Episode 3

The Ultimate Crypto Trading Course

Episode 3 - Everything You Need to Know Before You
Trade Crypto

SUMMARY

HOW TO MAKE MONEY TRADING

Today we dive into specific information that I wish I had when I first started out my crypto
journey. I would have done so much better if I knew this stuff. But now I'm going to give
beginners the advantage I never had

TODAY’S LESSON WILL COVER:

● Market Participants. Who are they? Why do they matter?

● Key Cryptocurrencies. Which ones do we need to know? And what do we need to
know about them?
● The Money Flow Cycle. How assets tend to move on a macro level within crypto.
● Key Terminology.
● Supply and Demand.

HOW DOES A TRADE WORK?

We have introduced this concept in previous lessons. Now we're going to reinforce the
definitions and use a crypto-specific example.

What are key components of a trade?

● Buyer: Is purchasing an asset

○ Such as Bitcoin or Ethereum
● Seller: Is offering an asset
○ Again such as Bitcoin or Ethereum
● Broker: A facilitator of buying and selling
○ Such as the FTX broker

FTX - A Crypto Broker

FTX is what I personally use. Don’t worry if you aren’t familiar with the platform. I will have
full tutorials on exactly how to use and trade on it later on in the course. For now, it will be
used as an example of a broker. FTX allows us to buy and trade crypto in exchange for a
small fee.
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If we open the tab highlighted above you can see all the cryptocurrencies available to
trade (as shown below).

Let’s look at BTC/USD in the image below,

The Market Trades section shows trades currently being executed

● Red is selling that's occurring

● Green is buying that's occurring.

The Order Book shows market participants waiting to buy or sell.

● Green is market participants ready to buy.

● Red is market participants ready to sell

FTX is the broker facilitating the buying and selling.

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MARKET CAPITALIZATION

In the context of crypto the Market Capitalization (market cap) is defined as.

● Market Cap: Token price multiplied by the number of tokens.

Another great free platform that we will go into in more detail later on is CoinMarketCap.

It has so much useful information for anyone exploring the crypto markets.
● The left hand column shows all the different cryptocurrencies: Bitcoin, Ethereum,
Binance Coin, Tether, Solana and Cardano are all types of tokens.
● As stated above, to get the Market Cap (middle column) you multiply together the
end two columns of circulating supply and price.
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At the top of the page you can see the dominance of Bitcoin as a percentage of that
market cap.

● Total Crypto Market Cap at the time of writing is about 3 trillion

● Bitcoin comprises 43.2% of that at the time of writing

Tiers of Market Cap

Now we're going to get a crash course on what these market caps mean and how assets
with different market caps tend to behave.

NOTE: The further we go down this list, the riskier and more volatile the asset.

● Bitcoin - The King 👑

○ Bitcoin has the biggest market cap.
○ Larger assets tend to be less volatile and generally safer investments.
○ Less volatile: the price goes up and down less relative to other assets in the
market
○ Generally safer: larger coins with more market cap tend to have been
around longer or have some or have some key reason for why their market
cap is so high. Also compared with coins with much lower market caps they
are less likely to be scams.

● Majors - Top 10
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○ When the price of Bitcoin goes up, the whole market tends to go up with it.
When Bitcoin goes down, the whole market tends to go down with it. The
majors are a smaller, less powerful version of Bitcoin.
○ Sometimes if the price of a major like Ethereum goes up a lot, there can be a
significant impact on the rest of the market. Not as much as Bitcoin, but still
very significant.
○ Coins in this top 10 can do really well regardless of Bitcoin as they are large
and mature enough to have their own mini-ecosystems.
○ When Bitcoin goes sideways that can be a great time to trade these coins

● Large Caps - Top 10-20

○ Much riskier than Bitcoin and the majors and much more volatile.

NOTE: Risk and volatility are not inherently bad. However, once we go past the large caps
into the lower caps we run into major liquidity issues. For now, we will take liquidity to
mean how difficult it is to trade with any large amount of money and build a large position
size.

● Mid Caps - Top 50

● Small Caps - Top 100
● Micro Caps - Top 100+

MONEY FLOW CYCLE

Normally it takes new traders 6 to 12 months to really get any sort of understanding of this,
but you're going to have the unique edge of understanding off the bat.

We start with fiat

● Fiat: Your usual currency eg. USD, GBP, EUR.

Fiat will funnel into Bitcoin as this is the best-known

cryptocurrency

Why is this? Let’s take a macro view with a little story.

Imagine you can see Bitcoin going up and you see your friend bought some for $100. And
now it's worth $500, you want in on that action? You think, “Hey, what if I put 1000 and
then that goes to $5,000.”

This is how the masses behave. They start funnelling their money into Bitcoin, this creates
a domino effect, then the price starts pumping. Eventually, it gets to the point where your
friend got in at $10,000 and the price is now $60,000. Your friend is now up 6x on his
investment yet you might not wish to do the same.

So now you dive into the large caps.

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Perhaps you discover Ethereum or some other large-cap, and you think, “Hmm, well, if
Bitcoin did well, this one might do well”. You do a little bit of research, it sounds exciting,
and you funnel your money into that. This time it pumps even harder. Bitcoin went 6x, but
this asset pumps 10x or 20x.

● Why does it go up so much? It has a smaller market cap, which means it takes
less money for the price to go up more.

And suddenly, the $100 or $500, you invested has gone up to $5,000. Perhaps you hear of
even greater returns someone has made and get FOMO (fear of missing out). You feel left
out and you want to go into the market even harder. And now you've made even greater
multiples than your friend who initially went into Bitcoin. So anyone who sees you do that
is also going to want to dive into the market. Even those in Bitcoin are seeing how your
returns pale in comparison to theirs and want to throw their money in too.

