15th OCTOBER 2019
VITALIK STRIVING FOR MOST SECURE CHAIN
This week, Ethereum co-founder Vitalik Buterin made a bold statement at Devcon 5 that after Ethereum transitions to Proof of Stake (PoS) “…the cost of a potential attack would make Ethereum the safer network of the two”, with bitcoin being the other. The switch from the Ethereum proof of work (PoW) model to a PoS model has been a long time coming and is also a massive talking point in the industry in regards to how it will look and run. At first glance the protocol is relatively normal,
“The more Ether staked, the higher are the probabilities that they would end up validating a block. Just like the more hashrate (computing power) a miner has, the higher the likelihood that he mines a block.”However, in Vitalik’s model,
“…there’s a period of time after a validator creates a new block, during which this block can be challenged and potentially proven to contain illegitimate data.”
Vitalik explained that under his model if sufficient proof is provided that a stake is dishonest then the validator of the block is slashed and the challenger is compensated,
“…a successful attack on the network will need multiple malicious blocks to be validated, which in turn would require an enormous Ether stake that could be slashed if someone were to successfully challenge the transaction.”
This is all good news for Ethereum and brings a new level of security to the network, not to mention the inherent increase in block size as they transition to ETH2.0 – the PoS testnet “Beacon” which went live on May 8th 2019.
IT’S A RED WEDDING AT LIBRA
I wrote about PayPal breaking ties with Libra and Calibra last week and this week’s news confirms our suspicions that all is not well with the partners of the project. The Financial Times has broken news that Visa, Mastercard, eBay and Stripe are to follow suit and also leave the project. A Visa spokesperson told Coindesk,
“We will continue to evaluate, and our ultimate decision will be determined by a number of factors, including the Association’s ability to fully satisfy all requisite regulatory expectations. Visa’s continued interest in Libra stems from our belief that well-regulated blockchain-based networks could extend the value of secure digital payments to a greater number of people and places, particularly in emerging and developing markets.”
eBay on the other hand took the approach that they would prefer to spend the time on enhancing the “managed payments experience”. This comes as no surprise given PayPal’s similar explanation last week and the two parties are directly tied. There could still be more big names to exit the Libra foundation given the initial 28 members to sign up signed non-binding letters of intent. It is widely thought that a lot of these exits have been spurred by the identical letters from U.S. Senators Brian Schatz and Sherrod Brown to all of the leaving parties warning of the “chilling” effects Libra could have on the global financial system and basically went on to say any associated parties would get an increased level of scrutiny from the regulators. So, not something anyone operating in the States really wants the hassle of apparently.
SEC PUTS A TON OF PRESSURE ON TELEGRAM
Coindesk broke the news that “The U.S. Securities and Exchange Commission (SEC) secured an emergency restraining order against the Telegram Group and its subsidiary TON Issuer for their $1.7 billion token sale.” If you’re interested the full SEC press release is available here. The emergency restraining order was taken out against Telegram and the TON token and the SEC have stated that it is to “…prevent Telegram from flooding the U.S. markets with digital tokens that we allege were unlawfully sold.” And the SEC have alleged that Telegram failed to provide investors with the adequate information regarding the raise. Effectively you have Telegram performing an IPO but dressing it up as a cryptocurrency or digital token raise. To date, Telegram has sold 2.9 billion tokens globally at discounted prices to 171 parties. Of this number, more than 30% (over 1 billion) of those were sold to U.S. residents.
Initially it was believed TON was a standalone project with the blockchain being in existence for over a year now, however, earlier this month, Telegram came out publicly confirming it was working with TON, and it had a few people left wondering as to why they took so long to publicly recognise the relationship.
After the partnership announcement earlier this month the TON token was named “GRAM” and while the token is not available yet, there are already secondary OTC markets popping up. Along with all the hype, Coinbase has confirmed they will list it once available, and claim early investors have made upwards of 400% on the project. But of course, this will all lead to nothing if the SEC block the raise and cause it to be delayed over compliance issues.
BITMAIN BULLISH ON MINING, HESITANT ON HALVING PRICE
Bitmain Co-founder Jihan Wu believes that the next Bitcoin halving may not be the immediate catalyst for Bitcoin price appreciation that everyone thinks and instead the price will continue to appreciate over a more long term timeframe. Not surprisingly, he is still very bullish on the future of crypto mining and hardware innovation, “If I were a miner, I would not stop mining but continuing to invest in mining equipment. We are currently in a short-term correction of price. Having a long-term perspective is significant”.
Bitmain as a business is continuing to expand on its service offering with a five nanometer ASIC due to drop in 2020 and 3nm chips currently in production. They have worked on an expanded repair centre, reducing repair turnaround to three days and developed a “World Digital Mining Map” to connect pools and miners, plus an “Ant Training Academy” designed with the novice miner in mind. Bitmain are a behemoth in this space, and there have been concerns aplenty that they produce and run miners for their own benefit long before they release them to the public, some forums even consider “new” miners to be second-hand from their farms.
