ETHE - Cryptocurrencies And Elliott Wave Analysis With Ryan Wilday

2023-06-20 11:10:00 ET

Summary

• Crypto Waves Founder Ryan Wilday discusses his Bitcoin thesis and preference for BITO over GBTC.
• Wilday emphasizes the importance of cash management and diversification in investment portfolios, including bonds, stocks, gold, and cryptocurrencies like Bitcoin and Ethereum.
• Using Elliott Wave analysis in cryptocurrency trading.

Listen to the podcast below or on the go via Apple Podcasts or Spotify .

Crypto Waves Founder Ryan Wilday joins James Foord, The Pragmatic Investor, to discuss the evolution of his Bitcoin thesis (0:30), why he prefers ( BITO ) to ( GBTC ) (2:00) and how he uses Elliott Wave analysis (8:05).

Full episode originally published May 4, 2023 on The Pragmatic Investor.

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Transcript

James Foord: Hello everyone, welcome to the Investing Experts podcast. My name is James Foord and I'm the Pragmatic Investor, joined by fellow SA contributor Ryan Wilday. He is the Founder of Crypto Waves on Seeking Alpha and an expert on Elliott Wave analysis and cryptocurrencies.

So let's start with the crypto part of it. Would it be fair to say then that you saw sort of Bitcoin more as a trading vehicle first and then kind of also subscribe to it in a more fundamental sense?

Ryan Wilday: For sure. Yes. I just saw it as a vehicle to short-term profits, to be honest, in the beginning, that was my mindset. I mean, even in stocks, I would have do short-term trading and long-term trading. And because I was a work a day, often things would end up being long-term.

I didn't have really deep trading skills, but I just saw – I understood volatility, I understood a little bit of technical analysis. It was hard to wrap my mind around Bitcoin from a fundamental perspective for a long time, probably at least until the height of 2017. Even as we were rolling into the high of 2018 – 2017, 2018, I was still thinking of it as a capability question, and you still had “Ethereum with more capabilities”.

And I didn't have the philosophical belief in decentralized networks, and censorship - issues of censorship in transactions. And so – but now I'm deep in – I have that as I watch politics evolve in the United States. It just deepens my conviction around those concepts. But, no, it was, I mean, and it still is a trading vehicle for me, but it – I would say that our other side deepened quite a bit over the last few years.

JF: Grayscale Bitcoin Trust ( GBTC ). Basically, what are your thoughts on GBTC? I mean, you said your algo tracks it. Is that something that you would own or would you recommend not owning it?

RW: I was the owner of it, and I still – I was the owner for a long time. I still own it, but I've been cutting my position and trying to do it gracefully. I mean, I think the problem is we lost the mechanism for it to get back to par. And unless it gets turned into a spot ETF, it's not going to happen. And I don't think that's going to happen under the current regime in the United States – so, especially Gary Gensler or the SEC.

So, I don't think there's a problem with this basic design. I think that we've seen – I mean and again, I don't know the inside halls of Grayscale Investments, but I think we've seen them be a good player in terms of custody and all that stuff. Never mind the Genesis issues and all of that. I mean, the Grayscale Investments itself, that subsidiary of the company has been good on the custody side. We haven't seen them. They've been one of the largest Bitcoin holders in the world, and we haven't seen any of that Bitcoin leak as far as we know.

So, I shouldn't call it crappy by design, but, I mean, what the market has done to it, the arbitragers that were selling the premium at the – when it first came out. I mean, I thought about joining that arbitragers game of giving – getting shares for my Bitcoin and then selling it for premium. I was always very tempted to do that.

But, yes, I mean, we're just left with a – I mean, we're just – it's like a hobbled asset. I mean, what can you say? I mean, I still trade it with my algo, but those are short-term trades, so they really don't count. I still hold a little in my retirement accounts just to try to get a graceful entry. So I trade it back and forth and make short-term profits off of it at various points in time, because I have a pretty good handle on the chart most of the time. It's got a little bit scary in 2022, but it's been pretty good this year. Again, the algo helps as well.

But that – but me trading, it doesn't say it's a good thing. I generally tell people, BITO, ( BITO ) is better. granted, everyone has to understand what's inside that, which is futures, not spot, that's concerning for sure. But at least we can say that, hey, this is an asset that's 99% correlated to Bitcoin on a day-to-day basis, right?

