Premium Daily Crypto NewsletterFebruary 12, 2019
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Crypto Market Commentary
Mav's Daily Commentary
Project Spotlight: Meridio
At an estimated $217 trillion in wealth, real estate is the single largest global asset class. It’s also notoriously illiquid. Getting in and out of properties is difficult for renters, owners, and investors alike. The Federal Reserve’s recent interest rate hikes — and unknown remaining hikes planned for this year — will only exacerbate the liquidity problem. Access to financing will likely constrict to levels we haven’t seen since the housing market crash in 2008. Not only will the cost of capital increase for institutional and private investors, but the economic chokehold could also slide down to prospective home buyers hoping to build a little equity.
Currently, real estate investment is largely limited to two options: either full ownership of a physical property, or real estate investment trusts (REITs), which were introduced in 1960 and have barely evolved since. Real estate is clearly starved for innovation, and the rate hikes are bringing this conundrum into high relief. It is time to question the dynamics of legacy real estate institutions, rethink the concept of ownership, and consider what it means to rent or invest in real estate.
The Problem with REITs
For investors who want access to real estate investments and still stay liquid enough to trade, a REIT has traditionally been the instrument of choice. It allows investors to buy and trade shares from a portfolio of income-producing real estate. REITs, however, have their drawbacks. When you invest in a REIT, you’re investing in a group of unknown — and potentially underwater — assets with no claim to ownership, not to mention fees up to 10% on top. Moreover, REITs have failed to yield target returns this year. While the asset class recently has made a slight recovery, it remains in the red across the board YTD. Our obfuscatory, fee-ridden, and underperforming REIT model leaves a lot to be desired. The micro-panic brought on by recent fed hikes are the shake-up we need in order to rethink the real estate sector’s investment paradigm from the ground up.
Blockchain Technology and Real Estate
It’s no secret that blockchain technology is poised to disrupt real estate markets. Even as long ago (in blockchain progression) as 2016, a study showed over half (56%) of real estate investors believed blockchain would transform the industry (IBT). While it’s still unclear to some how exactly this will happen, an argument can be made that the disruption is already underway. ConsenSys has already assisted Dubai with a blockchain implementation to transition a paper-driven title process to a trusted and fully digitized platform. The concept is proven: blockchain is the ideal technological infrastructure for secure and transparent record-keeping, increasingly-liquid assets, and democratized access.
In real estate, blockchain-driven fractionalization has the potential to transform our traditional understanding of renting, owning, and investing.
A blockchain-based real estate marketplace would allow participants to unitize, or “tokenize,” a physical property into almost infinite slices. This model of fractional ownership makes it possible to invest in a large basket of diverse properties, which statistically would have much more consistent returns than buying a single real estate property. Of course many investors, retail and institutional alike, may not want to do the busy work of researching and selecting a large amount of various properties. As the market matures, however, there is no reason someone couldn’t offer these services for a small fee. Investor pools could form with a REIT-like manager that does the diligence work and builds a portfolio of a variety of real estate tokens. This could give investors the same investment exposure as buying a REIT, except with a much smaller fee, more transparency into the underlying asset financials, automated frictionless payouts of rental income, and more freedom to enter and exit the investment.
The Future of Renting
There are many ways tokenized real estate would benefit investors, but it could also democratize access for regular homeowners and renters alike. 37%of American households today are occupied by renters, the highest it has been in over 50 years. This trend has dramatically increased in the last decade after the housing market crash in 2008, and will likely persist given interest rates will continue to rise in the foreseeable future.
Given this accelerating global trend — a propensity to rent rather than buy — another advantage of tokenized fractional ownership could be to allow renters to build up some equity in the asset. Enabling renters to buy tokens for their leased property can provide new attractive benefits. By reinvesting dividends back into the asset, one could incrementally build up equity in the property, creating a positive feedback loop that saves them an increasing amount of rent each month. Additionally, when a renter holds any amount of equity in their home, it creates a strong incentive to keep the property in good shape, undamaged and up to date. This would be beneficial to token holders, property managers, and all other parties involved, perhaps so much that landlords would even offer discounted rent to token holders. As global trends continue to shift towards renting due to the restrictive nature of buying and increasing cost of capital, blockchain applications will be able to offer new and creative renting models that help the end consumer.
