Coinbase, the U.S. exchange for Bitcoin ($BTC), Bitcoin Cash ($BCH), Ethereum ($ETH), Ethereum Classic ($ETC) and Litecoin ($LTC), crashed on the evening of Thursday, August 9, 2018 at about 5:37 p.m. PDT and stayed down for 17 hours. Irk was, of course, mid-trade. The following documents the events of that trade.
NOTE: This most recent Coinbase crash is also yet another reason why Get Irked tells everyone with interest in Bitcoin to trade crypto, not HODL (e.g. “hold”); events happen in this asset class’s space that happen NOWHERE else (mostly due to the lack of regulation in place which protects against this kind of shenanigans in other markets).
Irk was in a 4-Hour bounce trade and actually doing pretty well for himself. Bitcoin was testing resistance at $6584.80 and Irk was up in my trade with a per-coin cost at $6482.
We were playing a short bounce as we were in the middle of a consolidation move and we expected a small pop to ~$6600 and then further downside.
Thursday, August 9, 2018 – 5:37 p.m. PDT
Coinbase crashes. No warning. No error message. Nothing. It goes dead.
No trades are being processed. The exchange is nonresponsive.
Throughout the entire crash, Coinbase never updates their website to reflect that the exchange has crashed. No one knows exactly what is going on, but Bitcoin’s still trading on the other exchanges.
Bitcoin continued its movement. It bounced around a bit – down to $6300 where it held key support – and then had a nice pop back up to $6537 where it couldn’t break the level.
This movement indicated it was going to reverse direction. This would have been when Irk would have gotten out. Can you say “How screwed are we?”
Friday, August 10, 2018 – 10:00 a.m. PDT
Without notice, Coinbase returned to life on Friday – 17 hours later – at precisely 10:00 a.m. PDT Naturally, Bitcoin was already mid-freefall, dropping from $6476.13 to $6070.00 in less than 15 minutes and Irk was already upside-down. The price bounces up from the bottom but gets nowhere near our per-coin basis. He tries to right-side his trade but it isn’t going to happen.
The EMAs are coming down – an indication we’re about get slammed for a downside move in excess of 5%. There’s a bad moon arising…
We recommend playing with very small positions in downward trends in Bitcoin for exactly this reason.
We reviewed the Relative Strength Index (RSI) levels on the 4-Hour and Daily charts to see that Bitcoin’s approaching oversold conditions (an indication of an upside pop) on the Daily, but we are definitely going to drop first.
Without the pattern recognition and RSI level support, we would have put in stop orders and prepare to take a pretty decent loss.
Given our small position size and since the crash had royally flipped screwed us, we decided to “Niagara Falls it” and let the EMAs slam into Bitcoin so we could practice fixing a trade in trouble.
Bitcoin dropped from $6404 to $6010 – nearly a 6.25% drop. In case you’re curious how fast this happened, it took less 25 minutes.
If that doesn’t prove the cryptocurrency asset class is not for the squeamish, we don’t know what does…
At that point, way upside-down, we know we’re rapidly approaching Daily RSI oversold conditions. We start stocking up at lower support levels and selling at higher resistance levels to lower our per-coin cost using a variety of trading strategies and Technical Analysis (TA) techniques.
Over the next 24 hours, we make a variety of plays to fix the position using RSI levels, small bounces, oversold conditions and other options at our disposal. The trades are exhausting with tiny profits helping to chip away at the mammoth hole left in our position from the 17-hour deadspace. All the hard work didn’t go to waste, however…
Saturday, August 11 – 9:50 a.m. PDT
On Saturday morning, bullish volume appears on the scene — indicating a reversal. Intense sigh of relief.
Between 9:50 and 10:55 (a bit over an hour), Bitcoin’s price jumps 6.45%. Right-sided and delirious from two days of playmaking, we exit the trade with a 5% profit on my position and one heck of a learning experience (which we knowingly entered).
Yes, we could have earned more on the trade had we followed traditional trading discipline and taken a loss Friday morning in mid-freefall, but our intent for the trade at that point was to practice a nightmare scenario in a semi-controlled situation (with the right oversold RSI conditions, of course).
Why Irk didn’t take a loss when he saw the drop coming
- He was playing a very small position size.
- He knew Bitcoin was going to hit Daily RSI oversold conditions and likely bounce.
- He was already enormously screwed in his trade due to the Coinbase crash.
- He wanted to practice to see if he could get the trade right-sided and was prepared to take a loss if he failed.
NOTE: Many of the techniques Irk used throughout this trade are considered intermediate-to-advanced. If you’re in a trade and see downside is coming, set your stops and let the market kick you out. No trader should EVER ride a trade, including Irk. In normal circumstances, Irk would have been stopped out with a small loss at a much higher level than where we were at 10:00 PDT.
Make a plan.
Before you enter into any trade or investment – stock equity or other asset class – make a plan. What will you do if the stock drops? What will you do if it pops? When will you take a loss? When will you buy more? When will you sell?
Try to think of all the different scenarios that could happen and plan for each and every one.
The more you plan, the better you’ll perform!
Disclaimer: Eric "Irk" Jacobson and all other Get Irked contributors are not investment or financial advisers. All strategies, trading ideas, and other information presented comes from non-professional, amateur investors and traders sharing techniques and ideas for general information purposes.
As always, all individuals should consult their financial advisers to determine if an investing idea is right for them. All investing comes with levels of risk with some ideas and strategies carrying more risk than others.
As an individual investor, you are accountable for assessing all risk to determine if the strategy or idea fits with your investment style. All information on Get Irked is presented for educational and informational purposes only.