This Token Metrics newsletter focuses on past week's market data and top crytpo-related stories.
THE WEEK THAT WAS:
THE HIGHLIGHT OF THE WEEK:
The allure of the sound money
On August 1st the 10-year US Bond interest rate was 1.9% the day before it was 2.08%. Now the 1-month T-Note is giving you a return of 2.11% while the 10 year gives you 1.9%. 20-year is only at 2.21%, that is 0.10% spread with the 1-month!
Yield curve inversion is getting worse with time, and the fed monetary policy is putting massive pressure on long term interest rate. To be concise, this is ugly, and at some point, this will lead to another crisis as Powell has been much more dovish than what we thought and opens the way to more rate cuts in the future. The Fed is under the political pressure of the US government and is going to use every tool at its disposal to prop the markets up.
Vanguard Bonds have negative rates. Those bonds are also an excellent target for the Fed and the ‘too big to fail’ banks network that loves to buy its bonds for their monetary policy purposes. Moreover, if we have a look at the Vanguard ETF, we see that someone keeps buying an incredible amount of those bonds. So the question is who is crazy enough to buy negative rates bonds while equity markets are going up? Well, the Fed, Bank of America, Goldman Sachs and all the big boys. Those banks only have one purpose since Trump was elected: the markets cannot go down!
The Japanese central bank is now, thanks to its monetary policy, the major shareholder of more than 50% of the companies listed on the Nikkei. Now, the US could very well be heading there as they will do anything to keep the markets up.
So, whats lies ahead? Well, the US dollar will likely start falling. To buy those assets, the fed needs cash, well they just print it- organized devaluation and depreciation against other currencies in order to fill the enormous trade deficit. The overwhelming adverse reports that we have seen in the last three months are going to continue with the decrease of PMI (manufacturing index), non-farm payrolls, GDP growth, new house sales. However, indices and bonds (prices, not interest rates) will keep going up, both becoming part of probably the largest bubble in history.
Well, how does this apply to cryptoassets? So, when the dollar starts losing its hold as the world’s reserve currency, and the central banks already flirting with zero interest rates start running out of options to stimulate their economies, asset managers across the board will start looking at sound money options. We believe that precious metals such as gold will start becoming talking points among managers. Along with gold, this time around, there is another sound money option for fund managers to diversify their portfolios. Bitcoin. When the wealth in one asset class gets eroded, it moves to another asset class. We believe that significant allocation will be towards bitcoin in the next crisis. The Fed rate cut is just the beginning.
Why is this important?
Litecoin is currently the fifth biggest cryptoasset in terms of market cap.
You can check the recent blocks here. Though price jumped a bit, it has come down, and now it is hovering around $100. It is important to see how the miners react to the incident. If the hash rate remains constant for a week or so, it’s good news for the network. We’ll have more updates the next week on Litecoin halving. So far, so good.
Why is this important?
Bitcoin’s hash rate indicates miners’ interest in mining bitcoin. Hash-rate also lends security to the network. The more the hash rate, the more secure the network is. From mid-July, the hash rate has jumped more than 10%, and this is a result of two things. One, new miners joined the network, and two, some players in the mining industry have upgraded their mining hardware to the latest ASIC miners. The capital investment by miners indicates that they have faith in bitcoin.
Why is this important?
Out of 2,000,000 transactions analyzed by MIT, only 2% were found to be illicit. More such analysis will help put an end to ‘bitcoin is only used by criminals’ argument. This type of empirical data it becomes crucial for regulators to take informed actions.
WEEKLY TECHNICAL ANALYSIS:
We are analyzing two cryptocurrencies this week instead of one: Bitcoin and Litecoin.
Bitcoin broke out of a short term downtrend triangle as well as the 11k resistance level. It could seem that the buyers have managed to take back the upper hand however a word of caution as volume seems to have trouble to rise along with the trend.
Bitcoin is not out of the woods yet as it is going into the next downtrend triangle drawn from the last previous highs, respectively at 13.8k and 13.2k.
Scenario 1 (most likely): Bitcoin pulls back toward the previous resistance at 11k, now acting as a support, after hitting the resistance triangle around the 12k level. We could see Bitcoin evolving in a narrowing range (following its large upward movement from 9k to 11.7k) stuck between the downtrend triangle and the 11k support. Following this accumulation phase, we could see a strong upside breakout targeting 13k, 14k, and new highs.
Scenario 2: Bitcoin breaks the current downtrend triangle and targets the 13k-14k zone as a parabolic move thanks to a rise in volume.
Scenario 3: Unable to break through the triangle and unable to hold the 11k, Bitcoin pulls back all the way down toward the support cluster formed by the support level at 9.8k and the uptrend diagonal.
Summary: short term bearish, medium/long-term bullish.
Litecoin is being held hostage between a short term downtrend triangle and the support zone at 8k satoshis near the year lows.
Since the end of June, Litecoin has been evolving in this tightening range. This coincides with a significant decrease in volume’s momentum.
However, as the trend is trying to bounce off its support, we can see an increase in volume, indicating the presence of buyers defending the 8k satoshis support level.
The stochastic oscillator is currently in the oversold territory. As the fast line is getting close to the slow line, we could expect a rebound soon. Confirmation needs to be provided by the fast line crossing over the slow line.
Scenario 1(most likely): Litecoin could see some whipsaw for the days to come before breaking through the short-term downtrend with a short term target at 12k satoshis.
Scenario 2: Buyers are unable to sustain the selling pressure, therefore unable to defend the 8k satoshi level. We could expect a fast drop toward the 7k satoshi and lower.
Summary: short term neutral/bullish, medium/long-term bullish.
TOP PERFORMING TOKENS:
Top performing tokens from 07/27/2019 to 08/01/2019 were:
WORST PERFORMING TOKENS:
Worst performing tokens from 07/27/2019 to 08/01/2019 were:
ROI OF RECENT IEOs:
ROI of recent IEOs until 07/31/2019:
DISCLOSURE: Token Metrics is a regular publication of information, analysis and commentary and does not provide individually tailored investment advice. Its principal has advised and invested in many blockchain companies. A complete list of his disclosures, advisory roles and current holdings can be viewed here: https://ianbalina.com/pages/transparency.
Money image from Unsplash