Premium Daily Crypto NewsletterJanuary 16, 2018
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Crypto Market Commentary
Chinese Crackdown Provokes Next Stage Of Correction
Let’s Keep Things In Perspective
Welcome to 2018’s first major correction. For those new to cryptocurrency, this may come as a shock, but this is what a market without restrictions and stopgaps operates like. If a similar move were to happen in the Stock Market, they would send everyone home early and artificially control the price movement. The crypto market, on the other hand, is a free and open environment where the trading is global and always open.
There are few rules here, so a ripple of a rumor can turn into a wave of fear, uncertainty, and doubt in mere moments. We saw that today in the markets. Today’s negative numbers across the board were due largely in part to China. As we recently saw in September, China’s position in the market holds a lot of weight.
China banning ICOs seemed like the end of the crypto market at the time, but viewing September’s price action today it hardly registers as a blip. Likewise, historically we have seen a market correction around this time — three weeks out from the Chinese New Year — for the past four years. While past events don’t necessarily indicate future results, it has also been the case for the past four years that following a minor correction in January, the market has gone on to new highs moving from Q1 to Q2.
Furthermore, today’s correction only returned us to the total market capitalization at the start of this year. Coming off the recent (misguided) scare of South Korea banning exchanges, and the subsequent round two of that last week, the market is sensitive to any news which seems to indicate a direction towards cryptocurrency being outlawed instead of properly regulated.
Just as in the case of South Korea, a single Chinese government minister has enough sway to clear Billions from the market.
Sourcing information from an internal memo from a government meeting, Reuters cites People’s Bank of China (PBoC) Vice Governor Pan Gongsheng urging the government to enforce a complete ban on centralized trading. The memo from the meeting, held among internet regulators and other legislators last week, also has Pan suggesting local and national authorities target centralized cryptocurrency trading venues and the wider bitcoin services industry. Individuals and institutions who provide settlement and clearing services, guarantees and even centralized online wallet providers are also to see a ban, Pan reportedly added.
Many of the mainstream news sources went round in circles citing one another in reporting this news, but none went on to clarify what that memo was actually targeting:
OTC/P2P trading is not banned in China, but match-making services are more similar to a private exchanges. It’s those match-making services that are now being targeted in China. It’s about unlicensed trading, not about blockchain / tokens. Unless you are a Chinese crypto-whale, this “news” doesn’t affect you.
This is exactly the same way we saw the South Korean “ban” play out. Any sovereign government has a vested interest in protecting their citizens from unlawful exchanges where fraudulent activity is unregulated (i.e., governments don’t like black markets). Both China and SK want to shine a light on the fringe elements of this new economy growing within their borders. Those services and exchanges who operate under jurisdiction of the law (i.e., most if not all of the major ones) have no reason to fear punitive action.
We will continue to see fear cycles like this as cryptocurrency is still “vulnerable” to government overreach, but as we noted in our crypto college series, an outright ban of cryptocurrency is very unlikely at this stage. Furthermore, regulation is a harbinger to mainstream acceptance and institutional investment, which is necessary for continued development and prosperity.
We anticipate this trend may continue in the short term. Read about this further in our Fundamental and Technical Analysis sections below.
Offense – Adding Trades
Offensive Actions for the next trading day:
- Nothing specific for Wednesday; please follow Doc’s comments re: triangle breaks and “catching the falling knife” in the technical section below.
- Let WTC consolidate first before entering; see alt-coin technical section below.
- Don’t be in a rush to pick up inventory, let the Bear play out first.
Defense – Managing Risk
Defensive Actions for the next trading day:
- Nothing specific for Wednesday; please see comments in holdings below.
ReadySetCrypto’s 7 Categories Of CryptoCurrency
Tier 1 coins are those coins which we have considerable assets invested, are firm believers in the project direction and execution, and have very little reason to sell within short to mid term. These are coins which we risk evaluated to be very solid, and have a high probability of existence duration.
NEO ($NEO) is classified as a Dividend and Platform coin. As our largest holding, we believe NEO has the potential to become a dominant smart contract and DApp platform in 2018. It’s four most compelling features are:
- An innovative consensus algorithm which will allow for greater TPS (transactions per second) over its competitors.
