16th January 2020
Before we dive into this weeks Weekly Rundown, I’d like to take the time to announce that our regular author, Julian Carruthers, has decided that today will be his last weekly publishment. The team at Mining Store are forever grateful for his contributions to all 26 of our Weekly Rundown’s & wish him every success in his future endeavours. We’re confident that Julian will return to publish some special edition articles! Our Weekly Rundown’s will cease for the short term as we begin to roll out some massive changes across the board – more to come on that by early February!
This week we cover:
- HOT TOPICS FOR 2020
- Bitcoin halving
- DeFi adoption
- Central Bank Digital Currencies
- Bitcoin’s privacy
- Ethereum 2.0
- Facebook’s Libra project
- Safe haven and recession-proof status
- COBINHOOD SHUTS DOWN OR SHUTS FOR AUDIT
- NBA PLAYERS CONTRACT TOKENIZATION
- SUIT ON TETHER AND BITFINEX MANIPULATION
- EVERSTAKE AND CHAINLINK
- FEAR, GREED AND MENTALITY
- ARE YOU READY TO RUN WITH THE BULLS?
HOT TOPICS FOR 2020
The bitcoin block mining reward will halve on May 12th 2020, meaning coin reward will drop from 12.50 to 6.25 coins. The halving occurs every 210,000 blocks contributing significantly to Bitcoin scarcity. Tom Lee from Fundstrat Global Advisors believes the halving is not yet factored into the Bitcoin price, “Bitcoin and crypto total return should exceed that of 2019 … in other words, we see strong probability that Bitcoin gains >100% in 2020”.
DeFi, also known as Decentralized Finance, is in a pioneering era of financial innovation. We are already seeing these foundations being laid, and as mainstream crypto adoption continues, we can expect existing DeFi platforms to scale as well as an increased adoption of stablecoin DAI.
For millions (or even billions) of people in unbanked countries across the globe, this could finally mean access to financial products such as lending. This has the potential to spark a chain reaction of events around social change and behavioural change that we’ve ever seen the likes of.
Central Bank Digital Currencies
This year will see the launch of fully state-backed cryptocurrencies (CBDC). China, India, Russia and South Korea are among the plethora of countries considering the launch of a blockchain-based digital currency. While this is great for broad awareness, legitimacy and adoption, it’s also pretty scary due to increased citizen surveillance through the history of the blockchain. Governments will also benefit from a cost-reduction in the actual production of currencies, moving away from the physically printed notes and coins of today.
Furthermore, it could even change the global currency landscape as China’s digital currency has the potential to knock out the USD for top spot given how far ahead they already are in the digital space.
Bitcoin remains pseudo-anonymous in a time where we will see the introduction of Central bank digital currencies, increased state surveillance, mandatory DNA testing and centralised ID databases. There will be a strong push against this with a demand for a privacy fix from Bitcoin.
In 2018 we saw the Bitcoin Lightning Network launch as a second layer scaling solution which continues to work towards privacy transactions in 2020. This innovation could see a merge with other Bitcoin improvements like Schnorr Signatures, MAST, Taproot and Graftroot.
Arguably, Bitcoin Cash was the answer to Bitcoin’s scaling debate but what will be the final outcome on privacy? Expect a soft-fork at some stage during 2020 to help resolve this.
Will 2020 be the year Ethereum 2.0 finally gets off the ground? With 2019 as the year of progress, the new architectural overhaul is well underway. The move from proof of work to proof of stake has proved a difficult feat for the Ethereum team. The first hybrid model for PoW and PoS should be implemented this year, and with Ethereum’s being the world’s second largest cryptocurrency, all eyes will be glued to the outcome.
Facebook’s Libra project
Facebook and Libra suffered plenty of backlash from governments around the world in 2019. Libra was the subject of congress hearings and deep-dive investigations by policy and law makers around the globe, particularly in the US. To be successful, Libra will need to rethink its approach to regulated countries in 2020. Whether this is achieved through cooperative means or an entirely different route, outside of legal jurisdictions, remains to be seen.
One thing is certain, with CBDC’s due to be launched, Libra could benefit hugely from a live product and platform in the digital currency space.
