Fundamentals Report #81 – 3/20/2020

VITAL STATS

Block 622,319
Day until halving: 53
Mayer Multiple: 0.760
Est. Difficulty Adjustment: -13% in 5 Days
Prev Adj: +6.9%
Weekly price H/L: $7230 / $4394
Sats/$1 USD: 15,571
Disclaimer


MARKET COMMENTARY

Lock downs are spreading across the world. California and NYC are now in lock downs. Italy has devolved into martial law as their death rate from the China virus passes China’s (fake) official numbers. France is enforcing restrictions, borders across the EU and North America are closed. All this in an attempt to lower social contact and the spread of the virus.

Mandatory lock downs are not the answer. We don’t need the jackboot thugs to step on our necks like in China. Let the market solve problems and get out of the way. Trump has reached out to the private sector because that’s who solves problems. Hopefully, they slash regulation. However, the damage may have already been done. Recent reports are the FDA and CDC stood in the way of hospital testing and hospitals sourcing their own PPE. In a sad, but typical, display of Statism, the men that 3D printed ventilator clips enabling multiple people to use the same ventilator, directly leading to lives saved, have been sued for patent infringement.

There’s a great synergy to recent technological developments in their ability to combat pandemics like this, without government interference. The internet for communication, 3D printing for local manufacture, drone delivery for social distancing and bitcoin for germ ridden cash along with being the best price medium ever invented. All these things have amazing potential to help in this kind of crisis. The government just needs to get out of the way.

We must deal with the reality where we find ourselves, threatened by the State if we go outside. We must do what we can under the circumstances. Stay healthy and safe, look for alternate sources of income, help others where possible, and be understanding of those who’s world views are being destroyed. Speak out about non-government solutions and the benefits of freedom (and bitcoin).


TOP STORIES

EARN IT: The US Anti-Encryption Bill That Threatens Private Speech Online

Historically, during uncertain times filled with panic, governments seize the opportunity to implement rules that previously garnered little support (see the “Patriot” Act). The “EARN IT” Act is a bill being reviewed by a judicial committee that opens the door to criminalize encryption, which is an attack on privacy and free speech. They claim the bill is to combat child sex abuse material. With that intent, why do they simply not arrest the criminals in the CSAM rings? 

US Treasury Secretary Steven Mnuchin Appoints Coinbase Chief Legal Officer to Oversee Banking System

Even the bitcoin-hating Mnuchin is tapping bitcoin related talent. Bitcoin has infiltrated so completely into the minds of those in important positions, it will be the center of the next Plaza Accord when it comes. And it’s coming soon. 

Fed Expands Bailout Facility To Muni Bonds After Market Meltdown

The Fed is attempting to buy everything to save asset prices from crashing to unimaginable levels. They are buying bad Treasuries, bad foreign debt through currency swaps, bad Corporate bonds, and now bad Municipal bonds. This is while they are pumping Trillions of dollars worth of liquidity and asset purchases through REPO and QE. And don’t forget, the Fed funds rate is at 0%. Markets are still sliding. Total devastation.


PRICE

Weekly BMI |  2 : Bullish 

What a crazy couple of weeks. The price has somewhat recovered from its horrific drop last week, retracing 78% of the Mar 12th drop. The next week or two will likely see a slower advance. After all the doubters writing stories and drawing conclusions about bitcoin’s safe haven status from the dip, they will have to change their tune. Bitcoin will continue to be uncorrelated as it has been the last 10 years. It will march forward as all hell breaks loose in traditional markets.

There is a possibility that the price tries to form a bullish divergence on the daily chart. IOW a close below $4850 with a higher low on RSI. One aspect that makes this less likely is the spread on that specific close across exchanges. The $4850 number comes from Bitstamp and Coinbase, while Bitmex has a daily close on the 12th of $4350.

Most likely bitcoin will decouple from stocks and hold firm around these levels. The halving is a very special and unique event to bitcoin, and in this time of uncertainty and panic in every market, bitcoin will become attractive for it’s simplistic properties. As I tweeted this week, “Bitcoin is a pristine asset. Pure, untouched, fixed supply, new tech, unlimited potential. People will start seeing bitcoin as we do. #Bitcoin is the lifeboat.”

Get more price analysis in our member newsletter the Bitcoin Pulse.


MINING

The mempool is growing slightly due to slower block times. In fact, the network has recently experienced its slowest block times since the scaling conflict and blocks are manageable.

There’s some talk about mining in general, because this next difficulty adjustment is estimated to quite negative at -13% right now. However, price is recovering which will help that marginal hash rate to come back. Along with that, energy prices are cratering, so much of the hash rate will find their energy costs decreasing quite a bit. Overall, mining is stable and acting as designed.


ALTCOINS

ETHEREUM

Ethereum’s price is acting like a typical altcoin scam. Its gains against bitcoin come in spurts of a week or two followed by months of sliding back down. Obvious insider manipulation, without which the price would continue down. On the recent sell off, ETHUSD revisited the bear market low, where Joe “the scammer” Lubin called a bottom. Ethereum is in panic, they’re learning the hard lesson that, it’s all about price and monetary properties.

ETH2.0 is flailing. There’s no end to the roadmap in sight. If ETH drops further, many in the community will lose hope and many developers will be forced to find other work. The project will shrink, delays will mount. This dip could be the death knell for ETH.

DEFI

On the Defi side of things, MakerDAO has been exposed. They lost 5.67 million DAI to their built in auction process that failed to take into account a clogged network which wouldn’t let through bids. 30,000 ETH were auctioned off at zero price. Typical ETH non-adversarial thinking.

To fix this failure, MakerDAO “voted” (really only 4 addresses controlled 84% of the vote) to print new MKR and DAI tokens. They’ve also decided to start using USDC as collateral in their system. Why they didn’t use tether, which is much more accepted, liquid and skirts more regulations, is unknown. Bottom line, the Defi dream has been exposed as fragile multiple times in the last couple of months.


MACRO

An absolute jaw dropping performance from the dollar over the last week. The dollar index versus other currencies ($DXY) has broken all resistance at 100, falling just short of 103 at 102.99. The size of this move cannot be understated. A stronger dollar is going to put the wrenches on emerging markets and even Europe.

Perhaps the Fed has done enough shadow currency swaps with other central banks to ease this rise to 103. The Fed knew it couldn’t be helped so they flooded the world with USD to pay USD denominated debt, then they let is rise and it blasted off to 103. This isn’t over, the Fed doesn’t have control. The most they can do is delay the inevitable dollar rise.

The rise will be volatile, but it is very likely to continue to higher and higher, until the whole system breaks down. At that time, we’ll see big inflation.

The upcoming Episode 208 is about this very dynamic. Stay tuned.


MISCELLANEOUS

The search term “Buy bitcoin” usually underperforms “Buy gold” globally, but on last week’s Black Thursday market crash, it flipped for a brief moment. A very interesting anomaly. It is also a great sign that both these term are on the up trend. Not necessarily a sign of market performance, it is a sign of changing attitudes toward fiat money!


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