Today is the 24th 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 until 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 12,343 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
Lightning hardware nodes coming available
The Lightning Network is still growing fast and the infrastructure is improving. Casa HODL, a Bitcoin custody company worked secretly on a Lightning hardware node and released it last week. The device contains a Bitcoin full node and a Lightning node on top of it, all the software is pre-installed. The device cost 300 USD and the first batch was sold out within a few hours. Also pre-orders for the next batches are selling fast, the product is very popular on arrival.
This is extremely healthy for the Bitcoin and Lightning network as wel. A bigger count of full nodes will improve the decentralisation and anti fragility of the network. When more players come out with a hardware nodes the node count will probably explode because there is finally financial incentive to run one.
The Goldman Sachs news
The Bitcoin price tanked after the news came out that Goldman Sachs will put their plans for a crypto exchanges on hold. Because of the high amount of leveraged short positions the price lost more than 1000 dollar in a wenk of an eye. Later Goldman denied this news, this caused a lot of speculation about manipulation.
The price of Bitcoin dropped this week
The Bitcoin price tanked from 7247 to 6331 this week. A big drop happened within 24 hour and accounted for the entire loss of the week. We are closed to the recent bottom again, if we manage to bounce it will be the 5th time. Altcoins are still trending down while Bitcoin bounces on the 6000 level every time. The Bitcoin dominance is already above 55%. We approaching the end of a huge triangle, so a big move soon is very likely. Let’s hope it will be to the upside!
Fundamentals and valuation
In the history of Bitcoin the multiple was lower than today only 16.89% of the time. Since the multiple today is 0.82 while the moderate is 1.53, there is 46.41 % discount on BTC according to this valuation method!
Long term the prospects are still extremely bullish. Lightning Network and Segwit adoption are still growing and improving faster than expected and can boost adoption for day to day payments, micro transactions and Lapps. Wall Street, governments and central banks are on the sidelines to come in and could inject huge amounts of money. Furthermore, the Mt. Gox selling fear is off the table, Bitmain can’t dump much more bitcoins and an ETF is coming closer. Short term sentiment is neutral to bullish, but for the long term almost everything is very bullish.
This is no financial advice, just my view on the market.
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