That's a lot better than saying, Okay, really, I mean, GBTC and GBC has a mind of its own on the market. I mean, there's a relation chart-wise, but it's not a one-to-one correlation. It's like, it's got this mind of its own, and that really is that, like, 50% discount that's going on inside of it, which basically you can say half correlated to Bitcoin, right? Half of it’s market prices due to Bitcoin. The other half is due to the mind of the discounters or the discount stuff. Yes. So…

JF: I mean, during the more bullish times for Bitcoin, we have seen GBTC trade at a premium.

RW: Right. Yes.

JF: Are you saying that you don't really believe that that premium would come back perhaps in the future and that that might be something to play?

RW: I think it's possible. We certainly saw it shrunk, but I'm not clear whether it shrunk because of market sentiment, move really around GBTC or simply the SEC lost the lawsuit, that Grayscale has waged against the SEC, and it was excitement over that. I think it's too early to say, I mean, certainly in periods of euphoria, we saw a very high premium, right? I mean, maybe at that time to get it back to par. I have a really hard time. And what – did we get to a 100% premium at one point in time, like, back in 2018, I think, it was nearly double the value of Bitcoin. And someone's going to correct me. I mean, I just remember being very, very high.

And I think ( ETHE ) was even bigger versus Ethereum , but went into a faster slide. And so I think the mechanism for getting there is a difficult one.

I mean, you're asking – you really are asking retailers to move the needle of that thing back to par. Generally, like ETNs are often discount to the NAV inside. I think it's very similar. I mean, I think unless you have – if you're a closed end fund and you have nobody buying the shares to arbitrage it and doing – and then basically letting off when it goes to premium and really, you don't have a managed NAV, you don't have a mechanism for it to crawl back up.

And so I think it's – I just think it's a difficult one. Like, I've been talking – thinking about it myself, is there any way to arbitrage this, so we can help it along because you really need arbitrage as a mechanism, that's how things find fair value. They found fair value by arbitrage. And I just don't – I don't see the mechanism. I don't see the incentive to do that in the marketplace.

Yes. It might be the retailers. It might be retailers getting so excited. But now you have a competitor, BITO . And you – now you have other trust fund competitors as well. Like, I can't remember the names of the funds. I don't – haven’t never ever traded them, but there are other with the same design. And so, now you've got to spread that market – that money around, and I'm just not sure retailers are able to do that right now.

JF: Yes. Now in terms of the best way of owning Bitcoin, I mean, obviously, if you're trading in stuff, you need to probably use those exchanges. But I guess you would also maybe subscribe to the idea of the old saying: not your keys, not your crypto ?

RW: Sure. Yes, no, for sure. I have dedicated Ethereum and Bitcoin holdings that are multi-sig, off not on exchanges, I got the keys. I mean, I'm always evaluating my security for sure. And yes, so I differentiate my trading assets versus my long-term assets and everything I'm trading is... and in fact, even more and more, I'm trading CME futures. Because out of my brokerage account and then to hedge my Bitcoin holdings, so I'm sometimes trading that way. So I'm not even touching the exchanges at all.

JF: Now I wanted to get back into Elliott Wave because, of course, that's something that I've also looked at a lot. And there’s – well, I wouldn't quite call it a debate. But where do you stand on the idea of using logarithmic versus arithmetic charts?

RW: I don't even – I know, crypto, you cannot see the waves properly in a linear period, like you really can't. Like anyone take a Bitcoin chart, put it in linear on a weekly chart and you see mountains, right? And if you put it in a log chart, you see a clear trend, right?

Like, Elliott Wave is a trend analysis at a core. I think that plays out in actually every asset. I’d only – what I feel a little different is 4x because they tend to be actually ABC structures. They tend not to be five-wave structures. It's up for a short period of time, and they tend to be sort of nested ABC structures.

So, it's not even really pure Elliott Wave if you get in 4x most of the time. But a linear chart tends to work also because the function of how important log linear is a function of how volatile the asset is. If something – if a third wave tend, you can have – in crypto, well, let's say, take a non-volatile stock and its third wave coming up might get you 30% return. And then the third wave in Bitcoin, like, we really get, well, even just the fifth wave up to 125,000, which is my target, that is now, what, 4x or 5x close to that, right?