- A dividend structure for holders, incentivizing coin retention and network stability / diversity.
- SE Asia location, enabling NEO to break into markets more easily than competitors.
- Agnostic smart contract language, allowing for smart contract developers to use existing mainstream programming languages, which allows for cheaper smart contract implementation as compared to Ethereum who’s proprietary smart contract language, Solidity, can be a barrier to integration.
NEO is best acquired through Binance. Storing NEO on the Binance exchange will result in a GAS distribution once a month on the first. We recommend the NEON wallet for safe storage. GAS will be distributed on the NEON wallet daily.
WaltonChain ($WTC) is classified as a Dividend and Utility coin. Waltonchain is on the cutting edge of using RFID hardware to enable supply chain management 2.0. We believe Walton has the potential to become a dominant IoT blockchain solution
Waltonchain is the only truly decentralized platform combining blockchain with the Internet of Things (IoT) via patent pending RFID (Radio Frequency Identification) technology.
The custom RFID chips are able to digitally sign and verify transactions at the integrated circuit level, automatically and instantly reading and writing data to the chain without human intervention.
This unique implementation of blockchain + IoT facilitates the true interconnection of all things in the real world with the virtual world, creating a genuine, trustworthy and traceable business ecosystem with complete data sharing and absolute information transparency.
Walton has two major competitive advantages:
- A recently confirmed (to be signed) partnership with China Mobile’s IoT Alliance. China Mobile is the largest mobile telecommunications service in the world as well as the world’s largest mobile phone operator by total number of subscribers. Walton’s Management system is set to be implemented through mobile communication networks, and China Mobile is the largest one. Waltonchain is positioning themselves to be the single connector of the entire Internet of Things initiative put forward by the China Mobile IoT Alliance.
- They implement the blockchain through the RFIDs at the foundational layer. Their technology is patent-pending and gives Waltonchain a solid claim as the only blockchain that connects the physical world with the virtual world with truly reliable data. This is because all other IoT solutions tag items through API, and this means all the data is first passed through a centralized intermediate, a potential point of vulnerability.
Ethereum ($ETH) is an open blockchain Platform that lets anyone build and use decentralized applications that run on blockchain technology. Like Bitcoin, no one controls or owns Ethereum – it is an open-source project built by many people around the world. But unlike the Bitcoin protocol, Ethereum was designed to be adaptable and flexible. It is easy to create new applications on the Ethereum platform, and with the Homestead release, it is now safe for anyone to use those applications.
Tier 2 coins are those coins which have performed extremely well, we have a large amount of assets with, and we believe will continue to operate with high marks. What separates these coins from our Tier 1 status is a flaw or they haven’t yet proven their defining feature, though we believe they will.
OmiseGO ($OMG) is classified as a Dividend and Utility coin.
OmiseGO is a Southeast Asia-based company creating an e-wallet that will make transfer of assets and currencies possible. Merchants and users of the wallet can transfer whatever asset or currency they desire. For example, you could use your ethereum, bitcoin, international fiat, or even your airline points to buy groceries using the e-wallet app on your mobile phone. Transfers can happen across borders, or even while traveling abroad. Unlike Western Union or PayPal for example, the fees are almost negligible, and the transfer is instant. Because it’s based on a blockchain, there are no intermediary banks necessary and users don’t need bank accounts to access those funds. This is especially good for migrant workers who send money home and often don’t have bank accounts and are forced to use expensive wire services instead.