Home ownership, a long pillar of the American Dream, seems increasingly reserved for the wealthy. Blockchain is helping us imagine a market that is liquid and sustainable enough for everyday investors, owners, and renters to also get a piece of the pie. This is only scratching the surface of the new economic models and benefits tokenized real estate can offer. This is where projects like Meridio are building a new technological framework for the real estate industry that will blur the lines between renting, owning, and investing. As a ConsenSys formation, they are already seeing how blockchain technology, and specifically Ethereum, has completely changed how we think about ownership and manage our personal property. The rising cost of capital will be a catalyst for change, it’s time real estate catches up with the 21st century. Blockchain is the innovation that will take us there.
The Need For Maker and DAI In Real Estate
One of the most rewarding aspects of the Ethereum ecosystem is how collaborative projects are in the space. After all, these different projects and companies are deploying code to the same world computer. One such collaboration is Meridio with the Maker team. They integrated the DAI stablecoin into their platform early last summer in order to solve one of their most pronounced early challenges: investor apprehension to the volatility of Ether and Bitcoin.
Now, investors on Meridio can seamlessly trade real estate shares for Dai, which allows a near-perfect approximation to the US Dollar while still gaining the benefits and efficiencies of smart contracts.
Why Meridio needed a Stablecoin
When Meridio’s co-founders Mo and Corbin began showing real estate investors their alpha product in early 2018, investors loved the idea of owning and trading fractional shares of real estate, but they shied away from using Ether or Bitcoin to transact due to the price volatility. Investors simply aren’t comfortable risking 5–10% of their investment each time they purchased or traded shares. Rather than reverting to traditional off-chain payment methods such as wire transfers, Meridio began researching different stablecoins to use instead. After all, a stablecoin allows for the benefits of smart contracts, including trustless trades and nearly instant settlement time, without the volatility of cryptocurrencies. They explored several stablecoin options, but ultimately chose to start with Dai due to the volume of user adoption, ease of implementation, and decentralized price control methodology.
Meridio sees peer-to-peer trades, Ether balance conversion, and balance displays as only the beginning of their collaboration with Maker. For example, real estate asset owners that issue digital shares on Meridio could also distribute dividend payments using Dai based on real-time trading data, rather than manually issuing thousands of wire-transfers based on backward-looking data each quarter.
Moreover, if these dividend payments are recorded on-chain, end-of-year accounting, tax, and K1 issuance can be completely automated using tools like Balanc3. These instant, seamless, and documented payments on-chain are further eased by services like Wyre that are rolling out fiat on and off-ramps (USD⇔DAI).
The Maker team has many ambitious upgrades planned, notably support for a variety of digital assets in CDPs, known as Multi-Collateral Dai. I imagine a future where real estate tokens could be used as collateral for issuing Dai loans, given that real estate is a historically more stable asset than cryptocurrency or equities.
Ethereum provides a common platform for combining together many different, complementary projects, and you’re starting to see the movement accelerate especially within the crypto community.
The building blocks for a more open and innovative financial system are starting to emerge, and the sum is certainly greater than all the parts.
If you’d like early access to the Meridio platform or would participate in user testing, check out their sign up here.
Mav’s new class on STOs is described in this video and is available at readysetcrypto.com/sto.
A new episode of the ReadySetCrypto Podcast has been published; all of our episodes are posted on our blog (and on iTunes) and Episode Twenty-One is now available. Episode Twenty-One is Doc’s interview with Lior Gantz of Wealth Research Group about the state of the markets and methods on how to protect your wealth. Look for more episodes shortly as we comb the crypto space for valuable interviews, and create valuable content to keep you in the loop! See you tomorrow!
Doc's Daily Commentary
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Offense – Adding Trades
Offensive Actions for the next trading day:
- We’re still waiting for the Bear to play out, in the meantime there are some short-term swings setting up nearly every day on certain alt-coins.
