The Fundamentals Report #69 – 12/27/2019

12/27/19 | Issue #69 | Block 610,062 | Disclaimer
~138 Days Until Halvening
.776 on the Mayer Multiple


TOP STORIES

YouTube Crypto Purge
We now know what caused the out-of-the-blue take-down of a large percentage of Bitcoin related content on YouTube this week, a YT glitch. The backlash and uproar we saw over the last few days was pretty amazing. People were jumping to all sorts of crazy conspiracies. I’ll admit my initial reaction was BSV trolls reporting a bunch of content producers. My second thought was the take-downs could be a backlash against promoting certain ICO scams the SEC or other agencies recently updated on some secret ban list.

As the days went on however, it became more likely it was a mess up on YT’s part. In my member newsletter yesterday, my list of possible reasons were:

  • Unintentional sloppy algo by YT
  • Intentional algos enforcing new regs
  • Continuation of YT crackdown on alternative media
  • Scammer crackdown

I think this puts a glaring spotlight on the news drought in Bitcoin, we are making our own news with our drama. Let’s calm down and refocus on the halvening narrative. ETH2.0 Might Redefine Ethereum as a Security, Again
In a new blog post from Grant Gulovsen, Ethereum 2.0’s New Consensus Protocol: “Proof of Security?” he details how moving to ETH2 could create the completely weird scenario of it turning back into a security.

The legal analysis centers around the Howie test and Proof of Stake. I just giggle when I think of how many things are wrong with Proof of Stake now.

  • Makes ETH a security
  • Block rewards and network security will compete with lending market
  • Will it ever even launch?
  • Closed security, no external anchor
  • The act of hard forking so many times ruins decentralization and monetary value

Congressmen Press the IRS for Clarification
It seems bitcoiners have some friends in the US Congress. Many have been predicting that bitcoin works on the individual and the group level, so it’s expected that some politicians and bankers own bitcoin and will have incentives aligned with bitcoiners.

8 members of Congress are looking for clarification on tax treatment of forks and airdrops specifically. I’d love them to ask if the virtual currency in mandatory or if it could fall under the Fifth Amendment.


PRICE

Weekly BMI | 1 : Slightly bullish

The mid-line of the channel and the $7400 level are offering a lot of resistance to the price. However, we are continuing to press against these two important resistance levels and not getting totally rejected back to the bottom of the channel, which I interpret as a bullish sign.

Also, on the chart you can see the 20 day EMA (blue) and the 50 day EMA (purple). The price has been kept below the 20 and bounced off the 50 when we did break through a little bit. If the price can break the 20, the $7400 zone, and the mid-line of the channel, I think we could move quickly to the top of the channel.

The other option I see is continued sideways. I think most of the downward pressure in the price has subsided for the time being. Big support in the high $6ks and low in sentiment in the industry as a whole, makes a price increase the contrarian call.

Get more price and technical analysis on the Bitcoin Pulse newsletter for members.


LIGHTNING

BitMEX launches a cool new tool to track Lightning Network penalty transactions as part of their ForkMonitor site. These are LN channels that are closed in a non-cooperative way. In the future, non-cooperative closures and attacks of this nature could become more common and start to be a problem. There’s a lot of work happening around this concept and is the focus of a proposal called Eltoo.


MACRO

The Dollar takes a tumble. Today, the DXY dropped to 96.92 in the largest downward move since August. The move in the DXY was accompanied by a move in gold, breaking out above $1500/oz

This is a broad multi-currency move, but not all currency crosses with the dollar are affected, like the USDJPY, and most individual crosses are not showing the same level of move as the DXY as a whole. Another interesting issue is the Christmas wick. The DXY crashed in illiquid trading, only to resolve itself quickly to unchanged in that session.

What’s going on here? It seems as though there’s a targeted effort against the DXY to push it down and not individual crosses. There’s Herculean efforts happening in the repo markets crescendoing into the New Year. I suspect the mass amount of liquidity is being used to suppress the dollar directly, because a strong dollar is extremely negative for all economies in the world right now.


MISCELLANEOUS

Today’s bonus chart is from ByteTree.com of First Spends. First spends are spends of coins awarded to miners. Currently there are 12.5x6x24 x7 (week) = 12,600 coins created per week. The difference between 12,600 and the 13,000 Generated coins on the chart is fees.

As you can see there was a dramatic increase in the 1 week moving average in first spends on Christmas. This usually signals there is some selling about to occur as miners are moving their coins to liquidate and pay their costs. This is could also coincide with the end of the year, to pay yearly costs. This could be the reason that the price had difficulty breaking some of the resistance zones over the last few days.

Thanks,

A