Market Summary
Today (as of September 15th), the Bloomberg Galaxy Crypto Index was at 485.85 after being at 572.6 last month. These levels follow a low of 217.82 in early March. Last month we reached new 12 month highs and then the market immediately corrected. The BTC halving took place on Monday, May 11th around 4PM. That means that the BTC miners as a whole will now produce 6.25 BTC every ten minutes – down from 12.50 prior to the halving. It used to cost about $6,851 to mine a Bitcoin so when BTC was above that price, miners made a profit. Now, mining a single BTC costs between $12,000 to $14,000 which means the current market price of $10,806 (Sep. 15) is still undervalued with most miners losing money. This is why we are only guaranteeing GBTC on the downside at 12.50 or less for our Super Trader program offer.
Cryptoasset exchanges are still the wild wild west with basically unregulated markets, lots of market manipulation, and 100 to 1 leverage in some cases. You shouldn’t invest anything more than you can afford to lose, 10% of your liquid net value at most while 2-5% would be better. Cryptos will probably continue to be the wild west until we see a multi-trillion-dollar market cap and a much more regulation.
We recently presented a workshop on how big money trades and the last day focused on cryptoassets. I learned a lot in the workshop listening to other experts. First, the crypto OTC market is at least as big as the exchange markets – with between 40-60% of the total volume of cryptos. If you are a whale, you can go to the OTC market and find another whale to instantly sell/buy large blocks of coins. That’s difficult on most exchanges which put limits on trading sizes.
I also learned that most miners are pretty sophisticated traders. Some would like a bull market in BTC while others do not want one at all. Why? A bull market would encourage a lot of new entrants in the crypto mining game and they’d prefer less competition.
The following table below tracks the price of five major cryptoassets across three generations of the technology now along with Bloomberg’s index:
- Bitcoin, a 1st generation cryptoasset,
- ETH and NEO, 2nd generation cryptos, and
- Iota, a 3rd generation crypto
- Holo (HOT) – I replaced Skycoin because it is pretty dead and there probably won’t ever be a market in it for US Investors.
- BGCI Index – I’ve also started including BGCI prices in the table.
Date of the All-Time High Closes
*Dec 16, 2017 ** Jan 13, 2018 ***Jan 15, 2018 **** Dec 8, 2017 ***** May 29, 2019 # Jan 5, 2017
Last month there were HUGE changes in almost everything which was a contra-indicator somewhat as most coins are down from last month. Neo is one exception by gaining 35.23% over the last 30 days.
The following table tracks the amount of money in stable coins in the top 100 or which have a market cap of over $100 million. The percentage of the total crypto market cap indicates one measure of health for the crypto market.
The overall crypto-market cap dropped about 7% in the last month but the value of stablecoins jumped with their market cap now over $100 billion. What didn’t show up this month was Binance’s stablecoin, which is interesting because Binance owns the website Coin Market Cap and its own crypto BNB has been doing well.
* Bitcoin was as high as 90% of the market cap of all cryptos at the beginning of 2017 to as low as 32% at the top of the market. Part of the difference is that there are now nearly 2000 cryptocurrencies. So the number keeps going up even though the market cap goes down.
** This was the peak of the crypto market in terms of market cap. Data via Tama Churchouse, Asia West Investor email on 4/11/18 & Tether is not included in the top 5 as of Sep 20
Some interesting changes happened in the last month. coinmarketap.com listed 3095 coins last month versus 3417 now. Four months ago, 133 coins had a market cap above $25 million and this month there are 305. My conclusion – something is happening now with altcoins. Last month, coinmarketcap.com claimed they were 6,460 coins and now they list 7,062. There are some weird coins toward the bottom of the list like 3X Bitcoin or 3X Litecoin, ETH 20 da MA or ETH RSI 60/30 or 3x short Tether. Be careful with anything like that. I only trust coins in the top 200 in their list – but that doesn’t mean I’d come close in investing in any of them.
This month we are following 115 cryptos. Those include most of the top 75 cryptoassets in terms of market cap but there are still some for which we cannot get data.
The six tables above show the Market SQN® rankings over the last 6 months of the cryptos we track. This month we have 8 strong bull cryptos and 33 bullish. Last month we had 28 strong bull and another 53 that are bullish. In March 2020 only 6 cryptos were bullish.
