WBD002 Audio Transcription
Getting Hacked and Losing Your Crypto with Nik Patel
Interview Date: Thursday 30th November, 2017
Note: the following is a transcription of my interview with Nik Patel. It is amended to remove ums, errs and half sentences. You can listen to the original recording here.
In the second episode of The What Bitcoin Did Podcast, I chat with popular Crypto trader @daytradernik in detail about how he was hacked earlier this year, losing two-thirds of his portfolio and how he has bounced back. Nik also explains his approach to trading strategy, covering topics such as micro-cap trading, comparisons with trading forex and hedging his investments with Silver.
Interview Transcription
Peter McCormack: Hi, Nik. Thank you for having me here in Leicester to interview you for the second What Bitcoin Did podcast. I've asked you to turn your phone off, but there is a chance while we're doing this, we might have a $10k Bitcoin; how do you feel about that?
Nik Patel: Yeah, firstly, thank you for having me. I just want to say the podcast with Luke was fantastic; we need more of that in the space. To be honest, I'm conflicted in my emotions because I'm excited about being here, but I'm also very disappointed I'm going to miss $10k.
Peter McCormack: I don't know if it's going to happen. I think, as soon as we're done, we're going to be both switching on our phones and checking Blockfolio to see what's happened.
Nik Patel: And it's gone under $7k! It's like, "Damn it! Crap! So close".
Peter McCormack: So, listen, I first became aware of you back when I was trading earlier in the year. I did what most people do, trying to find more information out, more tips and learn more and following a bunch of people on Twitter and then following who they follow. But with you, I become aware of you through a Medium post where you talked about strategy for trading micro-caps, and that seemed to be an article that catapulted you forward. Can you give me a bit of a background to how you got in this space, how you discovered Bitcoin and how you came about doing that article?
Nik Patel: Yeah, sure. So, unlike probably the vast majority of people, I began with Dogecoin, not Bitcoin. I didn't even know what cryptocurrencies were; I was on Reddit and I stumbled upon the Dogecoin Reddit, got some actual tips, 10 Doge here, 15 Doge there, downloaded the wallet. I was like, "This is cool". From then on, my next coin was Vertcoin, just from bouncing around on Reddit, and then I found Bitcoin after that. So that was a weird way to get into it but, yeah, I think a lot of us wouldn't be here without Doge.
Peter McCormack: Yeah, that's funny you should say that; I was listening to the Crypto Street podcast on the way here with --
Nik Patel: @notsofast.
Peter McCormack: Yeah --
Nik Patel: Yeah, so did I.
Peter McCormack: -- and he was saying the same. For me, it wasn't that. So, what was your background before this though, because you've mentioned to me you also have done some Forex trading; do you have some trained background in trading?
Nik Patel: Yeah, so I have no -- everything is self-taught with me. But essentially what happened is, in 2013, December, that's when I first came across Dogecoin. I then traded in cryptocurrency for probably a year and a half. It was around 2015, early 2015 that I then decided, just before the bear market came in, this was perfectly timed, I decided to take a hiatus and learn much more in-depth about technical analysis and went into Forex and tried my hand at that.
I came across a trader called The Inner Circle Trader, ICT, and he essentially was putting out videos that were absolute gold, and I just focused on that for maybe a year and a half; then it wasn't until January 2017, this year, that I returned to crypto.
Peter McCormack: How similar was Forex to crypto; how did those lessons help you with it?
Nik Patel: TA-wise, a lot of very similar; price is price. So, price action trading is the same across most, if not all, markets. The only difference is obviously, when you have lower volumes and lower market caps, etc, manipulation is much more frequent and overt. So in, let's say, USD/CAD, for example, that then runs -- it's called Loonie for a reason; that thing runs like crazy. But when you compare that to an alt that's a $200k market cap that goes ten times in a week, it's very different.
Peter McCormack: Okay. So, I also became aware of you in another way earlier this year, and I want to focus on this first before we go on to things like trading strategy because, at the time, actually it totally broke my heart. You won't know, I was probably one of the people who messaged you on the day. Was it October?
Nik Patel: It was 10 October.
Peter McCormack: So, 10 October, I saw a tweet from you where you talked about being hacked and, when I get approached, like probably you and anyone in the crypto space, people ask me, when they want to get involved, the first thing I tell them to do is go and buy two Nano Ss or go and buy Trezor and understand security first.
Having a lot of experience in the space, you obviously took security seriously, but you suffered quite a significant hack, so let's go back to that day. Can you tell me when you first realised something was up?
Nik Patel: Yeah, so what happened was, on the evening of the 9th, I went to bed. I left my laptop on, I was staking five or six coins, and I woke up the next morning and I opened my -- it was CoinonatX, I opened that wallet and I was like, "Why has 75,000 XCXT left my wallet; I didn't send it?" So, I was like, "Okay, that must just be a glitch or something". I opened up my Equitrader wallet, all gone.
I was like, "Okay, this is strange". Opened up the rest of the wallets, everything was gone, and that's when I knew. I was like, "Something's happened somewhere". I don't how, but someone had managed to get on and steal my local wallets. It wasn't until later that I then realised that Bittrex had also been cleared out, and it wasn't until I'd actually calmed down and got some clarity that I realised why this had all happened.
Peter McCormack: So, calmed down, so what happened; what did you do?
Nik Patel: Nothing. I was calm in the sense that, at first when you find out, you're very shaken and you feel a little bit violated because you feel unsafe and like you could be being watched, that sort of thing. It's a very paranoid feeling. It wasn't until maybe six to eight hours later that I then got to just sit down by myself and just think, "This is how this has happened; this is how I move on from it".
Peter McCormack: How did it happen? Did you get to the root of the problem?
