2019 Market Update 009 - August in Review
Major Market News:
Tech
Walmart patenting their own stable coin
Finance
Kraken acquires Interchange
Blockfi raises $18M Series A
Coinmine raises $2.5 million
Gemini launches in Australia
Binance launches crypto lending
Policy
US 2yr/10yr Treasury spread is inverted for the first time since 2007
Hong Kong unrest continues, and regional bitcoin demand surges
Trump continues to put pressure on the Fed to continue rate cuts
South Korea launches a crypto-regulation free zone to support blockchain development
Virtual Value Tax Fix Act proposed to end double taxation on crypto
Did you know?
Self-proclaimed bitcoin founder Craig Wright, was found by a court to not be Satoshi Nakamoto, as he was unable to produce any evidence to proof him having access to the original wallet that contains the founder's 1 million bitcoin. He perjured himself in the process and is now facing penalties. It stands more likely than ever that the original founder of bitcoin has since passed, as we have not heard from him in nearly 9 years, nor seen any movement in his wallet. This significantly reduces supply.
The bottomline:
It truly feels like we are at the end of Act 1 of a novel right now. Troubles are brewing in the distances from an economic collapse in Argentina to violent conflicts between Hong Kong and China. All of them leave clues for us, as both countries showed a spiking demand for bitcoin, one because of a crashing fiat currency, the other because of authoritarian use of financial data to track down protestors. While some of the world is already deeply in Act 2 of this story of global revolt for freedom and stability, we still find ourselves in tamer waters. But the first signs of the coming storm are clear for us as well. The yield curve inversion rises, and interest rates are being pushed lower giving us the clear red flags for an imminent recession (~ within 18 months). This is the time to prepare ourselves. This is the time to stand firmly with a technology that is reaching new all-time highs in hash-rate, number of wallets, and daily transactions, 10 years after it's inception, while price still lingers below it's 2017 high.
On a recent podcast I was asked what I believed to be the utility of bitcoin if it were a commodity.
Without a doubt, it is decentralized trust.
It means that you can be banked with your lawful business, even if a bank does not like it. (Look no further than CBD or crypto)
It means that you can buy a train ticket to a peaceful protest, without getting micro-tracked by your government to be arrested and flogged. (A reality in Hong Kong)
It means that you can receive payment and not have to worry if it is counterfeit. (There's fake gold, fake art, fake checks, even fake dollars. There's no fake bitcoin.)
It means that you can own an asset whose entire supply, history, and monetary policy is audited every 10 minutes. (No one knows the Federal Reserve's next move, nor can we know how soon the Quintillion USD worth of gold in space, in the oceans and the earth's core will be mineable)
It means that you can transmit money internationally with ease, nearly instantly and free, and not be restrained by a system that will take advantage of you via inflated FX rates.
It means sovereignty. Over your data, over who you do business with, and quite frankly, over your financial future.
Our Past Predictions
Prediction from Market Update 008 "The moving averages have quickly accelerated. The 100 Day Moving Average (yellow line below) has now progressed to $8850. This moving average has historically only been broken 2-14% of all days in all past bull markets. The 200 Day Moving Average (red line below) has now progressed to $6450. This moving average has historically only been broken 0-1% of all days in all past bull markets. It stands to reason, that the bottom of this pull back is already in, or will most likely be completed with a re-test of the 100-MA. A 200-MA pullback of course is possibly, though statistically highly improbable. We also project the 200MA proceeding to around $7500 by September 1st, leaving the $6000's behind for good.
Result: At the time of this writing, BTC has dropped blow the 100MA briefly and already resurfaced back above it, marking the pullback most likely as complete. The 200MA as estimated crossed 7500 by September 1st, leaving the 6000's behind for good.
Technical Short Term and Fundamental Macro Economic Prognostic:
Short Term (2019):
Across both Bitcoin and Alt-coins we see a significant recoil opportunity.
Historically Bitcoin has found support at the 20 weekly moving average, which we came close to touching during the final week of August. Before it could touch it, bitcoin began a $1000 recoil on September 2nd. We believe that we will likely rally to around $17,000 before facing another, final, sideways consolidation, before breaking the all-time high closer to the halving date in May 2020.
Alt-coins are hitting a significant tipping point. They touched the 200 weekly moving average which has marked the ultimate bear market bottom on bitcoin. Should they bounce here, we could expect alt-coins to make up for much of their 2019 loses and underperformance in a rather short time. However should they break below the 200MA, it stands to reason that there may be an extended alt-coin winter, and we will adjust our positions and exposure accordingly.
Long Term (2020-2022)
Our Macro position remains steadfast. Our recent halving report falls in line with our prior research, with a targeted market top around December 2021, and a target between $150k to $500k per bitcoin. This month we are producing a similar quantitative deep dive on mining and price action, where we will review hash-power, miner capitulations, difficulty increases and more.
From #008: After in-depth valuation method cross-referencing, we have fine tuned our long term projections. We expect a bitcoin top at around $200,000 between June 2021 and April 2022. This analysis took into account bitcoin supply halvings, miner capitulations, active wallet and user trends, stock to flow scarcity calculations, recession projections, and bitcoin market cycle structures. The full break down will be presented within the coming weeks via a multi-page report. It stands to stress that the road till then will be bumpy, something we aim to take advantage of. Anyone who can commit to remaining allocated in this market from 2019-2022 is likely going to reap massive rewards. We will do all we can to produce the best returns over this time span, while responsibly playing the long game.
From #006: 'The global macro-economic backdrop is supportive of this as well as central banks are pushing off the next coming recession by artificially lowering interest rates to the extent that the IMF is considering negative interest rates. An economic environment where the bank charges you money to keep your savings, is one that we find extremely supportive of a crypto future. Sprinkle in Trumps plans for new Quantitative Easing (also known as printing more Dollars), and combine it with a Bitcoin halving which makes Bitcoin more scarce than Gold, we are looking at the perfect storm for digital asset appreciation'
From #007: 'Lower interest rates are not just on the horizon, they are impending. Furthermore President Trump went public in a tweet this week writing “China and Europe playing big currency manipulation game and pumping money into their system in order to compete with USA. We should MATCH, or continue being the dummies who sit back and politely watch as other countries continue to play their games - as they have for many years!” It's safe to say the President is comfortable running the printing press to achieve his foreign policy agenda. A concerning measure for anyone with USD savings, and a tweet to be celebrated by anyone who is long Bitcoin or other safe-haven assets. Bitcoin may just be the ultimate hedge during the coming economic recession.'
These positions will of course adapt over time, but they are based on taking a deeper look into similar market cycles, asset classes, and macro economics.
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