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Bitcoin Adoption is in its infancy

November 25, 2019

 

 

Price Does Not Always Reflect True Value

After 10 years in existence, the question of if and when mass crypto adoption occurs is still up to debate in the cryptocurrency space.  Humans historically think in linear scale. Once a personal investment is made, it is in our nature to believe in a steady, linear rise higher. Against the background of a technologically exponential environment, bitcoin lends itself to allowing exponential adoption growth rates along with volatile pullbacks.  To be accepted in mainstream, bitcoin gets adopted and THEN rises in value. It doesn’t get adopted because its risen in value, it RISES in value because it is adopted. This is why the bitcoin price runup of 2017 created unfair, inflated prices based upon utility as opposed to true value. It was not a sustainable fair market price, and quickly rejected. Value MUST be driven by mass usage and commensurate adoption rates, THEN go up in price. These are birth pains of a new currency self-adjusting to its respective auction market.

 

What is Mass Adoption?

Mass adoption means governments globally have created an enabling environment for blockchain and cryptocurrency to flourish or adopted the technology in their own practices.  Mass adoption needs to be specified according to the specific use case. Mass adoption as a store of value is different from mass adoption as a payment method or mass adoption of smart contracts.  Over the course of the last 10 years we have barely gone through “mass awareness.” The majority of people, in the U.S. at least, have heard of Bitcoin, and from rough estimates, perhaps 2-5% of Americans have used it. When that surpasses maybe 10%, then mass adoption has truly begun.  Mass adoption of crypto would mean that its use would be an ordinary function of daily use.  Mass adoption will take momentum when the general public is able to access, purchase, hold and use cryptocurrencies without having to understand the underlying technology.  Just as everday people can turn on a PC without knowing or understanding how it really works inside.  Current payment methods must be displaced by faster opportunities in everyday life to pay for goods and services using cryptocurrency.  Global acceptance requires a safe, easy and inexpensive and reliable platform to easily transact.  A number of stages are required for mass adoption of cryptocurrencies to take foothold. The first stage was awareness and the next is institutional adoption to enable institutional, political and regulatory acceptance.  This second phase will require end users and institutions to transact with eachother with confidence.  This process took two decades to fully develop in the case of e-commerce.

 

So When Do We See It?

A lot slower than the public thought two years ago during the Bitcoin mini-bubble of 2017.  One key ingredient for mass adoption is liquidity and right now few marketplaces have the volume and infrastructure required.  When we attempt to project growth of the crypto industry, we see three distinct market areas, each of which will have its own adoption curve. In an organic adoption cycle, grassroots awareness spreads the word, accelerating adoption in the retail world and everday users.  Large scale commercial areas take notice and take action to monetize the opportunity to get first mover advantage.  Banks and payments businesses need to consolidate these solutions to provide any efficient global service.  This would signal adoption in the institutional segment.
This pattern is playing out textbook in cryptocurrency markets right now. In the beginning, crypto was limited mostly to techies and math aficionados. Soon after this it grew into financial speculation in the retail space.  Businesses like brokerages, exchanges and payment services popped up and are now servicing this market. Right now major institutions like Fidelity, JPMorgan and other big players are servicing parts of the crypto value chain.  With all three areas now on the adoption curve, we are likely moving into the second inning of mass adoption.  This phase will require government regulations to accomodate the indisputable growth and provide for a safe and fair market.  The historical analog here would be the development of e-commerce on top of the internet, taking 20+ years for full global adoption.  Even the brightest back then underestimated the timeline.  The rate of adoption for digital currency will likely be parabolic and in less than half that time as it is will be integrated as Internet 2.0

 

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Floored: The Complete Documentary Film

August 20, 2018

The End Of An Era

This is a great historic documentary about the ups and downs of pit floor trading. It depicts the end of an era, where the transition from open-outcry to electronic trading took place. A look back to a time when traders were kings and the characters were large. Far removed from the fast, algo driven trading today.

 

Sell volume imbalance at the edge of a balanced auction – August 9 close

August 9, 2018

ESU18 SEP Contract

Why Price is Just a Number

These volume imbalances were built up for most of the session. While retail traders were looking for the break of resistance, the orderflow shows distribution.  Net negative delta increased while price was at highs to fuel the negative divergence.  A key HVN at 2859.25 was not able to find acceptance and the change control to seller control occurs shortly after.  Price is advertising higher but volume revealed the true narrative.

 

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Market Profile Composite Snapshot for ES – June 2018

June 27, 2018

ESU18 SEP Contract

 

Is Risk-Off Priced In?

The market is a forward pricing mechanism and the window for price dislocations are very small.  The Footprint orderflow show that sellers have been in control since mid-June.  These are normal rotations in what appears to be a healthy, two-sided auction that is respecting Profile structure.

Constructive Bull Market

Note that as of Fridays session, longer term size buyers were aggressive on the offer and taking advantage of weaker longs that may have exited on the bearish newsflow that hit in mid-June.  As I called out in the trading room,  LT buyers are now stepping in to take the discount and attempt the drive higher into the lower composite value area starting at 2754.25.  That is the narrative that seems to be playing out.

