CryptoAM: China loves Blockchain, Tezos Launches, & Kraken Vs Bloomberg

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Somebody pointed out to me that Cryptokitties sounds like a fan group for girls that like boys in crypto. It got me thinking…what else do we talk about that makes no sense to non-crypto peeps? My guess is pretty much everything.

Hello green, it’s been some time…

3 things you need to know:

One: Xi Jinping likes blockchain, but not Bitcoin. If you’ve been involved with cryptocurrency for some time, this sounds familiar. Pretty much every legacy institution that is threatened by cryptocurrencies but doesn’t want to stifle tech innovation says “Blockchain, not Bitcoin.”

  • People at odds: The people of China resoundingly disagree with that statement. Before the Bitcoin trading ban in February 2017, Chinese exchanges were accounting for 90%+ of all Bitcoin trading volume. One month after the ban, that figure fell to 20%.

  • Dig in a little: This statement is both promising and ominous. China has made it clear they want to be on top of all things tech, and that extends to blockchain. The government is making huge investments when it comes to developing blockchain technology in order to position themselves to control it. The core of ethos of cryptocurrency — decentralization — does not jive with the Chinese governments need to be in charge. I’d expect the currency part of cryptocurrencies to have a very hard time succeeding in China.

  • Thanks! To the one dedicated reader sending me this on a Sunday night

  • Read more…

Two: Tezos Foundation has just launched it’s beta net. Since raising an insane $232M for their purported “self-amending ledger”, Tezos has been caught up in legal battles and regulatory issues for a whole year. The main issue surrounding the launch of the network was a legal battle between the Swiss foundation that raised the $232M and the two co-founders, Kathleen & Arthur Breitman, over intellectual property rights. While Tezos’ was fighting internally, they were hit with multiple lawsuits claiming their ICO was not compliant with the SEC...

  • Finally: According to Tezos’ statement, the team has proposed the genesis block of their so-called ‘betanet,’ and transactions can be processed on the network. The Tezos team also stated that users can start validating blocks or ‘baking’ after the first seven cycles, which they estimate to be in about three weeks.

  • Read more…

Three: Kraken to Bloomberg: No, you. Over the weekend we witnessed a back and forth between Bloomberg and Kraken, each suggesting that the other was manipulating cryptocurrency prices. On July 1st, Bloomberg issued a report claiming that the Kraken exchange seemed to have large amounts of wash trading in the USDT markets, and accused them of manipulating prices.

  • Kraken hit back today with a statement calling out Bloomberg for failure to “comprehend basic market concepts such as arbitrage, order books and currency pegs.”

  • Kraken followed up by saying, “If we are to take up our pitchforks against market manipulation, guide your torches toward this illumination: the Bloomberg News piece was published on June 29th, the last business day of trading for Q2, and expiration date of numerous futures contracts. It raises red flags.”

  • One thing: The report that Bloomberg published makes a surprising logical error. They investigated two instances of heavy buying and selling of Tether, and found that price barely moved. They made the leap to assume that the large demand/supply should have moved the price…but this is not the case! Tether is pegged to the USD, and generally does not fluctuate at all from that mark. In periods of incredibly high demand/supply you will see some deviations, but Kraken makes up a minuscule amount of volume compared to other exchanges and should not have much effect on price.

  • Two thing: Wash trading is incredibly common on crypto exchanges due to the unregulated nature of these markets To single out Kraken is relatively irresponsible journalism, as to the casual reader it may seem as though Kraken is subpar compared to peers. In reality, wash trading is far worse on exchanges based outside the United States.

  • Be smart: It’s far more likely this is a case of bad reporting, and not an attempt to manipulate markets.


Also in the news:


What I’m reading today:

Exploring the Fat Protocol Theory

SMTP for email transfer, HTTP for hyperlinks, TCP/IP for data transfer. Every application you use is built on top of those protocols. Facebook, Google, Amazon, would not be able to exist without these protocols. Since the advent of the internet, the majority of value has accrued to the applications on top of pre-existing protocols, and the protocols themselves have not generated much wealth for the people who invested in them.

The underlying argument of the fat protocol thesis is that blockchain technology can fundamentally flip that dynamic and change it such that the protocol layer accrues more value than the application layer. The theory posits two main reasons why this happens:

  1. Shared data layer

  2. Speculative token attachment

First: the shared data allows for user data to be held in a central place (namely the protocol/blockchain) and to be shared equally among the applications built on top. Historically data was siloed and barriers to entry were large. With a shared data center, it’s easier for companies to build on top and for them to work together. For example, it takes quite a bit of effort to transfer your assets from Robinhood to E-trade (built on different bases), but it’s seamless to do so between Coinbase and Binance.

Second: the speculative token attachment encourages building and speculation on early stage protocols, as any application built on top of the protocol will increase it’s value and create a loop of value creation. As applications are built, the protocol accrues more value. As the protocol accrues value, people are incentivized to build applications. Since the tokens are needed to access & use the protocol, they go up in value the more a protocol is used. It’s a virtuous cycle.

Due to the protocol gaining value linearly with application usage, the theory assumes applications cannot accrue value larger than that of the underlying protocol.

In the linked Medium article, I explore some of issues I’ve found with the thesis, and invite you guys to join the conversation in the comments!


Around the corner:

  • The Reserve Bank of India is banning banks from interacting with cryptocurrency starting on July 5th.

  • The Augur mainnet is launching on July 9

Tell us what we should add!

Market Outlook:

Quick Take

What a fantastic weekend, and a great start to this week! Looks like our Fear and Greed indicator last week correctly called us out on being too fearful, and we saw a forceful reversal. We broke through 6k in a strong fashion and hit our 6.2k mark soon after.

Right now, I’m looking at 6775 and 6300 at top resistance and bottom support. This reversal is the strongest reversal we’ve seen since the beginning of April, and I suspect we will retest the 6775 soon and likely break through as well. The price action combined with strong volume indicated a reversal in the the process, and break of 6755 would likely take us to the 7.2k level.

Daily Chart:

We’re kicked up the momentum, strength and speculation. Alts are vastly outperforming BTC right now, as was expected due to speculation being so low over the past week. Any uptick in BTC would send floods of volume to alts.

We still see a fearful long/shorts indicating that plenty of people have been shorting from >7k and are in a prime position to get liquidated from further upwards movement and help continue the rally. Indicators are decidedly bullish, as we are still <50 on the overall index.

Here’s a reminder of what these criteria mean

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