Premium Daily Crypto NewsletterAugust 8, 2018
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Crypto Market Commentary
Mav's Daily Commentary
Markets See Massive Sell-Off As Fear Grips Investors
New Yearly Low Established — Are We Oversold?
The market continued to dig a deeper hole today as it sold off 20 Billion and established a new yearly low — We are now equivalent in total market cap to November 15th, 2017. Interestingly, Bitcoin had nearly the same market dominance then, 51%, as it does today, 49%.
What’s truly amazing here is that the market is operating on a fear of nothing, as nothing has happened.
For those unaware, the VanEck / SolidX ETF proposal was delayed by the SEC yesterday, leading to 30 Billion being sold off.
The key word there is delayed. Not denied.
They have delayed other ETF applications as well.
Why this one hurts so badly is that the market did a great job of convincing itself that we were going to see an approval in August, despite what the rational voices have been saying.
So rather than speculating, let’s get empirical and discuss rationally what is going to happen so that we may be smarter and less emotional than this clearly oversold market.
For one, there are 4 ETF applications on the table of note:
– First update: Tue Jan 30 (+35 days)
– Second update: Fri Mar 23 (+87 days)
– Third update: Fri Jun 15 (+171 days)
– Final deadline: Aug 23 (+240 days)
– Notice originally posted on January 24
– First extension issued on March 1 (~45 days later)
– Second extension issued on April 23 (~45 days later)
– Third extension issued on July 24 (~90 days later)
– Final deadline is September 21 (~60 days later)
CBOE VanEck / SolidX ETF:
– First deadline 16 Aug
– First extension issued on 7 Aug
– Second deadline Sept 30
– Final deadline 27(?) Feb 2019
Bitwise Hold 10 Cryptocurrency Index Fund:
– Filed on July 24th
– First deadline is Sept 7
So if you’ll notice the pattern, the timing of the ETF approval process follows a standard formula:
– the ETF files a “proposed rule change” with the SEC
– the SEC posts notice of the filing in the Federal Register and solicits comments
– the SEC has 45 days from posting to approve or deny the ETF
But the thing to note is that the SEC doesn’t have to decide within 45 days. It can extend the deadline up to three times:
– 45 more days if “a longer period is appropriate”
– 90 more days for the ETF to address grounds for disapproval
– 60 more days if again “a longer period is appropriate.”
This means the real deadline for the SEC to approve or deny an ETF is 240 days after it files notice in the Federal Register (45+45+90+60).
Because of how the law works, the SEC can’t just set a 240-day deadline as the initial span of time for consideration. It has to do the extensions one at a time.
So, for example, the Direxion ETF was given its third & final extension allowed by law (15 U.S.C. § 78s(b)(2)).
This means that we will likely see another two ETFs denied or approved within the coming month. Proshares (deadline Aug 23) and Direxion (deadline Sep 21) are different animals than the CBOE VanEck / SolidX ETF.
Unlike that ETF, the Direxion and ProShares ETFs are not commodity-backed.
In other words, these funds won’t involve buying actual Bitcoin, instead being based off futures. Hence, they are not expected to have as much impact on Bitcoin price as the VanEck/SolidX Bitcoin ETF. When the Direxion ETF was delayed last month it barely affected the market, but yesterday’s delay of the commodity-backed ETF sent the market into an existential crisis.
The market’s expectation is that a commodity-backed ETF would significantly impact spot price, while a futures-backed ETF like ProShares or Direxion won’t. Still, how the SEC handles futures-backed ETFs could signal what they’ll do with VanEck/SolidX.
After all, the VanEck/SolidX ETF the market cares so much about is merely a copy of a previous application.
There was another SolidX ETF proposal that was denied March 29th, 2017. The VanEck/SolidX ETF currently under review has exactly the same insurance and exactly the same custodian (SolidX.) For all intents and purposes, it is the same proposal just with some amendments to the registration.
Overall there aren’t that many changes from the application that was denied. Specifically, after the SEC letter with concerns/questions from January 18th, 2018, it seems like they didn’t do much to address those concerns.
Having read the application itself, I would go so far as to say it is sloppy and unfinished. There are brackets everywhere, and the OTC index it relies on is unfinished.
Those concerns could be somewhat alleviated before February of 2019, but I think it should be clear that the market is putting far too much faith and hope into this clearly flawed ETF.
Obviously biggest change is that VanEck’s name is on it and the CBOE is behind it as well. But in terms of changes they just added like 2 small paragraphs about VanEck’s role, likely just for “marketing”.
Do some digging and you’ll find that these aren’t the people we should be entrusting the health of our market with.
In August of 2017, Joe Foster, portfolio manager and strategist for VanEck is on the record saying,
“Bitcoin and other digital currencies are a fad that has attracted the attention of programmers, speculators, and early adaptors. It is my opinion that governments will not allow digital currencies to reach the critical mass needed to challenge the utility of fiat currencies (such as the dollar).”
I’m sure after the run-up of late 2017, VanEck thinks Bitcoin and cryptocurrencies are even more of a “fad”. I ask, are these really the people that deserve to move the market 20 Billion in one day?
Once again, I need to stress that this ETF is dangerously polluting the mind of the market, and it is much more important that we focus on technology and adoption than the ETF.