That if you put – if you use fibs the way we use it, you will not get a projection anymore close to 125,000.

And the only reason we get a 125,000 is because we use linear log fibs, but it has played out for years for me. And I'll use a clear story. So, this is back when I was really trading Ethereum more than Bitcoin in 2016. And I was a member of Elliott Wave Trader, not on staff. And I was still learning Elliott Wave at a deep level. And I was using linear fibs, and I was – we were coming off out of the – so we had the Dow hack, and then – I don't remember what the low was, $6 or $7 in 2016, I don't remember something like that, and then it broke out at $10. And I used linear fibs and this fibs and I had projected a target of, I think, $30 or something like that, okay?

We got to $30, and I thought, you – there's a lot of technical – typical technical things you see at fifth wave targets. One, it didn't look like it had even finished the third. Number two, it didn't have any of the technical aspects that you would expect near a top. And then I had a fifth target and then it kind of started to zoom past it.

And then at that same time, one of our members did a really deep dive down on the very important aspects of log fibs. Like, if you do linear fibs on the S&P 500 over the last 100 years, it won't work, at least, not to use fibs and fib target the same way as we do. You can do – you can use linear on a shorter timeframe, but you can't do it on a 100-year chart. That's the light, the span.

So he went through the 100-year chart of the S&P 500 and showed the importance of log fibs. And the point is that, let's say you're looking at the 1.618 extension. In log, it will mean the same thing on every timeframe. Meaning you can do a five-minute chart, 10-minute chart, 15-minute chart. And if you're using log fibs, you get similar hits of fibs at any timeframe.

If you're working on linear, all of a sudden on the long-term chart, you've got to talk 500‘s extension, 600 extension. And it just doesn't make any sense if you're trying to stick to a method to start to – no, you're basically apples to oranges on your fifth extensions. That's the main point. And no one's going to get this on the podcast if they're not deep into Elliott Wave. But you can apply the method by timeframe.

So anyway, my point was after that talk, I was like, holy crap. I take the same setup, I apply it in log, I don't get 30 as a target, but the next big fib is 1,300. And then after that is like 2,000 and after that is 2,500. Now I maintain that Ether broke down after a C Wave. In 2017, it did not give us a full five waves. That can be debatable. But – or you can say that – you can even say that it's working on its fifth wave now.

But regardless, and I challenge that notion, too. But irregardless, the next key fib was 1,300, right? Where did we top? And we were, like, 1,300, 1,400, right, in 2017, something like that, I don't remember exactly what it was. I think it went into 2018 when Bitcoin topped in 2017. I would have never been long between 30 and 1,400 - but I was - if I had not had that realization, if I had not been on the log chart.

I would have, I mean, 1,700 in terms of percentile gain, I have never outdone in my life yet in terms of a yearly gain, right? I won't even talk about it. It was life changing. 2017 was life changing. Now I didn't – I knew it was – I knew we had come into a top in Bitcoin. I was running the service. I had lots of coins in all these alt wallets, because I was secure back then. And I think at one point in time, I lost six figures over 24 hours because I was just moving coins out of wallets and covering my service.

So I wish I could say it was, I mean, it was life changing at the same time, if I wasn't moving all those coins around, it could have been ever more life changing. But regardless, my point is, because I don't want everyone to think, I made myself ultra wealthy at that time.

What my point is I would have been out of Ether at 30 if I was using linear fibs. And I would have just gone home and I would have said, okay, we're near a top. And then I just would have watched it zoom all the way up to four figures. Instead, I got out at 30. I saw that guy's article, I went back to my fibs. I went to log, and I said, holy crap and I went very long. So anyway.

JF: Good thing you saw that article that you changed your life. Now the reason I was asking is because I think when you do use the log, like, for example, looking at Bitcoin now, depending on how you measure certain structures, I feel like you get a very bullish outcomes, which I don't – sometimes I feel like I'm not very realistic. You get like Bitcoin going into like 500,000 or even a million.

Is that something or you just like, well, that’s it that those are the fibs?

