The Crypto Cheat Book

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Dear friend,

Before starting this enriching and insightful experience with you, I would like to thank you for showing an interest in this work. The intention to write this book truly came from the bottom of my heart and my deep love of the crypto-community. Thus, any useful information that I may provide you with brings me closer to my goal: help you profit from the unique and incredible investment opportunities around the blockchain technology.

The information shared with you in this book comes from the experience that I have accumulated investing and trading cryptocurrency and in the last two years researching and learning about it. While my path has not been a straight line to success (I do not consider myself successful yet!), I managed to be profitable and develop a solid technique when seeking investment opportunities, a technique that I want to share here with you.

Last, but not least, I wish you to be successful in this niche, as I truly believe that this is a unique opportunity to multiply your wealth and gain knowledge of a yet-to-be-discovered treasure, which is blockchain.

Artem Bespaloff,


A Crude Marketplace As of August 2017, the digital currency marketplace is vaguely regulated, unknown to most people and its full potential is yet to be realized. If you are reading this today, you can consider yourself one of the few lucky people in the world who has found out about this fantastic investment opportunity. Chances to build great wealth in the cryptosphere are existent, but you need to be able to adapt. For this reason, there are some basic techniques that I want to share with you to help you craft a sharp analytical mind when it comes to investing in decentralized currencies.

In the first section of this book, we will consider certain predominant factors to acknowledge before investing - such as your budget, your attitude towards risk and your investment goals.

In the second section, we will proceed with analyzing the different types of cryptocurrencies and Initial Coin Offerings and classify them into different categories. In this section, you will also learn how to scrutinize each different asset before making an investment decision. I would like you to especially pay attention to this segment, as I believe it provides you with precious knowledge.

In the third section, I will discuss different factors that have proven through time to influence price movements, and how to determine highest and lowest price values. I will support this data with a few examples.

Hopefully, this guide will put you on the right path to building wealth within the cryptocommunity.

Disclaimer:

Please, do not consider the information contained in this book as investment advice. I am not a financial professional and please assume that my subjective mind might have influenced the content of this book. Good luck!


Who Are You As a CryptoInvestor? (If you are not a complete beginner you can skip this section – although not recommended !)

You will probably think that these questions are too obvious and that anyone capable of logical rationalization already knows the answers. However, my point here is to help create a more clear vision of the overall crypto-picking process before jumping into more specific details. I also believe that being able to classify yourself as an individual will help you make more rational decisions down the path.

wHow much money am I willing to risk on this specific coin? (Obvious) wWhat is my overall budget? wAm I a risk taker or a risk averse individual? (If you hate risk this universe might not be for you)

wWhat percentage of my portfolio would I like to be composed of risky investments? wHow much do I realistically expect to make on a certain coin in a specific timeframe?


The answers to these questions will be largely dependent on YOU. However, I do not recommend holding a significant stake of your portfolio in what I call risky cryptocurrencies.

Risky cryptocurrencies tend to fluctuate much more in price than other ones and are more susceptible to price manipulation by bigger players. Don't worry; we will define what constitutes a risky digital asset later in this book.

While all "crypto" is considered to be speculative, some currencies tend to be less than others. Most of the time, I do not suggest you to hold more than 10% of my portfolio in over-speculative coins.

**Coins that I consider less speculative in the long term are Ether, Bitcoin, Monero and other long-performing coins (they just tend to perform better). My reasoning behind this is that the roadmap and the horizon of these coins are relatively clear and we can make more comfortable predictions as to their price direction. For now, these currencies have established themselves in the market. Their history also shows us that betting on them and holding over periods of 90 days and more seems to be a reasonable decision.**

Once you have determined an answer to each of these questions, you can then proceed to find a coin that might have the upside potential that you are looking for. To help define it, you can proceed to the following section of this book.


Classifying Cryptocurrencies Almost every day we witness the creation of new cryptocurrencies. It seems like there are so many, but which one is the one? In this part of the book, you will learn an easy way that I use to classify different assets between themselves. Most of the time, I separate them into different groups:

w Does it use its own blockchain w Is it a modified copy of another blockchain

w Does this coin interact with another blockchain (ERC)

Individual chain projects, such as Monero, Ethereum, Bitcoin, Dash, etc. that have strong developer teams and are aged two years and older tend to beat the market over time more often that projects that are a copy of a specific blockchain (a.k.a Litecoin – but we will talk about this one in the last section of the book).

w As a rule of thumb, I always research the project managers before making any decision.


A critical factor to consider is the role of the cryptocurrency in the decentralized system. Does it serve any purpose?