 

Why Smart Money is Long

With the initial onset of China tariffs and the media focus on an all out trade war with China,  most of the smaller funds took risk-off  into end of month.  That newsflow appeared to have flushed out weak longs who appear to have taken profit after the intense scrutiny of trade between the world’s two largest economies. It appears the tipping point, at least in the short term, has been reached. The OPEC supply meetings were constructive and and CL drove higher due with Trump administration levying strict tariffs on any country that buys Iranian oil.  Production was low and so there is currently negative correlation with the ES.  This is definitely not a correlated market and so watching this week if correlation links positive and drives ES higher.

 

 

Why Digibyte Will Be the Standard, not Bitcoin

April 30, 2018

2019 Lamborghini Uro V-12 engine

 

Directions:
Choose the pair that best compares to the relationship in the example below. 

Alloted Time:
1 minute

 

DIGIBYTE : BITCOIN

Apple : IBM
Lamborghini : Chevrolet station wagon
Peets Coffee : Folgers Coffee
disruption: status quo
all of the above

(See Answer Below)

 

A Faster Engine

Digibyte is a global blockchain with cybersecurity for digital payments.  It is 50x times faster than Bitcoin with over 5 million blocks and 15 second block times. Digibyte (DGB) is the most decentralized mineable blockchain in the market with over a 100,000 nodes.  It was the second coin to activate Segwit for atomic swaps.  DGB uses five mining algorithms to prevent centralization and protect against a 51% attack.  Currently, the community is discussing a hard fork which will swap out an algorithm for another to prevent ASIC -90.00% mining centralization.  Yes, they are the gamechanger and everyone will hear more about them very fast. Over 4 years, DGB has become the world’s fastest, longest, and most decentralized blockchain.  It is scheduled to perofrm at 180,000 transactions per second by 2035 since the block size doubles every two years.  Meanwhile, Bitcoin is bogged down by 7.8% unconfirmed transactions.

A Better Designed Coin

Operational since 2014, this coin has a number of interesting functions, including advanced security protocols on top of its 15-second block time. Digibyte was first mined on January 10, 2014, has come a long way from its early days. The CEO behind this rising coin, Jared Tate, revealed that the blockchain aims to deliver a high-speed and protected virtual token to a broader audience. Supported by dual bands of developers, including pre-miners and adopters, Digibyte is gaining momentum in acceptance points and is being deployed by other decentralized systems.

 

A Higher Price Trajectory

In terms of the price action, Digibyte has recently touched $0.04 level, which is a landmark for this currency. Trading at $0.043 after doubling in the last month, the trading volume of Digibyte has had a steady rise. With a circulating supply of 10,172,475,033 DGB tokens.  The current price correlation with the base markets has DGB increasing at a ratio of 2:1. For a legacy coin, Digibyte has a low market cap and a low per unit price. It is massively undervalued and the price projection I have for DGB is over .70-.80 by end of year.

 

CORRECT ANSWER:  If you chose “all of the above”, you may go home now.

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How Crypto is Preparing for Takeoff

March 16, 2018

“We were working in a complete vacuum as to information based upon prior performance and prior design.”
Howard Hughes

 

A Leader Will Emerge

In order for newly designed planes to have taken off, better runways had to be built in response to the innovation. In order for virtual currency to take off, reliable infrastructure and exchanges need to be built to support the demand. There is no analog for an auction market with the initial, high volume transaction requirements that virtual currency has launched off with.   The largest exchanges right now are Coinbase and Binance and they are facing this temporary dilemna of reliability which has morphed into a P.R. nightmare of sorts for the crypto space.  Both are a large part of the ecosystem right now and the community is looking at them at a critical time when coin technology is currently ahead of the exchange infrastructure to handle transaction volume.  Scalability is a good problem to have though since it is borne out of demand for expansion.  The exchanges may not yet be aware of their influence and that their direction can shape the entire marketplace globally.  They will have to assume that role of leadership since most other exchanges are looking to them to set the bar for expectations in what is expected and an acceptable model for the crypto community of traders and investors. They are being relied on for something larger than there own revenues and will be forced into the role of working to define the new ecosystem and industry.

Why the timing of the G20 Meeting Matters

Japan will be calling on G20 members to concentrate on developing anti-money laundering (AML) strategy for cryptourrency on March19-20.  From a global perspective, this is a systemic remedy that will benefit cryptocurrency infrastructure and improve the speed of mass adoption.  The fact that cryptocurrency is dropping in price into this huge catalyst is likely why larger investors are taking notice of this setup.

 

The Art of Being Greedy When Others are Fearful

As BTC/USD is dropping below 8,000, billionaires Jack Dorsey and Peter Theil are seeing the opportunity of this massive discount and are buying Bitcoin at these levels.  Founders Fund, run by Thiel, bought about $15 million to $20 million of dollars in bitcoin for their portfolio and is supporting it as a “digital store of value” and calling it the equivalent of online gold.  Technically, the BTCUSD graph appears to be putting in a “W” pattern which would confirm a long-term bottom could be in formation.

