Monday, December 14th, 2020
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Your Weekly Update On All Things Crypto |
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Looming Crypto-Wallet Regulation Met With Opposition |
One of the final acts of the Trump Administration might be a major blow to the ideals of the cryptocurrency industry. Treasury Secretary Steven Mnuchin and his department have plans to rush out regulations surrounding self-hosted cryptocurrency wallets (i.e. hardware wallets and wallets running on a user's computer). The proposed regulations would require financial institutions to verify the identities of recipients and senders for all transactions involving self-hosted wallets. In essence, every transaction of crypto-currency between accounts would require users to verify their identity.
While this regulation has not yet been imposed, it has already been met with harsh criticism from leaders in the crypto industry and politicians alike. In fact, four Republican representatives have already written a letter to Mnuchin urging him to consult with Congress and industry stakeholders "before taking any decisive action."
Lawmakers and crypto businesses alike fear the legislation would compromise individual privacy, increase the administrative burden on these emerging companies and stifle American innovation in the space. Brian Armstrong, CEO of Coinbase, tweeted about the regulation last week claiming it could have unintended side effects, and that it would "kill many of the emerging use cases for cryptocurrency".
Two of the basic tenants of the cryptocurrency industry are the ability to transact directly peer-to-peer, and the ability to "bank the unbanked." If these laws were implemented, they may restrict access for much of the population that needs cryptocurrency the most. If the citizens of a developing country cannot prove their identity, they can no longer send and receive crypto funds from American based-businesses. The reason this industry was invented, was to provide an alternative to this type of government overreach and a way for people to transact directly peer-to-peer around the world. This would be a giant step backward for the ideals of crypto, however, due to the intense push-back we are seeing from major players and policymakers in the space, our hopes are high that this regulation never comes to pass.
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Massari Releases Their Crypto Thesis 2020 Annual Report |
Last week Massari, one of the largest data aggregators in the crypto-industry launched their 2020 year-end report. Massari has released an annual report for the last four years, and their review is one of the most comprehensive in the industry. The over 130-page report highlights some of the key trends that have been emerging over the past year, and some trends to watch out for as we enter 2021.
The document details a comprehensive review of 12 major topics in crypto:
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Top 10 Trends to Following (pg 7)
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Top 10 People to Watch (pg 16)
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Top 10 Investment Themes: Real vs. Relative Value (pg 22)
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Bitcoin: Brrr Money and Digital Gold (pg 31)
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Ethereum: The Parallel Financial System (pg 43)
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DeFi: Money Legos (pg 56)
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Stablecoins: Eating the Crypto World (pg 71)
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Crypto Credit 2021: Leverage is a Helluva Drug (pg 83)
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Synthetic Assets: All About Accessibility (pg 90)
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Infrastructure: Crypto Exchange Unbundling (pg 102)
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Web3 & Nfts: The Digital Resource Economy (pg 111)
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The Final Boss: Exiting to the Network State (page 125)
In our opinion, this is, and will most likely be the most comprehensive annual report in the crypto space this year. Although the document is long, the level of clarity it provides across multiple sectors of the crypto industry may actually end up saving you time and money in the long run. We highly suggest using this document as a starting point to broaden your understanding of any of the above facets of the crypto industry.
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CleanSpark Agrees to Aquire Bitcoin Miner ATL Data Center |
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CleanSpark, the microgrid software developer of a patented and revolutionary "stratified" downdraft gasifier, has purchased ATL Data Centers for up to $19.4 million in shares of the Company's common stock. The purchase represents the first strategic acquisition of CleanSpark's larger $40M institutional investment growth plan.
The acquisition will provide a profitable, full-scale demonstration facility to maximize energy efficiency and integrate renewables for CleanSpark's power-intensive bitcoin mining. CleanSpark's CEO, Zachary Bradford, says "as part of our strategic acquisition initiative, we identified energy-intensive companies facing the greatest amount of exposure to high power costs and resilience risk." He continues to explain that "prior experience in the digital currency mining industry provided insight into how proper energy management was crucial to successful and profitable mining operations."
In 2018, CleanSpark's energy professionals were tasked to design and engineer micro-grid solutions for 'stand-alone' mobile bitcoin systems. With the ATL complex, CleanSpark now has 23 such mobile mining rigs in addition to their main facility. There are currently 3,741 bitcoin mining units (ASICS) in daily operation on-site, processing approx. 190 PH/s which as using approx. 9.6MW of capacity. The Company expects to demonstrate that, by using their technologies, they can reduce the cost of energy to below $0.0285 per kw/h.
