The Daily Bit: July 18 2018

Tweet of the Day

I muted the words Bitcoin, Gold, Netflix, Trump and Putin. I haven’t seen a tweet in the past 24 hours.

– @jfahmy

Top Cryptos By Market Cap

BITCOIN (BTC) |  10.46% | $7,421.76
ETHEREUM (ETH) |  5.45% | $496.00
RIPPLE (XRP) |  8.08% | $0.5103
BITCOIN CASH (BCH) |  9.29% | $866.71
EOS (EOS) |  11.66% | $8.87
LITECOIN (LTC) |  9.32% | $91.17

*As of 9:40AM EST


The markets jumped in unison yesterday, and so did fans of Goldman’s new CEO, David Soloman. Lloyd Blankenfein’s successor moonlights as an EDM DJ on the weekends and will begin monitoring Goldman’s bitcoin operations in October.

Word On The Street

Time to Pay Attention (Again)
Bitcoin shot out of a cannon yesterday afternoon, ripping straight through the psychological $7,000 barrier before leveling off roughly $500 higher.

As is tradition, the propulsion brought the entire market in tow, with $20 billion topped onto the total capitalization in less than one hour. It should come as no surprise that Cardano (ADA), Stellar (XLM), and Zcash (ZEC) were within the top 10 gainers due to their potential to be listed on Coinbase.

So, why the jump?
From the technical side, Bitcoin completed an 
inverse head and shouldersreversal pattern on daily charts that began filling out in early June. Two past attempts to break through a key resistance level of ~$6,800 came to fruition yesterday with a massive surge in volume that was 2-3 times higher than levels seen since the start of July.

…. but lines on a chart aren’t enough to explain the sudden rally.Business Insider provided another explanation this morning, suggesting that a short squeeze led to the pulsation. For those at home: short squeezes occur when sellers scramble to cover their positions in the event of a price increase. That could check out given the significant of $6.8k.

Then there’s institutional money. There’s been a steady flow of whale money into the market during the decline, the most recent slab coming from Avenue Capital Group’s Marc Lasry, who invested 1% of his net worth ($1.68 billion) into bitcoin.

Granted, a sub $20 million purchase isn’t going to move the needle, but the news will likely bring out more enthusiasm for the market as a whole.

The bottom line: Timing market tops and bottoms is Fool’s Gold. With the downtrend that began on December 17th official breached, we might’ve seen the last of the low $6,000s.

Where’s Blockchain?

Sky High
Despite 30+ years of marveling at the Jetsons, the bulk of our mass commuting is completed on the ground. But that could all change if Boeing gets going with the 
flying taxis that they’re building with AI company SparkCognition.

You bring the wings, I’ll bring the blockchain
That’s at least how we think the foundations for Boeing NeXt were laid. With Boeing engineers covering flight and propulsion while Spark fuses blockchain into the navigation systems, autonomous taxis could become the real deal.

With NeXt hovering over a potentially $3 trillion market, lofty ideas are on the table:

  • Modeling smart cities to facilitate “urban aerial mobility”
  • Passenger-carrying hypersonic flight
  • Vertical and takeoff landing vehicles

Other ideas taking flight: Uber (expected by 2023), Rolls-Royce (early 2020s).

The big picture: There is a slew of logistical and environmental concerns that need to be tackled before flying taxis become a reality, but the technology is here. However, don’t expect them to hit NYC anytime soon – the first stop will be more open metropolitan areas like Dallas.

What Else You Should Read Today

Adoption

  • PundiX, an Indonesian startup simplifying the process of crypto payments and transactions, will deploy 5,500 devices across East Asian retail outlets next month.
  • Columbia and IBM launched a blockchain research center that will also contain an accelerator for the incubation of innovative projects from the broader community.

Blockchain Works (Site)

By The Numbers

  • Monday’s are for blockchain digital media, Tuesday’s are for blockchain insurance – the latter market is expected to reach $1,393.8 million by 2023 at a Compound Annual Growth Rate of 84.9%.
  • Spam transactions are clogging the Ethereum blockchain, with Vitalik Buterin estimating the costs to be about $15 million.

