Market Insights: Patience and Revolution

Market Insights: Patience and Revolution
February 8, 2018 Alex

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Disclaimer: Not professional or financial advice

Strong But Not Quite Steady

Bitcoin held its levels since yesterday when there was a fair amount of volatility. Today we’re seeing a better price, and some decent volume.

If we zoom out on the BTC/USD chart to a week we can get a better look at the current trend. Broadly speaking, the longer the time increment of the trend you’re analyzing is (1 Day vs 1 Week, for example), the more accurate the trend you’re seeing tends to be.

It could be worth waiting a few more days to see confirmation in the charts so far as where the price is going. Cryptocurrency has been fueled by a huge amount of speculation, and so in a bear market like this, and when we’re seeing a steep sell off, it’s easy to get tricked. It’s hard to tell what current buying behavior is built on.

Bottom line: wait for longer confirmations. Wait to see a super strong signal of the market going back up. Then follow standard strategies – dollar cost average, be patient, etc.

Litecoin Logic

We should apply the same logic to Litecoin as we do to Bitcoin. Look at longer time frames, wait for volume to come, and give things time. You want to see strong confirmations before buying in.

It’s better to see slightly lower gains that have a high probability rather than to roll the dice for less certain gains.

Cash Pump

Market Capitalization is hovering somewhat. We can see some divergence, namely in the form of Bitcoin Cash (BCC), which has a history of these types of runs.

There are many people who own BCC with strong motive. So when we see it pumping as it currently is, it’s valuable to be mindful of sentiment surrounding it. That said, BCC is doing a lot insofar as partnerships in Asia. Roger Ver is quite relentless in pushing the product and getting its message out.

Other than BCC, everything else is a little up, a little down, and generally following the top coins.

Where the Dopamine Flows

The current state of the market is one in which people are likely to become a bored, and start looking for a dopamine hit. In a highly speculative market, it’s essential to be mindful of where the opportunity for a dopamine hit is. People are looking for the next hit, the next big opportunity, and that’s where they will often flock.

Don’t get caught up in this mentality. Wait for the market to move in the right direction, wait for some confirmations, and then execute your strategy. Don’t chase coins. When people chase, they often lose and bleed chips, so to speak.

Narrative Integrity

Cameron Winklevoss said in a recent interview with CNBC (on Wednesday, Feb. 7) that Bitcoin has “potential appreciation” of thirty to forty times its current value. The Winklevoss twins have said that they think Bitcoin is set to disrupt the 7 trillion dollar global gold market over a period of 10 to 20 years.

At the same time, Goldman Sachs has come out as saying Bitcoin could easily go to zero.

Neither of these parties is necessarily right. The takeaway here is that it’s important to look into news like this and ask yourself, “why has this person made this claim, and what data actually backs it up, if any?” When news and price speculation drive more volatility, things get tricky. Be logical, think through the information you take in.

European Central Bank

Mario Draghi, the president of the European Central Bank recently said that “the listing of Bitcoin futures contracts by US exchanges, could lead European banks too to hold positions in Bitcoin, and therefore we will certainly look at that.” This statement is interesting as compared to the claims of parties like Goldman Sachs and various pundits.

It’s important to be mindful of the fact that statements such as these are not the whole story. There are always agendas and interests at play. At any rate, if a central bank holds Bitcoin, it’s a big deal, and will have implications. What those implications will be is hard to say, but they will prove interesting.

The Implications of Securities

Many people took the recent testimonies in yesterday’s senate hearing as quite bullish. But it’s important to look into what something like an ICO being a security truly means. A security in any case will be approved based on distinct characteristics and standards.

If you look at what the SEC requires, there is a lot that goes into something being treated as a legitimate security. The issue is that this system of evaluation does not fit well into crypto. When you take a cryptoasset and put it into the security box so to speak, it’s a tough fit. For example, how could Ethereum show how much money it’s going to make, or what they own?

Many pundits will probably say that the nature of cryptoassets needs to change, not the framework of securities. It will be interesting to see whether crypto and the community will end up breaking the mold. Hopefully they (we) will.

History As A Lens

When looking at the institutional issues crypto is facing, it’s enlightening to go far back in time to look for an analogy. A good example of this is the Dutch East India Company in the early 1600s. This was perhaps the first time when shares were issued as a representation of fractional ownership in a company, and when resources could be pooled so that multiple people could hold shares of a company and trade them.

This was a huge shift in how money worked, but also in how equity worked. Before this setup, shares weren’t owned by way of joint ownership. A huge boom in wealth followed this change, because it was a new way to create, share, and measure wealth.

If we then fast forward to look at J.P. Morgan, we can see that he – amongst others like Carnegie, Rockefeller, and Ford – redefined the way wealth was measured, and redefined what it was. And if we read into the history, we see that new regulations had to be made to fit. Part of the reason regulations were made to fit was because people like Morgan could leverage economies of scale. They were making things people wanted during the industrial revolution – the demand was huge.

Crypto can be viewed through this history, because where people like Morgan and Ford had economies of scale, we now have blockchains, speed and bandwidth, etc. These things can create such massive value, and the market can get so big – in a way that is built on real utility and not speculation – that the government will have to create new legislation to fit.

The bubble we’ve seen has been built on price, not a ton of coins with real utility. But as products develop and utility increases, the market will grow in a huge way. The key is that there needs to be real value – things that people like, things that people use. As a community of people passionate about crypto, this means that we should pay more attention to making crypto have greater true utility.

We are in the midst of a revolutionary change similar to those seen in history. And it’s still very, very early.

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