July 25th.
She admits she initially thought both dates would be bullish, even calling for May 16th and July 25th as the tops of this cycle in an interview on the Market Meditations podcast.
How do we interpret this? Perhaps we appreciate the diversity of the crypto community. In the ‘B Word’ conference last week, Twitter CEO Jack Dorsey suggested that the crypto community is reminiscent of the early internet community. It’s fascinating to have so many people discuss such a variety of methods of market analysis. For more on the ‘B Word’ conference, check out yesterday’s newsletter.
Here at Market Meditations, our preferred techniques are technical analysis (primarily through tools such as Fibonacci Retracement and Moving Averages), fundamental analysis (the type of analysis we share regularly on this newsletter) and of course sound risk management and a good grasp of trading psychology. That being said, we enjoy learning about all methods, even those in the stars! To learn more about our methods, check out our Getting Started guide.
Not financial or tax advice. The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. We are not financial advisors. Every investment and trading move involves risk. Do your own research when making a decision. See our important security disclaimers here.
Disclosure. Some of the links we’ve included are affiliate, they give you rewards and discounts and earn us a commission. Additionally, the Market Meditator writers hold crypto assets. See our investment disclosures here.
Joachim Klement, “The Flaws of Our Financial Memory,” CFA Institute Conference Proceedings Quarterly 28, no. 3 (2011): 1–8.
Doss, Manoj K et al. “Creating emotional false recollections: Perceptual recombination and conceptual fluency mechanisms.” Emotion (Washington, D.C.) vol. 20,5 (2020): 750-760. doi:10.1037/emo0000590