Safe haven and recession-proof status
We’ve already seen how quickly global markets can be unhinged by threats of war when the US and Iran exchanged blows last week with price spikes for both gold and Bitcoin. Over five days of conflict and uncertainty Bitcoin jumped 21%.
If a recession hits during 2020, the aftereffects could see cryptocurrencies soar. It will be the first recession that cryptocurrencies have seen so it’s hard to know exactly how they will react. If one thing is for sure, it’s that whatever the reaction, it will be volatile.
It will be an exciting time to be involved in an asset class that could prove the answer to global recession and government mismanagement.
COBINHOOD SHUTS DOWN OR SHUTS FOR AUDIT
Cobinhood has a patchy history. In May 2019 they raised $3 million, only to unlock and dump tokens on the market just days after the raise. It was a gloomy time for crypto in Taiwan, with over 100 jobs lost as a result.
Fast forward nine months and the troubled exchange, which surprisingly still seemed to have some volume, made an abrupt announcement on Friday stating the “Exchange is shutting down and auditing all accounts’ balances from Jan 10 to Feb 9 in 2020. It will be re-opened on Feb 10, 2020”.
It isn’t yet known if the exchange will continue to trade.
What we can take from this is a lesson. The Cobinhood initial token raise last year was swiftly followed by foul play and poor business ethics which highlights the need for traders and investors undertake significant due diligence on any exchange before handing over funds.
Australian and New Zealand traders got hit in 2019 with the closure of Cryptopia with many token holders still awaiting the outcome of audits and court hearings. Don’t get caught out.
NBA PLAYERS CONTRACT TOKENIZATION
Brooklyn Nets guard Spencer Dinwiddie has announced that from January 13 investors will have the opportunity to purchase tokens to the value of $34.5 million ($13.5 million in the first year). The tokens will be on the Ethereum blockchain and Paxos (PAX) will act as trustees and escrow provider.
Accredited investors will have the opportunity to purchase a minimum of $150,000 in what is effectively a flat bond, where Spencer Dinwiddie will realise the full value of his contract upfront and pay back bond holders during the course of the year with interest. Full maturity taking place at the end of the 3-year contract. A very exciting development in the world of sports and cryptocurrency relationships.
SUIT ON TETHER AND BITFINEX MANIPULATION
Three plaintiffs, Eric Young, Adam Kurtz and David Crystal have lodged a case in the Southern District of New York claiming that Tether and Bitfinex have “monopolized and conspired to monopolize the bitcoin market”. The claim particularly points at the defendants manipulating the market by printing unbacked Tether. The plaintiffs claim the defendants printed USDT (US dollar Tether) and used it to artificially increase the price of bitcoin. Once achieved, the bitcoin would then be converted back to USDT to replenish Tether reserves.
This is not the first time Tether has had to fight a case like this. In November they published a letter of intent to dismiss a separate class action. The damages related to that case were over $1 trillion.
EVERSTAKE AND CHAINLINK
Everstake has announced the deployment of its own oracle nodes on the Chainlink network. In the statement, Everstake highlighted the need to develop and work with other projects in the space; “complex technological solution requires additional efforts from other market players. Everstake recognizes the importance of supporting decentralized oracles”. The node will further increase security and data reliability across the Chainlink network.
The nodes surrounding Chainlink’s network are vital in the maintenance of a fast and reliable smart contract ecosystem. As an example, the oracle designed for the ETH/USD pair uses 21 independent nodes to retrieve the ETH/USD pairs pricing from many different sources. They are then aggregated and uploaded to the blockchain so that people can accurately query the smart contracts price. It’s vital that a DeFi ecosystem is protected from any single node going down or malicious players attempting to manipulate pricing.
What the future relationship with Everstake and Chainlink exactly is, remains somewhat unknown, but it is clear that Everstake wants to grow with the DeFi space. Everstake currently specialises in hosting staking options for various coins and has over $860 million in staked coins. No doubt they’ll work further on the passive income side and potentially start offering DeFi options as well, only time will tell.
It’s worth acknowledging that I do not have an interest in Everstake, nor have I ever used them, so I cannot comment on them from a user perspective.
