Twisted Nerve
Market Report: 29th Oct. 2018 — Subscribe to our newsletter.
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CRYPTO NOTE
The daily view from our desk
As the clocks go back, Ja Rule spent his extra hour in bed thinking of ways to get even with 50 Cent. Ice T, on the other hand, reminisced about the least gangster crime in hip hop history. If you spent your time wishing there was a religious version of PokemonGo, then your prayers have been answered. Or maybe you just did this in Red Dead Redemption.
TWISTED NERVE
Cleaver. Cleaver. Chop. Chop. First the bear and then the pop.
Bitcoin’s price action continued its unnerving path, treading on the lowest weekly volume since November 2016 — the accumulation time that preceded last year’s bull run. In the beginning of October, a Bloomberg report argued the current stability is an omen for bears who are keeping a tight grip on BTC’s incredibly dense trading range — which saw a £80 ($100) spread last week. What does this mean and how can you look out for a reversal?
Mike McGlone, Bloomberg’s Senior Commodity Strategist, explains that bitcoin’s volatility tends to reach new lows when it finds a price bottom. In 2015’s example, its 180-day volatility almost saw a new low of 40% in October — when the bear market ended. Now, it should fall below that level before price can recover. Volume is another leading indicator and it bottomed in Jan. 2015 — just two weeks before that year’s low.
WHAT A METRIC OBSERVES
“One does not simply turn a bear market around without sufficient velocity”
As usual, the question is always distinguishing a local extrema from an absolute. That way a sustained reversal of those two metrics above is needed before price can follow. In the meantime, note bitcoin’s current 90-day volatility is already around 42%, and you can follow it on Basil Bayati’s excellent Sifr Data website. Also note this measure should be calculated with log returns. Another great portal to check is Willy Woo’s Woobull.
Curiously, the inventor of Bitcoin’s PE ratio just updated all his charts last Friday and argues the NVT ratio — which measures the network’s transactions value to its market cap — says we’re still in the middle of the bear market. But that Bloomberg report remembers such metric is less useful if Bitcoin is now used to store value instead of transferring it — something which Willy also acknowledged today while analysing its low velocity, even if he believes the quantity of BTC moved around must increase before the bulls show up!
WHAT TO LOOK OUT FOR
Filter the noise and stay ahead of the pack
▪ Your Friendly Goomba notes Bithumb, Korea’s largest exchange, is now also the number one market for Bitcoin and Korean Wan trading now accounts for half of the volume.
▪ Are you tired of looking at boring charts? The Trading Room suggests an automated moving average strategy to trade alts based on the past week’s market conditions.
▪ Bitfury, a mining hardware manufacturer and full service blockchain tech company headquartered in Amsterdam, is considering to go public. Check its IPO details here.
WHAT TO READ TODAY
An insight a day could give you more profits to play
▪ Delighted with Initiative Q’s referral system? The FT’s Jemima Kelly provides an excellent overview of the “elementary pyramid scheme with grandiose ideas”.
▪ The great Cambrial Capital team participated in Multicoin’s Summit last week and summarised the key takeaways from six of the exclusive talks for you and for the world.
▪ Last Thursday’s Bloomberg Ideas event hosted three great economic and tech writers — Matt Levine, Tyler Cowen, and Elaine Ou — to debate whether “crypto is welcome here”.
FOUNDATIONAL TRIVIA
Because the building blocks of crypto needn’t be irrelevant
Velocity is a concept associated with the Quantity Theory of Money. In the world of cryptoassets, it can be simplified to the average number of times a given coin or token is moved, i.e. spent or transferred over a blockchain, in a certain period of analysis.