Weekly Update Diversification Protocol Week 14 - Multiple 0.73 - Undervalued - Long Term Extremely Bullish - 100% In BTC - Living Off Gold

Today will be the second weekly update of the Diversification Protocol. This protocol is designed to allocate a weekly income or funds to be invested mostly to BTC when it is undervalued and mostly to gold and optional stable coins when BTC is overvalued. It also tells you to spend gold for living when BTC is undervalued and BTC for living when it is overvalued. This will create higher returns on your investment through a full cycle and reduce stress in a bear market. HERE you can read the protocol in dept.

The valuation is done by using the Mayer Multiple and compare it to historical values. The Mayer Multiple is the current BTC price divided by the 200 day moving average. We use data from mayermultiple.com. When you want to be updated on the multiple several times a day you can follow THIS twitter account.

Because I just started the protocol, I didn't accumulate gold and stable coins yet. In this update I will exactly follow the protocol, but since I only start saving gold and stable coins from a multiple of 1.6, I will only be able to execute it 100% according the rules after that point is broken. Funds invested in BTC today will eventually at least partly be converted to gold, since the BTC accumulates in the same wallet and a percentage of the total BTC in this wallet will be allocated to gold at higher valuations.

The current multiple

Weekly allocations of funds

The protocol will be slightly boring till we get to a multiple of 1.6, till then we allocate 100% in BTC because it is undervalued. With the current 200 day moving average we need a BTC price of over 15.198 USD to start allocating to gold and Stable coins. This can take days or months, but it is good to be prepared already.

Important news of the week

Price was extremely stable this week

The price didn't move much this week, it rose slightly from 6988 to 6997 USD. After the huge crash I see this stability as a positive thing, it will take some emotion out of the market and bring some common sense back. There were no big bullish or bearish events to give the price direction this week, but overall I saw some signs that might be bullish.

The price was relatively stable this week

The market will soon have to choose direction

As you see on the chart below, the price action is narrowing between the upper downtrend resistance line and the long term support. Soon the market will have to decide direction and I think it is quite crucial. When it breaks to the upside it might be the end of the downtrend and when it breaks down it could signal a 2014 like bear market and we can get a slow and long downtrend before we can go up again. Let’s see what happens, when you can HODL with a long term vision it doesn't really matter!

What will be the direction?

Eclair Android Lightning mainnet wallet available

Since this week you can use Lightning on your mobile phone! The wallet is in the app store and ready to download. At the moment you can only send payments, to receive securely a watch tower system is needed, this will be implemented later.

Soros and Rockefeller come to crypto

Yesterday the news came out that the head of Soros investment office received permission to trade cryptocurrencies and today the news came out that Rockefeller also will get involved. This can be seen as positive (billionaires that enter the market) or negative (both have a really bad reputation). I think it will be positive for the short time, because it doesn't make sense to short an undervalued market, but negative long term because manipulation will probably increase.

Read the news about Soros

Read the news about Rockefeller

And HERE is my own post about this subject.

ETF back on the table

The SEC is considering to approve a Bitcoin ETF that is filed by Proshares. This ETF will enable investors to go long or short on BTC on the regular stock market. This ETF will be backed by BTC futures contracts, so no real Bitcoins will be held. However, via arbitrage it will influence the spot price.

Read here the official paper of the SEC

Tax season could be a reason of the bear market

Tom Lee thinks that the downtrend is almost over, because selling pressure will decrease after the 17th of April when the tax season in the USA comes to an end. It is estimated that American Bitcoin traders ow the IRS around 25 billion USD. Even if only one percent pays their taxes and cashes out their BTC to dollars to do so, 250 million dollar will hit the market. This analyse makes a lot of sense to me, since the bear whale only dumped 130 million dollar.

Fundamentals and valuation

In the history of BTC the multiple was lower than today only 10% of the time. Since the multiple today is 0.73 while the moderate is 1.58, there is more than 50% discount on BTC according to this valuation method! The price is relatively stable now and some decision is expected soon.

Long term the prospects are still extremely bullish. Lightning Network can boost adoption for day to day payments and Wallstreet, governments and central banks could inject huge amounts of money.

Disclaimer
This is no financial advice, just my view on the market.

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