Last month I said it’s time to have a strong position in this market. That was of course at a top but if you hold the course, then you should do well in the next few months.
The chart to the right shows the 15 top and bottom cryptoassets. We now have 28 cryptos with Market SQN® scores above 1.0 (versus over 60 last month) and four with a score over 2.0 vs seven last month.
The top coin is now NEM (XEM) with a high Market SQN score and price that’s up 78.67% over the last 30 days and up 265% so far this year.
Binance’s coin has also done well. It’s up 21.3% over the last 30 days but up only 105.78% over the last year.
Chainlink moved from 12th in market cap to 5th which it held for a while. But today it ranks 8th in market cap. Link was one of my positions in the Trading Genius II trading contest, but when my $10,000 position reached $51,000, I sold it. That guaranteed me a profitable contest result even if the other four positions went to zero. The sale of LINK also guaranteed an 80% profit if I sold my other four positions at break even. I will probably try to lock in at least a 100% profit in over the six months.
The unofficial leader in our trading contest has been fully invested in Chainlink and his $50,000 position was worth over $250,000 last month. Now, it’s down about $100,000 to $155K.
Right now, BTC is in a sideways market type with a Market SQN® score of 0.52.
Crypto News
Bitcoin: BTC represents a majority of the market and is up 48.9% over the year after being up 92.7% last year. At its current price of $10,800, 84% of all BTC holders are in the money – because about 66% of the BTC holders have been in it for more than a year. In the last 7 days, $2.96 billion has gone into BTC at the exchanges while $3.26 billion has gone out of it. This data is from “intotheblock” and I’m not sure if their data includes OTC markets or not. If their data excludes OTC transactions, then it is useless. Intotheblock can also show the address of in the money, out of the money, and at the money addresses –
Intotheblock has a lot of interesting data. For example, the following chart shows the daily active address (active, new, and zero balance, along with the price). Total addresses with a balance hit a new high on Nov 11th, 2019 and it’s been climbing steadily since then. It’s currently 31.42 million.
Think about that. Out of 7.8 billion people on the planet, only 31.42 million own Bitcoin and more likely, many individuals own multiple BTC addresses. For example, I have BTC in two wallets and with one broker – so that’s at least three addresses for my holdings. Further, I probably have some very small fractional amounts of BTC left on old exchanges. So let’s say most owners are like this which would mean then perhaps 8-12 million people own BTC in the world instead of 30 million-plus.
That shows you something about the upside potential. In 2018 at BTC’s high, there were 27.51 million addresses. Remember that about 4 million BTC is stored someplace on the network and cannot be accessed. These addresses include 1.1 million attributed to the inventor of BTC, Satoshi; coins where the keys have been lost; and coins lost due to the death of an owner with no instructions given for recovery.
14 million BTC and 31.42 million address means each address has an average of 0.4456 BTC. But of course, some addresses might have 50,000 BTC or more.
I like going to Cointelegraph.com for news. On Sep 14th there was an article by William Suberg who says that one of the best known BTC price models (Plan B, a time series model) predicts an order of magnitude step up in price. The model calls for an average BTC price of $288,000 before 2024 – when the next halving occurs.
Where will all of this new money come from? A few sources which probably include – 1) gold investors 2) silver investors; 3) countries with negative interest rates; 4) countries with predatory governments; 5) millionaires and billionaires hedging against quantitative easing (QE), and institutional investors wanting a non-correlated asset to hedge their portfolios.
There was another story about MicroStrategy which recently purchased of $175 million in BTC in a single purchase (obviously OTC). The company has 38,250 bitcoins at an aggregate purchase of $425M. Notice that that is an average purchase price of $11,111 – which is above the current price of BTC. MicroStrategy is now competing with Grayscale in a BTC acquisition race.
Ethereum (ETH) and Ethereum Classic (ETC): ETH is set to launch its Ethereum 2.0 upgrade later this year ending a long streak of delays. The upgrade will start moving ETH to a proof of stake model from its current proof of work model. That means the current ETH miners will have to make a major shift in hardware because their equipment will be obsolete after the switch.
