This week we cover:
- HISTORICAL NEW PHASE IN BITCOIN CYCL
- NOT YOUR KEYS, NOT YOUR KICK
- CRAZY PRICE PREDICTIO
- CHINESE HOG THE HAS
- AUTOPSIES AND EXHUMATIONS FOR QUADRIGACX CE
- KOREAN GOV TO TAX CRYPTO
- VECHAIN HAC
- FEAR, GREED AND MENTALIT
- BTC TECHNICAL ANALYSIS
HISTORICAL NEW PHASE IN BITCOIN CYCLE
Following on from the euphoric thought of $500k Bitcoin valuations, let’s take a look at where we are in the current price Bitcoin cycle. Yesterday, CryptoPotato wrote “industry experts seem to believe that right now is a historic time for Bitcoin accumulation” and I tend to agree.
Industry experts like Matt D’Souza have taken an institutional approach, reviewing what would make them bullish in the current market and labelled the current position of the market as the “first third of a bull market… conditions representing an excellent signal to buy”.
Matt D’Souza’s main points are:
- Institutions are getting more involved in the market, evident by CME Bitcoin futures contracts, this is a sign that “smart” money is flowing into the market.
- Bitcoin has outperformed a lot of altcoins, the latter generally a retail product. He points towards Bitcoin dominance increasing by more than 15% since the start of the year.
- There aren’t a lot of people (including friends and family) asking about Bitcoin right now, especially when compared to November 2017 when there was a flurry of interest. This leads him to believe that until this re-occurs, the price is not near its top for the cycle, as it was when we saw it hit $20k in 2018. “We are presently in the opposite environment where institutions are accumulating, while the retail shows zero interest.”
While I agree with a lot what D’Souza has to say, I always look for what people are saying on the other side of the fence. The Bitcoinist released an article this week that discussed institutional “smart money” still being a way off. The article took the point of view that “professional fund managers literally can’t hodl” they have to ensure they maintain equally weighted investments and they also can’t sustain heavy pullbacks or losses.
Institutional money may “(end) up buying bitcoin at $1 trillion when BTC is already established” and no, that’s not $1 trillion a coin… that’s overall market capitalisation. To put that in perspective, if that were to happen, the value would be equivalent of somewhere upwards of the previous ATH, north of $20k per coin. We shouldn’t be surprised by this as it’s not unusual to see institutions waiting until the market is in a bullish mode or is “proven” before they are willing to jump in.
So whether you believe the whales are already accumulating or are waiting to pounce, all signs point towards an interesting few years. I dare to dream!
NOT YOUR KEYS, NOT YOUR KICKS
The CryptoKicks market has arrived! Nike have registered the name ‘CryptoKicks’ with the U.S. Patent and Trademark office this week along with new ERC 721 tokens on the Ethereum blockchain.
CryptoKicks will enable you to unlock tokens that link directly to the unique blockchain owner ID, allowing you to confirm not only the authenticity and ownership of your new shoes but also the history of the shoes’ origin.
To top it all off are on-chain “surrogacy features” like allowing owners to “franchise” their unique shoe designs to others. Another unusual feature is something they’re calling “parenting” or “nannying”, the latter allowing some sort of third party to “take care of the shoes”.
This brings some next level tech to the shoe design space and it will be interesting to watch which other brands start picking up on this trend in the years to come.
CRAZY PRICE PREDICTIONS
According to Dailyhodl, Mark Yusko, CEO of Morgan Creek Capital Management, “believes Bitcoin’s fundamentals will fuel explosive growth for the leading cryptocurrencies over the next 10 years.” This comes not long after Blockhain.com research showing the number of Bitcoin wallet addresses rising sharply this year to hit 44.2 million, an increase of 38%.
Yusko predicts a new parabolic rally for Bitcoin by 2021 with wallets seeing an,
“…increase by a factor of four or five by 2030 … Between now and 2021, we’re likely to see $100,000 Bitcoin … By 2020, we’re likely to see $250,000 Bitcoin, and then sometime out 2030 we could see $400,000 or $500,000 Bitcoin as it reaches gold equivalence.”
Unlike Yusko, I’m not so sure when we’ll actually hit the $500k mark but as per my previous writings, I believe we are just entering the next bull run now, and will likely top out at, (or at least experience) a Bitcoin price above $200k in the next couple of years.
CHINESE HOG THE HASH
According to the recent CoinShares report and as reported by Crypto Briefing “an estimated 65% of BTC mining now happens in China.” Given the government is heavily invested in stopping this, you might well be asking how?