Nik Patel: Yeah, so I was downloading brand new wallets to speculatively mine. So, I was mining launches of coins that I think would go 10X, 15X within a week from just having such a low mining average. One of these coins had a remote access Trojan which bypassed my computer security, and I have no idea how this happened because my security catches everything usually, yeah, so that installed TeamViewer onto my PC. I didn't even know what TeamViewer was. It essentially allows for remote access to your computer from anywhere.
Then, once that had happened and whoever the hacker was had gained access to my computer remotely, he got rid of everything in my local wallets because I had them unlocked for staking. After that, I made this stupid mistake, I never do this, I left my backup code for my Bittrex 2FA on my PC and it made a bad situation go to worse. I never do this. I think what must have happened is, I'd have copied it down on the computer thinking to copy it down in my notepad, and then just never done that step and never removed it from the PC. So that obviously made a bad situation worse.
Peter McCormack: So, what then? What did you do after that, once you've realised everything had happened?
Nik Patel: I rage tweeted!
Peter McCormack: You did, but do you know what, everyone rallied behind you.
Nik Patel: Yeah, it was overwhelming. Honestly, the experience itself was devastating, but the response and the reaction from the community was even more overwhelming. I had 1,000 messages in 24 hours. I couldn't even respond to everyone.
Peter McCormack: Apart from that one wanker who started trolling you.
Nik Patel: Apart from that guy, yeah. It's fine; each to their own.
Peter McCormack: Yeah. So, you said a coin had installed a Trojan on you?
Nik Patel: Yeah.
Peter McCormack: So, who where they; what was that all about; was that just a scam point?
Nik Patel: I'm pretty certain it was Phantomx, because then some people on Twitter, some security experts, were running the file through and finding a lot of stuff that isn't usually in a wallet. There's always, not always, but there is usually a malware detection on wallets because it picks up, I don't know, I'm a technical neanderthal, but they pick up a certain file that was in the original Bitcoin wallet, and all the clones from then on get picked up by certain malware detectors; but this specific file had bypassed that and it wasn't until people did a sort of reverse engineering that they figured out it what it was.
Peter McCormack: Are they still going? Have you spoken to Phantomx? What's the deal with it?
Nik Patel: I didn't speak to Phantomx, but they are still going. They're on Mnrank.
Peter McCormack: Wow, okay.
Nik Patel: Maybe they cleared it up or got new devs; I don't know.
Peter McCormack: Okay, so you've got through that day, did you get to sleep okay?
Nik Patel: Yeah, I was fine. Yeah, honestly, I'm only 22, it’s not a big deal really. It was 65% of my trading portfolio, but my trading portfolio isn't my entire worth either. I was wise enough to diversify and so, whatever I lost, it's a significant amount but I knew if I can do what I've done from 18 to 22, from 22 to 26, I'm still young, when I'm 26, it's going to be a blip; so it's fine.
Peter McCormack: When did you start trading again?
Nik Patel: It was probably two weeks after because I'm writing my book and writing's my favourite thing so I was like, "That's going to take my mind off it and I don't want to revenge trade to try and get things back", because a lot of people would do that; they'll have a big loss or a hack or something and they'll be like, "Right, how do I get this back straightaway?" and make stupid decisions. So, I was like, "I'm just going to relax, take two weeks off, talk to some friends, talk to my family and then just write my book". So that's all I was doing for two weeks.
Peter McCormack: You obviously then had a new chapter to write that you properly prepared for?
Nik Patel: Yeah, the silver lining is that there will be a hilarious new chapter in that book for many to read and learn from.
Peter McCormack: Have you written that bit yet?
Nik Patel: No, not yet. I'm still writing. So obviously, there's the memoir section of the book and the manual section of the book, and I'm doing the memoir section first because it's an utter nightmare; it's a mess because everything that happened when I was 18 is a blur, so trying to go back and recall how I got into the space and all the highs and lows is very difficult but interesting. So, I'm writing that half of the book first.
Peter McCormack: And you're using Patreon to fund it, right?
Nik Patel: Yeah, so the reason I was doing that, I was like, "I'm going to write the book anyway", it doesn't really make a difference if people pledge or not; but it's a way for people who are very interested to have a say; it's a way for them to get extra material that I'm not going to include in the book, like that last chapter that I just published on advanced order book reading. Also, I wasn't expecting anything like the donations that I got, or I'm still receiving, so it's just been wonderful really.
Peter McCormack: Well, I'll put the link to Patreon into the show notes, but you also had a lot of support from the community in terms of donations, right, to help recover some of your losses, which is one amazing thing about the crypto community.
Nik Patel: Yeah. It reminded me of crypto in 2013/14 because what we had back then was a massive tipping phenomenon. Everyone would tip each other all the time. Every day, people would be getting tips and giving tips and when a tragedy occurred, or even something in real life occurred, people in the crypto community would pull together and help out, and it was very reminiscent of that time, to have all that support, not just financial support, but everyone messaging me. It was amazing.
Peter McCormack: Did you think of quitting at all?
Nik Patel: No, not once. I was very proud of myself actually because, like I said, it was very shaking and I was sat there on my bed like, "This is an absolute nightmare. What am I going to do?" but I never once thought, "I'm not going to do this again, I'm not going to keep trading, I'm not going to stay in this space, it's me done". I wasn't thinking any of that.
Peter McCormack: Well, that's cool. Has there been any lingering emotional, psychological effects in terms of how you trade or how you approach your day or security? Has it changed anything?
Nik Patel: There's certainly lingering effects security-wise; I scan both PCs every day, I make sure all of my security is as it should be every single evening before I go to bed. In terms of emotional or psychological effects, I would say not, there's nothing really. My trading hasn't changed whatsoever. I'm pretty strongminded as well so, for me, it was more what I could learn from it, and it's definitely made me a better trader and just a better person in the space. I know much more about security than I did before.
