 Hi everyone, it's MJ the fellow Actree and what I've done in this video is combined seven videos which I made for you to me on fundamental analysis for cryptocurrency trading. Now if you want to watch these videos without the ad interruptions and in more of a course like structure then what I would like to encourage you to do is to come to you to me and enroll in this course. It is for free and you can see that we've then split the videos into the two different sections. You can also get the slides from the videos. I've also put up the whole script as well and also you can then comment on each of the videos. It's a lot more interactive. So if you want like I said there's going to be a link in the description below to this entire course on you to me. However if you want to watch it on YouTube sit back and relax. All seven videos are going to be in this video and I hope you enjoy. Cheers. Hi everyone it's MJ the fellow Actree and welcome to this series of videos where we're going to be looking at how to become a fundamental analysis crypto trader. So very quickly who on earth am I? So I'm a fellow of the Actural Society which means I know a lot about asset valuation, risk measurements, capital management, portfolio construction and all that kind of statistical modeling. So there's all the theory but I've also got a bit of crypto experience. Been playing with bitcoin since 2014, gone to multiple hackathons, been trading this stuff from over eight years and have also been working at Polygon since 2021. So hopefully there's going to be this combination of the theory and the practical to bring forth a new way on how to trade these cryptocurrencies. Now of course we just need to have a bit of that disclaimer that these videos should be seen as educational not financial advice. Remember if you do want to invest a significant amount you do want to consult a financial planner. A good one will analyze and match your liabilities and make sure that what you're buying is right for you. Remember a good investment for me might not necessarily be a good investment for you depending on how your liabilities are. Also we are going to be trading cryptocurrencies which means high volatility and this can be very very risky if you put too much money in. So like I say just a bit of disclaimer to keep in the back of your mind. Now what we're going to be doing is using Bybit. Now Bybit is a crypto exchange they sponsor the Red Bull and they have quite a lot of interesting leverage tokens and leverage positions that you can use and that's why I want you guys to all use Bybit because when we discuss derivatives of strategies it's important that we're on the same page. So we're using the same platform so that you can follow along. Now of course when it comes to risk management and crypto even if you already have a crypto account I recommend that you set up one on Bybit maybe just fragment your holdings across these exchanges. Exchanges have been hacked accounts have been compromised on various other ones so you want to make sure that you do fragment your holdings across various exchanges. So encouraging everyone to sign up on Bybit and also maybe even just create an account on Bybit and deposit money and use what you learn in these videos just to test the strategy keep this account separate from maybe the rest of your crypto thing and you can see well hey you know do these fundamental techniques work and are they better than the technical techniques that are maybe using on another exchange. So with all that said let's maybe go and walk through how to get started on Bybit. So the first thing you want to do is click the link to the sign up page and you'll get to something like this then what we need to do is enter in our email along with a password. Let me see what would be a good password there we go and you're going to click create account. Now to verify you just need to drag this puzzle piece over here this is going to verify that you are a human we don't have to necessarily save that you're then going to get an email verification code so check on your email I've got it on my phone so let me just open up my phone and see what this email is going to be and this of course very important to make sure that we have a lot of security sometimes if you didn't get an email make sure you just click resend and then what you'll get is a code over here so mine has come through 1 3 7 6 3 8 and it is valid for five minutes so make sure you type it in nice and quickly and once you've done that you basically inside of Bybit and what you want to do is choose either if you own crypto you can then come in and deposit or if you don't own crypto then you can actually buy crypto using fiat so this is quite interesting you can click here buy crypto and you can choose how much so I'm using South African rands and so if I want to put in say you know a hundred rand it's only five dollars and you can actually choose you know the method you can do bank transfer or I think there's even you know a whole bunch of other ways that you can do it with regards to credit card google pay bank transfer and that so what is lovely is if you do not have crypto yet and you are South African I think it's for for quite a lot of the countries you can come onto Bybit onto one click buy and you can choose how much you want to spend and if you want to have it a thousand how you need to do it and you can come in here and choose what is the best method for you another way to to get some crypto is to come and deposit crypto directly and how that would work is you would choose the coin that you're going to be depositing and essentially what will happen is they will create an address for you to have so you can change this to say ERC 20 they'll give you an address here which you can copy and then you can always come to your meta mask type in your password unlock and send the crypto directly to it so these are the two ways on how you can get crypto into Bybit is like I say either by depositing crypto choosing the token you need to deposit getting this address and then sending it to this address or as we saw you can also use that one click buy by putting in your credit card details doing a bank transfer and that is a way to get your crypto inside on Bybit there are two main types of trades the first is the spot trade this is when you buy and sell the actual asset and you can buy the crypto and you can then go and withdraw it but what we're going to be doing are the leverage trades and these are derivatives such as futures and what they do is they allow you to gain more exposure to price movements they are a little bit more complicated in order to execute but that's how we're going to have these videos and I'm going to walk you through on how to actually use them and what I want to do is also just encourage you guys to join the community so if you want to join the community then what I want you to do is after you've signed up with Bybit using the link and you've made your first deposit I want you to email me your telegram handle let's maybe use my personal email address which is mj at mjactury.com and then once we're in this group we're going to have a whole host of discussions you know we can talk about what token to analyze what videos to make also what various other questions to answer and we could also have some cool NFT giveaways make our own tokens airdrop it have a lot of fun so like I say if you do sign up with the Bybit account email that to me and we can welcome you to the community now coming up in the next video is we're going to start looking at you know the difference between fundamental analysis and technical analysis and why I'm going to be favoring the fundamental over the technical so I'll see you all in that video keep well cheers hi everyone it's MJ and welcome back to the series of videos on fundamental analysis for crypto traders so what we're going to be talking about in this video is valuation and I want to compare two concepts price versus value now price is the amount an asset is listed for on these various exchanges whereas value is the amount an asset is actually worth now if your price is less than your value this is a buying opportunity or if you're using derivatives you want to get long exposure and if price is greater than value then it is a selling opportunity if you own the asset but even if you don't own the asset you can use a derivative and get short exposure which means you'll make money if the price comes down and the assumption here is that in the long term price and value will converge however we understand that in the short term these two values can diverge and that is what creates trading opportunities so it's kind of like an underlying assumption that we're using when we go into trading but of course if we're given price how do we determine value that is the big big question and this is where we have two methods we've got technical analysis and we have fundamental analysis so these two methods like I say technical analysis this is when you use price history of an asset to determine its value it is backwards looking because you're looking at the history and it is focusing on the past fundamental analysis considers the current factors around an asset and how they will progress it is therefore forward looking and focuses on the future now technical analysis if we were to just talk a little bit more about it like I say it uses price history and the nice thing about that is that all of this data is in one place it's also available on most exchanges you go on to buy it and you can see the price history of any given token they also provide a whole bunch of analytical tools on the exchange to assist you with technical analysis they'll sometimes even show you know the price data in these candlestick format just to try and give you more understanding of how that price data is looking now some traders will also look at trade volume however beware this data is very easy to manipulate you can have two accounts that just flush you know from one to the other and can inflate this number and also it is quite difficult to aggregate trade volume across different markets and different exchanges so your purists will only use price history however there are some guys who are also using trade volume as well now like I say technical analysis it's very popular why because it is very very easy to get started but the question is is