Tuesday, November 6th
|Nov 6||Public post|| 1|
🔥We’re back in action this week from our hiatus, sorry to keep you all waiting. It’s been a wild couple of weeks for us over at Ledger Group. CryptoAM is a hobby of mine that started taking up a lot of time — so when our research business picked up, it was a scramble to sort out the AM. We’ve figured the time out, and we’ll be back up an running for the foreseeable future!
To keep things interesting, we’re giving away one LEDGER NANO to a lucky subscriber. All you have to do is retweet this tweet, and be subscribed to CryptoAM. Simple stuff. Think of it as my way of saying sorry for the dark times.
3 things you need to know:
One: The Bitcoin Cash Hardfork — what’s going on?
You may have noticed over the past few days, Bitcoin Cash (BCH) has been on a run. BCH is up about ~30% since November 2nd, with the clear driver being the upcoming hard fork.
For context, the BCH roadmaps plans for network upgrades twice a year. In theory, these will be non-contentious forks. In reality, we are seeing a battle between two different BCH implementations.
The first (BCH-ABC) is a continuation of the current roadmap, with a focus on slowly laying the technical groundwork for scaling.
The second (BCH-SV) is a proposed change to the network that would increase block sizes to 128MB, and forgo all other changes to the code, which the developers of BCH-SV deem unnecessary.
These upgrades are incompatible with one another, and may lead to a fork similar to the BTC fork we saw in August 2017 — the one that birthed BCH.
BCH-ABC is being supported by Binance, who announced their decision on November 2nd, sending the price of BCH flying. Coinbase followed suit later that day at around 8pm, saying they would also support BCH ABC.
BCH-SV has gained support from popular influencer Craig Wright, CoinGeek, and the anonymous owner of Bitcoin.org, Cobra.
The prospect of a contentious fork generally drives price up until the fork date as investors accumulate the to-be forked coin. Prices often tumble after the fork, as investors cash out both the newly created coin, the old one and move to new assets.
Bitcoin Cash is expected to conduct a hardfork upgrade at about 16:40 UTC on 15th November 2018, so I’ll be keeping an eye on it until then. Forks and Airdrops are some of the most profitable
Two: The SEC claims that a plain english guide to ICOs is coming
The SEC is planning to announce a “plain english guide” to ICOs later this year, according to William Hinman, a director at the SEC. Seeing as the SEC hasn’t released any clear guidelines on which ICOs, this would be a great step in the right direction.
ICO funding is slowly draining from the U.S due to unclear regulation, and overall volume has dropped precipitously to the lowest point in 16 months.
It wouldn’t surprise me if the “plain” guidelines are just a rehashed version of the same old Howey test. After all, the Chairman of the SEC has said as much before. In a statement last December, Jay Clayton cautioned lawyers that laws remain laws, and didn’t give any indication that new frameworks will be introduced.
“When advising clients, designing products and engaging in transactions, market participants and their advisers should thoughtfully consider our laws, regulations and guidance, as well as our principles-based securities law framework, which has served us well in the face of new developments for more than 80 years.”
Three: Goldman Sachs has signed up a small number of initial clients for a bitcoin trading product
Another day, another wall street bank is in crypto. This comes a few weeks after Goldman claimed they were shutting down plans to advance their trading desk. This a typical for the news cycle re: crypto. Reports that institutions are entering the crypto space are often follow by retractions, clarifications, and then confirmations.
In an industry fraught with uncertainty, move slow and break nothing is often the best approach — and it’s clear that to me that banks are just as obsessed with controlling the narratives as retail investors are with their entrance into the markets.
To sum up some major bank moves in crypto & blockchain over the past month:
Fidelity spins up a new division dedicated to crypto assets
Morgan Stanley issues a client report calling crypto a “new institutional asset class”
J.P Morgan head of Blockchain (yes, they have that) said “We are big believers in Ethereum
HSBC and ING have issued their second letter of credit on their R3 Corda based blockchain
Some key points about the product itself:
The product will be a cash-settled non-deliverable forward that will be traded on the OTC market
The source of this news also dismissed claims that the financial giant is exploring ethereum derivative products. BTC has gained a strong foothold in terms of approaching widespread institutional acceptance, but ETH has yet to see comparable progress.
