2019 Market Update 003 - February In Review
Major News:
Exchanges are leveling up
Coinbase integrates with TurboTax
Robinhood receives Bitlicense
Binance allows buying crypto with credit cards
Gemini passes SOC 2 security audit
tZero now trading security tokens
Abra launches BTC-based stocks
Fortune 500’s go crypto
J.P. Morgan announces plans for JPM coin
Apple working on supply chain Blockchain
Facebook plans stable coin launch soon
ETFs are making progress
SEC reviewing Bitwise ETF expected decision April 1st
SEC reviewing CBOE ETF expected decision April 5th
Institutional money is entering the game
University of Michigan invested millions in crypto fund
Morgan Creek secures Public Pension investments
Pantera raised another $125M despite bear market
AskFigure raised $65M despite bear market
Crypto technology, usability, and competitiveness is making leaps
Major networks like Bitcoin and Ethereum have surpassed new all-time highs in the number of daily active wallets, daily transactions and transaction volume. (See image)
The lightning network has hit significant adoption this month as the lightning torch (a social experiment) was sent between over 140 individuals across 40+ countries, incurring only cents in fees, a task that would have racked up thousands of dollars in wire fees and months in transaction time.
This symbolic experiment attracted major players such as Jack Dorsey, CEO of Twitter and Square, who is working on integrating bitcoin with twitter.
The first community Lightning network implementations have hit the market, allowing you to tip other twitter users fractions of cents at no cost, ordering Dominos Pizza, or yes, buy a cup of Starbucks coffee. Bitcoin has thus proven to be both a preferable player for large transactions and micro transactions
Ethereum successfully completed Constantinople Hard Fork, allowing better scalability.
Samsung Galaxy S10 includes private key storage
The bottomline: The temperature in the market is starting to heat up. Usability of digital assets is becoming more undeniable by the day, and major institutions are starting to wake up to this idea, as is seen not by news headlines, but by cold hard cash that they are starting to invest. We stand with conviction behind that this is the period to accumulate, increase crypto count, and double down.
Our Past Predictions and Performance
As we predicted in our Market Update 001-002, the markets have continued on a sideways path this past month. While we saw some rallies for the first half of the month among top 20 digital assets, the rest of the market continued on a decline. This is a pattern reminding us of the early 2017 market phase where major coins tended to lead, often followed with a month delay by the smaller coins.
Our Macro Prognostic has accelerated to the Mid Term tier, but remains the same:
Short term (next 6 months): “The markets are likely sliding lower during this period due to fund liquidations, lay-offs in the industry, and project shut downs. We target Bitcoin at around $2,500. We will use this period to day trade, with less than 5% long term allocations. This will allow us to have returns that are less correlated to market performance, meaning we are more likely to turn a market down month into a winning month for the fund.“ This phase is considered completed, based on current technical indicators. We maintain a significant cash position to short the market should a new relative low be hit.
Mid Term (February till October): This is the period when trading volumes will likely start going low, and many projects will have failed. This is the ideal time to start looking for the projects that are still working hard despite the financial pressure. At this time we will start strategically buying into quality projects whose prices got decimated during the market sell-off, but are still progressing fundamentally. We will also continue day trading taking advantage of side-ways market strategies, as well as keeping a lookout for breakouts.
Long Term (October onward): The return of the bull market. Based on past similar market cycles, from the Bitcoin bubble in 2014 to the Tech Bubble in 2000, and the recession in 2008, most of these markets return to their next bull run after 600-800 days. Since we are nearly 460 days into the bitcoin bear market now, this timeline is closer than we think. Hence we believe by year end things are very likely to start going up, and when things go up in the Crypto space, they go up dramatically.
Technical Prognostic
The 2017-2019 market cycle is becoming more and more eerily identical to the 2013-2015 market cycle.
Compare the following chart of 2013-2015...
... to the chart of 2017-2019...
... so far each phase has performed more or less identical to how it performed the last time, from how many weeks each phase took, to how much it dropped.
We have now reached the point where the price is being carried by the 200MA on the weekly log chart, yet suppressed by the 20MA. Fancy terms aside, what this essentially means is that we are looking at a high probability that this is the bottom, and that we will be going sideways for another 30 weeks or so. Knowing this is key, as it allows us to fine tune our strategy which leads us to...
Management Strategy Update:
We believe the likelihood is high that we have hit the bottom, and will be going sideways for the next 200 days. What we experience in this period is a lot of sideways volatility, which can either be massive opportunity or death by a thousand cuts when using stops. Of course we are seeking the opportunity in this. Starting March 1st, we will begin a 200 day accumulation phase as we accelerated into phase 2 of our prognostic. This means that we are cost averaging from a 0% allocation towards a 100% allocation over the next 200 days. Not only does this allow us to slowly increase exposure, but also pick up cheap discounted coins daily and take advantage of random drops. On top of this we stay vigilant, ready to short the market, should we drop to new lows, allowing us to hedge the drop, and continue our 200 day accumulation at lower prices which is a positive more than anything else.
These positions will of course adapt over time, but they are based on taking a deeper look into similar market cycles and taking a lot of predictable catalysts into account.
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