it effective now when it comes to equities and efficient markets the the academic literature gives the answer of no that it is a pseudoscience however when it comes to crypto and more inefficient markets then we have seen some people be very very successful with technical analysis but one of the reasons given is that this becomes a self-fulfilling prophecy if you have a big influencer they draw some graphs they draw some you know moving averages and they say oh this is a by sign and then everybody who's listening says oh this is a by sign and they purchase that asset that purchasing is going to put pressure on their price to increase and therefore you know that narrative has actually been self-fulfilled due to the message that has been given to the influencers and that is one reason how you know technical analysis can kind of have a little bit of proof and say listen here you know what we're doing is getting us results the big difficulty comes though is when you have two influencers or multiple influencers using different tools that are telling different narratives and you know this is why the prices go up and down up and down and it can get a little bit confusing it's also important to realize that no one is 100% a technical analyst okay why because there's just too many listed assets to choose from so sometimes people will all everyone is essentially a bit of a fundamental analysis at the start and I mean it's a very quick question you can give yourself is you know why are you trading crypto instead of equities or forex or those kind of things and you might say well because growth is is higher in crypto than it is in equities now that's the whole thing growth is a fundamental factor in fact it's an umbrella term for a whole bunch of various factors that contribute to this growth factor which we can use to determine value maybe even once you've chosen crypto you know why do some people trade only bitcoin over the altcoins like how do you determine which coin that you want to trade here if you're looking at the age of the network the size of the network the hash rate of the network once again these are all fundamental factors so fundamental factors they determine the asset's value okay and what we're going to be doing is we're going to be running them through a model and then what we're going to do is we're going to trade if the value that's been you know suggested by our fundamental models is different to the price and that kind of concludes this video like I said if you've joined using bybit and you've made your first deposit email me your telegram handle we'll create a group where we can discuss what tokens to analyze I can answer your questions there can be some NFT giveaways airdrops and all that good stuff but in the next video we're going to be looking at the discounted cash flow model which takes fundamental factors puts it in a formula to help us determine the value of an asset I'll see you there keep well cheers hi everyone it's MJ and welcome back to the course on fundamental analysis for crypto traders in this video we're going to be talking about the discounted cash flow model which is the very heart of fundamental analysis and it says the following the present value of an asset is equal to the discounted sum of all future cash flows now this formula is mathematically very simple and we will see that it reduces to just a few parameters however those parameters are extremely complicated to estimate and the market struggles to agree on what they should be and this is why the price follows this jagged tooth pattern because sometimes people think that the premises should be this and then the price goes up no then they think it should be like that and the price comes down and so we see that type of oscillation now like I say the formula is very simple mathematically the discount cash flow is equal to C divided by I minus G in fact you don't even need a calculator sometimes if you have these parameters and the parameters are C this is the cash flow which is generated by the asset there is G this is the growth rate how the cash flow is expected to change in the future but that one is incredibly complicated on on estimating and then there's also I which is the interest rate that captures risk and the time value of money and we use this to discount the cash flows and what we essentially see is that an asset's value is going to be high when the cash flows and the growth rate are high and the interest rate is low and we're going to see that the value of an asset is low when the cash flows and the growth are low and the interest rate is high now let's maybe go through an example so should I buy the following asset for $450 and I've been told that it's going to generate $100 at the end of the first year $150 at the end of the second year and $300 at the end of the third year now if the interest rate is 10% and what we need to do is you know in order to find the present value of an asset discount the sum of all future cash flows then what we're going to see is that that value is going to be equal to $100 which is the cash flow at the end of the first year discounted by one plus the interest rate and this case is 10% has a way of 1.1 and then we're going to add because we need to sum all of these cash flows we're going to sum the second and the third now the second one is $150 but now we need to discount it by 10% and 10% again and that's why it's squared 1.1 squared that we're going to be discounting it and that $300 at the end of the third year we're going to be discounting it for three time periods and that's why it's 1.1 to the power of 3 now what we see is that that hundred comes down to 90.91 that $150 goes down to $123.97 and that $300 becomes $225.39 because essentially what we're doing is these cash flows are spread across a whole you know period of time we want to bring them all the way back to the present value in order to take them away from time because there's the time value of money the further the cash flow is into the future the more it's going to reduce when we bring it back to the present and we want to bring it back to the present so that we can actually make a decision on whether or not we want to purchase this so what we can see is if we sum all of those together now that they're all at the same time period we get 440 and 27 now since the price of 450 is greater than this value I'm not going to buy the asset and if I'm using derivatives I'm going to maybe get some short exposure because I'm expecting the price of this asset to come down and to converge to its value over the longer term now let's say we've got this exact same example so the same asset generating the same cash flows but now the interest rate is 5% so what's happening here is that $100 is going to be discounted by 5% that $150 is going to be discounted by 5% for two years and the $300 is going to be discounted by 5% you know three times and what we see now is that these cash flows are a little bit bigger now in the present value it's like now 95 remember previously it was 90 or the second one 136 previously it was 123 the final one is now 259 and the last one was 225 and we see now that when we sum all of these together we get 490 now since the price of 450 is less than the value of 490 I do apologize on my my slideshow that I've got the last one there but it should be the 490 what we're going to be doing then is purchasing the asset or getting that long term exposure and what's fascinating by this is worse the formula is telling us how sensitive the value of an asset is to interest rates okay when the interest rate was 10% I didn't buy when the interest rate was 5% I did buy and this is what makes it difficult is because we're looking at the future and the longer we look into the future the more those distant cash flows are going to be sensitive to whatever the interest rate is going to be and that's why when central banks increase interest rates we see the value of assets decrease why because equities what are their cash flows they're getting these future dividends and the higher the interest rate the more they're going to be discounted and they're going to therefore be worth less property is the same their cash flows are rent and their future rents are going to be discounted more and worth less when the interest rates increase so what we're seeing is that interest rates are very very important and in fact we're going to dedicate a whole video to understanding them better very very important fundamental factor is the interest rate and I'm sure you guys have seen the news when interest rates change the value of assets change which causes the price of these assets to also change and this is a very key thing that technical analysis does not take into consideration because technical analysis is you know focused on the past it doesn't consider how interest rates are going to change in the future and it's blind to this very very important fundamental factor which we know influences value and hence price now like I say I want to create a whole video on just understanding interest rates more so instead what we're going to be doing in this video we're going to end it off by doing a bit of maths and deriving this discount cash flow formula when we have interest cash flows to see how we get that c divided by i minus g in the beginning of the video so if we were to derive the discount cash flow formula there is going to be a bit of maths but bear with me let v equal one divided by one plus i we will refer to this v as the discounting factor instead of having to have the division we can have it as a factor and then what we will see is that the value of an asset if we're looking at it as the discount to some of all future cash flows while allowing for the fact that these cash flows are going to grow into the future we see that in the first year we you know at the end of the first year we have our cash flow and we're discounting it by just one v in the second year we're discounting it by two v's that's why it's squared but we also need to consider the fact that the cash flow has grown due to economic activity due to the fact that you know assets crypto and all of these things are getting bigger and bigger and bigger and we see this for the third year and going forth that what we're seeing is that we're discounting it but we're also inflating it according to the growth now what is happening is