Commentary
Digital Assets extended gains to end the week up another +8% — outpacing strength in US/Chinese equities, Commodities and Gold. Overall Digital Asset volume gained +35% wow to a daily average of $150B.
BTC +1% gains this week were pretty tame vs smaller, higher beta coins which did much of the week’s heavy lifting. Gains amongst major coins and tokens this week were led by XTZ +18%, VET +17%, ETH +16% and TRX +16% — many of which are already up > 100% YTD and trading above 80 RSIs.
Positive headlines this week included 1) the quant trader behind the Stock to Flow model predicting a 2021 BTC price target of $100,000, 2) Positive BTC comments from the CME’s chief economist, and 3) Analyst Tom Lee calling $40,000 BTC by the end of the year. Negative stories this week include: 1)the Plus Token Ponzi scheme potentially preparing to sell $123M in BTC, 2) the US Treasury Secretary hinting at new crypto rules, 3) and Italy shutting down 2 crypto trading platforms.
Smaller, high beta tokens continued to rip this week driving Non BTC Crypto gains this week to +15% and extending recent outperformance relative to BTC. Gains outside of BTC are starting to look extremely stretched, though, with BTC underperformance falling to -2.5 standard deviations below the pair’s 50 day moving average. Historically a drop below the 2 standard deviation mark has signaled mean reversion and a rotation from Alts into BTC.
For BTC, support at the $9,000 level looks to be building with both the 50 day moving average and the 200 day moving average converging on this level. The 50DMAVG looks like it will cross above the 200 DMAVG next week — which I think will be interpreted as another bullish sign. I continue to see $11,100 as the most important mid term resistance line — a cross above would increase confidence in the long term symmetrical triangle pattern BTC has been consolidating in. A break out of this long term consolidation problem would imply a price target of $28,000.
Thoughts
Halving — What if this time goes like last time?
The upcoming May halving will see BTC’s current 12.5 BTC block reward halve to 6.25 BTC. This will cut BTC’s total annual supply increase from the current 3.67% to 1.8%. In theory this should increase scarcity and drive price higher.
BTC has only experienced 2 previous halvings. The first, in Jan 2012, I think we can largely ignore because the market now is vastly different (constituents, volume, infrastructure, and overall maturity).
Looking back at price action around the 2016 halving we saw two price peaks: the first 22 days before the halving and the 2nd 178 days after the halving. If we map that % change onto 2020 price levels, we get a mid term price target of ~ $15,000 for April 20 and a longer term price target of ~ $23,000 for November 7.
Listed Miners finally seeing some love
Big week this week for listed miners Canaan and HUT 8. In the 2016–2017 bull run — GBTC was one of the few listed BTC proxies. I wonder if in this next cycle, Canaan and HUT 8 will fill the same niche.
The Coronavirus has infected Chinese miners
The BTC 7 day average hashrate has fallen ~5% since the end of last month. Hashrate has been on rip this year as miners seek to monetize old equipment that will be obsolete post the May 5 2020 halving. This 5% drop is one of the largest hashrate corrections we’ve seen in the past 6 months. I think this is probably due to lockdowns and quarantines being imposed around China; most notable in Chengdu — the epicenter of the Chinese mining industry.
News
- Stock to Flow quant: BTC will hit $100,000 by end of year 2021
– $8,200 is the floor for 2020
– BTC will hit the May 12 2020 halving at ≥$10,000
– Expects BTC to top >$100K before Dec 2021 - Treasury Secretary: Trump planing new crypto rules
– Told congress will launch significant new requirements at FinCEN
– Worries crypto will be equivalent of Swiss secret number bank accounts - CME’s Chief Economist likes Bitcoin
– “It is an exciting concept that deserves further study” - Trump’s Fed Reserve nominee: US must be proactive on digital USD–
– Shelton has been a longtime advocate for the gold standard
– Sounds like she may be a close Bitcoiner
– Last week Fed Chairman Powell told lawmakers that Libra was “a wake-up call” for the central bank - Plus Token moves $123M in BTC
– Was a multi billion $ Chinese Ponzi scheme broken up last year
– Analysis of addresses associated with the scheme show coins being moved into smaller wallets — possibly in preparation for liquidation
– I think a good deal of 2H19 BTC sell pressure came from the liquidation of Plus Token’s 200,000 BTC - Tom Lee: BTC could hit $40,000 this year
– Lee is a former JPM analyst and well known crypto commentator
– He caught a lot of heat last year for calling a $40,000 target in June - Circle sells off investment app to Voyager Digital
– Circle has pivoted away form retail focused crypto trading
– Focus now appears to be more directed at USDC (stablecoin) growth - Coinbase opens 3x margin trading for select clients
– Only open to institutional clients
– 3x obviously pretty tame vs other offerings on the market
– Coinbase probably ticks more compliance boxes than competitors like BtiMEX so possible an attractive offering to more traditional US investors - OkEx platform token spikes as exchange burns 70% of supply
– Burned a total of 700 unissued tokens
– Reduces the total supply to 286,021,636 OKB - Google joins Hedera Hasgraph’s governing council
– Hedera provides enterprise focused distributed ledger tech
– Other council members include: Boeing, IBM, Deutsche Telekom - BitGo expands global footprint into Germany and Switzerland
– BitGo is one of the largest and longest running custodians in the space - Poloniex rolls back trading history after trading bug
– Rolled back 12 minutes of trading history
– Follows a execution of a number of ‘erroneous’ trades - Italian regulator shuts down crypto trading sites
– 2 crypto trading and derivative sites shut down with several FX platforms
– Accused of violations of Mifid2 violations and provision of illegal trading products and services. - ETC jumps into DeFi as a collateral asset
– ETC will be accepted as collateral on the Fantom platform - Ukraine: Crypto mining doesn’t require state regulation
– Remarkably forward looking comment from the country’s Ministry of Digital Transformation:
“Mining does not need to be policed by state-run supervisory authorities or third-party rules. It is an activity that is regulated by the protocol itself and the network participants.”
- Iota halts network in wake of Trinity Wallet attack
– No guidance given long the network outage will last
– Iota thinks $300,000 to $1.2 million worth of IOTA has been stolen so far
– How decentralized can a network be if it has a pause button? - How many people hold 1 or more Bitcoins
– Analysis estimates between 400,000 and 800,000 globally
Reads
- VanEck: The Investment Case for BTC, 2020
– A good general introduction to BTC presentation
MaiCoin Podcast
- Chinese: BTC破萬，然後呢？
Charts
- Chart 1. Weekly % Change — Top 20 by Volume
– BTC +1% vs more big gains in smaller, high beta tokens
- Chart 2. YTD % Change — Top 20 by Volume
– BTC gains YTD a tame 42%
- Chart 3. RSI — Top 20 by Volume
– Average RSI up to 75. Lots of > 80 RSIs
- Chart 4. Position in 52 week range — Top 20 by Volume
– Number of tokens up around 52 week highs (100% = 52 week high)
- Chart 5. % vs 50D MAVG — Top 20 by Volume
– BTC a relatively tame +18% vs 50D MAVG
- Chart 6. BTC vs Alts — 1 year % change
– Alts +209% over the past 1 year vs BTC +183%
- Chart 7. BTC Dominance- 50 Day Z Score (number of standard deviations)
– BTC dominance (% of total Digital Asset market cap) -2.5 SDs < 50D AVG
– Typically that signals a bounce; a rotation out of Alts and into BTC
- Chart 8. BTC — Symmetrical Triangle Pattern
– $11,100 remains the key line of resistance
– Increasingly strong support at $9,000, convergence of 50 & 200D MAVGs