After all, the news from this weekend regarding Bakkt and their custodial services / fiat to crypto platform / emphasis on retirement funds / emphasis on retail payments is much bigger news than the ETF.
But, for a moment, let’s put on our investigative hats one more time and try to predict what is going to happen over the next couple months.
First question, do either the Proshares or Direxion Futures-backed ETFs get approved?
As the Proshares the filing acknowledges, the market for bitcoin-tied derivatives is still nascent and early-stage.
“Bitcoin futures contracts have only recently been listed for trading and have a very limited trading history. There can be no assurance that an active trading market for bitcoin futures contracts will develop or be maintained,” the firm wrote.
So this is a bit of a tossup. Bitcoin futures have been traded successfully for 8 months, and while they’re still not widely used, they are increasing in popularity as the CME reported their Q2 volume was up 93% over Q1.
We could see their approval go either way, and with both of them being decided within a month, that sets the stage for more market disappointment if there’s back-to-back denials. Again, the market doesn’t regard these as highly as the commodity-backed ETF, but let’s consider the worst-case scenario.
Proshares is denied on August 23rd, Bitwise is denied / delayed on September 7th, Direxion is denied on September 21st, and the VanEck/SolidX ETF is denied once again on September 30th.
That’s a whole lot of FUD. September may be worse than what August is currently.
But let’s look at the opposite side. The SEC commissioners responsible for deciding the fate of these Bitcoin ETF applications are currently split 3-1 as we saw with the Winklevoss ETF denial. Hester Peirce is clearly pro-ETF and I think she’ll continue to hold that sentiment.
Then Elad Roisman will most certainly succeed Michael Piwowar this month. He is on the record saying that the SEC must treat ICOs, Blockchain, and other emerging technologies in a fair and transparent manner.
He also used to work for ICE/NYSE, which as we’ve seen from the Bakkt launch is clearly warming up to crypto.
In addition, the Democrats have now made their recommendation for the other replacement. They will probably approve the Republican and Democrat candidates simultaneously to keep balance. They will put forth a progressive, open-minded candidate in Allison Lee.
This is two new chances for a yes vote, both replacing current no votes, and potentially swaying the deciding body from 3-1 to 2-3 in favor of Bitcoin (there is currently a vacancy necessitating the 4 votes when there should be 5).
So, it is very possible that we might see a bloody August and September, but keep your eyes on what’s going on in the SEC and how we might see the tides shift in time for the final decision in February.
The market is clearly oversold. We have endured a bear market predicated on fear and uncertainty. We could very well be approaching the capitulation point.
Keep your chin up, even through days like today.
If you were not able to join us for the recent webinar “Ten Steps to Building Your Portfolio” webinar, the replay is available here.
We’ve started to produce episodes for The ReadySetCrypto Podcast; all of our episodes are posted on our blog (and on iTunes) and episode eight is now available. Episode Eight is an interview with Andrei Polgar, the author of the book “Age of Anomaly” which speaks to anticipating negative market events. 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:
- None today.
Defense – Managing Risk
Defensive Actions for the next trading day:
RSC Managed Crypto Fund
Technical Analysis Research
This past weekend 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.
In today’s video I discussed what we’ve seen over the market over the last few weeks and how TA helped us understand it at every step of the way…not only understand, but also to “frame in” the important levels and what we should be doing as the price broke those. RIght now we’re under the spell of the weekly downtrend and every tick down gets us closer to the eventual capitulation. .
. I will be diving much deeper into the various derivatives that will enable much more fluid and nimble trading to those of you with an interest to do so. The challenge continues to be what exchanges that you can use depending on where you live, which of course will be a fluid situation.
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.
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:
I hope you all got a chance to catch my webinar class from earlier this year; if not, the replay is available here. If you missed my earlier webinar, “More Profits in 2018; Ten Ways to Chart Like a Pro.” then you can catch the replay here. My new class “Introduction to Technical Analysis” is now available via our online store.
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
For flipping Good.
For long-term holding Neutral.
What is it?
What is our verdict?
What we like: The prototype has an insane 130,000 TPS
What we don’t like: TPS expected to drop as more nodes join the network. Team’s business strategy relies on collaboration with other companies.
- Project name: Tolar
- Token symbol: TOL
- Website: https://www.tolar.io
- White paper: https://www.tolar.io/wp-content/uploads/2018/07/Tolar-whitepaper-1.pdf
- Hard cap: 45,000 ETH (token sale contributors will own 35% of the total token supply)
- Conversion rate: ICO price and presale price for 1-9 ETH = 0,000145055 ETH per TOL
- Maximum market cap at ICO on a fully diluted basis: $54 million based on current ether price of $420
- Bonus structure: For presale, contributions of > 50 ETH = 20% bonus; between 10-49 ETH = 10% bonus. 3-month lock up for bonus tokens.
- Private sale / white list: Presale in progress until the end of August 2018. Presale and whitelist registrations are currently open at https://tolar.io/presale.
- ERC20 token: Yes (will be switched to native tokens when the mainnet is launched)
- Countries excluded: USA, China
- Timeline: Currently planned for September 15-20, 2018 (14:00 GMT). The ICO may end earlier if hard cap is reached (please visit Tolar’s official website and join their Telegram channel for the most up-to-date information on their upcoming token sale)
- Token distribution date: Q3 2018
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.