My mum said, "What if this had happened five years down the line and for absolutely ridiculous amounts more; what then? Then you can't recover from that". Significant amounts now is much more palatable than overly significant amounts in five years' time.
Peter McCormack: How do you feel about the hacker how did this and hackers in general?
Nik Patel: To be honest, I have a very weird philosophy about this. Not to get too deep, but I basically --
Peter McCormack: Go deep, man.
Nik Patel: Yeah, I basically believe that anyone could be anyone else and it's just good fortune that I am who I am and I'm not the hacker or someone else. Maybe they needed to do it.
Peter McCormack: Okay, interesting.
Nik Patel: I could have been the hacker, had I been a different sperm cell.
Peter McCormack: So, a number of people who listen to this will be new to the space, like I said to you before, the first thing I tell people to do is think about security, think about passwords; not like they've done before. It's not a case of just having a new password which is your daughter's name or something.
Nik Patel: Yeah, definitely don't have your dog's name 1, your dog's name 2, your dog's name 3.
Peter McCormack: Yeah. What are the key things with regard to security you would be advising someone new coming into the space? You're a seasoned veteran and you've been hacked.
Nik Patel: Yeah, so loomdart introduced me to U2F keys. They got me to get one about six months ago. I would say that should be the first step in security for everyone.
Peter McCormack: What's a U2F key?
Nik Patel: It's just a physical key that provides a second layer of authentication for Gmail accounts in particular, and you can't log into that Gmail account without having this physical key plugged into your computer. So, what I would say is a different Gmail account for every exchange and a U2F key to secure those Gmail accounts.
Peter McCormack: Okay. Interesting. I've been using a secure email, I won't say which one because people will target, but I do have old Gmail accounts as well, which I actually took my phone numbers off as I got advised.
Nik Patel: Yes, that's another thing; don't keep your phone number attached to anything to do with security. That should just be for texting your mum when you need a pint of milk. That's it; nothing else.
Peter McCormack: The sad thing is though, all of us in the space love crypto, we love what it presents, the opportunities, both financially but also technology; but the security side of things is possibly the biggest negative to it.
Nik Patel: It's a barrier to entry for anyone who isn't technologically-minded. Like I said to you off air, I'm a technological neanderthal, I really am. It takes a lot of hard work for me actually understand and comprehend things to do with security and just the tech behind cryptocurrencies, I'm much more pure trader; but it's work that has to be done. You have to take an active interest in securing your funds and understanding how that security works itself, because it is a liability if you're not.
Peter McCormack: It's not just security around trading, but actually a big lesson I had last week was security around researching what you invest in. I got busted in the Confido, Confida scam, whatever you want to call it.
Nik Patel: Yeah, the ICO thing?
Peter McCormack: Yeah. Well, I didn't invest in the ICO, I invested post-ICO and I can't remember the article, but there was an article that said, "Three alternative coins to invest in from Bitcoin", and it was a major publication. It was something like Dash, Ethereum and Confido, and they put Confido in there as their outsider bet.
So, I became aware of it; I did some limited research. I obviously didn't go on 4chan, and I'm happy to share the numbers because I shared this publicly, but I put £25,000 into this because it seemed like, with the low market, a big opportunity and obviously now, whether it's an exit scam or a legal issue, the money's gone. So, people also need to be aware of scams out there.
Nik Patel: Yeah, scams are a big thing in cryptocurrency still. They were even more so back in 2013/14. Devs would run off with pre-mines straightaway. If you had a pre-mine in 2014, you'd better justify that 1%. Now 10%, it's fine, it's dev funds, it's okay. But, back then, it was 1% and you have to come up with a solid philosophy for why you need this money. But, yeah, so scams are definitely a thing to be wary of.
Peter McCormack: I think I saw you tweet something, or maybe retweet, where, on CoinMarketCap, there were adverts for three essentially Ponzis at the same time?
Nik Patel: Yeah, it's funny, CoinMarketCap, probably the most visited site in cryptocurrency daily, except maybe Coinbase and CoinDesk, so yeah, that’s probably the third biggest, and they have literal Ponzi schemes all over the place; and for newbies, why wouldn't you want 10% return on your investment in a day, or whatever, guaranteed? It's just stupid.
Peter McCormack: I think Bitconnect certainly needs delisting.
Nik Patel: Yes.
Peter McCormack: There are a bunch of people behind that talking about it as well. I mentioned to you the other day when we were talking about Tether, so interestingly, I had a Skype call with Twitter user @Bitfinexed who has been campaigning for this, and I'm staying neutral right now. I see the argument for it being an issue with potentially being similar to Liberty Reserve, I think it is, which means the US Government won't like it; and I see the other side where people are saying it's fine, it's useful, institutional money to buy up large stakes within Bitcoin.
But he certainly raised it to the point where I think the New York Times or Wall Street Journal have brought it up and other people have taken a look. Do you have any view on Tether?
Nik Patel: To be honest, I don't think I have a very valuable view on it. I don't really keep up to date with what's going on with Tether. I am aware of @Bitfinexed's reservations, but also it does have its advantages; it's great not having to cash out into USD. I've never actually used Tether, so I'm going to put that out there, I've never actually used it so I can't first-hand say what the benefits are, but I know people who rely on it; they margin trade a lot more. So, it's swings and roundabouts.
Peter McCormack: I think one of the fears is not so much whether it's a scam but more that it might get shut down the US Government in that it is a tool, potentially, for money laundering; you can buy Tether on one exchange in one country, transfer the Tether to another exchange and then liquidate your position.
Nik Patel: Very true.
