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|Aug 13, 2018||Public post|
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3 things you need to know:
One: Bitcoin is starting to dominate again. It was December 2017 when we last saw Bitcoin with over 50% market dominance. In the span of about a month from early December to mid January Bitcoin dominance fell from 60% to around 33%, and all time low. Since then, Bitcoin dominance has been slowly climbing back up, and it just recently passed the 50% threshold.
What this means: As far as crypto goes, Bitcoin is a “safe” asset. It is the most legitimate and proven project there is, and there are plenty of institutional products coming out that all but guarantee Bitcoin will remain king for the foreseeable future. Long BTC.
Two: FinCEN receiving 1500 crypto related complaints per month. The Financial Crimes Enforcement Network director Kenneth Blanco said that the agency receives over 1500 reports of suspected money laundering or fraud every month. The complaints are filed by traditional institutions and cryptocurrency exchanges.
Legal worries: FinCEN is working closely with the SEC and CFTC to develop proper regulatory approaches to cryptocurrencies. Blanco mentioned that ICOs are a specific area that they are focusing on, and all organizations that perform ICOs are expected to follow proper KYC and AML procedures.
Takeaway: The “sobering up” of the market continues. In 2017, most people operated under the assumption crypto wasn’t subject to rules. In 2018, this couldn’t be further from the truth.
Three: Gambling DApps are gaining in popularity. Gambling is one of the best applications of blockchain, at least for the players. With all the code for the games visible in public smart contracts, you don’t have to worry about the house cheating you (because people read the smart contract code right?). Gambling DApps aren’t exactly legal, and most of their developers choose to remain anonymous. If anything, gambling DApps reside in a gray zone, a very dark gray zone. Now, gambling DApps like Augur, Fomo3D, and Etheroll are consistently topping the charts in terms of daily users and ether volume, just under decentralized exchanges.
Ready Player One: As I’ve said before, blockchain can have a huge impact on gaming, and gambling is part of that. In the future I would expect to see blockchain eSports platforms and gambling seamless integrated on decentralized platforms. The main obstacle to this is obviously regulation. Because of this, I do not expect the US to lead the way on the blockchain gambling front.
Also in the news:
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The past 72 hours have seen some of the most insane price action, with massive swings in a matter of minutes. There are long wicks on either side, and it seems like there is clear price manipulation going on right now.
The vol here makes it a dangerous idea to trade with leverage, so keep that in mind.
I’m looking to support around 6140. Momentum and trend are both down, so I’m expecting a retest of support today. A clean break of 6140 would likely send us down 5.8k as sell pressure intensifies.
The bull case is a strong reversal above 6.4k, which seems less likely than a breakdown now. I’m reducing exposure to the markets right now, especially alt-coins.
Fear & Greed
Momentum has gradually declined, along with strength and breadth over the past few days. We are not quite in the fearful territory mostly because of the uptick in longs over the weekend. It seems many people are attempting to call the bottom here, which is why I believe that a break of resistance would send BTC price tumbling as people panic close. Catching the bounce may be a viable strategy here.
Alts are getting hammered right now, and the overall market cap of crypto has fallen dramatically to it’s 2018 low of $212B. We are seeing a “flee to security” as panicked investors exit their alt-coin positions to BTC for a semblance of safety. It’s a self-fulling circle, as a flee to safety encourages more people to run.
This is the bubble popping. Most alts are down 90%+ from December/January highs. Over the next few months, many coins that lack fundamentals will die off as the market continues to sober up and realize that the vast majority (95% of the 1700 on CoinMarketCap) do not have true value.
For those that do have true value? You’re looking at a fire sale.
Around the corner:
What I’m reading today:
Yale Economist Aleh Tsyvinski and PhD candidate Yukun Liu published a comprehensive analysis of the risks and returns of cryptocurrency. The paper draws a number of interesting conclusions.
Cryptocurrencies are highly risky, but also have dramatic returns. Analyzed using the Sharpe Ration, cryptocurrencies’ returns outweigh the risks, slightly more so than traditional stocks.
Momentum is an extremely valuable indicator. If Bitcoin increases by more than 20% in the previous week, you should buy Bitcoin (historically this generates very high returns).
Abnormally high mentions of a cryptocurrency online and on social media is correlated with positive returns.
Cost of mining and volatility do not predict cryptocurrency returns.
The probability that Bitcoin will fail and go to zero is a whopping 0.3%
“If you as an investor believe that Bitcoin will perform as well as it has historically, then you should hold 6% of your portfolio in Bitcoin. If you believe that it will do half as well, you should hold 4%. In all other circumstances, if you think it will do much worse, then you should still hold 1%.”
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