we have the situation where what we want to do is try and get our v and our 1 plus g to be at the same power just going to make things a little bit easier so what we do is we take value we multiply it by 1 plus i and then what i'm going to say is once my v's and my g's are on the same power i can combine them so let's say g is equal to 1 plus g divided by 1 plus i which that 1 plus i is the v and then we're going to simplify it to this formula over here now once we have it to this formula here we can you know multiply g on both sides of the equation we can then subtract these two equations from each other and what we will see is by doing that the right hand side reduces to just c and now on the left hand side we have value 1 plus i minus value 1 plus i times g we can then clean up the left hand side to get value equals 1 plus i times 1 minus g is equal to c and then since g is equal to 1 plus g divided by 1 plus i we can then say that value 1 plus i times 1 minus 1 plus g divided by 1 plus i is equal to c and we can start you know getting all of that on the same denominator we can start cleaning it up and what we're going to see is that those terms are going to cancel each other out you know the ones are going to cancel each other out the 1 plus i and the numerator is going to cancel out the 1 plus i in the denominator and we're going to simply have value i minus g is equal to c and which means value is equal to c divided by i minus g so look the maths for you as a trader is not that important to to be able to derive this on your own but it's important for you to see where does this formula come from it's not just like we made up this formula there is a lot of maths behind it but what is lovely is that it reduces to this very very simple formula but now we're going to see that hey how do we determine i how do we determine g because once we have those two parameters we can determine value and that can assist us when we look at the price on whether to go long whether to go short on the various assets we're going to end the video there remember to if you want to join the community you can sign up with by bits and then just email me and i'll check on my but i but side to see that you have registered we'll add you to the the telegram group we will have discussions on what tokens to analyze questions to answers some fun nft giveaways so make sure you sign up for for by bit and in the next video we're going to be looking at interest rates in a lot more detail because like i say they're so important and we see that the value of assets are very very sensitive to what interest rates are so if we have a better understanding of interest rates we're going to be able to make better trades as always thanks for watching and i'll see you in the next video cheers hi everyone it's mj and in this video we're going to be determining interest rates now in the last video we looked at the discounted cash flow model and there we saw that the value was equal to c divided by i minus g where c is the cash flow g is the growth rate and i is the interest rate and we saw that the value of an asset increases when the interest rates decrease and the value decreases when interest rates increase therefore interest rates are very important and we want to figure out how do we determine them and we will find out that interest rates are a combination of three things the time value of money opportunity cost as well as risk so let's maybe focus on the first one which is the time value of money and go through a bit of an illustration to explain the point if i was to ask you you know which of the following you prefer and the first choice is between a hundred dollars today or a hundred dollars in one year's time i think the majority of you would choose a hundred dollars today if i gave you another choice and said would you rather have a hundred dollars today or a hundred and four dollars in one year's time maybe a few of you will take the hundred and four dollars in one year's time and if i gave you a third choice of a hundred dollars today and a hundred and six dollars in one year's time even more of you would start choosing the option in one year's time now the percentage difference between these two values where you are indifferent which means you don't mind if you get it now or you get it in one year's later plus that extra amount that is your time value of money so it's important to see that everybody has their own subjective time value of money so mine might be four percent where I would have taken the second option in the second choice yours might be six percent where you'd only have taken the second option in the third choice but what we see is that the central banks set a universal interest rate for everyone now if they set that rate at say five percent we'll see that it's higher than mine and so I am inclined to deposit money and earn the higher interest rate that five percent is also going to be lower than yours and so you're inclined to borrow money and pay the lower interest rates and what we can see is this is why there are some people who borrow money and some people who lend money because the time value of money is subjective to each of them and when it's been set for some people it's better to lend and for other people you know it's better to borrow so one way of thinking of the time value of money you can almost think of it as the cost of money and what we see is that if interest rates are high it means money is now expensive to hold on to which means people will want to get rid of it and what I mean by get rid of it not necessarily throw it away but rather they would deposit their money in a bank account why because it's going to earn this really really high interest rate rather than borrowing it they're not going to borrow the money because it's very very expensive to borrow except to repay this high interest rate and that's why when interest rates are low you can think of as money as being cheap to hold and people will want to borrow money rather than deposit it because it's so cheap to you know gain access to it they can then go and use this money and do a whole bunch of other things with it and it's not that expensive because the interest rates are low so very very important to understand that the time value of money is subjective however there's a universal rate for everyone now what we see is that the central bank can increase interest rates and what this is going to result in is less borrowing more saving why because it's expensive now to borrow and it's more rewarding to save now this means that there's going to be less cash in the economy so money has been sucked out of the system also it means less projects are undertaken because a lot of times people fund projects with debt they borrow money in order to build various infrastructure or to start various businesses but when the interest rates are quite high it becomes you know less beneficial to do that because they have a higher amount that they have to repay so less projects are undertaken and less spending on goods and services happens as more people are putting their surplus cash into the bank and less people are borrowing money in order to go and spend and both these two things together result in the economy slowing down now when the economy slows down and we've got less cash in the system we're going to see the value of assets drop okay not only is there now less buying pressure on the price if money is expensive because like I say sometimes assets are funded with debt but there's also going to be less demand for whatever utility it's bringing due to the slowdown in the economic activity and also what we saw in the formula is that the future cash flows are also going to be discounted at a higher rate so why would the central bank or in the america's case the federal reserve ever increase interest rates and the answer to this is to combat inflation which means if we want to understand the time value of money we need to understand inflation so if interest rates are too low people are encouraged to borrow money okay this means they're going to spend more on goods and services and they get invested in various projects but now all this new money into the system is chasing the same number of goods and services now this is going to cause the price to increase because if the supply is the same but the demand is more you know from basic economics that that's going to push up the price now when the price of the collective you know number of goods starts to increase that means that the real value of money starts to erode why because each dollar can now get me less goods and services and so what we see is that the dollar then loses out on real value and everybody who's holding the dollar effectively becomes poorer so inflation in that sense is not very desirable but now you want to know what are some of the other causes of inflation so when interest rates are too low we'll see inflation being caused but there are other things that can cause inflation these are things such as wars pandemics natural disasters anything that's going to disrupt the supply chain means that there's going to be less goods and services in the market and what we're going to see then is that the price of goods and services are going to go up why because if demand's the same but supply has dropped again that results in price increasing and the dollar losing its relative value so that's where the inflation comes in and therefore the Fed will increase interest rates to try and preserve the value of the dollar but this is where you can see that this fundamental analysis starts going down the rabbit hole because in order to turn the value of an asset you need to depend on the discount cash flow model which depends on interest rates which depends on inflation which depends on supply chain which you know depends on demand for the various goods however they can also be disrupted by various factors and all of these things are also all interconnected you know for example the war in Ukraine what this has done is this disrupts the supply of say wheat and gas if demand stays the same it's going to exceed the reduced supply which means prices are going to increase and so inflation is going to rise therefore the Fed increases interest rates to combat inflation but now asset values drop due to the higher interest rates so therefore it is useful from a fundamental and this point