Markets Start To Shift Towards Bearish Disposition

Are We Falling Back To $6,000/BTC?

Another uneventful day left the market down only 2 Billion as both Bulls and Bears struggled to find reason to rally their cause.

Taking into account overall market sentiment, low volume, and an apparent weak market structure, it’s more plausible that we have a large break down in the coming days than a rally upward.

One of the more interesting takeaways from today was a recent bullish forecast issued by J. Christopher Giancarlo, the top derivatives regulator in the United States.

Giancarlo, the chairman of the Commodity Futures Trading Commission (CFTC), stated in an interview with CNBC that:

“I personally think that cryptocurrencies are here to stay. I think there is a future for them. I’m not sure they ever come to rival the dollar or other hard currencies, but there’s a whole section of the world that really is hungry for functioning currencies that they can’t find in their local currencies. There’s 140 countries in the world, every one of them has a currency. Probably two-thirds are not worth the polymer or the paper they’re written on, and those parts of the world rely on hard currencies. Bitcoin [or another] cryptocurrency may solve some of the problems.”

“We’re talking maybe 10 years down the road,” he clarified.

“There’s no question that the United States is leading in a number of areas,” he continued, referencing the burgeoning U.S. bitcoin derivatives market, “but there’s other areas as well of innovation where I think it makes sense for us to take a little bit more of a thoughtful and intelligent approach, just as the U.S. Congress did 20 years ago in the early days of the internet.”

While Giancarlo has shown previously his affinity for the space, it’s reassuring to see him continue to issue these positive statements. Furthermore, we’re interested in the upcoming Fintech Forward event in DC this week which will be hosted by the CFTC. Though it’s unlikely that we’ll see anything substantial come out of it, we will have several contacts in attendance who will fill us in if the opposite is true.

As we continue to see fear rise in the markets, positive regulatory guidance could prove essential to helping us stem the tide. Another element is the continued operation of the largest projects in the space.

One such example was the recent allegations that EOS block producers were allegedly involved in collusion and mutual voting.

As 12 out of the 21 EOS block producers are Chinese entities, the evidence came to light that Huobi was colluding among them in the form of a spreadsheet with entries for “node mutual voting tables” and “node income statements”.

In a statement on medium, Brendan Blumer, CEO and Founder of Block.one, confirmed that EOS is “aware of some unverified claims regarding irregular block producer voting, and the subsequent denials of those claims.”

Despite that, one of the most frequently discussed weaknesses of the dPOS consensus mechanism in use by EOS is this centralization and potential for block producer collaboration. As the current block producers vote on who will be added or removed from the group of 21, this presents a problem where collusion could have producers stay in power indefinitely.

Overall, this shows the vulnerabilities of an experimental stage of decentralized systems we’re in. Finding and eliminating such liabilities will be one of the biggest challenges over the next couple of years.

The point is that this is necessary to create something better. Trial and error is part of the scientific method, and we’re very much in the early days of this technology.

While EOS’s issues are inexcusable, hopefully, this shows why multiple solutions to the same problem are necessary, and why it’s important you don’t put all your eggs in one basket at this early stage. Hedge your bets, and never consider any one project the “best”, because we’re years away from anything resembling complete manifestations.

Watch Doc’s recent online classes here and here on “Four Rules to Chart Like a Pro.” 

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Defensive Actions for the next trading day: 

• None.