5 things I learned in crypto this week: 12 - 18 November
I think I speak for many when I say it’s been a really tough week in crypto. Principally, we lost crucial psychological support in BTC, which triggered another bleed-out across the market and likely extends the bear market into 2019. Moreover, the wasteful hash war between BCHABC and BCHSV, Craig Wright’s claims that every coin other than his own is doomed and the beginning of a likely slew of SEC enforcements against ICOs mean it’s unlikely to be a merry Christmas in crypto. Can we go back to 2017 please?
In any case, I’ll try my best to find five reasons to be cheerful. Here’s what I learned this week…
1. A new look at pricing models:
I applaud Chris Burniske for the work he’s done in trying to define valuation models for crypto assets – it’s no easy task. In his latest Medium post, Chris explores quantitative pricing models, drawing the distinction between fundamental value models and relative pricing models. For the former he revisits the MV = PQ equation he used in his book Cryptoassets, and for the latter he covers emerging models such as NVT and MVRV. He explains why relative models will likely be more widely used than fundamental models for the foreseeable term, concluding: “Most asset-classes already have consensus on suitable quantitative models, but market participants continue to disagree on the inputs to those models. Right now in crypto we disagree on both the models and the inputs — hence the volatility.”
Link: https://medium.com/@cburniske/theory-follows-price-follows-theory-304ef97d1b71
2. The potential of prediction markets:
You would only need to look at my bio to guess one of the main applications of blockchain that has captured my interest. My admiration of Cindicator’s ‘hybrid intelligence’ model aside, I also pay close attention to the development of the Augur and Gnosis protocols. I was therefore salivating when I found this report by Circle Research on the current state of play in decentralised prediction markets. The report offers an even-handed account of what both projects (n.b. It also reviewed Stox, but I skipped that part) purport to bring to the crypto sphere and how they’re intended to function. It also assesses some of the key challenges and risks both face, including the limited scalability of the Ethereum platform and potential issues with regulators.
Link: https://www.circle.com/marketing/pdfs/research/circle-research-prediction-markets.pdf
3. Look out for the bullish catalysts:
Last week I promised you a podcast recommendation, and here it is. One of my favourite market analysts in the space, Alex Kruger, appeared on The Dog Pound podcast/YouTube stream to provide a macro overview of the current environment. He discusses some of the longer-term catalysts for bullish growth, including market narratives that can reinforce the case for BTC as a store of value such as the Van Eck ETF. He also touches on the topic of when we’ll know we’ve hit the bottom, which in his view is when the sell side of the order book visibly dries up. It’s also worth sticking around until the end of the podcast for Trader Mayne’s TA roundup.
Link:
- Is Binance set to rule the world?
I’m sure I’m not alone in finding The Block one of the most reliable and thought-provoking sources of news in the crypto space. This week reporter Larry Cermak (follow him on twitter at @lawmaster– he doesn’t hold back in calling out bs) wrote an in-depth piece on Binance’s rapid business expansion and future growth plans. He talks about the company’s ‘nimble’ approach to finding friendly regulatory jurisdictions and how this has provided a strong advantage over its more immobile competitors (e.g. Coinbase), which have had to be more cautious in listing new tokens. It remains to be seen, as Larry mentions, how this laissez-faire approach will be treated by US regulators. The article also discusses the company’s approach towards tackling malicious activity and nefarious actors on the platform, as well as plans to ‘become its own disruptor’ through creation of a DEX platform.
N.b. Also worth reading Amy Castor’s piece in the same publication on Binance’s approach to regulation: https://www.theblockcrypto.com/2018/11/16/fast-footwork-binance-has-danced-around-regulations-and-even-moved-itself-to-run-its-exchange-the-way-it-wants/
5. The dangers of comparing bitcoin with visa based on transaction throughput:
I find Nic Carter to be one of the most lucid minds in the crypto space and enjoy reading his posts. Earlier this week he wrote about the transferring of value on the Bitcoin protocol, and more specifically around the incompleteness of using transactions per second (tps) as a measure for Bitcoin’s success. He argues instead that tps should be combined with typical transaction characterises and settlement assurance to create a more accurate picture when weighing Bitcoin alongside electronic fund transfer systems like Visa. The article uses some really good visuals to demonstrate the point.
Link: https://medium.com/@nic__carter/transaction-count-is-an-inferior-measure-fba2d5ac97f1
Bonus recommendation (just to really help cheer you up): I really liked this description of the crisis in the Silicon Valley startup ‘dream’ in Matthew Prewitt’s piece on blockchain governance…
• We wanted democratization, we got a crisis of democracy
• We wanted shared prosperity, we got grotesque inequality
• We wanted transparency, we got the end of privacy
• We wanted more information sources, we got a cacophony of fake news
• We wanted an ecosystem of startups, we got a new era of monopolies
• We wanted to connect with people from other walks of life, we got bubbles
Link: https://medium.com/blockchannel/blockchain-is-governance-e0d827b97b3f