of view to keep on geopolitical factors because if you were let's say you know rewind the clock and you saw that the Russian you know army was mobilizing around Ukraine and you thought okay this war is going to happen and then you traded on that news you would have been able to short a whole host of assets and got an exposure so that when their prices decreased you would have made a trading profit and that's why it's very very important that you keep your eyes on what's happening in the world and again it's something else that technical analysis won't tell you technical analysis doesn't tell you when an army is outside another sovereign nations border and it's preparing to to invade you know the price history doesn't contain that information which will have a very big impact on asset prices around the world but now time value of money is just one of the things that influences interest rates there's also this idea of opportunity cost which we'll talk about on this slide as well as risk which we'll look at in the next slide now opportunity costs it's it's an interesting one it's probably not as pronounced as the time value of money but it also is something to keep in the back of your mind and it's this idea that money is a limited resource saying yes to one project means saying no to another now interestingly large pension funds have a regulated and limited universe of assets that they're allowed to deploy their money in therefore their opportunity costs are quite low so this contribution to the interest rate or their required interest rate is going to be very very small because they can really only go equities and bonds that are of investment grade whereas small hedge funds or retail investors they have access to a larger universe of assets you know thus the opportunity cost is going to be high for them and they're going to you know demand a higher interest rate on whatever they look at you know so if you're considering crypto it means you personally also have a high opportunity cost because there's a whole host of other things that you could have been investing your money in for example forex equity property bonds structured notes venture capital commodity etc etc etc thus higher interest rates need to be applied to crypto projects as their potential investors have higher opportunity costs now there's also this other concept known as risk and there's this old saying the higher the risk the higher that expected return now what don't mean by this word expected return this way finance can get a little bit tricky because sometimes we use different terms to refer to the same concept so looking forward interest rates can be seen as expected returns but when interest rates are bringing things back they're sometimes referred to as discount rates but essentially it's the same kind of idea depending on what side you're looking at it from so higher risk means a higher interest rate so let's look at an example who would you rather lend your money to someone with a stable job and has many fixed assets or someone who's unemployed and already in debt okay what interest rate would you charge the two of them now when you're giving your money to these people please realize that it's the same time value of money and it's going to be the same opportunity cost that you could not have used that money elsewhere but now there's this third factor and that is the riskiness in this case it's known as credit risk you know the likelihood that this person's actually going to repay you now you put on a low interest rate to the first person as they have a low risk so a low risk premium will be added to the time value of money and to the opportunity cost because this person is expected to repay you whereas you put on a high interest rate because there'd be a higher risk premium to the second person as it's more likely that they're not going to repay you so you need this higher interest rate you need to earn more back from lending it to them to compensate you for that higher risk so when it comes to interest rates like I say we've got a discount cash flow model which like I said mathematically that is very simple you can do that maths even without a calculator but the parameters are where it gets complicated because interest rate is time value of money opportunity cost and well is risk and yes time value of money this is something that we can actually visually see you know the federal reserve rate is the most important this is something that can be quantifiable you know you can go on to the internet you can see it's eight percent you can see it's two percent you can see what percent it is you can actually quantify exactly what it is going to be however with opportunity cost okay this is going to be influenced by regulation and rules around crypto this is unquantifiable it's very difficult to put a number on opportunity cost but it is qualifiable in the sense that you know when opportunity costs are high and you know when they're low so you know them relatively you might not know them absolutely like you would with the time value of money and the same goes with risk okay you know there's a probability of ruin hack operational failures and whatever crypto project that you're looking at again very very difficult to quantify i mean actually spend a lot of time trying to quantify it by but at best it's just proxies but it is qualifiable so you know that oh if something happens or the hash rate decreases or this happens then the likelihood of this risk event occurring increases you can then have again just like opportunity cost a relative idea on how that thing is going to be changed rather than an absolute idea of exactly you know what is that probability going to be now what i want us to do in the next video is to just like how we looked at interest rates in this video i want us to look at growth rates in the next video and then once we have these two ideas we're going to bring it back and look at a fundamental trading strategy saying okay how do we trade these things when they are unquantifiable and we're going to show that how you can start looking at how they change that can give you signals on where to trade so that's coming up in the next video but also it's a reason why i want you guys to join the community because this is where we can have debates on our telegram group discussing whether we think you know a certain change in geopolitical factors or a change in the economy is going to result in an increase in the interest rates or a decrease or what the impact is going to be on inflation you know we can have these debates in this telegram group so for all of you who've signed up on to buy bit and you've made your first deposit just because i want to keep the group to people who are actually trading it just makes the community a lot more richer rather than just having you know numerous amounts of people who maybe spam the group with things that we were not that interested in so i want to keep the group just to traders who are actively trading so if you do join via buy bit using the link please send me an email i'll verify that and we'll add you onto this group where we can have these discussions and i think that's going to help us benefit each other and we can have healthy debate but i'll be talking more about those fundamental trading strategies and how we go about it after the next video in which we're going to be determining growth rates as always keep well and i'll see you soon cheers hi everyone it's MJ and welcome back to the series of videos on fundamental analysis for crypto traders in this video we're going to be determining the growth rate because remember in our discounted cash flow model we are given the following formula that has the three parameters c is for cash flow g is for growth rate and i is the interest rate and what we're going to see is that the value increases when the growth rate increases and the value decreases when the growth rate decreases and that's the thing is when it comes to fundamental analysis the key questions to ask are what is the interest rate and how will it change and we looked in the previous video about interest rates and what determines them then there are what are the cash flows of this project that is c and then in this video we're going to be focusing on g which is how are these cash flows expected to change in the future and that's given by the growth rate and what i want to do is take a step back and look at equities because there are two types of stocks they are the income stocks this is where your cash flows are quite high relative to the price of the stock and the growth rate is quite low relative to the price of the stock and on the other side of the scale you have growth stocks this is where the cash flows are actually quite low relative to the price of the stock but the growth rate is high relative to the price of the stock so examples of these two So, an example of an income stock would be an old chocolate factory. Every month, they're making a lot of money selling the chocolate to the people, but you don't really expect them to grow that much in the future. Whereas growth stocks, this could be something like a new tech company. They might not even have a cash flow at the moment, however it is expected that they're going to make a lot of profit in the future. Speaking about expectation, at the end of the day, income stocks is what we essentially want. You put your money into an asset so that you can receive future cash flows, whether it be in the form of dividends for equities, rent for property, and so it is anticipated that in the future, all growth stocks are expected to become income stocks in the long run. And it's important to keep this in the back of your mind because a lot of the times, people rush into tech stocks and they see, oh, there's massive growth here, but there's no possibility of a cash flow and then these companies go all the way up and they just kind of crumble out. So, you do want your crypto project or your stock or whatever you're investing in to have the potential to generate a cash flow, but it's important to realize that when it comes to growth stocks and what we're actually going to see is that your crypto projects are similar to growth stocks, we're going to see that their value is more sensitive to G, the growth rate rather than in the cash flow. You do want to make sure that there is a potential for a cash