Other participants are currently/planning to be operating in the BTC derivatives market, such as the CME, Bakkt, CBOE, and LedgerX. Although Goldman won’t be offering them, derivatives products for new underlying cryptos (i.e. ETH, XMR, etc.) are coming soon from these other players.
Something fun: Scientists say mysterious 'Oumuamua' object could be an alien spacecraft
Harvard researchers raise the possibility that it may be “a fully operational probe sent intentionally to Earth vicinity by an alien civilization.” - NBC News
Also in the news:
Direction: We’re currently in one of the tightest ranges BTC has experienced since the bear market of 2014. BTC volatility has plummeted and we’re at the lowest point ever on the .BVOL index since BitMEX started running calculations back in Feb 2017.
Bitcoin dominance peaked at about 55% this cycle, and has slowly trended down as select alt coins have been popping off. We’ve seen the addition of two alts, ZRX and BAT to Coinbase, both experiencing 30%+ pops due to the listing. I’d expect similarly positioned alts to perform well, as alt coins generally outperform in times of low BTC vol.
Bitcoin volume has declined dramatically since it’s December peaks, and over the past two months BTC has lot a decent amount of volume to alt coins as speculators seek higher returns (see: flight to risk-on assets during stable periods).
Charting BTC in this range offers little insights, so I am just including the chart to indicate the key levels we need to break on high volume to indicate direction. On balance volume shows that there has been significant accumulation though, which is a bullish indicator. I’m leaning towards a bullish retest of 6500 at this time.
Key Support: 6320, 6250
Key Resistance: 6410, 6460
Actions: During this time, I would suggest trading alts — or trying to play both sides of the tight range if you are scalping BTC. Special situation/event driven alpha is the best alpha to chase in times of sideways actions.
Playing actions such as suspected listings, main net launches, news announcements and forks will likely be the best way to trade these markets for the next few weeks until volatility returns. I’ll be picking up XLM and ZEC as potential Coinbase additions, as well as accumulating low cap coins which show promising roadmap results, and have market caps below their ICO raises (there are a lot…)
Fear & Greed
Fear and Greed is back! And we’re decidedly neutral, leaning greedy. This is skewed heavily by the long/short ratio and momentum, as strength, breadth and speculation are all fearful. Seeing as momentum is being skewed by the recent ranging, I would consider this an overall bullish indicator.
There’s a big problem with crypto trading. Too many fraudulent actors. People actually take trade signals from random people in twitter— with no way to vet anything.
CoinSavage is the platform to change all of that. They have built a fantastic (and free) platform where all portfolios, trades, and ideas are open sourced and timestamped. No more hindsight TA, now you can actually see for yourself if people are performing, and prove to your audience you know what you’re talking about.
Around the corner:
What I’m thinking today:
I’ve managed to get a hold of a Morgan Stanley report on the state of the markets for you CryptoAMers. The entire report is quite good, and if you want it I’ll be putting in in our telegram chat. If not, I’ve parsed out some of the more interesting graphs with my thoughts below!
My thoughts: They’ve jumped the gun a bit here. I don’t think these narratives have played out, especially store of value and refuge for a depreciating currency.
My thoughts: We’ve seen a massive increase in trading against USDT, which I think is a testament to the “stickiness” of the system. USDT was always an option to trade against, but as you can see it really only took off after the influx of new traders late dec - early Jan and the ensuing bear market that forced them out of BTC.
Once in the cryptocurrency ecosystem, people are generally likely to stay. Many people feel more comfortable cashing out the USDT to protect their holdings because they know once the market heats up (which is the underlying assumption ofc) they will move back into crypto in droves. This to me suggests that a large move upwards would be amplified by the amounts of “dry powder” sitting on the sidelines.
My thoughts: Point #3 is ridiculous. Market isn’t waiting around for the next technological development.
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CryptoAM is a Ledger Group project. We offer consultancy, advisory and research services for established companies and start-ups interested in the blockchain & digital asset space.