CryptoAM: BitMEX Shenanigans, Dubai Blockchain, and Central Bank Currencies
Wednesday, August 22nd
|Aug 22, 2018|| 2|
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3 things you need to know:
One: BitMEX goes under maintenance and BTC immediately pumps 6%. In the world of crypto, 5-6% moves in minutes are the norm. This particular move has raised red flags due to the seemingly planned nature of the pump. The upwards move happened at the exact moment BitMex went down for maintenance!
Why this matters: This is clear evidence that large players are able to push the market in certain directions when it suits them and they see the opportunity. This throws a wrench in the plans of any ETF approval, as the SEC is most concerned about manipulation in the markets. It also highlights the flaws in the cryptocurrency ecosystem — one exchange shutting down shouldn’t provide opportunity for people to game the system.
Two: Dubai partners with Global Blockchain to look into using blockchain for trade finance. The city sees a high volume of goods pass through its ports, and its trade finance industry is thriving, but inefficient. Dubai seeks to move many administrative processes to the blockchain to increase efficiency and greatly decrease costs.
Enter the blockchain: The city is working with Global Blockchain (GB) to explore blockchain implementation in its vibrant trade finance industry. Many administrative processes, such as invoices and import permits, can be executed in a more cost-efficient manner through an on-chain migration. The blockchain allows for transparency and removes the need for trust, lowering the risk of misused funds and trimming down administrative processes.
GB (go blockchain!): GB is a big player in the space, having invested in several projects including Kodak’s KodakOne platform. They are also developing an interoperability system for the blockchain, Laser, which is described as the SWIFT of blockchains. Hopefully, GB’s collaboration with Dubai is more legitimate than their work with KodakOne — which was essentially just a PR move.
Why this is significant: Blockchain use case exploration by governments is promising for the space, as it shows that major players are bullish on the applications of the nascent technology and are willing to devote capital and form partnerships to test it out. As more government-backed blockchain projects gain traction and see success, we expect other nations to join the herd and begin their own research into blockchain implementation in various aspects of governance from voting to trade finance.
Three: Thailand announces a digital currency project on the Corda platform. The Bank of Thailand has shared its plans to develop its very own Central Bank (backed) Digital Currency.
Big partnerships: The nation’s government will partner with 8 financial institutions, including HSBC and Standard Chartered, to roll out their new digital currency. The currency will be distributed through wholesale channels, through markets to institutions, and will not be accessible through retail channels to the general public. The point of issuing the CBDC is for it to be used in the financial services sector to facilitate activities efficiently.
Bond issuance on the blockchain: Bank of Thailand is also conducting a proof of concept for DLT; they plan to use the technology to facilitate bond issuances in a more efficient and cost-effective manner.
What this means: More and more governments, especially in the EMEA region, are rolling out blockchain proof of concepts to increase efficiencies in areas from debt issuance to voting (we see you Sierra Leone!). As blockchain implementation continues to increase cost-efficiencies in smaller countries’ proof-of-concept experiments, we expect larger players, such as the US, to observe, replicate, and even improve on these use cases.
Also in the news:
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Yesterday we witnessed a massive, face-ripping candle to the high 6.8k area, which came due to a combination of BitMEX maintenance, extremely high concentration of short positions, and strong buying pressure near annual support levels. Just a friendly reminder - it’s not the smartest idea to enter a short position when BTC is consolidating above/near a key support.
We currently broke straight back down to the level we were trading at before the manufactured move upwards. If we hold 6.4k, it’s likely to retest 6.6k soon. If we break below 6.4k, it’s likely we trend back down the 6.2k level and below.
We are currently battling for the crucial 6.4k level. It’s time to pay attention!
Fear & Greed
People have been piling on shorts in the past couple of days in anticipation of a market overreaction to the (possible) ETF denial coming on the 23rd. Most shorts opened are now underwater. If the market doesn't overreact on the 23rd, we'll be seeing an EPIC short squeeze.
Personally, I’m betting the market will overreact and will be watching the news closely.
Red area = price below current price. Notice how almost half of all shorts were added below the price, meaning they’ve lost money.
Around the corner:
August 23rd - SEC Decides on ProShares ETF
August 23-24th – World Blockchain Summit in Hong Kong
August 24th – NEO Blockchain Challenge in Tokyo
Coinvention - Aug 30 & 31 ( I will be attending this one -- say hello!)
What I’m reading today:
Virtually anyone who bought cryptocurrencies from November onwards has lost money on their investment. Some have even seen up to 90% losses. How will these losses affect future investment into cryptocurrencies?
“Kim Hyon-jeong, a 45-year-old teacher and mother of one who lives on the outskirts of Seoul, said she put about 100 million won, or $90,000, into cryptocurrencies last fall. She drew on savings, an insurance policy and a $25,000 loan. Her investments are now down about 90 percent.”
“In the United States, Charles Herman, a 29-year-old small-business owner in Charleston, S.C., became obsessed with virtual currencies in September. He said he now felt that he had wasted 10 months of his life trying to play the markets.”
There seem to be two main camps of retail investors. Those who got in when assets were already overvalued thinking they would get rich quick, and those who got in when assets were overvalued thinking they would get rich quick AND genuinely believed that DLT was a world changing technology.
The latter seem to be handling this bear market much better, often feeling as if they should put more money in instead of losing faith in the entire system. However, being a believer or not doesn’t change the fact that due to some people’s poor investment decisions, they now have to find new jobs, live off meager savings, or take out more loans.
Will this hinder a future bull run? Probably not. The amount of people who lost money which they couldn’t afford to lose is a small minority of all investors. Most people were not putting their entire life savings into the markets. This downtrend, although following the largest increase in prices ever, is not new to crypto, and the cycle will almost surely repeat itself in the future.
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