flow, but like I say, when we look at the fundamental factors to focus on, growth rate is going to be more important for crypto projects because they are more similar to your growth stocks. Cash flow, it's not that important, especially when you're trading in the short term. If you're a long-term investor with a very long time horizon, then it's a different conversation, but when you're trading and it's more short term, growth rate is going to be a lot more important than cash flow. Now, some things to note about the growth rate. It is a lot more difficult to determine than the cash flow. I mean, the cash flow, you can objectively measure, you can go to a stock's financial statements and see exactly what type of dividends are they paying. You can see what type of revenue they are making with crypto companies. The blockchain is transparent. You can see what fees they are collecting. You can actually see this information. It's out there in front of you. It's not up for debate, whereas growth, growth is a lot more subjective. Some people might feel that this company is going to grow at a larger rate than others, and some other people might feel like, no, it's going to be lower, it's going to be higher. It is a lot more subjective. What we're going to see is the reason for that is because it depends on various factors. Each industry is going to have its own set of fundamental factors that are going to be influencing what the growth should be. Because of that, everyone's got different opinions on growth. Therefore, growth stocks and against crypto projects as well falling under this tend to be more volatile because the market struggles to agree on what that G value should be. Remember, when it comes to our cash flow model, I is the interest rate and the large chunk of that interest rate is coming from the Fed rate. Yes, though there might be opportunity costs and risk, which is more difficult to determine, the bulk of that interest is coming from the Fed rate. The cash flows are coming from financial statements. Are coming from revenue. So those two values, you can at least see and plug into the formula. However, the growth parameter is a lot more difficult to determine. But this volatility, it's good news for traders. It means that there's going to be a lot of spikes, a lot of dips. And if you're able to call the market, you don't have to call it correctly all the time because that's very unlikely to do. But if you can just start doing it more than 50% of the time, then you can start to see a profit coming in. So let's look at maybe crypto projects, this growth rate, what are some key fundamental factors that people are looking at? So one of the big ones is the number of transactions. The more transactions that are happening on a crypto project, whether it be a blockchain infrastructure, whether it be a decentralized app, a smart contract, whatever, the more is better. Why? Because it shows that people are using it. And if people are using it, it means that there's utility and all these kind of things. The question though is, are these transactions genuine? And it is very, very mindful to be aware that in crypto, you can set up bots that can spam a network that can, you know, automatically go through a smart contract to inflate this number because this is such a key metric. Scammers will want to inflate certain numbers in order to mislead traders. And that's why it's very difficult to set up a bot that then looks at all these values and makes trades because another bot can confuse that bot. And it's better to trade as a human, especially at the given moment, rather than try and push your trading strategies onto an algorithm that can get manipulated, especially if it's looking at some of these fundamental factors. Another one is number of users. How many people are using this app? How many people are using this network? Again, it is difficult to determine. And what we sometimes do is we look at the number of unique addresses as a proxy, but it's only a proxy. Why? Because one person can have multiple addresses. So for instance, when, you know, Polygon announced that with their Reddit partnership, they've got 3 million new, you know, addresses being signed up. It's like, yes, fair enough, but maybe it's been, you know, one million people doing it on average three times, or maybe even less, and people just doing it multiple times in order to claim those NFTs. So that's one thing just to keep in the back of your mind is that number of unique addresses is just a proxy for the number of users. And it tends to be a much greater number because, you know, it's very rare that one address is used by multiple people, more likely that one person is controlling multiple addresses. So just something, like I said, to keep in the back of your mind. Then there are the number of dApps. And what's nice here, again, this is easy to count because a lot of the blockchains will be boasting about the number of decentralized applications that have been built on them. However, once again, sometimes it's not the quantity of dApps, but the quality of dApps. And again, this becomes a very subjective measurement, you know, what makes this dApp better than that dApp? You know, sometimes you can have a dApp that has got lots and lots of transactions like we had the sunflower situation on Polygon, but it was very much a not very useful application. In fact, people saw it more as spam than something actually bringing utility. However, there was a debate in the community regarding that. So again, the quality of the dApps is another subjective measure. And then what you want to look at is the ecosystem infrastructure. I think this is what definitely puts the reason why Ethereum is ahead of all the other blockchains barring Bitcoin, the ones where you can actually build and do stuff on it because of Ethereum's extensive ecosystem. So when you start looking at these other blockchains, yes, they might have a better user experience. Yes, they might be faster, cheaper and boast about all these various benefits. But what type of ecosystem do they have surrounding it? Do they have multiple wallets for people to access it? Are there various DeFi protocols and Lego blocks for people to do what they need to do? Are there bridges to the other networks? Are there exchanges so it's easy to acquire the token? You know, again, you want to look at that ecosystem infrastructure to determine, well, okay, does this token actually have potential to be a player in the future? So what we're seeing is that there are a whole bunch of fundamental factors that influence growth. However, it is very, very difficult to get accurate figures. But that is okay from a trader's point of view, because we could maybe take the assumption that the existing price will reflect the market's best guess. So the trading opportunities come in when something causes these fundamental factors to change. And that's nice because we don't have to know what the absolute value is of all of these fundamental factors. We just need to know that, hey, when something happens, how is it going to change them? So I'm going to give two examples. Example number one, let's say a big nation bans cryptocurrencies, just like what China did. Okay, what happens then? Well, we expect the number of users and transactions to drop. So what is this going to cause? The growth rate to decrease. This growth rate decreases, value therefore decreases, thus price is expected to drop, and therefore we want to sell or get some short exposure to the market. And what we're seeing here is we're going through the rationale on why we're going short. Like I say, with technical analysis, when you're just looking at the past, you're not going to see, oh my gosh, a big nation has just banned crypto. The past data is not going to reflect that news or anticipate that type of news, whereas when you're forward looking, you can see these things and make your trading, you know, your trading play. A positive example, let's say Starbucks announces, well, Starbucks has announced an NFT experience to be built on the polygon network with regards to their loyalty in their Starbucks Odyssey program. So what happens is before Starbucks even starts programming or deploying a single small contract, we can anticipate that in the future, there will be more users on polygon because a lot of people buy Starbucks, a lot of people want to be part of this loyalty program. So we can anticipate in the future that there will be more transactions on polygon. And even right now, we're going to see that there's more prestige for polygon, maybe other fast food restaurants or other big businesses might say, well, the fact that Starbucks is building on polygon, they've probably done their due diligence. And if it's okay for Starbucks, then it's probably going to be okay for us. We don't have to go through that same due diligence process. We can trust Starbucks. So we can also start building on polygon. And this is why it's so important for these, these blockchains to get these big deals because not only are they going to get more users, more transactions, but it also gives them a lot more prestige. And all three of these things are going to increase the growth rate of polygon. So look, we don't have to know by how much the growth rate is going to increase. If it's going to increase by 1%, 5%, 10%, we don't, I think it's very, very dangerous to try and be that accurate that you can try to determine exactly what the growth rate is going to change to. All we need to know is that this is going to cause the growth rate to increase. And if we know that the rates of polygon is going to increase, all the growth rate of polygon is going to increase, then the value of polygon is going to increase. And therefore, we're going to expect the price to increase. So what happens is an event happens, the value changes, there's a divergence from the price and we expect over a given amount of time, price and value to converge. So once the value has increased, we can expect the price to increase. And therefore, we want to bi-polygon it on this news or get that long-term exposure. But this is only one part of the puzzle because what we need to know and we're going to talk about this in the next video is knowing when to close out the trade and take profit. We're going to see that, remember, especially with this course, we're being traders. We buy in, we