NAVcoin ($NAV) is a Privacy coin with upcoming Platform features. NAVcoin has been around for 3 years. It is not minable, instead being based on a Proof of Stake system in which stakers earn 5% annual returns. Theoretically this means there could be 5% inflation on the supply, however, that would require every coin holder to stake, so likely there will be very marginal inflation between 1 and 3% year over year. It is a currency originally based off of Bitcoin version 0.13, which should tell you it’s got a good foundation from which to build its feature set. Being based off Bitcoin, it currently is a method of transaction, with notable upgrades in the form of Segwit (with possible lightning network integration in the future) and 30 transaction times with extremely marginal fees. That’s great but a lot of coins have that going for them, so thankfully we’re just getting started with the real interesting pieces of NAV. The first and currently only implemented feature, NavTech is a unique dual blockchain technology. Essentially, NAV runs on these two blockchains in order to completely disconnect the sending wallet (your wallet), to the receiving wallet (where the money is getting sent). Think of it like a VPN, NavTech completely strips the sender’s details so the transaction is completely anonymous. The anonymous transaction space has really gotten big lately, with Monero’s recent price action and Ethereum’s implementation of ZKSnarks being two big examples that come to mind.Moving on to the roadmap, there are two big upcoming features for NAV:
- The first is Polymorph, which is a really cool blend of Nav’s anonymous transactions and Changeally’s instant exchange. What this means is that, for example, I wanted to pay someone in Bitcoin but I wanted to do it anonymously. Polymorph would take my bitcoin, turn it into navcoin in order to be processed and sent anonymously using the Navtech dual blockchain, then turned back into bitcoin at the to be sent to the receiving wallet. This will certainly set NAV apart, as it guarantees anonymous transaction for all of the coins on changeally. This is huge for exposure, and a great opportunity for NAVcoin to gain trust, which is absolutely critical anonymous transaction coins.
- The second big upcoming feature is ADApps, or Anonymized Decentralized Apps. This is also a huge potential win for Nav as there is already a huge amount of interest in the crypto space surrounding Dapps, such as Ethereum and Omni. Adding in the anonymous layer would attract projects that would value the anonymity. Nav is still in the planning stages for this project so it could still be awhile before it comes to fruition, but we should see the whitepaper for it soon, and if they could be first to market with ADapps that could prove to be a killer feature for them as it would give them first access to the interested demographics.
Simply put, ICON ($ICX) is a massive scale blockchain Platform that allows
- Decentralized Application (DAPPS) – Build DAPPS on ICON Platform like on Ethereum and NEO. Yes, soon, you will see ICOs happening on ICON platform for different DAPPS
- Interchain (Interoperability with Blockchains) – Allows different blockchains connecting to one another through their protocol. ICON is fully compatible with traditional blockchains like Bitcoin and Ethereum and in future can bridge other public blockchains such as Qtum, NEO and many others to achieve their mission statement – “Hyperconnect the world”
- Artificial Intelligence (AI) – Use of AI to ensure all nodes contributing to ICON Republic/platform are rewarded fairly and not to have certain powers over distribution policies. AI will continue to learn a variety of variables to determine optimal distribution policies and achieve complete decentralization.
- Decentralized Exchange (DEX) – ICON will integrate different DEX protocols on their platform to facilitate exchange of ICX and other future ICON platform currencies. Bancor protocol will be their first DEX protocol when mainent launches this month end and Kyber and others will follow. Not just throwing Kyber’s name out there, it was confirmed they are working with each other, official partnership yet to be announced.
Ripple ($XRP) is a real-time Payment protocol for anything of value. It’s a shared public database, with a built-in distributed currency exchange, that operates as the worlds first universal translator for money. Ripple is currency agnostic and has a foreign exchange component built right into the protocol. Ripple acts as a pathfinding algorithm to find the best route for a dollar to become a euro or airline miles to become Bitcoin. It will look at all the orders in the global order book. The case for XRP comes down to the following: 1) Payment systems work best with bridge assets to focus liquidity. 2) There are good reasons to expect a cryptocurrency to be the most popular bridge asset. 3) There are good reasons to expect that cryptocurrency to be XRP.
- Open, decentralized payments will have lots and lots of assets, including national currencies of all kinds and cryptos. A significant fraction of payments will be among assets that aren’t the most popular. Using intermediary assets to settle those payments concentrates liquidity and reduces spreads.
- National currencies are always tied to jurisdictions and can’t be universal. Systems built around them will never be as open and inclusive as systems that aren’t.
- XRP settles faster than any other major crypto. It higher transaction rates than other major cryptos. It is beat by others only by the amount of liquidity available today. And, most importantly, XRP has a company that is devoted to making sure XRP succeeds for this specific use case.
Fundamental Currency Research
Given that they are wholly overblown, it is very possible the market is carried to higher highs within the next month. To make that happen, the market needs to regain confidence and find further bear market sentiments unpalatable. We saw that exact scenario play out in late September as the market recovered after weeks of downwards movement. We could also see the market recover quickly following a large piece of good news — Newton’s Third Law in action.
