CryptoAM: FBI Investigations, Regulatory Certainty, and Blockchain Games

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Good morning! As of writing Bitcoin is unchanged since yesterday, but alts have started to spring up. We’re even seeing some 10%+ bumps (looking at you $DGB), in a market that is mostly devoid of life.

3 things you need to know:

One: Ubisoft is hosting a blockchain hackathon. The “Blockchain Heroes” hackathon challenges game developers to integrate blockchain and gaming. Ubisoft is partnering with Crypto Kitties to promote the event. Crypto Kitties collectibles sell from a few dollars all the way up to a few thousand dollars.

  • Why this is important: Ubisoft is one of the largest and well know publishers/developers in the gaming industry. This is a great step towards integrating blockchain into video games.

  • Why I am excited: I think in-game collectibles + true ownership of collectible using blockchain is one of the coolest things ever. As a former Pokémon card collector when I was a child, and having played digital card collecting games like Topps Star Wars Card Trader, I would love to have my entire collections recorded on the blockchain and be able to trade my collectibles through the blockchain.

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Two: South Korea has revealed its new cryptocurrency regulatory guidelines. The FSC has tightened regulations on exchanges by requiring them to collect more information on their customers and scrutinize transactions more carefully. This is to prevent foreigners from using Korean crypto exchanges, prevent criminals from laundering money, and to prevent illegal cryptocurrency transactions.

  • Why this is good news: Most people trading on cryptocurrency exchanges are doing so in a perfectly legal, law abiding manner. Regulatory uncertainty causes uncertainty in the markets which is not good for price. With this news, we can be quite certain that Korea is not going to “ban” cryptocurrencies, which has been the headline of numerous clickbait articles over the past year.

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Three: The FBI has 130 open crypto related cases. Many of these cases pertain to dark web drug deals. Kyle Armstrong, who is in charge of the FBI’s virtual-currency initiative, said that dark web marketplaces are where 10% of drug users make their purchases. Armstrong noted that the transparency of the blockchain can make it easier to trace than cash but harder to figure out the identity of the senders.

  • SEC: You have to wonder how many cases the SEC has open pertaining to ICO sales which are actually securities. Unlike the FBI, the SEC doesn’t have to look very hard to find people breaking the law, because they’re literally running ads on every site imaginable.

  • Read more…

Also in the news:

What I’m reading today:

The Crypto J-Curve

If you’re unfamiliar with the crypto J-curve, I suggest you check it out. It’s an insightful theory thought up by Chris Burniske that details the speculative cycles of the crypto-markets.

There are are two things that give Bitcoin value. There is value derived from true fundamentals, and value derived from speculation. In December, at 20k, the vast majority of the price was derived from speculation.

Today, at 6k, there is much less speculation and the price of Bitcoin is derived more (but not mostly!) from fundamental value. Now that we are more “fairly” priced, the main catalysts for price increase will come from true fundamental value. One fundamental value begins increasing, bringing price increases, we will see the speculators hop back in the ring.

So what does all of that mean for today? Well, we are unlikely to see a bull run for a long time. We are in a slow growth phase, with most of the speculators pushed out the market. There are two possibilities for a bullrun. Either there will need to be a catalyst for adoption (think ETF’s, ETH futures, etc) or this will be a slow, drawn out process similar to 2014-2016 years.

Around the corner:

Tell us what we should add!

Market Outlook:

Quick Take

We’re looking at heavy resistance at the 6.2k and 6.3k level, which are both a support turned resistance. We have a bearish market structure and are in a downtrend. The longer we trade sideways the more likely it is to have a violent move, the direction of which is unknown.

The way to play this is to wait for a confirmed breakout from previous resistance levels, which on the downside is 6k, and on the upside is 6.2k. A decisive break (meaning a break and at least a 30m candle close above/below the resistance) would lead to further movement in that direction.

If you have a long term view on this market and some risk tolerance to weather further downside, there are some criminally underpriced alts right now due to bearish conditions.

Daily Chart:

Some good news: Fear & Greed index is telling us that the market may be overly fearful right now. We are less fearful than yesterday, but we are looking a massive amount of shorts. A break up would trigger a ton of forced liquidations and would give fodder for a reversal.

Here’s a reminder of what these criteria mean

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