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3rd DECEMBER 2019

This week we cover:

  • IS FUTURES TRADING DOOMED?
  • SWISS GOVERNMENT PRO BLOCKCHAIN DEVELOPMENT
  • THE DOLLAR COST AVERAGE (DCA) WINNERS
  • CHINA SHUTS DOWN EXCHANGES
  • HORIZEN SIDECHAINS GO ALPHA
  • BITCOIN TECHNICAL ANALYSIS
  • REBALANCING A COIN’S WORTH BASED ON NODES
  • UPBIT INSIDE JOB
  • SOUTH KOREA FRIENDLY CRYPTO
  • FEAR, GREED AND MENTALITY

IS FUTURES TRADING DOOMED?

Andreas Antonopoulos had an interview with Ivan on Tech this week and offered an opinion on futures traders which goes against the norm. While he feels that futures trading can depress cryptocurrency prices in the short term, it’s the speculators and not the HODLers with something to fear in the long term.

Cointelegraph reported Antonopoulos as saying “critics often overlook the real stakes of cash-settled cryptocurrency shorting” and that there is something “really dangerous about doing cash-settled naked shorts against a cryptocurrency”. Basically, if you borrow to short something like Bitcoin then your liability is unlimited.

If you aren’t a leverage trader don‘t feel like you have to be. And if you are taking a dollar cost average approach, it could very well be the more healthy long term method.

If they [institutional investors] faced a situation of a renewed Bitcoin bubble and they continued to take a contrarian position against the market, they’d be throwing fiat into a black hole.” – Andreas Antonopoulos

SWISS GOVERNMENT PRO BLOCKCHAIN DEVELOPMENT

Switzerland’s Federal Council, adopted a proposal this week aimed at improving the framework around nascent technology. According to Coindesk this has been designed around “increasing legal certainty, removing barriers for applications based on Distributed Ledger Technology (DLT) and reducing the risk of abuse.” It will be a “blanket framework” that will amend nine federal acts across several areas.

Switzerland is already one of the global leaders in blockchain-friendly legislation, with many crypto companies seizing this opportunity and setting up shop in Switzerland, including Libra. The new proposal conceded that while the existing legal framework is “well suited” to new technologies, such as DLT and blockchain, there is also room for improvement. The Swiss parliament will review the amendments early 2020.

THE DOLLAR COST AVERAGE (DCA) WINNERS

I often talk about the benefits of DCA-ing your Bitcoin entries. It helps ease the emotional impact constant trading can have, reduces brokerage fees and keeps you honest by having a pact with yourself about how much you are willing to invest each week, month or year. It’s a plan, and one that has been shown to work.

Crypto advocate Anthony Pompliano (@APompliano) Tweeted this week on the benefits of DCA which prompted me to check in on some top line figures from dcabtc.com:

  • $100 monthly for 1 year / $1200 total investment
    10% increase
    Total value of $1,969
    Gains = $769

  • $100 monthly for 2 years / $2400 total investment
    11% increase
    Total value of $3,362
    Gains = $962

  • $100 monthly for 3 years / $3600 total investment
    03% increase
    Total value of $10,441
    Gains = $6,841

And for the dreamers…

  • $100 monthly for 5 years / $6000 total investment
    1,172.06% increase
    Total value of $76,323
    Gains = $70,323

  • $100 monthly for 9 years / $10,800 total investment
    133,089.56% increase
    Total value of $14,384,471
    Gains = $14,373,671

CHINA SHUTS DOWN EXCHANGES

Headlines continue to flow out of China this week as the People’s Bank of China (PBOC) reportedly claim (via Zycrypto) “the 173 Chinese virtual-currency trading and token issuing platforms have all exited without risk”.

This kind of claim reinforces the country’s anti-crypto stance, not to be confused with the pro-blockchain vision. Mining could more than likely see an aggressive move shortly as well. These moves could be interpreted as the authorities trying to eliminate all forms of competition prior to the launch of a digital renminbi. Don’t be fooled, these kinds of legal enforcement’s will have a negative impact on price. Previously these have all been short lived, but the Chinese market is where a lot of demand flows from, and it may take time for this demand to reroute or find another way into the market.  