RW: I – well, what I always tell people is those are the moon counts. And now, I would say, we've seen over – since I started in 2017, we've seen Bitcoin hit all its major fibs.

JF: Yes, that's true.

RW: So, it's – with Bitcoin, it's harder to challenge. What I would say with altcoins whatever you want to call it, even Ethereum, we've seen it miss those big targets. And I don't chalk that up as Elliott Wave isn't working. No because Elliott Wave also told me when they were going to miss and told me to get out, right, to cut my positions.

So it works as a risk management tool whether you hit your targets or not, whether the support holds or not, that's just important. Like, I trust the supports from Elliott Wave and when they break, that's important, I've got to cut my position or get out depending on what support we're dealing with. So, is Bitcoin always going to hit those fibs? You know, I really can't say, right? Like, I mean, I think Elliott Wave has some predictive qualities, but I've seen enough targets miss. I've seen enough, you think they're going to go five waves, they top in the third wave with aka C Wave, and then they die, right?

So, the just – that's okay with me because I trade those C Waves. I trade the C Waves, and I get as much juice out of them as I can before they start to fail. I mean, that's how I trade. And over the time – over time, I've grown very realistic about what we can get out of an Altcoin before they die.

Even with Ethereum, I'm very realistic about my projections going forward in Ether. I have very bullish ones. I expect 10,500 right now in the current cycle as long as 1,000 holds. But and again, it's always – if this, then that. But I'm also realistic that because it's popped in my view as C Wave in 2018 Elliott Wave loses a little bit of its value, and it's a little bit easier to trade Ether on a shorter timeframe than that major weekly chart where Bitcoin has just hit every milestone in its weekly chart. And it takes about a break of, like, $3,000 to, like, say, I'm not getting a $1 million?

If it takes a break of $3,000 for me to doubt a $1 million. And the thing I don't say is by when, right? Because maybe a million comes when I'm 80 years old, right? So I think the point is that I trade long-term counts as a roadmap to help me work in and work the trade at a lower level. And then, okay, that'd be nice. I'm not holding any Altcoin out for its crazy moon targets. No. I'm trading smaller timeframes. I'm snapping off 3xs, 5xs, sometimes I got to get out after 30%. Sometimes I got to get out at a small loss.

I'm working on smaller timeframes. And then yes, if after it does X, Y, and Z, and it sets up again, okay, now let's talk about the next target, right? It's just swing trade by swing trade just to be realistic because I've seen way too many Altcoins especially fail. And again, Ether to me was a big failure in 2017. People may not think it that way, but from an Elliott Wave perspective and my perspective, I mean, I can – my colleague, Jason sees the fifth wave as now. I have a hard time seeing it for various reasons.

Okay, that's fair. I can give that to him. But I think it should have happened in, not maybe 2018, and it was just – it's – I think there's an exogenous thing that happens at crypto, it's that Bitcoin sucks the liquidity out, right? As soon as Bitcoin tops, all the liquidity starts jumping out of the market, and then Altcoins can't go anywhere. And I think that's what happens with Altcoins. They're great as long as Bitcoin is performing. Now maybe one day they stand on their own, but I think it'll be very few who stand on their own over time.

JF: All right. Sorry. So you're saying that because of that failed move in 2017, where do you stand now on Ethereum? You see that going lower?

RW: No, no, no. I'm bullish on Ethereum. I see it going at 10,500. I'm only saying that when you're dealing with ABC's structures, and then again, that can be challenged. Beginning with ABC structures, the predictive qualities of Elliott Wave analysis reduces a bit. So I'm very reluctant to say after 10,500, what the target should be.

I'm very much going to say, okay, let's hit 10,500, then let's see where it retraces, let's see where Bitcoin is, and it'd be a little bit easier to talk about scenarios in Ether after 10,500. And that's because of the ABC structures where Bitcoin is mostly done what I've expected since the top in 2018, even more than that the bottom in 2018, except that sometimes it took a little slower. Like, I would have rather seen it shoot up to a 125 just like everybody else in 2021.

But from an Elliott Wave perspective, it isn't so bad to take a detour as long as you don't bring support, and there are two levels of support, 16,000, which should kind of tap below it, but it's come up and the second one was – is 3,000 region. We got others below that.