The Golem Team, for example, developed the GNT token and attributed specific use cases for it. In this case, GNT is used as a financial intermediary between decentralized processing power requestors and providers. Therefore, the value of this token will simply be determined by the forces of the market – Offer and Demand. If the Golem team, does in fact, successfully launch their project –we can assume that the market players will determine the value of each GNT. If they deliver a useful product and there is growing demand for it, you can anticipate the value of their token to increase, and vice-versa.

Currencies used as 'gas' is another example. Gas units tend to make the network more secure by forcing an attacker to pay higher fees in denial of service attacks and make the code behind smart contracts more efficient. This aspect of a coin usually predicts the factors that will influence its natural demand.

Ether is one example of currency used as gas.

How are the coins held and distributed by the network? Are there masternodes that freeze significant amounts of coins and thus decrease supply over time? Are there wallets that control a big part of the supply?

Dash is an example of cryptocurrency employing a masternode system to help validate the transactions.

Note: I tend to avoid coins that have no other use cases other than speculative value. Basic economic models can be used to prove that this is never a good option. While some will argue that fiat money has the same principle, I strongly disagree. Fiat money is the only legal tender officially accepted within a community (for now).


As long as 99% of the global economy relies on fiat currencies and debt, I will not consider them to have uniquely speculative value. Mainstream adoption is what eliminates speculative value.

wThe value of these tokens is rarely justified. Often, they tend to be pushed to specific price levels due to price manipulation. Sometimes, they were just an intermediary used by companies seeking to fund their projects.

Example: Dogecoin, other bitcoin clones and currencies that I will omit to mention here as I might offend some readers.

w If you are investing in an Initial Coin Offering (ICO) research the market for other similar competitors and ask yourself in what will this specific coin be different?Consider that if the team members have a successful background or resume, you can be more comfortable assuming that they will deliver the project, against a team that has no track record at all.


Market Capitalization and Past History A useful technique is to compare the market capitalization (MC) of a coin to the high average of the top 10 (excluding Bitcoin and Ether). If the coin that you found has a relatively small MC, a ton of potential, a good team and anticipates positive news, you can be sure that if the overall cryptocurrency trend remains bullish, this coin might see a bigger increase than others. Note: As of August 2017, I consider MCs below 250 million dollars to be low.

Another technique that has helped me generate thousands of dollars in profit is the comparison of two similar cryptocurrencies between themselves, against the leading market cap averages and multiplied by the chance that an anticipated release will impact the market positively (or negatively) Once more, remember that the cryptocurrency market differs alot from other markets. What might seem rational/irrational here might not be elsewhere. I tried to resume it with the following formula:

(AVERAGE MKT. CAP OF TOP 10 COINS EXEPT BTC AND ETH) * ( % PROBABILITY OF UPTREND) (YOUR CHOSEN COINS MARKET CAP) *Please consider this formula flawed and do not rely on it.

The probability of takeover is the chance that a coin ranked in late MC positions finds its way up to the top 10 or 20 most valued coins.

Example: Suppose coin α is valued at 250 million dollars. Their main competitor β is estimated at 1.1 billion dollars and is the 7th coin in ranking, while the average MC of the top 10 coins except Ether and Bitcoin is 1.8 billion. However, coin α is anticipating good news such as a software release, alliance, or else. After the publication of this news, both coins will have a similar competitor advantage. You expect that this news will trigger a bull run with a probability of 70%.


Analysis: This means that 70% of the time (or 0.7) coin α will approach a similar theoretical valuation to coin β. Which would be anywhere between [250m , 1.8b]. This means that 70% of the time your investment will be a profitable move. Therefore, for each 1000$ invested, 70 percent of the time,

your profit should be between 0% and [1.8b/250m x 100] %.

Note: Coins with smaller market caps [50-300m] usually experience bigger fluctuations than coins with market caps over ~ 1.5b. However, market capitalization is not a precise mesure of the size of a market. If I have in my possession 1 million tokens and I sell 1 for 300$, it would theoretically mean that my tokens have a total MC of 300 million. But, this does not mean that for every "x billion" movements in the MC of my token, "x billion" amount of dollars have to flow in, or out.

Ask yourself what will this company bring thanks to the innovative technology of blockchain that a traditional company can't. What problem will they solve thanks to a blockchain?

Usually, I don't recommend investing in recent ICOs right after the token is issued to the public. It is not unseen that people hurry to liquidate their positions after the initial offering and this drives the price down for some time. Later in this book, you will learn the different factors that tend to influence prices.