TESLA BUYS UP BATTERY MANUFACTURERS
Tesla has quietly bought up battery manufacturer Hibar systems in order to produce its batteries internally. The purchase has been made without any fanfare; the company’s website is just a landing page and it looks like the 50+ team based within will start working exclusively on new Tesla battery technology. Wccftech reported, “Tesla knows that if it can build a denser, and longer-lasting battery than emerging competitors such as Volkswagen AG, then it will have a sizeable advantage”. In February this year Tesla also acquired Maxwell Technologies for $218 million with a similar goal in mind.
The interesting part about this is the overall advancement in battery technology Tesla are pushing. Inevitably it will flow through to more affordable at home solutions, specifically for solar farms, and allow for excess daytime energy to be harnessed for use later that evening. It’s what most residential mining farms currently lack with excess energy always heading back into the grid at a fractional rebate only to be re-purchased back later that evening. Currently it’s far from viable to purchase your own batteries for residential setups.
BITCOIN TECHNICAL ANALYSIS
Following on from last week’s technical analysis, we are still watching the key price levels labeled as 1, 2 and 3. This week BTC continued to edge towards key price level 2 and remained below the 200-day moving average line. However, key price level 2 acted as strong support and BTC failed to break through to the lower side.
All eyes are on the approaching death cross as the 50-day moving average line continues to approach the 200-day moving average line. When a shorter day moving average line crosses a longer day moving average line from top-down, this can signal a bear flag and cause the market to crash.
Sentiment remains bearish for Bitcoin and will continue to remain bearish unless price manages to break above the 200-day moving average line and start a new upward trend.
TRADING WITH A STRATEGY
Deciding whether you are a trader or not isn’t as simple as it sounds. It can definitely be a lot of fun, but it’s not easy. Built from my own experience and those in the community, below are some helpful pointers to consider.
Master your emotions. You almost have to keep emotion out of the equation completely. If you let your emotions lead you, you’ll be sure to fail. You gotta keep your wits about you and make sure you are playing with your head and not just your heart. If you take one thing out of this article, make it that.
With that in mind, here are some other tips:
- Have a plan before you enter any trade. Be sure of your maximum risk for the trade and have both and entry and exit strategy.
- Ensure you keep track of all your trades. Reflect on them and learn from your mistakes. You win some, you learn some.
- Reduce harmful or negative trading habits. Try and make profits without a large risk downside.
- Do your own research and do a lot of it.
- Be cautious of all the “noise”. Too often people buy at the top and sell at the bottom due to the media they are exposed to in the market.
I recently read an article on Coindesk that outlined some categories traders could find themselves in. Only when you truly understand your current situation can you look to expand on your abilities.
The below points are from the article, see if any of these statements sound like you:
- “I usually break even”– When this occurs it could be a sign that your risk management is effective, however, you are also too risk averse and will fail to capitalise on anything substantial or you are barely able to cover trading fees.
- “I make a small profit”– When this occurs it could be a sign that your risk management is effective, however, it is also an indication that you aren’t letting your trades run. It is usually driven by emotionally charged decisions made in haste, such as closing a position too early because of what is known as “weak hands.”
- “I make a large profit”– When this occurs it is a sign that your risk management strategy is working well and that you have reached a pinnacle in risk aversion by applying trading sizes to the appropriate risk. It is usually an indication that you close positions at predetermined prices and let others run their course.
- “I usually lose”– When this occurs it could be a sign that you have limited understanding of market cycles, need to further your research on the asset class you are investing in and you tend to pick illiquid projects/coins/tokens.
Once you have identified how you currently perform it’s a good time to look at diversifying your investments. Successful portfolios are a mixture of investments, this could be a mixture of large caps and small caps. For example, you may prefer to HODL 70% of your crypto holdings, leaving them in cold storage and only trade the remaining 30%. Whatever your final approach is, have a good think about it, write it down, stick it to the wall and abide by it. And if you’re considering changing the way you do things, that’s okay too. But make sure you take the proper time to review it and be sure you are happy with the decision. Take the emotion out of it. What works for me may not work for you, but I always share my goals with friends and family I trust to keep me honest.
FEAR, GREED AND MENTALITY
The Alternative.me Fear and Greed index is still floating about the mid-30s and fearful. We saw a similar reading and behaviour for an extended period of time when Bitcoin was bouncing around the $3 -$3.5K USD mark. The general media and twitter discussions were around Bitcoin descending lower and to were pretty much fearful. As it turned out, that was right before it blasted back to $13K USD and the indicator jumped into Extreme Greed at that point. I suspect we are at a similar stage in that move north and this is a consolidation period before our next move north. When that comes, only time (and patience) will tell.