Fundamentals Report 11/8/19 #62

11/8/19  |  Issue #62  |  Block 602,904  |  Disclaimer
~188 Days Until Halvening

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TOP STORIES

Quantum

Quantum computing is quickly becoming the next great FUD campaign in Bitcoin. At the beginning of the last great bull market in 2015 we saw the emergence of the scaling FUD. The merging of BIP101 into Bitcoin XT’s code base was the start, and it lasted for almost exactly 2 years. This time around, the thing destined to kill bitcoin, instead of the block size limit, is quantum computing. Just read this articlethe “expert” is essentially saying networks need hard fork governance.

As I learn more, I’ll be addressing this in the weeks to come, but suffice it to say for now I’m not worried about quantum FUD. Power requirements as a percentage of the world’s total output will be the ultimate safe guard for bitcoin, and for the time being, quantum computers are about 1% of the way to threatening bitcoin.

Payments

I have a quick headline for you on Bitcoin payment use. It seems “Italians apparently prefer Bitcoin over Visa or MasterCard for online payments.” In a recent survey, Italian claimed they liked Bitcoin 3rd most as a payment method, behind PayPal and the Italian PostePay. This is interesting because Italy recently experienced banking crisis and political upheaval in 2018.

FBI and Homeland Security Talk Tough

In a hearing of the US Senate Committee On Homeland Security And Governmental Affairs, Mitt Romney asked about the “cryptocurrency” threat to Homeland security. The FBI Director quickly answered, that cryptocurrencies are a “significant problem that will get bigger and bigger.” He went on to say, “We’re looking at [cryptocurrencies] from an investigative perspective including tools that we have to try to follow the money.” 

I simply want to point out this is the same government wanting you to be scared into reporting your bitcoin holdings on tax forms, with the implicit threat that they are able to find your stash of bitcoin and go after you. As we see with the FBI and Homeland Security, are much more technologically advanced departments, they can’t do it effectively and are still “looking at tools”. Completely contradictory stories.

This is a soft kill technique. Implied threats and creating worry in the minds of holders or possible future holders. This is garbage.


PRICE

Weekly BMI |  2 : Bullish 

If you were signed up for the Bitcoin Pulse, my 3x week price newsletter, you wouldn’t have been surprised by today’s sell off. Get 12 issues a month for $10 through Patreon.

Time to get bullish! Over the next 14 days I expect the price to recover to resistance and break out of the channel to the top side. The end of the year might be filled with $10,000 headlines.

Price tried but failed to hold the 200 Day Moving Average (blue), and currently bouncing off of the 50 (orange). I believe it’s likely to hold and make our way back up to the top of the channel. However, if we do close below the 50, something is drastically wrong, and we would likely see more down side. Unlikely scenario though.

BTFD

Bitcoin price chart

MINING

Yesterday, miners saw the first significant difficulty decrease since 2018. It makes sense if you are aware that hash rate follows price. While some miners can borrow to fund operating costs and are stacking coins already in preparation for the deflationary spiral of the halvening, marginal miners do not have that luxury. Small miners are the margin and are much more price sensitive.

In a stagnant market, increasing hash rate is bearish. It increases supply of coins on the market, because coins are found more quickly, but finding them is more costly, leading to miners selling more to make ends meet. A difficulty drop like we saw yesterday is bullish.


ALTCOINS

Altcoins are a mess right now. The altcoin casinos, otherwise known as shitcoin exchanges, are pulling out all the stops to get revenues up. In a tweet yesterday I called it, “Morally bankrupt altcoin degeneracy.” Now we are seeing exchanges like Coinbase, offer Proof of Stake rewards for holding those coins with them. While this isn’t an outright scam, staking rewards sold as “passive income” or Proof of Stake sold as a viable replacement to Proof of Work, is a scam. Coinbase is well aware that these solutions are disastrous. The model has changed from trading fees to staking fees, but it will likely earn them relatively little.

DAI

The powder-keg that is MKR DAO keeps growing, now topping over $339 million in ETH locked as collateral. It’s stunning to me that people can’t see this as being no better use for all that ETH than to sit as collateral for a stablecoin. It’s perverse. I don’t know which is more likely, that a major bug gets discovered in MKR or the ETH price grinds down.

Chart

The chart below is by @Woonomics. He states that to investors, there are two types of altcoins, Oscillators and Degenerators.

“The vast majority of alt-coins are Degens. Their price chart has a measurable half-life, like radioactive decay.”

“A handful are oscillators. Oscillators are proving SoV properties.”

“[An oscillator] must oscillate around a horizontal line, for at least one full bull-bear cycle (around 4yrs).”


MISCELLANEOUS

Below is redemption data for Casascius physical bitcoins from casascius.ludvigart.com/value/. These physical bitcoins were created from 2011 to 2013 and have a private key embedded in the coin. Most coins trade at a premium so hodlers are not incentivized to redeem them; however, you can see a spike in redemptions at the peak of the 2017 bull run. An interesting fundamental metric to watch.

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A