Another simple, yet useful, trick to know past price history. Did the price grow 3700% in the past five months? Was it stable for three months but good news was released yesterday, and the price increased 20% in one day? The latter is considered as an attractive opportunity. However, be sure to check how this kind of news usually affects the coins trajectory. In some cases, this might be the beginning of a 200-300% growth trend. In others, it might just fade away in two or three days.

A perfect example, as of August 29th, 2017, would be Monero. Monero is a token with a lot of potential, a fascinating and very implicated team, but there has not been much interest in the coin lately. In this case, virtually every positive news will have a large impact on the price of the currency, as we have witnessed in the past four days.


To resume this section, you should always pay attention to fundamental factors such as the uniqueness of the idea, team leadership, market capitalization and upcoming news.

Following general sentiment on /r/ethtrader and /r/cryptocurrency is sometimes a good way to predict future price movements. However, do not rely on this method as lately I have seen many fake accounts trying to manipulate the crowd, and the quality of the subreddit is on a downward trend.


Which Factors Influence Price Movements ? In this section, you will learn what affects the prices of cryptocurrencies and how to deal with it. What you will discover here is not time-proof; eventually, you will have to adapt to the crypto-market. However, my role is to give you specific examples to help you understand what forces have an impact on a cryptocurrency's price.

News.

Obviously, news are the pulling energy of an assets price. Two years ago, when I started playing around with cryptocurrency almost any press release had a price impact on Bitcoin or other cryptos. As of today, this has changed.

Almost every day now we witness some media coverage. However, the news that you will be looking for are the ones that talk specifically about adoption, alliances, partnerships, and government related.

Those of you who were invested in Ether earlier this year will remember how the Enterprise Ethereum Alliance drove the first big price wave from around 12$ to 42$ in a matter of days. The second EEA company release had a similar effect on the price. However, the market slowly became accustomed to this type of news (only for Ether) release, and every following announcement of the same kind had a diminishing effect on the price of Ether. Alliances and partnerships are without doubt an important element to look out for when researching cryptocurrencies. While this type of news might have a diminishing effect on the price of Ether (for the moment), you should not exclude the enormous upside potential that they might have on another digital currency.


Lately, governments, banks and big industry leaders have been showing a growing interest in blockchain technologies and the benefits that they might help incorporating. Vitalik Buterin, chief scientist of Ethereum even personally met with president Vladimir Putin to discuss the future of decentralized technologies and economies on a national level. Considering the numerous advantages that blockchain can bring within an economy, we will, without doubt, witness the incorporation of these technologies on larger national levels too. Paying attention to this kind of news will most probably be profitable in the future.

Technological Updates. Updates often introduce significant upgrades to their systems and in retrospect amplify the potential applications of each project. If you are tech savvy, you are probably already paying attention to this. However, for many, this is something hard to understand, and it's okay! Something that has helped me a lot in qualifying projects has been reading and learning every bit of information on system upgrades, technology and the scientific fundamentals lying behind them. Soon enough, you will be able to realize just how many projects have flaws in them and you will be able to eliminate them from your list quickly.

Exchange Adoption.

Often, newer or less known currencies will experience a price spike due to their integration on exchanges. This theory is supported by the fact that the availability of the coin will have an impact on the volume exchanged. However, be aware that this does not always have a longstanding impact on the price and most of the time it's a "buy-the-rumor-sell-the-news" type of event.


Block Reward Reduction.

Time has shown that block reward reduction has a positive effect on equilibrium price levels (see: Bitcoin, Ether [August 2017]). This principle is easily provable with basic economic models such as demand and supply. Considering a stable or increasing demand for cryptocurrency and diminishing supply tends to drive equilibrium price levels towards higher levels.

Note that events with similar effects will have the same repercussions on the price levels. Ex: Proof of Stake, or any other circumstance that would act as an incentive for people to hold (or hodl, as some prefer!) their coins.

Competition Has a similar coin adopted a new technology before its competitor? This will leave a mark on the price. Litecoin, which is no more than a faster copy of Bitcoin, witnessed an enormous price surge due to their faster adoption of the Segregated Witness update. I am not aware of any other two coins that had a similar effect, but I assume that the result would be the same. u Also, please be aware that low volumes driving prices up or down tend to be temporary. Use this tip to your discretion


Conclusion Finally, I would like to thank those who have read until the end. Your interest in my work is what will motivate me to continue writing useful content for the community. I am truly passionate about this new technology, and I am willing to share as much as I can with you, fellow enthusiasts. If however, you disagree with anything that has been said here or would like to specify something, please feel free to critique and contact me. I will listen to what you have to say and will work even harder to provide you with useful content to help you benefit from this wild ride.

To the MOON! Artem Bespaloff











The Crypto Cheat Book

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