What we can learn from today’s correction is invaluable. Find the coins that maintain strength in the face of adversity. Specifically in the top ten, we can see that those coins who have lost the most in the last 24hrs are coins the market has deemed “more risky”. Ripple ($XRP), Cardano ($ADA), and Stellar ($XLM) all have losses near or above -30%.
These are coins that have either recently entered the top 10 and still have something to ‘prove’ to the market, in the case of Cardano and Stellar, or they historically are divisive, in the case of Ripple.
Conversely, we see Bitcoin ($BTC), Ethereum ($ETH), and Litecoin ($LTC) have losses of only -20%. These are the original ‘big three’, which coincides with our evaluation of them being ‘blue-chips’.
We’ll continue to watch this macro trend play out.
Today is a day that has two different intelligent responses: acquire more positions of a coin you’ve been waiting to get into, or take a week off from crypto.
As we mentioned in the Top Ten analysis, look for coins that are riding this correction with strength. VeChain ($VEN), KuCoin Shares ($KCS), and Ethos ($ETHOS) are of particular mention. Most cryptocurrencies trade with a Bitcoin pairing, so if you sell a cryptocurrency into Bitcoin, you are not absolved from corrections, even though Bitcoin has performed better than most. Instead, if you catch wind of a major correction, you can temporarily convert to USD on Coinbase and wait for what you believe to be the dip to buy back in.
This could be a major win if timed correctly, but the problem with cryptocurrency is that things move very fast and markets are always open. Furthermore, many times no rumors exist before a major announcement is made (e.g., Bitcoin Cash listing on Coinbase).
So, if your portfolio is in the red, use it as an opportunity to enlarge your stake, or take a break. The technology hasn’t changed and there has been no major bans. We will recover and come back even stronger.
Additionally, we saw Bitconnect ($BCC) close down their lending and trading services today. This is a major win for cryptocurrency as a whole, as Bitconnect is known as a Ponzi Scheme that preys on new and unsuspecting crypto investors. Unfortunately, a lot of people will lose their capital today as Bitconnect tokens are essentially worthless. We strongly advise you stay away from lending platforms and any platforms that promise “guaranteed returns”. More than likely, they are scams and will take your money without recompense.
Today’s featured ICO is:
A highly scalable, low cost mobile first network infrastructure for Ethereum
Token type: ERC20
Total Tokens: 100,000,000
Available for Token Sale: 50%
Know Your Customer (KYC): YES
Сan’t participate: USA, SINGAPORE, CHINA, CANADA
Accepts: ETH, BTC
GoNetwork is tackling the issue with blockchain technology that centers on speed and high cost of transactions. Through the launch of its very own highly scalable, low-cost, mobile-first network infrastructure for Ethereum, it allows off-chain transactions.
Created by the winning team at the world’s largest Ethereum hackathon ETHWaterloo, GoNetwork also aims to look at partnerships with governments and organisations.
Join the GoNetwork ICO whitelist here.
Technical Analysis Research
- Bitcoin Cash
Movement from the consolidation patterns! As I said in this space in yesterday’s advisory, “we should see a strong move out of a symmetrical triangle pattern like this, however there is a strong tendency in the crypto market for the initial break to be to the downside first to a support level.” The question that we’ll need to determine is whether or not Crypto as a whole will rebound to the upside like it usually has. I’m not stepping in front of it just yet.
This is a great time to identify possible buy points and use my “smaller timeframe technique” based on market fractals to give yourself a greater sense of certainty that you’re not catching a falling knife. As this proves out, we’ll have plenty of buy points in the next few days. If not, it’s best to let the bear quietly pass without poking him.
If you have a particular tool that you think is superior, please let me know. You can access the BitFinex and TradingView platforms for free, however there are some paid features that you might want to consider depending on your needs, such as expanded watchlists, different study sets, account alerts, etc.
Coinigy is a great tool for determining prices on each exchange, however I may not have access to the full suite of tools on TradingView charts. I am currently not using it as a front-end GUI for my exchanges, which it supports.
I also use Blockfolio to give me a quick snapshot of my holdings, and find that it does an excellent job to aggregate all of my holdings into one easy-to-read snapshot of my cryptocurrencies, which are typically located in many different places.