Defense – Managing Risk
Defensive Actions for the next trading day:
RSC Managed Crypto Fund
How to read this portfolio: Please read through the FAQ tab
- ETH/USD 2% added 8/10/2018 @ $363.14
- ETH/USD 2% added 9/9/2018 @ $200.50 (10% more to add)
- LTC/USD 2% added 8/10/2018 @ $62.56. (5% more to add)
- XMR/BTC 2% added 9/21/2018 @ .018BTC
- BTC/USD 2% added 11/7/2018 @ $6501
- XLM/BTC 2% added 11/19/2018 @.00004389BTC
- XEM/BTC 2% added 11/27/2018 @.00001901BTC
What is the RSC Managed Cryptocurrency Fund?: We have one goal: To beat the market. To do this, we aim to balance risk vs. reward. Additionally, we aim to enter positions advantageously and in small increments, not all at once. As such, the pie chart you see above is representative of our “expected” portfolio, but will likely not match our “actual” portfolio. Why don’t you just buy into every position at once?: We aim to not only beat the market, but do so in a way that allows us greater leverage than simply buying in all at once. To do this, we will DCA into our positions to lower the average buy-in, and allow us greater yield from our initial capital seed. This also allows you the flexibility to follow our documented moves or immediately buy in when you want. We expect this will help you follow along easier as our moves are more deliberate. By setting targets for allocation, you know exactly how we intend to diversify our portfolio. Why are you only targeting large caps? Where is ____ coin?: We are targeting large market capitalization coins regardless of our belief in their viability as this enables us to diversify our risk and improve our chances of staying positive. We can hedge our bets by creating a fund that incorporates all of the major assets yet distinguishes between them based on the allocation. For example, we allocated more to Ethereum over its competitors as we feel it has more built-in longevity given its status as the default ICO platform. Of course, that can change, and as such we will be periodically rebalancing this fund as we redetermine viability and yield. Can I invest in this fund / can you manage my funds?: Not at this time. We are looking for ways to legally tokenize a fund such as this, but at this time no avenue exists for US citizens. Will we be adding small caps / ICOs?: It is likely we will be starting a separate fund dedicated solely to small caps / ICOs. We feel that the market simply isn’t showing favorable risk / reward signs for us to be trading them right now, but that will likely change soon. Why was the previous portfolio discontinued?: We felt it wasn’t correctly connecting with our customers as we started it in late 2017 and even during the 2018 bear market we were still very profitable. The same could not be said for customers who joined us during the bear market and tried to replicate our portfolio. Simply put: we wanted a portfolio that was easier to follow along with and less risky for our customers while still aiming for profitability.
RSC Altcoin-Exclusive Crypto Fund
Technical Analysis Research
Any rally that we try to take long will be counter-trend in most of the top-ten, although some are starting to break that trend impressively. TRX has been strong lately!
My beta for the Digitex Futures platform will be live soon; expect to hear more as I know it.
Doc will be attending The TradersExpo in NYC March 10-12 – see you there!
In August we introduced a new “fund” project that we’ll be creating over the next few months, in piecemeal form. I will be slowly and methodically creating a “fund” with (currently) 23 assets that we will do “live” or at least very plainly indicate where we intend to enter portions of assets. As long as the market continues grinding down in a bear, we will use sentiment-based entries to hopefully secure a better entry. All that I saw were bear flags tonight; we are close to some good entries on coins showing positive divergence on the RSI. Going forward into the end of this year my plan is to do a LOT more swing trading; what would really help is a decent derivatives exchange. I am looking for big things from Digitex in this regard, which will be a commission-free futures platform however all trades must be made in DGTX as the base currency. Put yourself on the waitlist for this platform by clicking here. I have started to acquire DGTX tokens at Mercatox in anticipation of them turning up their platform, and this looks to be a good candidate for a pump prior to the production event. Here are the recent swings that we’re tracking in the portfolio below; :
- DGB/BTC – long @ .00000608 (7/23). My target exit is .000008BTC.
- WTC/BTC – Long @ .00155980BTC (4/23). My target exit is at .002BTC.
- ADA/BTC – Long @ .00003931BTC (5/1) My target exit is at .00005BTC.
- ONT/BTC – long @ .0008905 (5/20) My target is .0013BTC.
- ETP/BTC – long @ .000522BTC (9/21) My target is .00072BTC
- ZIL/BTC – long @ 641satoshis (1/16) My target is 750 sats.
Please keep in mind that if you want to follow these trades, I am using FIXED RISK POSITION SIZING. This means that I am using a fixed amount of risk capital that is based on my account size, like 2%. I am assuming that the trade will burn to the ground and that I will lose that entire capital position! Only in this manner can one effectively manage a position the way that you have to. If you’ve every checked your blockfolio nervously every 5 minutes when you’re underwater, this will prevent that. I will track these positions in this area and not in the main portfolio section. I will use a public portfolio tool to do so, which you can access by clicking below:
If you go to buy any of our courses at our online “store” you can receive $10 off the street price with your member’s “coupon code” of member18crypto..