Peter McCormack: I think that's the potential risk, but we'll see. Okay, look, I want to talk a bit about strategy. You know what it's like, anybody listening to this, anybody who follows you on Twitter, in the end most people want to know what trade you're going to make; but you know as well as I do, it's better that people learn strategy and learn their own way of trading. So, could you talk to me about what your broad trading strategy is?
Nik Patel: What I would say my trading strategy is? Well firstly, I'd like to start a bit macro; make sure you are diversifying your portfolio. So, if I had to go for three of the main things newbies should be looking at, it's risk and portfolio management, security and patience. You can't teach patience, but you can definitely learn the other two.
So, we've gone over security. With risk and portfolio management, make sure you're putting 10% of your profits from a trade, 15% of your profits from a trade, into cold reserve BTC that you're not going to touch. Just put it on your hardware wallet, put it in a paper wallet and stick it in a safe, something like that; just do that.
Also, look at other assets that are not directly correlated to cryptocurrencies. I have been buying 100 ounces, 50 ounces at a time of silver periodically as Bitcoin has been rising from about $5.5k.
Peter McCormack: Okay. This is really interesting because you mentioned that the other day. I've not actually heard somebody else do this. There's another trader, @NicTrades, Nicola Duke --
Nik Patel: No, I don't follow her.
Peter McCormack: Oh, she's great. She trades Forex, crypto, commodities, stocks, so she trades across everything. She does a lot in crypto and, from what I've seen is, those people who have exposure to non-crypto trading seem to be more experienced in trading; they talk a better game. So, can you talk about why silver?
Nik Patel: Yeah, the reason why silver is the same reason why anything for me in trading, because I go chart first and then after that, I will look into the fundamentals and everything else. So for me, the silver chart, historically, just looks beautiful. On the monthly, I showed you the chart on Twitter and I'll put one up later so people can go back after this conversation and see what I'm talking about, but the silver chart, the monthly silver chart, just looks like we are on the precipice of the next bull cycle for it. Considering we are now ten years without a recession, when the next financial crisis happens, I think we go commodities and cryptocurrency, nothing else.
Peter McCormack: What does a bull run in silver look like. because a bull run in crypto is 10X, 20X, ridiculous? What's a bull run in silver?
Nik Patel: Well, the thing is, I've only started buying now that it's hit -- below $19 is when I started buying. So, for me, I've not experienced a silver bull run before but, going off the chart, the all-time high on the monthly chart seems to be $48, $50 or something, so it's only like a 4X from here, but when you consider that it's physical silver that you can keep, that you have full control of, just like a private key for Bitcoin, I think a 4X is a 4X.
If it happens in ten years' time, and you're thinking that far ahead, you can put in 10% or 15%, like the same thing with cold wallet BTC, into anything that you think, as an asset, has potential to increase over the next decade or so, and just do that and make sure you keep at it and don't get complacent.
Peter McCormack: Where do you buy the silver from?
Nik Patel: So, I use two websites that allow you to directly buy using BTC. www.bitgild.com, I've used them four times now and they've delivered from, I think they're in the Netherlands, and they've delivered within four to five days to the UK. They do VAT-free silver because I don't know the technicals, but there is a specific, I don't know what the word is, but within EU law, you're allowed to sell silver coins without charging VAT. So, yeah, that's definitely an advantage over buying gold or buying silver bars; go for coins.
The other website I am not even going to try and spell.
Peter McCormack: I'll put in the show notes.
Nik Patel: It's Dutch, it's like www.zilvergoudwinkel.nl but I'm not going to try and spell that.
Peter McCormack: Brilliant name. Have you actually sold silver back at all?
Nik Patel: No, not yet.
Peter McCormack: How would you do that?
Nik Patel: Well, lots of places accept it. There are British companies that are solely focused on bullion, so BullionByPost, places like that, they'll buy back your silver. Obviously, they take an undercut of the spot price, so you might get, right now, silver is £12.60, £12.70 an ounce, something like that; they might give you £12.00.
But, for me, the reason I'm buying physical silver, it's not just for potential gains, but to diversify my portfolio so my risk is spread across the board. Also, because it's something that, even if it doesn't go 4X in a decade, even if it just stays where it is, my money has not moved. It's a constant and consistent asset to rely on and depend on to keep your money in.
Peter McCormack: So, it's essentially de-risking whereas others hedge with Bitcoin but, if you hedge with Bitcoin, and Bitcoin itself can crash --
Nik Patel: I've seen an alt and BTC bear market and it is ugly.
Peter McCormack: Yeah, post-Mt. Gox.
Nik Patel: Yeah, and also 2015, early, when I left, and I don't know if it was a coincidence, or I'm the Messiah, but I left in early 2015 as BTC and alt both just capitulated for a year and a half and then returned in January when we had this bull run begin. It was great.
Peter McCormack: That was just when I entered as well. Okay, so do you trade anything else outside of crypto and silver?
Nik Patel: No, I've actually stopped trading Forex. It's just not as interesting. Trading, for me, isn't what I love, it's not what I enjoy doing; it's a means to an end and it allows me to pursue what I love and what I'm passionate about on a day-to-day basis without worrying about financials.
So, for me, trading as little as possible and only in the things that really interest me is much more what I want to do than just trading everything for the sake of trading. So, I stopped doing Forex when I came back to cryptocurrencies in January, and I don't have any intention of re-joining that unless we get a BTC and alt bear market and you just go back and make some more money there.
Peter McCormack: Like @notsofast was saying on the Crypto Street podcast, there's just always an interesting conversation to be had. I met Luke, I'm meeting you now, you can be on Twitter, there's always some drama, some conversation going on.