FEAR, GREED AND MENTALITY
Alternative.me Fear and Greed index has jumped to 49 and neutral. We saw Bitcoin jump from $7.1k up to $8.4k before receding back to the low $8k’s. My sentiment around the halving is bullish. And with that only five months away, coupled with increasing global concerns around a recession, all indicators are pointing towards a bullish year for Bitcoin.
Ensure you have your positions and entries/exits road mapped for 2020. Call it a new year’s trading resolution, but I strongly recommend a plan of attack to help keep yourself honest. But it’s not set and forget. Don’t be afraid to change or amend it during the year as news come to light, but use it to stay focused on the decisions you do make and make sure you are always researching.
I have attached a section I completed earlier in the year about the expected bull run which outlines some of the areas I found interesting from the last run as well as projected points of interest for the upcoming run.
ARE YOU READY TO RUN WITH THE BULLS?
The crypto market has been pretty light on the news this week which gives us a chance to reflect on the last bull run in 2017. Make sure you take time to consider your personal goals and profit points for the next run and try not to get distracted by the hype and run up that is inevitably stampeding forth.
Using the daily candles from 2017, you might be able to use these movements to help foreshadow future trends – although there’ll always be discrepancies.
I followed the thought process that the BTC run from $1,750 USD to the all-time high of $20,000 USD could follow a similar pattern if (and when) it moves above $20,000 USD. Once the overhead supply is removed, the upside will be significant. I think the possible extent of the next run could take everyone by surprise. I’ll be playing by the rules and will set targets where I’m prepared to take profit without risk of being caught in the moment and getting greedy. If you do take profit too early, don’t be afraid to re-enter on good technicals. Some of us have been waiting a long time for this, and if that’s you, make sure you capitalise.
The under $3K USD bracket
This was before we really broke into the upside. From 21st May to 4th August 2017 Bitcoin stayed in the $1,750 – $3,000 bracket and offered a 50% increase at least twice in that time.
The up to $5K USD bracket
From 5th August to 12th October 2017 Bitcoin broke past $3,000 and spent 69 days in a range up to $5,000 representing a 66% increase. Very large volume appears in the middle of this bracket when Bitcoin perfectly back-tested the previous support of $3,000.
The up to $8.5K USD bracket
The period $5,000 – $8,500 lasted 44 days between 12th October and 25th November 2017. During this period, 67% price appreciation was presented and you could have traded successfully in this range at least twice.
The up to $12K bracket
The period between 25th November and 6th December 2017 presented a 50% increase in price and ranged between $8,000 – $12,000. This represented a fairly aggressive appreciation period, especially when you consider it was only 11 days.
The all time high $20K
Between 6th December and 17th December 2017, Bitcoin went from $12,000 to $20,000, appreciating the last $8,000 of that in just three days. This leap demonstrates a 65% increase in price and stayed there for 11 days before beginning its descent.
If we breakdown the 2017 run by pure numbers, it really was a ridiculously impressive period. There was a heap of hype and stacks of swing trading opportunities. Using these levels, I’ve replicated a potential target for the next run. The general idea is that once the run starts, you want to avoid getting caught up in the moment. You should have set exits and, if you are seasoned, re-entry points. One way forward would be to use the below stages to sell or trade 50% of your Bitcoin position, or another might be using these as potential partial take-profit levels.
The final level is $200K USD, which at first glace might seem totally insane, which is fair enough and it just might be. But looking at the previous price movement, and the total lack of history for what’s achievable in this next run, the last run gave us massive appreciations in the final three days. If you are going to hold or trade for this entire period you really want to try and capitalise on that last aggressive price appreciation.
Personally, I’ll have a set level within the below targets where I’ll take out about 30% of my position to cover entries. And then I’ll be looking to hold the residual through to what looks to be the end of the run.
Whatever your targets are, write them down, work on them and keep honest by reminding yourself of what they are. Easier said than done, but try and back your own decisions and avoid getting caught up in too much market noise. You really only want to be able to blame yourself.
All that in mind, let me be explicitly clear – this is not financial advice and you should always do your own research.
Author: Julian Carruthers
Not financial or investment advice, always do your own research.