Monday, November 23th, 2020
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Your Weekly Update On All Things Crypto |
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HODL FOMO vs Speculative FOMO |
For this week's macro news, we wanted to touch on an important topic covered by Nathanial Whittemore, host of the Breakdown Podcast. On his November 17th episode, he contrasts the difference in consumer sentiment between this bull run and the 2017 bull run. Most notably, compares the current sentiment (HODL FOMO) to the sentiment of three years ago (Speculative FOMO).
In 2017, Bitcoin was still very much in its proof-of-concept phase. Retail money flooded in for the opportunity to make big gains vs. their fiat dollars. The eco-system was still under-developed and the Bitcoin network was slow, clunky, and expensive. Today, things are very different. The largest investors this time around are institutions, not retail. These institutional investors are not holding Bitcoin as a speculative asset. They are holding Bitcoin as a hedge against the current monetary system. It has become and increasingly popular alternative as governments around the world continue to debase their currencies. Institutional investors are not trading for short term gains, the Bitcoin they purchase is likely to stay locked up in cold storage for years. Corporations, hedge funds, and family offices alike are all now looking at Bitcoin as an alternative reserve currency as opposed to a speculative asset, and much of the parabolic price action has been caused by fear of missing out on the adoption of Bitcoin, not the gains from Bitcoin.
This is a calculation of the percentage of all bitcoins that have not been moved from one wallet to another for at least 1 year. The metric is currently only 2% down from All-Time Highs. This means a higher percentage of those who purchase, are looking to hold for the long term. Using tools like BitcoinTresuries.org we can also see that the number of corporate treasuries adopting Bitcoin as a portion of their treasury reserve is growing rapidly. Or perhaps we need to look no further than $14 Billion that Coinbase raked in from Institutional Investors since April to see that this trend is accelerating.
As institutional money continues to pour into Bitcoin, it aggressively snatches supply off the market as these investors plan to hold for the long term. As supply continues to dwindle, fear of missing out gets kicked into overdrive and the Bitcoin price will continue to balloon.
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ETH 2.0 Staking Breaks Late, But is it Enough? |
December 1st, 2020 is the proposed launch date for the watershed Etherum update, ETH 2.0. This monumental update will move Ethereum from a Proof-of-Work algorithm to Proof-of-Stake. This upgrade will bring massive improvements to scalability, transaction processing, and a tremendous reductions in energy consumption. In order to make this upgrade possible, over 520,000 ETH needs to be staked by Tuesday, November 24th.
As of last Thursday, the staking contract only had 10% of the ETH required to make the upgrade. This led to rampant speculation as to why more people weren't staking their ETH. We listed a few of the more coherent arguments below:
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Minimum Quantity - You need to stake at least 32 ETH, which at the time of writing is over $18,000, and simply too expensive for most users. That said, staking pools like Rocket Pool are now allowing holders to stake smaller portions in pools.
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Complexity - Right now, the only staking option is to run your own ETH 2.0 node. While this is easier than setting up a mining rig, it is still intimidating for the average user. (Pooling networks are now reducing that complexity by running nodes for you.)
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Lock-Up Period - Staking in ETH 2.0 is a one-way street. Once your tokens are staked, they will be locked up indefinitely until the upgrade is complete, which may take upwards of 1-2 years.
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Yield Farming - While the yield on your staked ETH is still undetermined, you would be forgoing the "yield farming" rewards that could be achieved by staking your ETH in other De-Fi contracts while ETH 2.0 is being built out.
The launch of ETH 2.0 seemed almost certain to be delayed past its intended launch date of December 1st, until Friday, November 20th when two Ethereum whales staked over 150,000 ETH within hours of each other. This resurgence of activity may be exactly the shot in the arm that the community needed to push them past the finish line. However, even with this incredible influx, the staking contract is still just shy of 50% complete, with 252,704 ETH currently staked at time of writing. If Ethereum is able to complete this staking contract on time, we expect the Alt-Coin & De-fi market to take off like a rocket ship, with the promise of scalability, and real-world use case feeling well within reach.
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ConsenSys Adds Truffle Back to It's Ecosystem |
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Sticking with the Ethereum theme. Last Tuesday, November 17th, Ethereum-focused firm ConsenSys acquired the team and technology behind Truffle. The acquisition is a reunion of sorts; Truffle, the suit based platform that gets "developers from idea to dapp as comfortable as possible" originated within ConsenSys in 2015. It is a development environment, testing framework, and asset pipeline all in one. The terms of the acquisition were not disclosed, but Truffle founder, Tim Coulter, said "As the most popular Ethereum development framework, it is a natural fit for Truffle to be party of the ConsenSys product stack."
ConsenSys is a a leader in the blockchain software engineering space. There full-stack Ethereum products help developers build next-generation networks and enable enterprises to launch more powerful financial infrastructure. With the acquisition of Truffle, users can access built-in smart contract compilation, linking, deployment, and binary management. Truffle has over 8.5 million downloads and is a vibrant ecosystem of new and experienced developers alike, making ConsenSys product offering a even larger player in the development space.
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Bitcoin: Dangerously Close To All-Time Highs |
Bitcoin continued its parabolic run last week, reaching rare air at $18,950. A price point only is seen for 4 days in its entire history. On Sunday, we saw a slight correction, breaking down as low as 17,600 before quickly rebounding to $18,300. The bulls are in full control now and every dip is being rapidly bought up. We expect to see a test of all-time highs in the coming weeks, but at that point, we think we should see some profit-taking a healthy consolidation before smashing through all-time highs and pushing higher in Q1 of 2021. The dotted horizontal lines at $16K, $14K, and $12.5K represent some of the key lines of support that we could see tested in the next correction. Check out the chart here.
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Alt-Coins Rebound - It's Time To Pay Attention |
Bitcoin has stolen the spotlight for the past 3 months, but as its parabolic run approaches All-Time-Highs, it becomes more and more likely that some holders will take profit and the price will correct. But where does all that capital flow when Bitcoin holders take profit... Alt-coins. As seen in the chart above, Alt-coin dominance has been sliding for the past few months as capital has flowed into Bitcoin, but now we have found support on the critical line of support, formed since March of 2017 and broken the descending line of resistance. This looks very bullish for alt-coins to kick off another rally. And ETH 2.0 picking up steam, the alt-coin market may be setting up to spoil us with joy over this Christmas season.
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Cardano is a proof-of-stake blockchain platform: the first to be founded on peer-reviewed research and developed through evidence-based methods. It combines pioneering technologies to provide unparalleled security and sustainability to decentralized applications, systems, and societies.
Founded by ex-Ethereum CEO, Charles Hoskinson, Cardano boasts a powerhouse team, with the most Git-Hub commits of any project in crypto and strong community support to boot.
ADA has initially broken out of its descending wedge and looks promising to make a strong run against Bitcoin in the coming weeks. With smart contracts capability (Gogen) looking likely to launch on Cardono in Q1, we expect to see strong price action for Cardono next year. Check out the trading view here.
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Polkadot, like Cardono, is also a smart contract platform built by an ex-cofounder of Ethereum. It claims to be on track to deliver the most robust platform for security, scalability, and innovation in the crypto space. With a focus on blockchain interoperability, Polkadot does not seek to replace Ethereum, but instead to complement it by providing developers the opportunity to build on a scalable blockchain while still interoperating with ERC20 (Ethereum) contracts. DOT has also broken out of its descending wedge and looks extremely bullish to make gains vs Bitcoin in the coming weeks. After a nearly 60% correction from its all-time high relative to Bitcoin, DOT has bounced off a critical line of resistance and looks well-positioned to continue its upward trajectory.
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