sell out, we buy in, we sell out, we get our exposure, we close out our exposure and we look for the next deal. It's very different from a long-term investor who buys and holds. You know, here we are making a lot of movements. So yes, we might want to move in on the search and news, but we also need to know when to move out. I'm going to talk about that in the next video. But as always, please do sign up to buy a bit because we are going to be using that exchange when we go through how to actually get long and short exposure. So it makes sense for us to be all on that same exchange. Also, if you do so, email me that you have, I'll verify it and then I'll add you to a telegram group where we can actually have discussions on, let's say, the news of Starbucks or China banning, and we can have a debate amongst ourselves whether we think this is going to increase the growth rate or decrease the growth rate and by how much trading opportunities are going to be popping up because of that. So if you haven't done so already, please make sure you sign up for buy a bit. We are going to be talking about trading strategies in the next video, and then we're going to actually go on to buy a bit and actually show you the platform and how to actually do this. So just make sure you've already signed up. You've made your deposit so that you're already, so that when you see that video, you can follow along with me. As always, thanks so much for watching, and I'll see you guys in the next video. Cheers. Hi, everyone, it's MJ, and welcome back to fundamental analysis for crypto traders. In this video, we're going to be looking at trading strategies because in the past few videos, we've been looking at this discounted cash flow model, and we saw that the two most important parameters when it comes to determining value of an asset are the interest rates and the growth rates. Now, if I was to use an ocean metaphor, we can think of changes to interest rates as being like changes in the tides of the ocean. Here, we're seeing big movements, however, they occur over longer periods of time. So when your interest rate changes, your price and value of your assets is also expected to change quite drastically. However, changes to interest rates don't happen on like a daily basis. Whereas, let's say changes to the growth rates, this is kind of like the waves in an ocean. They're constantly coming in. There are smaller movements, but they are occurring over shorter periods of time. And when it comes to trading, you could have a series of news events in a single day and a whole bunch of these waves causing a bunch of movement during the day. Now, I guess to extend this ocean metaphor, just like how the ocean comes in and goes out, what we see with regards to price is that price also goes up and price goes down. Very rarely do we see an asset have a nice linear progression up or a linear progression down. It's always got a little bit of that jagged tooth kind of oscillation. So let's maybe ask ourselves this question, why do the prices oscillate and why are there these cycles? There is this theory known as the market overreaction theory. And it's this idea that if the change is negative, then value decreases, but the market gets fearful. And so what's going to happen is that the price is going to drop by more than what the value decreases by. And then once the market realizes that they've overreacted, the price is going to recover over time, despite then not being any positive news to warrant that increase. And I guess the same happens when the change is positive. We know that value has increases, but the market gets so greedy that what tends to happen is the price jumps up by more than the value increase. And therefore, once the market kind of sobers up, the price starts to decline over time, despite no negative news. So how can we use this as a trading strategy? So the ideal thing to do would be to surf these waves. So immediately trade when the news breaks out. So if it's positive news, get your long exposure, buy the asset. If it's negative news, get some short exposure, sell the asset. But then you need to make a judgment call on the timing. Because if it's positive news and the market has overreacted, you're going to want to close that long position and then open up a short position. Same with the negative news. If the market has got fearful and has, you know, the prices drop more than what its value is, you want to close up that short position and open up into a long position. And then, of course, you need to know when to have your final closing up. Again, another judgment call. So with positive news, once it's gone up, you've sold theoretically at the peak and you've shorted it. You need to know when to close out that short position and take your profit on the trade. The same as with negative news. You need to know when is the ultimate dip. Close that long position and then, well, once it's at hit the dip, you then open up a long position and then once it's recovered, you need to know when to close that long and take your profit. So let's maybe go through this again, looking at it on a graph. So here we have negative news. So we're assuming before the news event that the price is equal to the value. Then what happens is that there's this negative news event and we see that value is the blue line and it decreases because the news has changed the growth rate. However, the price drops by even more than the value because of the market getting very, very fearful. You then need to try and judge when it is the ultimate dip. Close out that short position, enter into a long position because now we can see that the price is a lot lower than value and in time it's going to converge and then once that happens, you can then close out that long position and take your profit. So it's interesting to see here that the negative news does destroy the value but the price overreacts and then bounces back a little bit. Same happens with regards to positive news just in the other way. So before the news, if we assume that the value is equal to the price, we then have this positive news event like a new feature, something's coming out, a new partnership, great, we see that value does increase. However, the market gets exuberant, gets greedy, everyone starts buying in the hype and pushes the price beyond the value. Once it goes beyond this value, you then wanna close out that long position that you're in, enter into a short position because as time comes in and the market realizes how, hold on, yes, this was good news but it's not as great as we thought it was gonna be, that price is gonna then converge back to its value and you can then close out and take your final profit. Now of course, you wanna be careful out there, okay? Cause what tends to happen is news events don't come out one at a time, okay? On any given day, you could have a multitude of things happening. So for example, maybe a blockchain releases a new feature. So Polygon says, oh, we're now doing zero knowledge rollups or we've introduced this ID thing and it's like, great, that is good news but maybe the Americans start saying, hold on, we need to start regulating these crypto more especially the staking ones cause they're like a security and therefore they need to be, go through all these processes and that can be very bad cause maybe it's gonna block American investors from getting in and then at the same time there's some geopolitical factors happening somewhere else in the world and it's all happening at once and you're not really sure, is this good for crypto? Is this bad for crypto? And you can see that it's just crazy. This can all happen in one day where you've got good news, bad news and other type of news that you just don't know what it's going to, what the reaction is. So the question is, how do you trade in the storm? Okay, of course, if you're an advanced trader you know to take out a reverse iron butterfly spread what this is a combination of various derivatives that essentially results in you paying quite a big premium if prices stay the same. However, you get exposure if prices go down or if they go up, so it's kind of like a long and a short position structured with options so that you just don't have the two cancelling them out. Like I say, it is an advanced trading strategy so what we'll maybe do in a much later video or on my YouTube channel but there is a way to try and capture this extreme storm. However, if the two magnitudes cancel each other out and there's no price movement then this reverse iron butterfly spread is going to bite you and you're actually going to lose. That's why very much an advanced trading strategy. For beginners, I highly recommend when things are getting crazy like this and there's good news, bad news, unknown news all happening at once there's no shame in just waiting it out moving your position straight into cash closing out all your positions waiting to see what happens and rather trading on news events when they do come one at a time or where it's a little bit more clear whether they're good news or bad news and I guess that's the whole thing is when it comes to trading you need to respect the idea that this is more of an art than a science. There isn't a set of formula that you just carry out and that you just guarantee to make money know what happens is that you need judgment and luck to determine the timing and the magnitude of these news events. Now, in time when you start getting more and more experience you tend to get luckier as your judgment tends to improve but a lot of people do compare trading to gambling just because of the fact that there's a lot of probability involved in them. I guess both are influenced by chance and you do need luck but just like how in gambling when it comes to poker or the roller table you can use judgment in knowing how much to bet and when to walk away there is that skill element specifically in poker but one of the important things to realize is how trading differs from gambling is when you go to gambling and you're at the casino the odds are against you because the casino or the house needs to make profit needs to make money in order to pay oil of the salaries, pay the rent pay for the beautiful building pay for all those free drinks that they're giving to people so the odds are against you whereas with trading we don't know what if the odds are against you