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Monthly Archives: September 2019

What I’m Watching

A few things I’m watching for Bitcoin this week and for Q4 2019.

Today, Sept 30, is BSV Stress Test Day. Several services and purpose built tools will be used to flood the BSV network with traffic. The goal is to test the limits of the network in number of transactions and block size hoping to exceed the last stress test which produced 210MB blocks. The test starts at 12:00 UTC and can be followed at https://testbitcoin.live/ and https://bitcoinblocks.live/.

October 1st is Day 1 of the BSV CG conference in Seoul, South Korea. Highlights from this article CoinGeek Seoul about to kick off with major announcements expected include nChain Technical Director Steve Shadders discussing progress towards BSV genesis (the restoration of BSV to original Bitcoin code), a fireside chat with Craig Wright and Jimmy Nguyen and another Hackathon. This conference has been a bullish event for BSV price in the past.

The 30 day extension in the Kleiman v. Wright court case should expire around mid October. Could this case be settled in October? This would remove a lot of market uncertainty and setup a potential movement of the Satoshi coins. I wrote more about this court case in Bitcoin Court Case Settlement.

According to statements made in the court case Craig Wright will have full access to a trust containing ~800k Bitcoins on January 1st. If true, Craig Wright has stated several different outcomes. Early in 2019 he stated he would create rolling iceberg orders to sell BTC while simultaneously shorting. More recently he’s pulled back from that and stated he would give the fortune to charity. Either way, the BTC coins could hit the market via court case settlement, Wright’s sell orders or charities selling gifted BTC for fiat. More important than the supply shock may be what this confirms for the market, the Tulip trust is real and Craig Wright had those Satoshi coins all along.

On the technical side we have another stunning project release from anonymous BSV developer _unwriter called Overpool.

Overpool enables a lot of functionality on BSV, including the ability to do a very high number of transactions between two parties then broadcast the end result to BSV blockchain. In many ways this is a simpler and superior solution compared to BTC’s Lightning Network. Overpool was also released for use on BTC and BCH which is a clever dig as these dev teams likely won’t won’t utilize this powerful tool because it signals issues with their currently selected development paths. Kudos _unwriter on the great work.

I am also keeping an eye on the BTC Lightning Network. In early September a bug was discovered but wasn’t disclosed until this week. The recent news for LN is not looking good. While BSV is stress testing and striving for unlimited scale the BTC scaling plan seems to be sputtering.

First, LN is a fragile centralized system.

Second, LN operators keep coins at risk for loss for VERY minimal gains.

Lastly I’m watching the charts. As I wrote about in Bitcoin Trading Signals the Mayer Multiple indicator on BSV is flashing a buy signal six days in a row (including today) ahead of the stress test and CG conference.

If you’ve been following this blog for a while you may see that many of the things I’ve been writing about are coming together in Q4 and Q1 2020. However, there are many obstacles remaining. BTC still dominates the market and a continued downward slide may pull BSV with it. Can BSV get out from under the shadow of BTC?

While BSV traffic has steadily increased BSV transactions need a hockey stick chart to be ready for the halvening in mid 2020. Also, governments continue to look at Bitcoin from a legal perspective. Any attempts to outlaw Bitcoin, while likely detrimental to the legislating country, will also hurt adoption short term during a time when rate of adoption is key. BSV is designed to work within the law but it may not matter if a country outlaws all cryptocurrency.

The next six months in BSV should be the most memorable yet. From a portfolio perspective, I remain irresponsibly allocated.

 

 

 

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Bitcoin Trading Signals

I use several Technical Analysis indicators including Ichimoku Cloud, Renko charts, MA crosses, trendlines etc.

One indicator many people reference specifically in trading BTC is called the Mayer Multiple. The Mayer Multiple is explained here.

Here is a chart of the Mayer Multiple for Bitcoin SV compiled from daily closing price on coinmarketcap.com. MM in blue, 21MA of the MM in red, Price in yellow.

 

(caveat: plot points before June contain less than 200 days of historical data)

We are looking for extreme deviations from the mean for trading signals.

There have been 9 days in 2019 the MM was below .7 with prices in the low $50 range. When MM approaches .7 in the future this would indicate time to buy as price is severely depressed compared to the past 200 days.

With the overnight swoon in crypto prices BSV Mayer Multiple is now at .67 which is a BUY signal.

There have been 8 days the MM was above 2.6 with prices above $200. A Mayer Multiple this high is a sell signal. Those sales would have been very near the recent top when correlating with price.

Compare these MM numbers against stocks and you’ll note stocks are rarely below .9 or above 1.3. Crypto is volatile. By charting the magnitude of deviation from a slow moving long term average we are able to evaluate objective data about when is a good time to buy or sell.