 

 

 

Regulation is Good For Virtual Currency

February 12, 2018

“If I had asked people what they wanted, they would have said faster horses.” – Henry Ford


Creating and Leveling the Playing Field

Every big industry has benefitted from regulation throughout the 20th century.  The automobile industry, airline industry, food industry, manufacturing industry, and agriculture industry went through major regulation spurts borne out of a need for consumer safety and protection. So in the financial services industry, regulation on Virtual Currency (VC) should not be viewed as a negative, but as providing legislation, safety, and security that will allow new investors who are waiting on the sidelines to enter into the space.  After the Senate Banking Committee hearing last week, both CFTC and SEC have acknowledged VC as an alternative currency that will soon have a legitmate role in our monetary system.  Both agencies have the back of respectable coins and are looking to promote growth and development for it. As of now, they are still classifying VC as to whether it will be a commodity, a security, or a currency.
The most important statement from the Congressional Testimony:
“This simple approach is well-recognized as the enlightened regulatory underpinning of the Internet that brought about such profound changes to human society. During the almost 20 years of “do no harm” regulation, a massive amount of investment was made in the Internet’s infrastructure. It yielded a rapid expansion in access that supported swift deployment and mass adoption of Internet-based technologies. Internet-based innovations have revolutionized nearly every aspect of American life, from telecommunications to commerce, transportation and research and development. [“Do] no harm” was unquestionably the right approach to development of the Internet. Similarly, I believe that “do no harm” is the right overarching approach for distributed ledger technology.”   –   J. Christopher Giancarlo, CFTC Chairman


Where Are We Now?

With perceived uncertainty in BTC/USD the risk off trade has been priced in here. It’s an expected phase since VC markets are new and forming. Virtual currency still solves huge problems that paper currency has and the utility for it has already been established. This is just the beginning for cryptocurrency and regulation will legitimize the crypto markets and validate it as a solid asset class.  It will allow 300 million people in the U.S. who don’t own Bitcoin to feel confident now that exchanges are becoming safer to participate in.  The organization that is forming now will open the gates to attract heavier institutional buyers who will likely iron out the recent volatility.  This will in the upcoming months promote upward buying pressure and drive BTC markets higher.

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Time for a Group HODL

January 12, 2018
“All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.” – Schopenhauer

 

The promise of blockchain

It’s an exciting time for those who believe in the potential for blockchain, the digital and decentralized ledger for virtual currency transactions that eliminate the need for third-party intermediaries like banks. Enterprise customers are showing heavy interest in blockchain, and since nearly all are open-source networks, it would make altering logged data practically impossible. That makes blockchain particularly secure and should be viewed as promising for those that truly understand the commerce possibilities.

The speed of speculation

The fear of missing out on fast money created strong demand  and aggressive buying in bitcoin and other cryptocurrency.  What we are experiencing is the early stages of an auction market for cryptocurrency that is going through an adoption phase. Growing pains, that is all. Decentralization is not a process that happens overnight despite all the massive speculations over the projections of this space. Rational exuberance is definitely in order here.  The forming intelligence of this auction market structure has determined that the speed of this price discovery to value bitcoin in relation to these obstacles required a re-pricing.  Bitcoin price had to re-adjust to align with the timeline of adoption. There MUST be two sided trade in any market for it to be sustainable. And that is what we are seeing in this price pullback.
That Bitcoin has dropped nearly 50% in just a few weeks shows that volatility is supreme until market infrastructure reaches alignment with the promise of its utility and real world adoption on a mass scale. There is no doubt that bitcoin is the flagship for the altcoin space as many coins are trading against it as a pair and are levered to bitcoin as a corrollary, for now at least.

The reality of regulation

Regulation is a double-edged sword for bitcoin. On one side, the CME Group launching bitcoin futures and Japan accepting bitcoin as legal tender earlier this year, helps validate its existence and use. On the other side, central banks and governments have the authority to suppress bitcoin despite market demand. We could be talking about tens of billions of dollars  whose investors are willing but unable to invest in bitcoin.
This is just one of many obstacles that bitcoin faces on a short term and long-term basis. In addition to regulation issues, bitcoin has to try to stand out from a growing number of cryptocurrencies which are creating unique and improved ways of interacting with the blockchain that could gain mass appeal with faster and improved coin technology. Despite bitcoin having early mover advantage, the space is fluid with new coins that could overtake bitcoin and gain acceptance.
That in mind, crypto markets are reacting again to previous news that South Korea will ban anonymous exchanges starting January 30. Plans to apply a  corporation tax and local income tax of 24.2% on exchange profits have capped unbridled exuberance for now.  These bans are likely to be slowly lifted country by country. The shift will occur over time when banks realize that the era of third party transaction fees are over.  When these oppositions gradually lose their strongholds then we are likely to see a surge in acceptance points on an international level.