We’ve started to do some swing trades on alts, tracked in the previous section. I am mostly focusing on the top 10-20 coins for now until we confirm that we’re back into an overall bull market.
I am doing the majority of my Technical Analysis work on TradingView, and I have a BitFinex app on both my iPad and Android smartphone. All of these charting platforms call a TradingView API. TradingView is the 800 lb. gorilla in the Crypto charting space until the “established” players want to make a go at Crypto, like Ninjatrader, Tradestation, eSignal, Sierra charts, etc. My sense is that TradingView has such a head start that it will be very difficult for the big boys to make a dent in this space for a while. Until that point, TradingView has almost a monopoly in this space. 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 and/or Delta 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.
I am also trialing the Profit Trailer and CryptoHopper trading apps which are working well in this choppy market.
Fundamental Currency Research
We’ll focus in-depth on a coin you should consider, and talk about the fundamentals of what makes it interesting. This is not a “ this is the next big crypto” article or “reasons why you should buy”. We’re simply laying it down with hype, speculation, and other nonsense.
Today’s RSC Coin Spotlight is the 0x Protocol (ZRX):
No doubt you’ve heard about ZRX in the past several weeks since its listing on Coinbase on October 11, 2018. But you may be asking yourself: What is ZRX? And What gives it value?
ZRX is the governance token of the 0x Protocol, a standard for trustlessly trading ERC20 and ERC721 tokens. 0x Protocol allows users to trade tokens right from their wallets in either OTC trades or through a decentralized exchange otherwise known as a relayer.
0x protocol uses an approach they refer to as off-chain order relay with on-chain settlement. In this approach, cryptographically signed orders are broadcast off of the blockchain through any arbitrary communication channel an interested counterparty may fill the order by submitting one or more of these signed orders into 0x protocol’s Exchange contract to execute and settle trades directly to the blockchain.
The project ICO’d in August 2017 for $24,000,000. On August 2, 2017, iFinex Inc. (BVI), the company that owns Bitfinex, announced it would launch Ethfinex, an Ethereum-based trading and discussion platform that would utilize the 0x Protocol. Several other prominent relayers rose in the 0x ecosystem such as DDEX, Radar Relay, and Paradex.
On May 23rd, Coinbase announced it had acquired Paradex, a decentralized exchange that uses 0x. At the time of the Paradex acquisition, Cointelegraph reported,
“Coinbase will integrate the Paradex relay platform into Coinbase Pro which, according their blog post, will let customers trade ‘hundreds of tokens directly from their wallets.’ This would markedly expand the types of cryptocurrencies to which customers will have access through Coinbase. The blog post states that the new service will be made available to customers outside the US before eventually being offered to American clients.”
This acquisition led many in the crypto community to speculate that Coinbase would list ZRX and sure enough it was listed on Coinbase on October 11, 2018. The ZRX community eagerly awaits Coinbase Pro “Trustless” which could see the listing of many ERC20 tokens. Coinbase’s recent announcement of USDC, an ERC20 backed by USD, may be used in trading pairs on Coinbase’s new trustless service.
0x protocol relayers have a lot of flexibility on how they collect and relay the orders they interact with. Relayers can choose whether to have open or closed liquidity pools. Relayers can be private or open.
They can even be dark relayers which allows big players to transact outside of the eyes of the public by obfuscating their orderbooks and provide just-in-time quotes for crypto assets to emulate the experience of using a dark liquidity pool.
But 0x goes far beyond decentralized exchanges. The liquidity pools that relayers create can be beneficial to any number of projects in the Ethereum ecosystem. 0x allows developers a flexible approach to offering their users liquidity for their tokens.
Any DApp looking to accept multiple tokens as payment methods could tap into 0x’s orderbooks for the liquidity to convert the payment into the token of their choice.
For example, Since 0x can handle ERC721 tokens, two players of the ERC721-based card game Gods Unchained can trade cards with one another. Gods Unchained is going to utilize 0x to create an in-app exchange where players can trustlessly trade ERC721 cards with one another. https://godsunchained.com/
Developers see the value in a protocol like 0x and several major projects in the Ethereum ecosystem are integrating the 0x protocol as a vital function of their code.