or for you and they could be for you and that's what makes it interesting is that gambling over the long term you are expected to lose trading over the long term it's anyone's guess and if you have judgment and you think these things clearly then one could expect it to be more likely to be in favor for you but it is important to understand that there is risk now how much risk should you bring in to your trading strategies? that's a personal question that's something that you want to discuss with your financial planner because you do want to be aware of the fact that you could enter into a position it could go against you and you could lose everything okay but don't be scared of risk because risk I like to think of risk as a dragon guarding a pile of gold yes there's the dragon that could bite you that could cause you to lose all of your money but that dragon is guarding a pile of gold there are opportunities from the risk those who take risk do tend to get a reward if the dragon doesn't eat them and what happens when it comes to trading and this is different from let's say normal investing is we can use something called leverage to artificially increase our risk exposure now of course this is dangerous because what leverage is doing is going to make that pile of gold bigger but it's also going to make the dragon bigger so you want to just know a little bit about leverage before you start getting into it so leverage also known as gearing and you can see by the picture you've got a little gear and it turns a much bigger gear essentially that's what we're doing we're artificially inflating our exposure what it allows us to do like I say increase your risk exposure which can magnify your profit but also your losses so let me give a very quick example okay let's say a token costs $100 and you have $1,000 in capital with the spot trade what happens is you can only buy 10 tokens because you only have $1,000 in capital which means if the token increases to $110 you've made $100 profit but now $100 profit and if you were very very certain or you were very very confident that the news was positive and that you're going to get this exposure instead of doing a spot trade you might have wanted to have looked at a leverage trade leverage trades you can choose to magnify by two by three by five you can even get into some more sophisticated products that allow you to determine the actual magnification that you want BuyBit has a bunch of tokens at times two times three probably worth playing around with those first before you start moving up to the times five the times 10 and all these kind of things but in our example above if you had chosen the times five and the token increased by $10 you would have made $500 in profit now the interesting thing with leverage is that you can also get short exposure this means that you can make money if the price goes down now how this works is what you effectively do is you go into the market and you borrow the token you then and look the I'm going to explain to you the mechanics behind it but with these exchanges they wrap these things up in nice little leverage tokens so you can just trade and get that exposure but what's happening behind the scenes is that you're borrowing the token you're selling the token you've introduced a debt so there's going to be an interest repayment so the longer you have this exposure the higher that interest repayments going to be however if the token prices drops and you want to take your profit you then buy back those tokens settle your debt and the difference between how its price has moved you've made it as profit and depending on how you've leveraged it depends on what that exposure is going to be but now on Bybit this is the great thing about this exchange and this is the reason why I keep saying you guys must register on it and I'm going to be doing this in the next video is giving you a demonstration so we're actually going to go in and trade these instruments and show you how you can do it because they've made it a lot simpler now you just buy let's say you want the short token you just buy the token you sell the token you can trade it like any other token whereas like I say, back in the day you'd have to go through these mechanics of borrowing agreeing on an interest rate, selling then closing out and doing all these things exchanges have now got to a point where they automate a lot of this of course it's important to understand the mechanics behind it but at the end of the day you just want to know what is the leverage that you're exposing yourselves to so that when you take all of this theory you know how do you then apply it and we're going to be doing that in the next video so that's why I always keep saying make sure you've signed up with Bybit check out the first video if you haven't done already that tutorial on how to get started make your first deposit even if it's just a little one just to start playing around then send me an email with your telegram handle I'll check your and use the same email that you signed up with Bybit just so that I can cross check and then what I want to do is add you to our telegram group where it's only traders it's only people who've been putting money in so that the discussion is just a bit more pure we don't have too many you know trolls or spam or all those kind of things so I do want to keep the group private and limited to people who are prepared to be fundamental traders and we can use this group to discuss and chat amongst ourselves on how to proceed and of course it might be some fun NFT giveaways and other cool things so if you haven't done so already make sure you sign up with Bybit there will be links just look out for them around this video and I'll see you in the next one we're actually going to go onto the exchange and start making these trades I'll see you guys soon keep well cheers Hi everyone it's MJ and in this video we're going to show you a demonstration on how to buy and sell various leverage tokens on Bybit so make sure you've gone through the video that shows you how to register as well as how to deposit remember you can do it through a one click with Fiat or you can deposit crypto into Bybit and then you can start trading you can also go and do various forms of verification just to make sure you go up so it's in levels if you want to trade start trading large amounts also I recommend going to account and security and implementing as many security processes as possible just to make sure that your account is secured but what I want to do in this video is focus in on the trading of these tokens so what I want to show you are these leverage tokens okay leverage tokens are pretty cool and what we want to do is we want to come down to the Matic tokens over here so Matic you've got the 2L which is the long Matic which is what you want to purchase if you think the price is going to go up or you've got the short Matic which is what you're going to purchase if you think that the Matic price is going to go down now what you can do is go to you know Polygon news and you can read you know what is essentially happening in Polygon at the moment I mean there was this big news three days ago where Warren Buffett's back Neobank picks Polygon for Web 3 token and Matic price is a 100% rally and the interesting thing is I mean if we were to look that was three days ago and we were to come to say the Polygon price let's put over a seven day period we will see that you know what's today the 28th, the 27th, the 26th so it was round about here that that news broke out so you can see the price was busy chilling and then the news broke out and people were like wow that is really cool the price shot up and like I said Mark intends to overreact and then people thought okay it's cool that you know Neobank is using this but maybe you know we've overreacted let's get back to normal and you can see how the price then kind of returns a little bit so on and this is what we showed in the previous video on trading strategies that good news pushes the price up and then the price comes back down of course there's all these other little jagged tooth movements happening here because there's constant other news geopolitical news you know news infacting influencing interest rates and other factors around the growth rate you know it's just very rare that you're going to have that nice little up and down which we saw in the previous video but it's interesting to see that that's actually played out so on that news you could have bought once it hit the peak you could have then shorted and then you could have closed out your position over here and you've had that little news cycle so that's interesting like I said if you want to see positive news you can always go to the blogs of these various blockchains they're always going to say the good things that are happening so they're you know announcement with Starbucks their new technology and all these other kind of things whereas going on to Google you'll also get exposed to a little bit of the the negative news that is potentially happening with Polygon now this is just Polygon I mean if we come to to buy a bit and we were to trade the leverage tokens you can see that there's a whole host of other tokens I mean there's there's Ethereum which is the blockchain that Polygon scales up there's Solana which is a proof of history blockchain there's Bitcoin which is the OG there's Ripple which does interpaying transfers there's Adder which is you know the Cardona blockchain which is also quite old these days there's the Ape token which is based on you know the board APIOT clubs Avalanche is another token or another blockchain that tries to be its own layer 1, 2 and 3 you know you've got the Doge which is tied to Elon Musk and is a bit of a meme token Pocadots this one I mean I've seen it but I don't really understand it same with EOS I kind of not too big into that this is Ethereum Classics of course Ethereum had a bit of that fork back when the original Dow got got hacked then there's Phantom don't really know what GMT is I think that's Chainlink Litecoin I used to trade a lot of Litecoin back in the day Sand is a metaverse token and then you can see you've got these other ones that can actually give you 3S and that means three times the leverage but like I say we're playing with the polygon one so if I want two times leverage on polygon let's say