In 2016, the Ethereum network suffered a 51% attack. As a result, ETH split into two coins – ETH and Ethereum Classic or ETC. ETC is the old Ethereum – that is still subject to attacks. Recently, ETC suffered two such attacks in a seven day period. If you were trading ETC at the time, you probably lost it but if your ETC was locked up in a wallet or even sitting on an exchange then it’s probably safe. The first attack took place between July 31 and Aug 1st and the second occurred on August 5th. Another attack also happened in January 2019. It is known that someone spent $192,000 to rent hash power from a NiceHash broker for the 51% attack. The perpetrator made $5.6 million for a 2,800% profit. Be careful of your ETC. You’d like that ETH miners have learned and are changing their protocol.
Decentralized Finance (DeFi) Tokens: DeFi is currently attracting huge attention. DeFi refers to financial services using smart contracts which are enforceable agreements that don’t need intermediaries like a bank or a lawyer because they use blockchain technology. Since the beginning of August, the market cap for coins in this area has risen from $6.9 billion to $9.8 billion. SNT has risen by 20 fold. Aave (Lend) has risen 200 fold.
Most DeFi tokens are built on the ETH blockchain network. Decentralized exchanges especially (such as Uniswap) have really taken off. Other DeFi areas include:
- borrowing or lending cryptocurrencies to earn interest (Aave – LEND),
- betting on the outcome of events using Augur,
- creating and exchanging derivates of real world assets such as Forex or precious metals (Synthetix – SNX);
- a lottery where everyone gets their money back and the winner also gets all of the interest earned in the shared pot;
- and stablecoins.
Decentralized Apps (DeApps) are used to create stablecoins such as UCDC and Tether. Invest in these projects and earn interest where the average rate is close to 7%. For example, I get interest at Coinbase on USDC.
DeFi Tokens differ from big bank finance because 1) they are not managed by an institution (they are decentralized), and 2) their code is transparent so anyone can audit them because they are public for everyone to see; and 3) they were designed from the start to be global. In addition, they are also 4) permissionless (anyone can create or use them); and they are 5) interoperable which is a big word in crypto meaning that they can be built on pieces. For example, you could have a decentralized exchange, combined with artificial intelligence (prediction) to form a new product.
Part of the surge is from mainstream players getting involved. Financial institutions are starting to accept DeFi as a likely future and are looking for ways to participate. Even Grayscale is starting to look at putting together a closed end fund for DeFi. Beware, however, that a lot of these tokens are worth nothing and the situation is like the tulip bubble of the 1600s.
One of the more interesting tokens is Yearn Finance (YFI). It is a portal to various DeFi products with a goal of creating a simple interface to all of DeFi. YFI is the governance token for Yearn. There are only 30,000 YFI and then have all been distributed – none to the principles of the product. When you buy YFI you get paid to vote, but you are stuck in the token for at least three days. There is a detailed description of Yearn Finance and what is available at https://www.coindesk.com/what-is-yearn-finance-yfi-defi-ethereum.
I’m mentioning YFI because it has had short but amazing run so far. It launched on July 18th – less than two months ago — at a price of $34.57. It reached a high around $42,000 (Yes – 42 thousand dollars!) on Sept. 12th and it’s current price on Sept. 15th is $37,370. Good luck having been there at the start. Right now, US Citizens can buy YFI only on Coinbase Pro. I noticed it when it suddenly appeared at about #32 on coinmarketcap.com. It’s currently #20.
Also more than a $1 billion worth of BTC has been tokenized now to access decentralized finance protocols on the Ethereum network. You should understand what this means. According to DeFi Pulse, roughly 98,300 BTC has been tokenized which means it has been taken out of circulation to earn income. It’s locked up to mint a corresponding ERC-20 token (Ethereum based), to earn income. That’s only 0.47% of BTC’s total supply that’s been tokenized but it’s a trend worth watching.
More Data
I have another way of looking at the top performing altcoins. I use cointracking.info to keep track of the taxes on my positions. They list about 100 coins that I either own or used to own and they provide a 30 day trend. I have a lot of coins that were air dropped into my account so I only include those which have a total value of at least $25. Even then the list includes coins that I’ve never bought (i.e., BCD). Based upon that information, the top 10 coins are as follows in the table below.
Finally, here are a few charts. This chart shows weekly price bars for the last twelve months –
The next chart shows the Market SQN for BTC over the last year. We are in the Neutral or sideways range in mid-September.
The last chart shows the volatility for the last twelve months. Volatility rocketed back in March during the market sell-off in equities, retreated, but we are back in the volatile range now –
Until next month,
this is Van Tharp