Matthew Schultz, CleanSpark's Executive Chairman says "The recent, significant investments into Bitcoin by such respected companies as Square, PayPal, and MicroStrategy further validate our due diligence conclusions surrounding this acquisition." And goes on to say "this transaction should immediately position us as one of the largest publicly-traded Bitcoin producers in the country. We will certainly be the only micro-grid company that owns and controls the distributed energy supply to its own mining activities, in furtherance of developing our best-in-class technologies."
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Bitcoin: Not as Volatile As We Thought? |
The narrative that has pushed many investors away from Bitcoin in the past, is that it is far too volatile. Frequent 30% corrections, followed by super-cycle 80% corrections were enough to keep big money on the sidelines for over a decade. But as Bitcoin grows larger, the narrative is changing...
I have always said that "Bitcoin's volatility was a symptom of size, not weakness." Price discovery for any new asset class is going to be erratic. But as the market cap continues to grow, the swings in price have been getting smaller and smaller. Last year's bull-run saw 8 corrections of 30% or more, and while we just saw one of our first major corrections of this bull-run, price only managed to dip 17%.
Why is this happening?
1. Market Cap: Take an asset like gold, with a market cap of around $10 trillion dollars. In order to drop the price by 30%, you would need to see $3 trillion worth of added sell-side pressure. For an asset like Bitcoin, however, with a market cap of only $300 billion, you only need to see roughly $90 billion of added sell-side pressure. Big swings are more frequent when market caps are small.
2. Institutional Investors: This bull run is very different from the ones of the past. The cryptocurrency space is no longer just retail investors. It is now flooded with big institutional investors: Hedge funds, banks, corporations, etc. These are seasoned investors with deep pockets, and this "smart money" is aggressively buying-up every dip, so the dips don't go as deep. These investors are also not as quick to panic-sell either. Therefore the majority of their purchases will be out of circulation for years.
Long story short (and not financial advice)... "buy the dip" because chances are, the dips are going to be smaller and quicker than we have seen in the past. See the trading view chart here.
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Alt-Coins Find Support, And The Outlook Is Bullish |
Alt-coins have had a tough go the last few weeks, but we are starting to see the light at the end of the tunnel. Bitcoin's mania has simmered slightly since its parabolic rally was rejected at $20K. Now, Bitcoin's choppy sideways action looks like an opportunity for investors to start playing the alt-coin market instead.
The downward slide for alt-coins, since November 24th has turned into a falling wedge (a bullish technical pattern). We are also seeing alt-coins holding the line of support that it has tested multiple times in the past few months. If we hold the level of 35.25% dominance, and we break out of the falling wedge, alt-coins look ready for another rocket-fuelled rally going into the Christmas season.
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Yearn has quickly become one of the Blue Chip tokens in DeFi and has even been called "The Bitcoin of DeFi" by some. Yearn is a protocol for capital allocation. It coordinates capital allocation through incentivizing capital providers with the highest possible yields while incentivizing capital allocators (i.e. “strategists”) with the highest possible AUM to allocate. Yearn's founder and lead developer, Andre Cronje is also widely considered to be one of the best developers in the DeFi space. With a total supply of only 30,000 tokens and a fair launch, the tokenomics of Yearn's governance token are extremely bullish. YFI has found support on its 50-day moving average vs. Bitcoin and looks poised to continue to climb higher. For more info on Yearn Finance, read The Theory of the Yearn, by Massari.
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We featured this coin last week, but remain extremely bullish on the leading decentralized exchange, Uniswap . Narrative and technical signs look strong for a DeFi fueled alt-coin run in the next few weeks, and Uniswap will play a major role in facilitating the trading behind it.
UNI has been sliding against Bitcoin over the past few months, but its slide has turned into a falling wedge. UNI has found support on the lower support line of the wedge and looks ready to retest the upper line of resistance, or even break out to the upside. If DeFi season takes off, Uniswap will be a good bet to continue to lead the way for decentralized exchanges.
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None of the content or opinions expressed in this newsletter should be consider financial advice. We highly recommend that you do your own research before investing in any project within or outside the cryptocurrency space. |
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