HORIZEN SIDECHAINS GO ALPHA

“Horizen has recently released its first node, Mini-node, on the sidechain devnet. The release of the Mini-node is a significant milestone, because it puts us one step closer to the official release of our first sidechain.” according to the Horizen blog

Rob Viglione on the importance of Horizen sidechains;

“…(Horizen sidechains are) a huge step towards decentralization. This is decentralizing our architecture and enabling a much richer application environment that doesn’t have the cross-application cannibalization that can happen on a network

If you’re in a network with finite bandwidth, when you make a decision to build on that network you also have to consider the potential congestion on it. For us, we chose the architectural path of having a very robust secure mainchain, and we are constantly improving that security. The experimentation, the fun stuff, the exciting applications, the entire businesses that we are looking at migrating to blockchains, that’s what we want to happen on their own application-specific sidechains.

So, it’s a really big step towards decentralization in terms of architecture and then also creating massive scalability that can actually mainstream this technology.”

The Sidechains are unique as they allow developers to “write applications in their preferred language … (and enterprises can) take advantage of the mainchain’s functionality without having to build their own blockchain, all while utilizing Horizen’s large node network.” Developers will be able to easily customize blockchain components which include but aren’t limited to consensus, token and block reward time while being totally independent of the Horizen mainchain. A truly interesting advancement in the space and something I have been excited about for almost a year while it’s been in development.

REBALANCING A COIN’S WORTH BASED ON NODES

Coinmonks writer Aat de Kwaasteniet published an article on Medium this week, which ranked cryptocurrencies based on their number of nodes and their usage. A measure of how the “coin works and is used in practice and is not only seen as a trade object and moves currency from one wallet to another wallet on an exchange.” His research aimed to provide an alternative to simple market capitalisation comparisons which are so widely used on leading sites such as Coinmarketcap and which can be misleading to showing a coin’s true utility value.

The calculations removed:

  • ERC20 tokens (as they lean on another network for stability)
  • Coins without nodes
  • Coins which were not mineable, stemming from the belief that Satoshi Nakamoto had intended all coins to contain PoW (Proof of Work)

TOP 100 CRYPTOCURRENCY RANKINGS

The following steps were then taken to compare the data:

The number of nodes/peers that had a connection in the currency’s network in the past 24 hours was examined. We mean nodes/peers that are active in the network and are involved in checking/approving the transactions. So the mobile wallets, which in fact only monitor the network, are not counted. Quite a few coins work with so-called Masternodes, Supernodes, providers, consensus nodes or whatever name they have given them. Also with these coins the number of … nodes that have been connected to the network in the last 24 hours is taken.

With some coins, only the status page of the explorer indicates the number of nodes with which the explorer has or has had a connection. Then that number is taken, although it is known that in that case not all nodes in the network are counted. But that is the only known number for these coins. In about one third of the cases, the number of nodes/peers was not found on the website or the explorer of the coin. These are marked in yellow.

A few Coins are disqualified because the mentioned numbers are out of proportion so there is a wrong result. For example, because all (master) nodes that have reported once on the network are counted.

About two coins in the CMC list there was nothing left. Probably dead coins. These last two categories are marked in red.

The outcome being a rebalancing of the top 100 coins which are mineable and have the largest node structure, and actual usage, on the blockchain. The top 3 in order are, Horizen (ZEN), Bitcoin (BTC) and Ethereum (ETH). Relevant particularly for the Mining Store, mining and node community due to the take up of so many of us is Loki (LOKI) in 21st place. I recommend jumping over to Medium and reading the full article, it gives a nice alternative insight to the usual Market Cap calculations we use to value coins.

*Disclaimer, I hold Horizen, Bitcoin, Ethereum and Loki personally, none of these findings should be used as a sole guide to investment advice.