Hindsight being 20/20 we wouldn’t have known looking at a price chart these were the bottoms and tops at that time. Looking at price can stir emotions and we know emotions are the death of good trading. However, looking at Mayer Multiple it’s clear that the MM was very far from the mean and should be treated as a trading signal.

The current MM is ~.67. The past 200 days the MM has been higher 80% of the time. Keep in mind the Mayer Multiple is not a fast moving signal and as always balance any trading signals with your own research and fundamentals.

On a personal note, I’m back in Thailand till late October. Here’s a song remix from Thailand’s most popular Reggae band.

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Bitcoin Court Case Settlement

There is a court document circulating online that indicates there may soon be a settlement in the Ira Kleiman v Craig S Wright court case.

Ira Kleiman is suing Craig S Wright for 500k Bitcoins claiming his deceased brother Dave was part of the creation of Bitcoin and that Craig S Wright owes Ira half of a Bitcoin trust established prior to Dave’s death. Document below.

What are the implications of a settlement?

First, in a settlement Craig Wright would deliver up to 500k Bitcoins valued at ~$5B. Upon receipt Ira would owe estate taxes on the value received. This would force a sale from Ira of at least 100k Bitcoins and upwards of 250k on the market to cover taxes. Even if completed over the counter this would impact price of BTC quite heavily.

Secondly, many BTC holders have claimed Craig Wright is not Satoshi and does not have access to the coins. If Craig settles and agrees to pay Ira from the Satoshi stash of coins then the BTC narrative about Bitcoin takes a big hit. While BTC has been screaming for Craig to provide proof they may finally get it when he moves those coins. Be careful what you wish for. I don’t see this as a net positive for BTC yet many people are cheering the settlement as it’s a judgement against Craig. They are cutting off their own nose to spite their face. Craig Wright settling and moving the Satoshi coins provides credibility regarding everything he’s said over the years including how to scale Bitcoin, which is in contradiction with BTC.

In reality there was no way for Craig Wright to get the full value of his alleged 1.1M BTC holdings. To sell that many coins would crash the market, so losing a portion may not be so tragic for him.

Third, settling the case puts a lot of drama and stress behind Craig Wright and BSV. It clears the way to continue developing BSV. The drama will continue but the fact Craig Wright moved the coins cannot be taken away.

As mentioned, moving the Satoshi coins as part of settlement is one way a person can prove their identity (or at least possession of coins attached to an identity). If Craig moves the Satoshi coins watch the BTC narrative change overnight. There will be claims that moving the coins is no longer proof Craig is the creator of Bitcoin. The existence of Blockstream and BTC hinges on discrediting Craig Wright and his vision on how to scale Bitcoin. Watch the space for new propaganda campaigns. The propaganda shows the level of fear present for those who took BTC in such a drastic direction that Bitcoin forked twice. This is all coming home to roost now and in 2020.

Settling a court case for a $5 billion judgement is usually bad news. In this case I think this will end up being a positive. The drama fades away, the proof is made public, the markets are free to digest the pending movements of massive amounts of BTC and we can know move forward with new information about who’s who in Bitcoin.

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Assessing My Next Move

BSV is under the $130 level I pointed to as important to watch. BSV is a buy here, but don’t shit your pantaloons if the downward trend accelerates and BSV sits at $80 for a few weeks. Crypto trading is a bad idea. You probably shouldn’t do it.

Bitcoin trading changes you. The swings are frequent and violent. The returns and losses are mind boggling. You’re just not the same after going to the movies and walking out of the theater with a 100% profit and by the time you get home a 30% loss.

You don’t get used to it, you just go numb.

So as I consider my next move I see broken markets everywhere. Gold just went on a bender. Yemens bombing Saudi Arabia points to a Oil pump. The dollar is destroying everything. QE to infinity has stocks on a 10 year straight line pump.

This all has to resolve itself somehow.

Crypto might just be the sanest choice in a crazy world.

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I’m Listening

What do you want me to write about? You pick and I’ll give it an objective treatment. Maybe not a full SWOT but I’ll at least cover Pros and Cons.

Do you have questions? Ask me anything in comments. If it deserves a separate post I’ll do that.

It doesn’t have to be crypto but that’s my wheelhouse. You may not know this but I covered stocks and a bit of tech on iBC before I went full Bitcoin years ago. I also do quite a bit of TA. I stopped doing TA on Crypto as I can’t TA a coin if I feel the fundamentals are broken. It’s like putting lipstick on a pig.

So, give me something to work with.

My portfolio is sideways past couple weeks as I’m still irresponsibly allocated in BSV. I’m 70% confident BSV decouples from the crypto market in extreme bullish fashion in 2020 but in meantime won’t be shocked by a market wide swoon. $130 is still important level to watch which I noted weeks ago.