But – so, is – I – the problem is when – okay, when you're on Twitter and you post the setup, and then someone says, that is – that didn't age well, right, or you – that one failed. And then they're not paying attention to you anymore. And then you got there, like, a little bit later, okay? Whether the situation there is, okay, either my Elliott Wave account was wrong, or simply, it put in another consolidation side, right?

And it can be both, right? It depends. It all depends. And that person's gone, right? They're not following anymore. And that's the funny thing about forecasting and it's like – and that's why I always avoid time frames because like I've said, Elliott Wave – Bitcoin has always hit its targets.

But if you're picking on some post I made on Twitter at some point in time when Bitcoin was moving very aggressively, that little, smaller timeframe may have turned out wrong, right? Smaller time frames turned out wrong more often than larger time frames in most asset classes. So anyway, yes.

JF: Yes. Well, I mean, it's definitely a widespread problem nowadays judging people on certain tweets they made and not on the whole content of what they share?

RW: Exactly, yeah, or I mean I think I always say my value is in how to trade Elliot Wave, I think I think that, you know, versus -- know, I usually get complimented on me teaching how to trade and use the analysis versus me being such a brilliant Elliot Wave analysis that I'm always right. Right? Like and I'm more, you know, the reality is most professional traders trade close to a 50% win rate, on a long term basis, right?

It could be 55, it could be 53, it could be 56, you know, most of the time, I would say, you know, quant trading and high frequency trading is different, because they actually gear that to win rate. But most of us are, you know, I'm more interested in getting close to 50 and then 3 to 1 on my returns versus my risk. So, you know, it's just more easier to accomplish that, you know. And you can't do that if you don't take a stop when you need to, you know, I mean, you're wrong. So anyway.

JF: Yeah. Absolutely.

RW: The whole thing is funny.

JF: Twitter is hilarious, yes, especially when it comes to crypto. So now in terms of Bitcoin, you were saying then - would it be safe to say that until that sort of low that we breach recently is at 16,000 is broken. Would you say that the bottom is in so to speak?

RW: As long as that holds, yeah. I mean, actually, now I would say 18. Because, I mean, it's the old like, okay, you know, support needs to move up and 764 retrace of the entire range. I don't think that's a perfect support, but if you take it's around to 18 where you take the range that we've seen. From that 15,500, a log, a log of 764 is around 18 roughly, but that's where I would get concerned. I mean, just probability would say, once 764 goes, that's sort of the line and generally the whole position is, or the whole structure is invalidated.

Just generally. I mean, every once in a while, you get a poke below 764. I've seen Bitcoin go to the 88. But it's very it's, like, 99% of the time with the 764 retrace breaks. And it's going to take out the low. And so, generally, I often look for spike in reverse, but if we don't get it and we start consolidating below, then I just get -- I get out of my positions. And that wouldn't mean that I got out of Bitcoin. It would just mean that I cut my aggressive positions.

Because again, my, you know, I was buying Bitcoin down, you know, as we're going down in 2022. But because I knew we were in a bear market, I was just buying I tell people generally around like half a percent of my free cash flow every month, Right? Like, that's a very safe, like, who cares? I'm just adding a bitcoin as we go down. I'm not taking any aggressive long trades. In fact, I took some shorts along the way. That's very different from saying, okay, I'm just buying all the way down, you know, aggressively. You know, at some point in time, you're just going to run out of money.

And so, you know, cash management, is all key and all that. But, so if we break, my point is when we break 18,000 I'm not going to get out of my -- I do have, like my trading account are going to go to zero. But I still have my long term, you know, multisig wallet, old wallet, holding Bitcoin. That's not going anywhere. And then I will focus on adding to that, those old wallets by buying, you know, I might buy 5 bucks a day, I might buy hundred bucks a day, whatever my cash flow looks like. I also -- there's a lot of other asset classes, I do classes, I do similar type some indexes, yeah, various stuff. Some people make fun of me because I got into wine investing like a few years ago, and it's been very well for me.