UPBIT INSIDE JOB

UPbit, a South Korean Crypto exchange, was hacked last week and had $50million worth of Ethereum stolen. They have pledged “to cover all user assets with corporate funds and exchange deposits and withdrawals will reportedly take at least two weeks to resume.”

The hack begs the question, was this an inside job? Cointelegraph has reported it just might have been, “The ‘hacker’ timed when UPbit was making crypto transfers to its cold wallet (other alts like TRON, etc.). Hence, I think the probability of it being an inside job is higher than external breach.”

In 2017, another South Korean exchange – Bithumb was also hacked and a reportedly $13million was stolen. At the time this was also believed to be an inside job.

In this most recent instance, Binance CEO Changpeng Zhao tweeted the exchange will “work with UPbit and other industry players to ensure any hacked funds that may make their way to Binance are immediately frozen.”

All the other transfers from the day of the hack successfully made it from the UPbit exchange to its cold storage wallets or Bittrex exchange.

SOUTH KOREA FRIENDLY CRYPTO

This week, Coinspeaker reported on South Korea’s National Assembly’s Policy Committee passing a bill which will “create a framework that formally classifies crypto tokens and other virtual currencies as digital assets.” South Korea has long been a crypto ally and this appears to be yet another step in the right direction for fostering an environment in which new crypto-based businesses can thrive. It does however come with restrictions. All virtual currency businesses will now be required to:

  • Obtain an Information Security Management System certificate (ISMS)
  • Be a registered digital asset business
  • Comply with anti-money laundering legislation
  • Adhere to International best practices for Know Your Customer (KYC)

South Korea has been very specific with the need to adhere to these guidelines and has in the last year alone banned anonymous crypto trading in an attempt to ensure there is no digital money-laundering activity in the country. South Korea is one of the leading countries in the world for crypto users and is most definitely an early adoption front runner, right up there with Switzerland.

BITCOIN TECHNICAL ANALYSIS

This week Bitcoin managed to remain above the $7K USD support line as the bulls continued to defend against a sub $7K USD price drop.

The lower level trend line still remains a key point of focus for traders. If the bulls continue to keep price action above this level then BTC could start to trend towards the upper trend line and push BTC back towards the 10k USD mark.

Sentiment among major trading groups including Mining Store is still very bullish for the medium to long term. Some traders feel that $6.5K USD is bound to be hit, however, this could be supported by wishful thinking for late entries by traders rather than fundamental influence.

Ethereum has come under Mining Store trader’s line of site as it is presenting a very tempting entry price. Ethereum is sitting at the lowest price it has been since March 2019 and it is also just bounced off its major support line at $138USD.

Traders are looking at the risk to reward for entry into Ethereum as a very promising trade, particularly with Istanbul hard fork coming up as well as the switch to PoS coming in 2020. As most cryptocurrency traders know, a switch to PoS will result in a major supply lock up, and decrease supply can result in increased price.

FEAR, GREED AND MENTALITY

Alternative.me Fear and Greed index is sitting at 28 and Fearful this week – a shift from 17 and Extremely Fearful last week. The price of Bitcoin has been knocked around by continued Chinese regulatory pressures and an overall bearish sentiment in the space.

I wrote about dollar cost averaging and its success this issue, and I think that’s a good point to reflect back on if you are in doubt. Also keep your eye on the continued developments in countries like Switzerland and South Korea, these are positives shaping the future of crypto.

Bad news events and restrictions to the development and expansion of the space, like those that we are seeing with China, while unfortunate will most likely only deflate value in the short term. At the end of the day, Bitcoin and cryptocurrencies in general are decentralised and while governments can attempt to restrict access there really isn’t a way to completely stop their citizens from participating. The crypto industry as a whole is still very young and we should consider ourselves lucky to be here and involved in these early stages of growth.

Author: Julian Carruthers

Not financial or investment advice, always do your own research.

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