General

  • MasterCard filed a new patent that looks to increase the speed of cryptocurrency transactions.
  • Stellar received a stamp of approval from the Central Bank of Bahrain, meaning that use of it’s blockchain is acceptable under Sharia law.

Markets

  • The popularity of Augur’s prediction platform is growing, with over $700,000 currently on the table across 400+ markets.
  • There’s a new stablecoin on the Stellar Network called Stronghold USDthat is backed 1:1 by Uncle Sam and recently partnered with IBM for potential use on their private network.

Bulls and Bears

In the years following Y2K, stakes in digital real estate have exploded.The surge began with domain names in the Dot Com era and is now seeping into the world of VR through projects such as Decentraland.

In other words, we’ve warmed up to the notion that there is value in digital goods. That’s why blockchain identity company Civic’s recent acquisition of “Identity.com” is turning heads in the land of crypto: the purchase will expectedly bring greater attention to the industry.

More on Civic: The project aims to give users control over their data, allowing them to verify what personal info can be seen by companies. As former Shark and Civic CEO Vinny Lingham notes on Identity’s website, Civic long-term goals have the following objectives:

  • Decentralized identity ecosystem
  • Eliminate costs and efficiencies of ID verification
  • Improve user security and privacy
  • User-friendly experience
Well, this is awkward: it turns out Coinbase did not receive an endorsementfrom the SEC or FINRA to acquire the companies it’s targeting for the trading of security tokens after all.

Conversations between the exchange and regulators have been informal, with a Coinbase rep noting that their prior statement was incorrect given the fact that the “SEC was not involved in the approval process”. Likewise, FINRA’s spokesperson opted for the “no comment” route.

That begs the question…
Were we 
catfished? I had an exchange on Twitter yesterday with Frank Chaparro about the current state of the market, and it seems like folks are overly thrilled about bitcoin punching through $7k.

The enthusiasm is appreciated, but it feels like the positive sentiment that could’ve stirred the bulls from their slumber came from fundamentals that remain TBD:

  • A Bitcoin ETF *could* be approved on August 10th
  • Coinbase *may* list up to 5 assets
  • BlackRock *might* be eyeing crypto

And now, add ‘Coinbase *may not* have the go-ahead from the SEC and FINRA.

As for the bitcoin ETF: We’re not expecting one to be approved come 09/10. The reason? Custodial solutions are still being ironed out… and ETFs hold underlying assets.

The SEC has all the time in the world to green light an ETF – signing off on one while custody is on the operating table seems far-fetched.

Education

Cash Drag
After yesterday’s running of the bulls, it feels appropriate to bring up an old tweet thread from Ari Paul on, 
as he calls it, “the weird and wonderful effect of cash on a hypervolatile portfolio.”

Here’s the deal: While having a cash allocation may limit your upside in the event of a bull market, it has serious perks in the event of a correction.

Dragging in some numbers
Imagine you have a $1,000 portfolio that is 60% crypto ($600) and 40% cash ($400).

If crypto were to rally 100%, your new portfolio would be $1,600 with a 75% crypto ($1,200) and 25% cash ($400) split. Another 100% crypto rally would lead to a $2,800 portfolio of ~86% crypto ($2,400) and ~14% cash (still $400).

  • Cash drag effect: Your portfolio will capture a larger percentage of crypto rallies as it’s allocation size expands.

If crypto were to fall 50%, your new portfolio would be worth $700 with a ~43% crypto ($300) and ~57% cash ($400) split. Likewise, a second 50% drop would result in a $550 portfolio broken out by ~27% crypto ($150) and ~73% cash (still $400).

  • Cash drag effect: Cash helps weather further downside as it becomes a larger percentage of your portfolio.

Ari’s suggestion: Have a “meaningful” cash allocation, and rebalance after a significant crash (cash → crypto) or massive rally (crypto → cash).

 

THAT’S ALL FOR TODAY!

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