So both new money and money from Bitcoin flows into these large caps, and you get that
same domino effect where the price starts exploding.

From the large caps people seek out even more risk, to make even more money.

That's where they find the mid caps and low caps.

These smaller coins go 100x or 200x, but these increases in price are very unsustainable.
As the money flows into mid and low caps, this part of the cycle is a lot shorter. Coins will
go 1000x but the party ends just as quickly when everything starts dumping aggressively
as people either take profit or accept their losses

That money then flows back into Bitcoin.

Then the cycle completes itself.

Now, in the last five years that I've been in crypto, I have seen this happen time and time
again and understanding this can give you a huge edge in the market. It doesn't always
repeat the same way. But the fundamental principles are that:
● People start with the least risky assets and go to the riskiest assets.
● The riskiest assets are unsustainable.
● Money flows back into the least risky assets.

This is until that cycle ends and crypto no longer pumps.

That's when the money flows back into Fiat.

This applies to every single market whether you are trading crypto or something else.
Bitcoin is currently at the top right now, but this could change in the future.
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KEY CRYPTOCURRENCIES

There are hundreds of cryptocurrencies out there but we're going to hone in on the key
cryptocurrencies you need to start understanding to build up that baseline of knowledge.

● Bitcoin - BTC
○ Bitcoin is digital gold
○ A great store of value
○ What started crypto off
● Ethereum - ETH
○ Enabled the creation of decentralised applications like a new type of internet
and highly valued because of it.
○ The first layer one project
● Exchange Tokens
○ Binance Coin - BNB
○ FTX Token - FTT
○ Tokens that are made by exchanges to give you specific utilities on these
exchanges like discounted fees.
● Stable Coins
○ Tether - USDT
○ USD Coin - USDC
○ Stablecoins are pegged to their fiat counterparts. 1 USD = 1 USDT = 1
USDC
○ There are concerns about whether or not these coins are actually backed by
the dollars but I've been using them for the last five years and personally am
very comfortable in them.
○ Remember to do your own research.

There are plenty of other coins out there that we haven’t covered and you will slowly find
the ones you’re most interested in. And we will even teach you how to curate your own
personalised coin watch list.

KEY TERMINOLOGY

● Bull - Associated with going up

○ A bullish candle is a candle that goes up or implies the price is probably
going to go up.
○ A bullish trader is a trader that's betting on the price going up
○ A bullish market is a market in which the price is probably going to go up
○ A bullish sentiment is a sentiment that the price is going to go up.
● Bear - Associated with going down
○ Every example just given applies to bears as well
○ A bearish market is a market where the price goes down and so on.
● Trend - A general direction in which something is developing or changing
○ Uptrend, downtrend or consolidation (a sideways trend)
● Volume - The number of tokens transacted every day.
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● Volatility - Volatility is the rate at which the price increases or decreases over a
particular period
● Liquidity - Liquidity refers to the ease with which an asset can be converted into
cash without affecting its market price
○ If you buy $10 million of Bitcoin it likely won’t affect the market too much.
○ Yet if you buy $10 million of a top 40 to 50 coin that would have a larger
impact on its price.

The next part of key terminology we’re going to cover is native to Crypto Twitter (CT).
Twitter is a useful tool that you can use to help gauge market sentiment.

● WGMI - We're Gonna Make It

○ A term used by bull or people who are bullish on crypto
● NGMI - Not Gonna Make it
○ This is said to someone who's probably not going to make it (often a bear or
someone who shorts Bitcoin).
● HFSP - Have Fun Staying Poor
○ Not a dig at poor people. Rather an endearing term that we use to inform
people that their actions may result in a situation they'll have to learn to have
fun staying poor.
● HSBAF - Holy Sh*t Bears Are F*cked

This section was a little bit of fun because CT culture is extremely important to me, and
something I think is a very useful tool to anyone's trading.

SUPPLY AND DEMAND

Supply and demand are fundamental to any market.

● Supply: How much there is.

○ Reduced supply leads to drastic increases in price.
● Demand: How much people want it.
○ Increased demand leads to increase in price.

Let’s use an example to illustrate this point:

Why are Patek Philippes skyrocketing in value while Hublots struggle to hold their own?
● Both are very reputable brands with beautiful watches.
● The only key difference is that Phillipe Patek has a highly limited supply.
● That means after they sell all their watches, if there is further demand, the only way
for someone to get a hold of it is to pay someone more money for it.
● This creates a cycle of price increases.
● On the other hand, Hublot’s have a large supply.
● If I like a watch I can just go to the store and buy one for myself for the same price.

Why has Bitcoin gone up over time?

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● Supply is limited to 21 million Bitcoin.

● The demand for global adoption is continuously increasing
● Countries all over the world want to own Bitcoin, more and more stores and
merchants are accepting bitcoin increased demand limited supply results in an
increased price

RECOMMENDED MATERIALS

A Brief History of Bitcoin – in this reading, you’ll explore the history of Bitcoin. You’ll
travel through its journey of its creation, whitepaper, first trade, theft, hacks, crashes, and
of course its epic pumps.

Crypto Cycle Guide – in this reading, you’ll explore more details about the money flow
cycle and read about actionable strategies you can use to trade these cycles profitably.
Don’t worry if you get lost, as we’ll cover all of these strategies in details in the future.

Beginner’s Guide to Owning Cryptocurrency – in this reading, you’ll read a

step-by-step guide to setting up a cryptocurrency wallet, buying your first Bitcoin, growing
your Bitcoin stack, making transactions confidently, and storing your coins safely.