Nik Patel: Yeah, it's a dynamic environment and, compared to Forex, which is dull beyond measure, I would say just stick to crypto, it's just so much more interesting. The space is in its infancy, even though we're at $10k Bitcoin, really is it actually that great in terms of size? Not particularly. We're still an infant industry and an infant tech.
Peter McCormack: I think it seems big in size because of the prize but I was thinking on the way that --
Nik Patel: And because of where we've come from.
Peter McCormack: Yeah, of course, but I was thinking on the way over, if Satoshi Nakamoto had decided that it was going to be, I don't know, 210 million Bitcoins, would we be at £1,000 now and it wouldn't seem so big? It's all relative to where the decimal point is.
Nik Patel: Well yeah. Jeff Bezos' net worth is $100 billion, so to think that $200 billion or whatever we're at with Bitcoin now, it's minute.
Peter McCormack: We want Jeff Bezos to take crypto on Amazon.
Nik Patel: That would be fantastic. Please do because I use Amazon so much.
Peter McCormack: Okay. So, look, in terms of portfolio management, where do you sit between trading Bitcoin versus trading other leading crypto like Coin, Ethereum, Dash versus mid-coin versus micro-caps, across the board?
Nik Patel: So, percentages?
Peter McCormack: Yeah. Well, percentages, portfolio management or where are you most interested in trading?
Nik Patel: I'm sure most people are aware, I would say what my forte is probably micro-caps and low-caps. I tend to have a very different risk perception to a lot of people; I actually find that trading low-caps, because I know them so well, it's much better for my mindset and my peace of mind than trading high-caps and mid-caps, because I'm less effective at those.
So, I tend to keep the 15% that I do in cold wallet BTC, not traded, nothing; keep maybe 5% in BTC for random crashes and low bids; I keep nothing really in high-caps unless something really takes my fancy; maybe 10% in mid-caps; and the rest I just play degenerate.
Peter McCormack: Right, so you're like a hardcore aggressive micro-cap trader?
Nik Patel: Yeah, but the thing is, the wonderful thing about fixed percent risk is I can put 3% of my portfolio into an absolute shitcoin and it is only ever going to lose me 3%. So, for me, I'm much better at having 30 altcoins that are all under $5 million market caps and playing those; than I am at having maybe 10%, 15% of my portfolio in one mid-cap or high-cap.
Peter McCormack: So really, you're a trader, you're looking for growth and scalping, in and out?
Nik Patel: To a degree. I stopped day trading, contrary to my Twitter name; which I should probably change, but I stopped day trading in about March when we began this bull run really. I was like, "Day trading is just too much stress and it's not really that enjoyable, but it does give good returns if you know how to do it". So, I was like, "I'm just going to focus on intraweek, intramonth and a few long-term plays".
Peter McCormack: So, to new traders, explain intraweek and intramonth because this comes up, even intraday, and what does it mean to people?
Nik Patel: Yeah, so intraday is day trading; you're trading, so you might enter London open in the morning, 8.00am GMT, and probably exit London close 4.00pm, and you might be looking for 1% or 2% moves in Bitcoins and margin trading that on 10X or something like that. You might be looking at high-caps that have the highest volume of the day on Bittrex, which might move 10%, 5%. So, you're trying to get those scalps within a day. But it is stressful, and I would not advise it. If you want to day trade, day trade Forex.
Cryptos and day trading are a very difficult thing to master and I haven't mastered it, for sure. I found my most effective way of trading is to go for intraweek and intramonth, and what I mean by that is looking for plays that you think are going to grow within the week or the month. So, you might buy 1 November and be looking to sell at 20 or 25 November. So, you're in it for three weeks but, in crypto, that's like a lifetime. A coin can go 15X in three weeks.
Peter McCormack: Okay. So, you talk a lot about technical skills and technical analysis, put out technical analysis, you put out charts; a lot of people coming into crypto can't do this full time, they have jobs, they have families; they want to. Realistically, like Luke said last week, most shouldn't be trading, they should just be buying and holding something, but you can't stop people trading.
So, there's a lot to learn with technical analysis; I've been in this a year and I'm still at my absolute basics. If a new trader was coming to you and they said, "Look, I want to start trading", what are the key things around technical analysis that they could learn quickly and easily that will improve their trading?
Nik Patel: Okay, so what I would say about that is I don't think there is a quick and easy, but that is definitely not a reason not to get involved with technical analysis, because it is magic when you get it right. I, like I said before, learnt most of what I know through Inner Circle Trader tutorials, which is price action, so you're not doing patterns, no head and shoulders, no triangles, nothing like that. It's all based on where are prices and where are prices reaching for, stop losses, etc; so, where the liquidity is and where prices are looking to move. So, as a new trader, I would say look up whatever you can by him; it's all free.
Peter McCormack: So, we can put that in the show notes. Okay.
Nik Patel: Yeah, so look up whatever you can by him. You will have to invest probably 80 hours of your time before you get anywhere near a level of competence with it, but the material is gold. Other than that, obviously, there is the traditional means of technical analysis, just looking at learning your patterns, learning how to spot them without actually having to draw them on a chart. The reason I put things on charts now is mainly to put them in my Telegram thing so other people can learn from it.
Peter McCormack: Is that a free group?
Nik Patel: Yeah, it's free. The only reason I created it is so I would have a running list of my thoughts and I could go back at any time and compare charts from different days, and I wouldn't have to sift through Twitter or something like that. So, it's just great to have a channel; no one else can talk in it. Then I was like "If anyone else wants to have a look at where my thoughts are on any coin on any given day --"
Peter McCormack: So, anyone can follow that?
Nik Patel: Yeah, the link's in my bio. You can just go and have a look at that and I try to put as much detail in so people who don't know what I'm talking about have some sort of idea.
Peter McCormack: How many people are in the group?
Nik Patel: 2,900 or something.