District0x (DNT) is one of these projects. According to their website, District0x is a network of decentralized markets and communities known as districts that solves a number of coordination issues and inefficiencies commonly found within distributed community marketplaces.
This is accomplished by providing tools that can better align incentives and decision making among the market participants themselves.
The end goal is to create a self sustaining ecosystem that can flourish without the need for a central authority. Districts exist on top of a modular framework of Ethereum smart contracts and frontend libraries referred to as d0xINFRA.
District0x embedded their 0xprotocol into their districts on the district0x Network, giving users the ability to pay and receive payment in the ERC20 or ERC721 token of their choice.
Simlar to the ZRX token, DNT is used to govern District0x. As their FAQ puts it:
“The district0x token holders themselves decide whether a district is good or bad for the network through the District Registry, an incentivized voting game that dictates access to the network. Whether a district is good or bad not only applies in terms of the quality of the marketplace, but also prevents against districts that are deemed immoral or threatening to the entire network by DNT holders. This will be entirely up to the DNT token holders to decide.”
Like many people you may be asking yourself: “Where is the value in governing these protocols? Where is my money?” These are valid questions that honestly no one has the answer to yet. Like many aspects of crypto, these investments are speculatory.
One concern many have raised in the ZRX community is: What stops someone from forking the 0xprotocol in the case of a dispute? While it is true that a relayer who wanted to could fork away from the rest of the 0xprotocol but they would also suffer the consequences of disconnecting from everyone else in that pool of liquidity.
Similar arguments have been made for open-source software in the past and it usually boils down to the same concept that gives these open-source projects value: network effect. It’s hard to copy and paste Ethereum because it is the Ethereum network that has value not strictly the technology.
0xprotocol can be viewed in a similar light. Yes, you could fork the protocol but the value in ZRX is the network of users and application built on top of the protocol itself. District0x and relayers are a prime example of this. Any project that tried to duplicate ZRX would need to attract all of the protocol network’s users as well.
As the cryptocurrency space keeps evolving, we’re going to see users and developers take the path of least resistance. Why make my own operating system when I can use one someone else wrote? Why make my own network protocol for computers when I can use TCP/IP to connect to the internet?
Why make my own cryptocurrency network when I can build on Ethereum or Stellar? This line thinking logically progresses into: Why make my own liquidity when I can tap into a network like ZRX? Why make my own marketplace when I can use District0x?
This interweaving of utility protocols is going to create a strong fabric for ecommerce in the age of Web 3.0. Just like ZRX, District0x benefits from developers building off of their framework. These developers must place a refundable deposit of DNT to become a district creating a symbiotic relationship.
District0x provides a standard framework for any marketplace system with a reputation like Ebay or even Amazon.
One example of the districts on the District0x network is the RedLightDistrict created in partnership with Spankchain. They sell, as you might have guessed, adult content from performers on Spankchain’s network. District0x’s framework provides the RedLightDistrict with the ability to have buyer and seller reputations, an issue interface for performers to sell digital content, and seamless payments via the ZRX protocol.
The decentralized finance ecosystem grows with each new strand woven into its fabric; We are seeing more and more Dapps in the Ethereum space being built on top of or interwoven with other Dapps or protocols. District0x is just one of the threads interwoven with ZRX.
dYdX protocol is building another important product that integrates with ZRX relayers. dYdX is a protocol for short selling and derivatives built on the Ethereum blockchain. dYdX provides decentralized peer-to-peer shorting, lending, and options trading of any Ethereum based token. dYdX allows decentralized exchanges to offer sophisicated financial tools similar to centralized exchanges but in a completely trustless way. https://medium.com/dydxderivatives/introducing-dydx-2d0f0f326fd
Dharma protocol is another great example. Dharma is a protocol for issuing, underwriting, and administering debt agreements as tradeable cryptographic tokens built on top of, you guessed it, the 0x protocol. https://dharma.io/
Overall, 0x is certainly a project doing big things, and will certainly be one of the more successful projects you should keep your eye on heading into next year.
More resources on 0x:
2017- 2018Q2 Portfolio (Discontinued)
How to read this portfolio: Please click on the Chart Key tab above for definitions and color codes. The colors correspond to our 7 categories in the graphic below.