MaiCoin Digital Asset Weekly, Feb 14 2020

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

“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.”

Reads

MaiCoin Podcast

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
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