Peter McCormack: Any reason you've not considered a paid group?
Nik Patel: No, I don't need to make money off people. It's fine.
Peter McCormack: Do you have a view on that?
Nik Patel: No. I'm absolutely fine with paid groups as long as you're offering something that's worth what you're charging, no worries whatsoever. Signals, piss off. Everything else, if you're actually teaching people, you should be able to charge.
Peter McCormack: So again, explain signals because I know of a couple of key people who charge, I won't pull out their name, but they charge based on signals, and why is that bad?
Nik Patel: Because you're teaching anybody anything, and it's fine, each to their own, I don't actually have -- I say, "Piss off", it's funny, but I'm not really meaning it seriously; it's just the reason I don't like paid signals is just because you could do so much more, and you know you could do so much more to help that person for what you are charging them, but you're lazy.
Peter McCormack: My opinion on groups changed after meeting Luke, when he explained his to me, in that he actively teaches people to trade.
Nik Patel: Yeah, and that’s what you should do.
Peter McCormack: Yeah, they don't need to be there full time, they can join for a month and then hopefully leave being able to learn how to trade.
Nik Patel: The aim of it, and this is where paid groups can be great, the aim of it should be, "I don't want you to stay in my paid group; the reason I'm charging is because you can…" I only have limited resources and limited time, so people who are charging and actually teaching, that's great because those people then don't need to pay for anything three months down the line when they've mastered what you're teaching.
Peter McCormack: Rather than copy trading but with your own emotions rather than the original trader's emotions.
Nik Patel: Yeah, or just paying for signals for three years because you don't know how to trade for yourself, and all of that money that you've spent, you could have 10Xd in one coin that you've learnt how to trade through Luke's group or something like that.
Peter McCormack: Do you margin trade at all, and do you have an opinion on that?
Nik Patel: I used to margin trade; I don't really anymore. I do sometimes; I have a BitMEX account. It's not really something I do very often. If I'm anticipating big moves then, yeah, I'll throw on a long for fun, never a short. But, yeah, the opinion I have of margin trading is that it's very similar to Forex, because you're leveraging when you're doing Forex, you're definitely not buying £1.00 and selling it for $1.50 or whatever. So, it's the same sort of thing, and you just use the same techniques that you learn in price action trading to get in and out.
Peter McCormack: I think it's a great tool for a very experienced trader who can afford to take risks when they know the market's going to move, but the companies offering margin trading do it because they make a profit from it; I think, the majority of the time, they're making a profit from people who don't know what they're doing.
Nik Patel: Who don't have a clue.
Peter McCormack: Which is why I tell people not to do it.
Nik Patel: Yeah, but at the same time, it's a zero-sum game and that is what we are involved in. 100% of people can't win.
Peter McCormack: True, very true.
Nik Patel: I'm very glad of that otherwise no one would win.
Peter McCormack: Well actually there are arguments against it being a zero-sum game --
Nik Patel: Yeah, there are.
Peter McCormack: -- in that it only becomes a zero-sum game when the market goes to zero, but I know what you mean, there are winners and losers.
Nik Patel: Yeah, someone has to buy the top.
Peter McCormack: Yeah, okay. Yeah, someone's going to buy the $100,000 Bitcoin.
Nik Patel: Yeah, and not just that, someone's going to buy -- there was a coin back in 2013/14 called Kitty Coin; someone's going to buy the top and it's never going back there.
Peter McCormack: Well, do you know what, there was a time when people were saying there was someone who bought a $50 Litecoin.
Nik Patel: Yeah, this is different. Litecoin's a legit coin, this is a --
Peter McCormack: Do you know what, I remember seeing there was a guy on Reddit and he'd held Litecoin since it was about $50 back in 2013, and it was around $3 or $4, and he was like, "Look, I've had enough, I've held on to this for years, I'm done. It keeps going down", and he sold it. Then they announced SegWit, Coinbase, and I just felt so sorry for the guy.
Nik Patel: Yeah, that's devastating.
Peter McCormack: Well, you talk about patience but…
Nik Patel: I had the same thing when I started, because the first coin I put my own money into was Vertcoin, and this is when it first got released. I was reading the Reddit channels and posts and I was like, "Oh my god, this is amazing! My £150 could become £1,500!" and, as an 18-year-old, I'm like, "This is wonderful!" I bought Vertcoin at the top, it had gone down maybe 30%, sold it; then I bought MazaCoin at the top, then I lost 80% of that; then I bought SpainCoin at the top and I lost that. I was 90% down on my account within four days of having a MintPal account.
Peter McCormack: Do you know what, I bought EOS, I don't know, it was about six weeks' ago, it was about 60 cents, went down to about 50, got back up to about 70 and I was like, "No, I'm out. This ICO's going to go on for another year", and now I think it's about $3. My friend, Tom, who I told to buy it, is still in it, and I think it's his biggest thing at the moment.
Okay, so look, in terms of trading, it's always good to have people to bounce ideas off. Is there anyone in the space -- I asked Luke this and I think it's a fair question, are they are people that you bounce ideas off or other people you say, "Look, follow these guys on Twitter; they know that they're talking about"?
Nik Patel: Yeah, so the three people, if I had to pick three -- okay, I'm going to pick four, I would say @ThisIsNuse, so Ant is his name, and @bitcoin_dad; follow those two, because Nuse especially will teach you to swallow your ego and that is very important. You should trade like a robot. There should be no highs when you make a 10X. It should be very contained, and he will teach you that and also when to cut your losses, unless you're like me, or need a coin, and you hold for five months, six months, that's fine. It depends on your strategy of course. The other two people I would say is @notsofast, just a genius, and @SecretsOfCrypto.
Peter McCormack: Okay. I'll share those all in the show notes. The guy I've been following recently I quite like is Wilson Trodler.