we've been reading all this news and we're like wow what we want to do is we want to buy you know let's buy you know three of these Matic tokens so we can click here when it comes to the price okay I always like to if I'm buying I always set the price a little bit higher that's then going to make sure that I can get you know tap into it so I can actually tap in 10 9, 3 I'm looking down over here you can sometimes even click on it and it will set that price for you so you can see you can set click on these it's going to change your price over here you want to look a little bit at that volume I mean you can even visualize that volume over there the idea here is that the cheaper something becomes the more people are willing to buy it the more expensive something becomes the more people are willing to sell it and when they combine is what the price should be so the price now is like 10, 6, 8, 8, 6 that's like an in-between the buy and the sell and that's known as the spread because we're only buying three we can actually come in at this 10, 6, 8, 5 so just while we're doing this we can actually go in at a slightly lower one we can buy it click here and you can see straight away that current order got snapped up whereas if I came in and I put the price really really low and I click buy that's me to insert the the quantity that I want to get we'll see that then the order will sit here and it will wait until the price drops and if we come it doesn't even show us over here because it's so far down on the order book but it'll give us a little dot to show us that it's our one so you can even put these things below certain prices if you think that they're going to come down and you can then kind of catch them anyway we can cancel that once we have it we can also wait for the whole market to go up in value and all that but in this instance we can just sell it straight away again when it comes to selling now we want to click one of the green numbers because we need to sell it to someone who's prepared to buy it and someone's prepared to buy it at 6.5 so we click that and we're selling it now at 6.5 so of course we've just lost so many doing this because normally you buy you wait for the price movement and then yourself you're just buying and selling you're going to get hit hard on the spread and you're going to get hit hard on the expenses so just keep those two things in mind but this is how you can do leverage trading exactly the same as spot trading with these leverage tokens you can buy and sell these things just one thing to just be mindful of is that you do really only want to be in these positions for maybe two or three days at most because I mean if you kind of click here they only go up to I mean if you click like a week you can see they kind of don't really show these things over there so make sure that you're just in these things in and out like I say a day can sometimes be good once you've seen that good news event now there's also these instances where let's say you come to Matic and let's say you're really really confident so you're like wow Matic is really going to go up or really going to go down if you think there's going to be a really big movement you can do a margin times five now if you're going to long Matic what this means is if I was to do this here if I was going to buy 262 Matic I don't have enough US dollars to do that so if I want to go times five then what I'm going essentially what I'm doing is I'm going to be borrowing so let's come in here and because we're buying we click on one of the red numbers so let's click on one of the red numbers here and click buy that would be quite quick because sometimes these things can go against us but let's look at our trade history now we've just bought $195 worth of Matic but we only had $97 so you can see our asset has now increased the reason why it's increased is because we now also have a debt so we have an outstanding liability of $141 which is what we borrowed in order to purchase all of that Matic now of course if the Matic price goes up especially relative to the dollar we can repay our load and profit however if it goes down then we still have to repay this load which can be quite scary because it's now been magnified by five and we also have an outstanding interest so you can see that this is a very very risky risky thing that we've done but if the price moves in our favor we're gonna do really really well just make sure that at a later date you come down to borrowing and repayment and you wanna click repay and pay off your debt and now what we'll see is our assets have come back back to this 97 position so we've closed our position by clicking rebound you can always click on your asset overviews to make sure that let's check yes all my money is still in my spot of USD but essentially what I've showed you how to do is how to get leverage times two with the basic tokens and then you just buying and selling like it's a spot or you can go in and get that five times leverage and then borrow now of course if you're shorting Matic what you'll do is you'll borrow Matic sell that Matic and get US dollar and then of course the Matic price drops you can repay that Matic price at the lower amount and you've made this huge profit of course the prices can go against you make sure that you wanna close out on those trades and another thing which we didn't really talk about in the videos but another fundamental fact that you keep an eye on is what are the trading costs I mean you see here you've got earlier people can put buy bit and deposit your tokens what's interesting is to see what is the amount that you would be getting on they say a token like Polygon if you were to come in let's type it in on Matic so you can see the interest rate is 1% that means it is very, very cheap to borrow Matic now you can think it through if the interest rate is really, really, really low to borrow Matic does that mean that people think that the price is gonna go down or they think the price is gonna go up now of course this shows the demand for Matic so not that many people are borrowing Matic in order to short it because this price is 1.1 so this is quite a bullish signal for me to know okay Matic's actually going quite good I mean if we compare it to say Ethereum Ethereum is a little bit high so this means that people are a bit more bullish on Matic at 1.1 whereas Ethereum is 1.8 we look at another token like Solana it's 6.5 now what that means is that ooh people are thinking Solana you know not gonna do too great now let's maybe trade and take advantage of these interest rates so the idea here is I'm gonna come here and let's say I mean technically you would want to look at all of these different tokens so let's maybe check out a few more if Solana is at 6.5 Optimism you can borrow Optimism or here we go we can actually see which are the most expensive ones okay at 66% that's maybe a little bit too risky kind of situation but what we see is that you know borrowing USD is at 8% and that shows that you know again it's quite expensive to borrow USD because people are borrowing USD in order to get more exposure so this just by looking at these interest rates we can see that the market is quite bullish on certain things so if we were to kind of put in our trade or what one of our trades could potentially be is we could longmatic we could short Solana and play a little bit of that spread but it's probably better to you know like I said look at some of the news so why is Solana not doing as well as Polygon at this exact moment well it's got that's really good news they've got their little Uber ride going on let's see is there Solana spirals out of control a well-known Cryptocurrency is cautioning Solana holders that the leading Ethereum might go off the rail so this could potentially be why so what's fascinating is we kind of did a little bit and reversed the video it's normally I say in the videos go and you know read the news and then make your trades but we could see that that interest rate on Solana was a lot higher and this therefore gives us an indication that there might have been some bad news and we see there is this bad news so let's go let's go trade on it let's just do it you know let's let's let's show you guys how how it's done so we're going to go margin trading on Solana let's come to Solana and let's click over here we had to click trade we're going to click on the spot but then we're going to go margin and we're going to just short Solana to death so let's go in and short Solana sell the short oh wait we just need to click on our price because we're shorting it we need to figure out which one we want to sell it at let's get it in there at you're buying how many of these things 12 so we should be able to do it at that price sell the short okay we're going in big please note that your amount oh they're saying we're exceeding a little bit too much because we're changing that price available let's just change this to 12.6 and then we should be we should be good okay boom straight away I now have a debt of Solana however if Solana now goes down I'm going to be able to to profit so we're going to be using that news that you know we saw got verified by the interest rate and got verified by this article over here five hours ago um it's you know it's not it's not too old hasn't expired too much and what we're going to see is I mean already we can see that this loan price has got this negative you know this downward trajectory and it's going to be fascinating to see how much profit we get from it of course in a video like this I'm going to just keep you guys updated with how this trade went I mean we went kind of all in with all of our assets um we've got a huge leverage position by times five on Solana um but yeah it'll be interesting to see if this trade pays off I'll let you guys know of course in the telegram group but as always thanks so much for watching I hope this video just showed you a little bit about the interface how to buy how to sell these things I know it can be a little bit intimidating at first so go through it slowly maybe watch this video a few times um play around with small amounts at first and then yeah join me in the telegram group and we will chat about it I might even push some more videos on youtube um and we can see you know how the Solana trade turns out as always thanks for watching cheers everyone