Fundamentals Report #97

July 10, 2020  |  Issue #97  |  Block 638,651  |  Disclaimer

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Vital Bitcoin Stats

Weekly price:  $9221  (+$148, 1.6%)
Mayer Multiple: 1.09
Est. Difficulty Adjustment: +10% in 2d
Prev Adj: +0.00
Sats/$1 USD: 10,844
1 finney: $0.92


Market Commentary

There is some anxiety in the bitcoin space at the moment. A general bullishness about bitcoin is being tempered by a concern over the return of scammy behavior and a bearishness about the economy. People everywhere are growing uncertainty of exactly what a transition away from the decrepit debt-based system to a more sound money system will look like. In other words, what the coming financial reset will look like, and exactly how it will affect our lives.

Another source of uncertainty is the pseudo-finance space (AKA Defi). Years of effort has gone into rebuilding the narrative around Ethereum, which is the only hope for pluralists and blockchain advocates. Centre, the issuer of the stablecoin USDC, froze and confiscated $100,000 worth of USDC. Their announcement proudly boasted about their compliance and ability to freeze their coins. This brings up major questions around other projects which might have USDC "locked" in smart contracts. We know they have developer backdoors and finally people are starting to realize this is a significant weakness of pseudo-finance.

One thing that looks very conservative and stable in this time is plain vanilla bitcoin. Its simple elegance and blue-sky growth potential is the still the safest investment in the space.

OTHER TOP STORIES

COINBASE
Exclusive: Crypto exchange Coinbase readies landmark stock market listing, sources say
This would be a giant development for Bitcoin, not because Coinbase is a great company, but because it will add legitimacy in the eyes of marginal investors. They haven't filed with the SEC yet, the rumor is they've been talking to investment banks and law firms.

Something to note also is that IPOs are venture capital exits, or at least a portion of that value will be freed up to be reinvested into bitcoin, other businesses, or scam coins.

BUG
Researchers have discovered a Replace By Fee (RBF) vulnerability present in some bitcoin wallets
Effected wallets include Ledger Live, Edge, and BreadWallet. Check with your wallet software provider for updates.

INSTITUTIONAL
$190M Bitcoin fund tied to former ‘Sheriff Of Wall Street’ launches for institutional investors
Bitcoin is quietly growing like a weed in the institutional investment space. New York Digital Investment Group (NYDIG) filed a second new fund with the SEC. Their two funds now total over $300M. It's not known if they are solely investing in cash settled Bitcoin futures on CME, but the large sum leads us to believe they will have an allocation for physical bitcoin as well.


PRICE

Weekly BMI |  1 : Slightly bullish

This was a crazy week for price. It is slightly higher than this time last week as predicted. Halfway through the week, it looked as though we were about to retest $10,000. Then it abruptly turned to test support. Overall, not a big surprise and within the trend we've identified.

Volume on spot exchanges has bottomed out, back to the low levels at the beginning of the year. That period saw a range bound consolidation as well that broke to the upside. The first 6 weeks of the year saw bitcoin rise from $7200 to $10,400 before being derailed by the March crash. Starting from a higher foundation, price could break out of the $10,000 resistance this month on its way to test the 2019 summer highs at $14,000.


Mining / Lightning

The lightning network is chugging along. Several big developments have recently been launched, including Strike by Jack Mallers and Zap. That feature allows people to spend dollars in their bank accounts and the store receive bitcoin over lightning network. Protocol development also continues to tick forward, but you wouldn't know that by looking at the public numbers. Remember much of the growth of Lightning Network will happen in private channels going forward.

This week saw some attention paid to a specific attack against funds on the lightning network. In this type of attack the attacker causes a mass panic of sorts to cause many people to try to close their channels simultaneously. That will clog the underlying bitcoin network and create a window of time in which the attacker can possibility steal the funds.

This attack has been known about and highlighted as early as 2015. There's no obvious solution other than to not panic-close your channels. Perhaps a back up node where you can send funds could be a solution to any panic about your balances. Instead of closing your channels, users could send their bitcoin to a safe location still on the lightning network.

MINING
Hash rate on the bitcoin network is spiking. The mining sector is extremely healthy and showing strong fundamentals for price as well as industrial type investment. A large expansion in the bitcoin mining industry is beginning right now.

The expected increase in difficulty is 9% in 2 days, hitting an ATH, despite price being relatively range bound and still significantly below the 2019 price top.

The use of Segwit type transactions is starting to increase again. This is a good thing, because SW transactions are smaller in bytes meaning more transactions can fit into a block and transaction throughput is increased. Since fees are caluculated by satoshis per byte, SW transactions are also cheaper.

This transaction type has been available for 3 years, since the activation of Segwit in 2017, but several important businesses refused to use them for immature political reasons. Two of these companies are BitPay and Blockchain.info, the former is a payment provider and the latter is an early popular wallet.

The reason for the recent increase in SW transactions is likely that BitPay finally succumbed to their bottom line, using SW transactions to save on fees. Blockchain has yet to drop their childish boycott of these transactions.


Stablecoins / CBDC / Altcoins

Tether Dominance : 9.6% (-0.9%)

The Tether Dominance is shrinking slightly, similar to the Bitcoin "Dominance". The upward trend in Tether Dominance should reemerge as the PPP juiced rally in altcoins subsides. If an altcoin rally leads a bitcoin rally (unlikely in our opinion) tether supply will spike in the intervening switch.

This week we witnessed a new form of pump in the altcoin market. Users of TikTok began taking to the app to pump Dogecoin with the state goal of getting it to $1. For those unfamiliar with Doge, it was started by Jackson Palmer as a meme coin, specifically to be fun and lighthearted. It's once again living up to Palmer's original vision. The price of Doge spiked, doubling in 24 hours.


Miscellaneous

We wanted to include this google trends chart comparing Bitcoin, stocks, and gold. The March bump is noticeable in all three, but gold surprisingly show much higher levels of interest than the other two. Eventually, bitcoin will be squaring off versus gold, but it still has a ways to go. Also, surprising in the how low the search term "stocks" is relative to bitcoin. We looked at a couple variations, and the results were roughly the same.



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Written by Ansel Lindner and Jeff See

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