Nik Patel: I think I had a conversation with him a couple of days ago in tweets, but I don't think I follow him.
Peter McCormack: He's quite interesting. Okay, any big mistakes you've made outside of -- obviously, we talked about security, but anything, big mistakes you've made that you see other people making that you would say, "Look, avoid this"?
Nik Patel: Okay, so this is a very niche mistake, a very specific mistake, and I talk about it in my chapter on order book reading; people don't know how to react to sell walls and buy walls. I understand it because I remember when I started and I saw a big buy wall, I was like, "I have to get in, this is going to go up", and when I saw a big sell wall I was like, "Damn, I need to sell because this is going to go down". Do the opposite.
Peter McCormack: So, explain for new people what a sell and a buy wall is.
Nik Patel: Yeah, so a buy wall is a large order that has been placed in the book to drive newbies and inexperienced traders into the market maker's sells, and a sell wall is the reverse of that. So, they will put up a big sell order that outsizes the rest of the order book and that will drive prices down because people will panic sell thinking, "Oh, there's this big, huge sell. We're not going to get past it, we need to sell down", and that'll go straight into the market maker's buy orders.
Peter McCormack: In the exchange, how would they visually recognise that? This is where you see the chart and, below the chart, you see the big green blocks?
Nik Patel: Yeah, so you have the order book and, in there, you have an ask side and a bid side, so a sell and a buy, and usually a wall will be identifiable by the size in Bitcoin compared to the orders above and below it. So, for example, I run through an example with Ubiq in my chapter, and I'm talking about how, in the order book, you might see one order of 100,000 Ubiq in the buy, I don't know how many BTC that is, it's a lot; and that likely could be a spoof order and a buy wall that is primarily there to drive inexperienced traders into the sells of the market makers. Then what they'll do is they'll put a sell wall up and everything that you've just bought, they'll buy back cheaper.
Peter McCormack: This can't happen every time though, so how are you recognising, or are you just ignoring them?
Nik Patel: What do you mean, "It can't happen every time"? It can; it does!
Peter McCormack: Would you say every time it's happening, it is essentially a fake position to drive --
Nik Patel: Most of the time. Markets are manipulated; that's what they are. Every single coin in the space that has any volume or any interest is manipulated, and the way to accumulate without raising price significantly is to use these walls to push price around within a very constricted area, a very constricted price area.
So, most of the time, the way you'll be able to tell whether a buy wall is actually a spoof order that is there to push you up and get you to buy a sell is because, once someone starts dumping into it, they'll remove the order. So, they don’t want that much Ubiq, they don't want that much Mothership.
Peter McCormack: They just want to get the price down?
Nik Patel: Yeah.
Peter McCormack: Right, okay, interesting. So, in terms of when you're trading, do you use any fundamental analysis and do you have any preference in terms of the type of projects or sectors or coins you go into, or do you not care?
Nik Patel: Yeah, so my strategy, on the micro level, is to look at a coin's chart before I look at anything else and, once I've determined whether that chart looks appetising, I will then look into the coin's fundamentals. So take, for example, Raynos right now which is on Cryptopia, that chart, to me, is magnificent. It's got perfectly defined cycles of 125, 128 days, I can't remember exactly, and is in a great accumulation zone right now.
So, if I didn't know what that coin was, I would look at that, I would chart it or draw up the chart and put whatever analysis I needed to on it. Once I'd then determined that this looks good for a buy, I would determine whether it is worth a buy, and I do that by then looking at the Bitcointalk thread. I go through this in the article though I wrote on it.
Peter McCormack: I'll share that Medium one.
Nik Patel: Yeah, and I'll go through the fundamentals there. I'll look at the community, whether it's growing, how much development there is, what it's got lined up for the next three months, the next month, the next six months. I will look at the rich list, see whether the top wallets have been accumulating and for how long.
Peter McCormack: That's a really interesting point. I've never heard somebody mention that before. Can you explain that and how people would find that information out?
Nik Patel: Yeah, there are so many golden nuggets in this space that we are afforded and given that we aren't given in any other financial market. The beauty of a block explorer with a rich list is all the wallets are visible to anyone. So, you can find your coin that you're interested in, look at the block explorer, look at the top 100 addresses.
Go through them, monitor them once a week, screenshot them; see which of the addresses are selling, so coins are being removed and which are accumulating. See what the changes are after a week, after a month, and whether those addresses have gotten bigger or smaller. That will tell you whether people are interested for the long-term, or whether they are getting rid of their coins.
Peter McCormack: Okay, that’s really interesting. So, I just want to talk a little bit about the markets now. Do you have any particular view on what's been going on with forks and ICOs? I'm asking both together because, to me, they're actually now starting to become very similar things.
Nik Patel: Yeah, they're the same sort of thing.
Peter McCormack: Kind of, yes.
Nik Patel: Just stop, guys! Just stop! That's all I'm going to say. I don't get into ICOs very often. There are only three that I've been involved in; the Mothership ICO, which I'm still bullish on, but --
Peter McCormack: Is that the Estonian guys?
Nik Patel: Yeah, and I think that's a good play for 2018. Covesting, which I got into very recently; I got in in the pre-ICO, and that's a copy trader platform. The other copy trader platform, which is EQT, which I obviously lost in the hack, it's now doing terribly so I'm glad I didn't get back in, but I bought that at the ICO of 5k sats; it went up to 30k sats and then is now down at 2.5k or something like that. But those are the only three ICOs I've ever been interested in.
Everything else I am very, very picky with stuff like that, and I just don't think, unless you have a working product -- that's I love about Covesting is that they have this working platform, their estimations and what they are expecting and what they want is reasonable compared to the ICOs we've seen, which want $60 million off the bat for an idea.