So it's, you know, there's a lot of asset classes that are important to me. But I mean, the main thing is, like, cash management, you know. When you're in a bear market, you've got to -- you've got to slowly manage your cash as you go. Otherwise, you're going to end up, you're going to end up -- the worst thing -- so the worst -- the biggest thing, the biggest lesson I learned about trading is, I called the bottom in 3000 in 2018, but I was not in a financial position to fully take care of it, to fully make use of it. I didn't do bad. I did great, but like, I've always said to myself, okay, like, since then, I've said, okay, what am I going to do in the next bear market?

How am I going to get in low? And my conclusion was I got to be a little bit lazy and just say, okay, I'm going to hold on cash, but I'm going to slowly trickle that cash as we go down. No aggressive longs, no leverage. In fact, leverage may be applied to the short sides, a hedge, what I've been accumulating. And man, I was really -- I mean, this is like the third bear market I went through in 2022, and I was absolutely happy with my performance.

Again, I'm not saying all my calls were perfect. I'm just saying that my trading, the acumen of being really careful was – it was just excellent. I mean, and so when we were going up, we came off 15.5. Again, I didn't expect it to come off that that. Yeah. And we've reached my key support, I'd figure, you know, but then we started come up. I was like, well, I'm making money because I had just accumulated into that low slowly but surely add some – add more stats. So anyway.

JF: Yeah. Absolutely. I mean, at the end of the day, as long as you have that conviction, you've got to be able to just, you know, play the long game and accumulate. Now you talked -- sort of talked a bit about having other investments, and that's also one of the questions that I wanted to ask you because, obviously, in terms of analysis and trading, you're a crypto guy, but I would assume that you also have some other investments you just mentioned, for example, the wine. How do you see crypto and Bitcoin fitting into, like, the more diversified portfolio for investments?

RW: Yeah. It's funny how I gave my whole -- all my members like, like a whole webinar devoted to how I look at portfolios. So I look at asset class. I mean, cash has got to be an asset. Right? You’ve got to have cash. Yes. Cash is losing value, but how are going to take charge of opportunities without cash. Right? I have, I don't - I have not classically viewed bonds as an asset class, but within a high interest rate environment, they are great.

So I have been buying bonds of late because as soon as they drop interest rates, those bonds are going to fly. And then I'll probably be done with them as soon as they get back to zero rates in the United States, which I imagine we will again. The way it would -- if we got Fed anything like what we have today -- so now bonds is added to that. Like, general stocks, so tech index, NASDAQ, and then small caps, the Russell 2000, as well as SPX.

To keep it simple for some people, I just say SPX, you know, general stock market exposure gold. And I have that in the form of mining share, index GDX, as well as a little bit of physical metal, not a lot, but I've been looking at building that up because it looks like we're in a bull market right now, and I expect that to continue. And then Bitcoin naturally and Ethereum a little bit less so, but I consider Ethereum viable long term. And again, my value there is if the crap hits the fan where our financial service is going to be, it's going to be on Ethereum right now. Maybe one day it's on Bitcoin and there's some movements in that regard.

JF: Alright. Well, Ryan, it's been great having you on the show. Like I said, I've been following your work and Avi's for a while. So it's been great to have the chance to pick your brain for this time. Before we get off, just let everyone know where they can find you.

RW: Yeah. I think if you're really curious about what I do, follow me on Twitter, @rwilday, and then I do a public webinar. I try to hit the third Saturday of every month, as best I can. But I'll give a little indication about where it's going. It's a free webinar. You get a flavor. This is what I do every week for subscribers. Go through Bitcoin, Ether, a bunch of charts, and then I go through a bunch of Altcoins, which are selected, some crypto equities, then I usually often talk strategy. So check that out, and then I always say, you can go to my profile on Twitter if you want to try the service.

And on Elliott Wave Trader, we do it without any credit cards. So you can just sign up, email, password, and then if it's not for you, 2 weeks you have to ante up. But you get every single service stocks, futures, all of this, the quant signals we have, all of that for two weeks. And then again, no one's calling you up and saying, hey, pony up, it's not a high pressure thing. You know, it either works for you or it doesn't. But, you know, I've had people that have been with me since 2017 when we started. So check it out. Twitter, again, like I said, Elliottwavetrader.net.

Or if you go through Seeking Alpha's Crypto Waves so that's the other way to find us.

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