It might be a good old fashioned case of ‘do as I say not as I do’. The main drivers behind this centralisation of miners is “because most Bitcoin hardware is manufactured in the country – with juggernauts like Bitmain, Canaan, and MicroBT”. These manufacturers provide Chinese customers with preferential pricing and hydro power in places like Sichuan and they do it in a way that’s very cheap and in a cool climate, making it one of the best places in the world to mine Bitcoin. It’s estimated that 54% of the global mining share happens out of Sichuan alone.
I find that figure to be quite concerning. As investors, we are directly involved in a project which is designed around decentralization, yet one single country owns 65% of the hash (and 54% is pinpointed in just one single region). It’s a pretty insane statistic.
Imagine a natural disaster were to strike Sichuan, or there was a state-imposed threat or enforced ban. The network would be completely crippled. That’s a lot of power being held there.
But it’s not all bad news. Put the US/China trade war to the side for a second and look towards the 50-megawatt facility Bitmain launched in Texas in October. And just north of that, Northern Bitcoin AG and Whinstone U.S. Inv merged to open a 100-acre Bitcoin facility. Now that’s nothing to sneeze at and some serious hash power right there! There’s a lot of smart money gearing up for the next decade of Bitcoin dominance.
AUTOPSIES AND EXHUMATIONS FOR QUADRIGACX CEO
The victims, whose accumulative loss was $190 million, in the QuadrigaCX exchange scandal, have issued a formal letter via their lawyers to the Royal Canadian Mounted Police requesting the exhumation and post-mortem autopsy of its founder and CEO, Gerald Cotten. Micky reports the victims have requested this, citing “questionable circumstances” surrounding Cotton’s death and the significant losses they incurred. The victims hope to “confirm both [the body’s] identity and the cause of death”.
A little scarily, and a reminder of the risk with leaving your coins on exchanges, in June this year, court-appointed trustee Ernst & Young Inc “submitted a report to the court revealing that, rather than keeping customer funds in cold storage, Cotten had transferred them to his personal accounts.” And even worse still, “Cotten reportedly used the funds to make trades on other exchanges that resulted in substantial losses as well as to subsidize his … lavish lifestyle.”
So the question remains, is Cotten truly dead? And if so, is the $190 million USD owed to 115,000 customers gone for good?
KOREAN GOV TO TAX CRYPTO
Most crypto exchanges now have KYC in place for significant volume trading and transfers, and this is exactly what the Korean government is looking to lean on to ensure its citizens are paying tax on crypto gains moving forward. The Korean government stated this week that “related discussions have been taking place… [a] revised bill will be drawn up by the first half of next year.” This bill will aim to increase transparency on all parts of digital coin trading and Korea will attempt to enforce capital gains tax on its citizens. Just another sign that points towards countries adapting to this new space, albeit unfortunate, that it comes with a tax bill.
VECHAIN HACK
VeChain Foundation, the not-for-profit behind the VeChain public blockchain, has announced a hack of 1.1 billion VET tokens, equal to approximately $6.7 million. Yikes.
Yahoo reported that “the hack was the result of human oversight on the part of its finance and auditing teams.” VeChain took it slightly further, attributing the misconduct was due to human error and are adamant it was not an “inside job”.
Making an official statement relating to the effectiveness of their wallets and projects technology, VeChain maintain that if appropriate procedure had been followed, this hack would not have been possible. VeChain are working with local authorities in Singapore and specially recruited cybersecurity providers to track down the hacker. In the meantime, the majority of global exchanges have put a freeze on accepting any funds from the address and associated address where the stolen funds now sit.
FEAR, GREED AND MENTALITY
Alternative.me Fear and Greed index sits steadily in the extreme fear zone with a score of 24. Bitcoin prices hover around $7,000 at time of writing and volumes across the market are slowly drying up. Most indicators point towards a potential bear move but overall, long positions are reaching all-time high levels, which tells a more optimistic story.
This should be viewed with hesitation, it’s generally not a good sign when either shorts or longs moves too far in one direction. This can quite often signal an adverse reaction from the market. In this instance, a huge increase in longs could be followed by a sharp and quick price retracement lower, specifically designed to flush and liquidate the longs before the price can correct to the upside.
BTC TECHNICAL ANALYSIS
Bitcoins price is looking very tiresome this week as the $7K USD support line was broken. Furthermore, we exited the lower level of the upward trend line.
Eyes are now on the major resistance line we are sitting on at $6.9K. This major support line is formed by both the 500MA on the daily candles as well as the major support horizontal support line formed from 2018 price action.
If BTC does not hold its price above $6900 USD then we may test the next support line at $5.7K (buy zone 1).
It is also worth noting that there is a possibility BTC pulls all the way back to the weekly 500MA line (the same place BTC bounced off at the end of the bearish 2018 cycle).
Author: Julian Carruthers
Not financial or investment advice, always do your own research.
Read last week’s weekly recap here.