Peter McCormack: Well, you'll struggle to raise $1 million from VC at the moment without a working product.
Nik Patel: Yeah, exactly, and the reason is because it's FOMO, people have fear of missing out and newbies think, "This is the way to easy money, to quick money, so I'm going to put half of what I have into ICOs", and most of them fail.
Peter McCormack: When you're looking at a micro-cap project, maybe something that's just come out of ICO, are you waiting at all to see if it dumps first? Is that something that's relevant to you?
Nik Patel: Well, I don't buy ICOs after they come onto the exchange.
Peter McCormack: How long do you leave them for?
Nik Patel: No, just in general. I haven't actually picked up an ICO project outside of ICO. Like I said, I got in the three ICOs that I mentioned and, other than that, I haven't actually bought an ICO coin that's got onto an exchange, ever. It's just not my sort of thing really. It doesn't interest me, and I think there are much better opportunities elsewhere.
I love old-school coins, proof of work coins, proof of stake coins, stuff like that. You can find a coin with a 30BTC market cap, it's only, what, $300,000, and that can go 20X within three months. That's much more interesting to me than an ICO.
Peter McCormack: Okay, man. Look, this is all really cool stuff. So, listen, crypto can take over our life; it's a 24/7 market. We all wake up in the middle of the night and check our Blockfolio, but what do you do outside of crypto; what are your interests; what ticks your boxes?
Nik Patel: See, it's cool that you said it's 24/7 because, for me, it's completely not. People are always shocked at this, but I spend 10 hours a week on crypto, maybe 15, in between the week.
Peter McCormack: You're a freak in crypto!
Nik Patel: Yeah, so obviously I'll put shitpost on Twitter but, other than that, I'm not doing much actively in the space within the week except on my research week. So, every month, I'll have one week where I'll do 40 hours of research into new coins, into current coins, see where I'm at. That just gives me my feeling for the market. Other than that, the other three weeks of the month, I spend probably ten hours actually doing crypto-related things. I read a lot; I write a lot; that occupies most of my time.
Peter McCormack: So, you crypto so you can write?
Nik Patel: Yeah.
Peter McCormack: Outside of your book, what kind of things do you like to write?
Nik Patel: Everything in reality. I was doing fashion journalism before. I like to write anything, film reviews or fiction, short stories, poetry, all sorts of things. I just love writing. It keeps my mind stimulated and, alongside reading, that's pretty much all I do.
Peter McCormack: What's the dream, man? What's the future? What do you want to happen?
Nik Patel: The dream, right, yeah. So, I'm pretty reserved in what I want. People want Lambos; what I want is a self-build home paid for completely upfront. Debt is slavery, don’t get into debt; don't take out loans for this shit. All I'd say is save up enough, buy a house with cash, and that's what I'll be doing hopefully next year, hopefully the year after, around then, before I'm 25.
Peter McCormack: And you're going to build it with your own hands?
Nik Patel: No, I'm not going to build it with my own hands. Unfortunately, I don't think I have the skill for that, but I will definitely be looking into self-builds because they're so much cheaper than building a pre-built house and I have the patience and the time. So that is the dream for me because, once you have a house, most of your worries are set; you have a place to live forever.
Peter McCormack: You don’t have children.
Nik Patel: I don't. That's true.
Peter McCormack: You wait until you have children!
Nik Patel: I don't think I want children.
Peter McCormack: What about your family and friends; what do they make of what you do; do they understand it?
Nik Patel: Most people don't know what I do to be honest. My family know, of course, my girlfriend knows. I tend to keep it on the downlow. If I'm out with friends, buy them a couple of drinks and that's all they need to know.
Peter McCormack: Okay. Look, a couple of closing thoughts; this has been great, Nik, I do really appreciate your time.
Nik Patel: No worries.
Peter McCormack: You've talked about the YouTube videos, which I'll add into the show notes, but any other particular resources you would refer people to, any books, films, reading material?
Nik Patel: I'm going to give a second-hand referral, because I haven't actually read it, but I've heard very good things from people I respect, Chris Burniske's book.
Peter McCormack: Luke brought it up as well, yeah.
Nik Patel: Yeah, I haven't read it. I haven't got round to reading it, and my reading list is like 120 books right now, so probably won't get round to it any time soon.
Peter McCormack: So, I went on Amazon last night, it had sold out.
Nik Patel: Oh, wow. Okay, so you probably can't read that unless you can borrow a copy from a friend.
Peter McCormack: I think it's restock 2 December or something.
Nik Patel: Okay, yeah. So, there's that. There's also @notsofast's articles on Medium about security and stuff like that, and just keep up to date with the interesting veterans on Twitter. There are a lot of newbies as well who are very good, so just make sure you have a diversified following list and just keep up to date with what they're into; there's a reason why are what they are.
Peter McCormack: Have you seen the Banking on Bitcoin documentary?
Nik Patel: Yeah, on Netflix?
Peter McCormack: Well, I saw it on the plane on the way over to America and I think, for the first time ever, I truly understood on a, I don't know, fundamental level, what this actually means to people, and I finally got it.
Nik Patel: Yeah, it's amazing because we don’t think about remittance. For us, I'm not sending money to Ethiopia and getting 35% taken by Western Union, but it is a huge thing, it really is, and when people watch stuff like that, which is very accessible, I think it can only do good things for the space. Yeah, so those sorts of resources are vital.
Peter McCormack: Cool, man. Okay, I think we're about there. Any closing thoughts, anything you want to say?
Nik Patel: Not particularly. I think I've said everything I need to say. Yeah, just don't buy stupid ICOs, please!
Peter McCormack: Okay. Appreciate this, man. That was really good. Thank you.
Nik Patel: No worries. Cheers.