I am flying to Asia late tomorrow to vacation with a group of friends on a tropical island for a couple months. You know, typical Bitcoiner stuff. But don’t hate me too much, it’s a hellish 23 hours of flights and 11 timezones to reach my final destination. I am going to nearly the exact opposite side of the planet from where I am now so forgive any delays next couple of days.

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Bitcoin is Smart Money

When you hear the term Smart Money what comes to mind? For many, it’s institutional investors with privileged information pulling the strings on market movements. Smart Money consists of the insiders, the mythical perfect traders, that group of people that is always two steps ahead of the average Joe and one step ahead of you.

When I talk about Smart Money that’s not what I’m talking about.

When I talk about Smart Money I’m talking about Bitcoin. No, I’m not saying that Bitcoin is a group of people that is smarter than you. I’m saying that Bitcoin IS Smart Money.

What does that mean?

Human civilization has gone from a barter system to trading seashells, shiny rocks, tulip bulbs, precious metals and now, pieces of paper as money.

Future generations will look back at this time and think trading pieces of paper in exchange for goods is as silly as our ancestors trading seashells.

Our money today is dumb. Really dumb. The Pentagon lost over $1 trillion because they couldn’t keep track of where it went. Enron happens because the money is so dumb no one can verify if audited financials are reliable. Madoff was successful for so long because his clients had to rely on his fabricated statements about their investments. Financial crises in 2009 happen because Lehman and AIG can play fast and loose with financial regulations when using dumb money. Hurricane Maria funds for Puerto Rico were mostly squandered because local government had a windfall of relief money and little oversight. Terrorism happens because any organization can be funded anonymously with a few palettes of paper shipped across borders.

These events caused by the abuse of dumb money impact billions of people. Those who control money with little oversight act with impunity causing massive losses for the public, and they often get away with it.

What doesn’t get measured doesn’t get managed.

The US government prints dumb money every day to cover a multitude of poor decisions. There is no limit. They just print it. PRESTO! More money. An Econ 101 student understands Supply and Demand, so how dumb is that?!?

Every fraction of a Bitcoin that has and ever will come into existence is publicly verifiable. I can buy a coffee with Bitcoin with more privacy than if I use a credit card but I can’t transact in Bitcoin illegally with anonymity. This is very important to understand. Bitcoin is private, but not anonymous. Bitcoin is Smart Money.

So what is Smart Money? Bitcoin is programmable. Here’s a basic example in money terms. When you dine at a restaurant you are presented with a check to pay. That check has a breakdown of your meal plus taxes and usually an optional tip. With our current dumb money this puts a burden on the owner to account for taxes, tips etc. Small business owners spend thousands to be compliant with taxes. With Bitcoin your check can be a Bitcoin invoice where taxes (sales tax, municipal, alcohol tax etc) are their own Bitcoin payments separate from food and tips. Send your Bitcoin transaction and every tax, tip and payment gets paid instantly to the final destination. This relieves a huge burden for the owners and governments. This changes the game. Dumb money can’t do this.

Here’s another example. Many countries have lax or difficult to enforce clean air laws. Why spend money to ensure your car runs cleanly if you can externalize the costs to the environment and other humans? Why would chemical plants handle chemicals cleanly if they can dump it in the river? With programmable money clean behavior can be incentivized. Smart contracts on Bitcoin can meter and enforce compliance and/or fees. Dumb money can’t do this.

Many of the ills in society are because individuals or corporations can externalize costs with very little risk. Banks are routinely fined for different reasons yet they continue the unlawful behavior because in the long run dumb money covers their tracks enough times the occasional fine is not a deterrent. Bitcoin, as a distributed ledger, can keep all transactions in compliance. Dumb money can’t do this.

This works because every fraction of a Bitcoin can be instantly verified anytime. There is no “fake” Bitcoin and there is no way to move a Bitcoin that doesn’t leave a public record. Bitcoin is private, but not anonymous. Bitcoin is a global ledger.

Now imagine Bitcoin everywhere. Gas station, groceries, international shipping and trade. Smart Money that is programmable and instant. Tax relief that is immediate and automatic. Accountability that is public and global. The opportunity to commit fraud disappears. Honest Money means Honest Government. Smart Money means Smart(er) Government. Who doesn’t want to live in a country where the Government is just as accountable as the tax payers?

This is what mass adoption looks like as a world currency. Now, which coins fit this criteria? Scalable, honest, on chain.

Once you understand this capability and the impact you can see this system is inevitable. I can’t say exactly how this will look, and realistically this may take a decade or more, but there’s no going back.

Governments will love Bitcoin because it enables immediate and honest tax collection. Citizens will love Bitcoin because their governments will also be subject to immediate and honest reconciliation of tax spending. No more secret funding or government waste. Now, imagine that! This can change humanity.

A global ledger of value (and information) transfer is the next (r)evolution of human transactions.

Bitcoins is Smart Money.

This post first appeared on Coinspeak.io

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