Debunking crypto narratives: the fastest horse in the race always wins
There’s a narrative going around that ethereum is setting up to outperform bitcoin. Please bear with me as I attempt to debunk this. Meanwhile, a major gold counterfeiting scandal just surfaced in China, indicating that upwards of 4% of China’s gold reserves might be fake. Finally, we’ll delve into the bitcoin technicals, which haven’t changed much on a macro time frame. Indeed, bitcoin is as boring as it was back in 2018 when it meandered at $6,000 for months on end.
In any case, let’s dive right in.
Ethereum is unlikely to outperform bitcoin
There is a pervasive narrative in the cryptoverse that attempts to paint ethereum in the same light as bitcoin or better. Here’s why I think this narrative is not only flawed psychologically, but also fundamentally incorrect.
Firstly, the main premise of bitcoin in my eyes is that it is fundamentally, technologically uncorrelated to central banking systems and their respective banana financial markets. While I do not know when this house of cards will come crashing down, it doesn’t take a genius to realise that a thousand shallow cuts — in the form of ongoing bad decisions — will eventually overturn the current system.
As such, given that bitcoin is not directly supported or fundamentally correlated to markets, it fits the category for being the best asymmetric hedge against short term decision makers.
However, as one would rightly point out, bitcoin has been closely correlated to the S&P in recent history. To my mind, this is because the market is dominated by day traders who are also speculating in other financial markets. This is why trading bitcoin today is basically the same as trading the SPX, and it will end as soon as bitcoin truly hits the masses who will market buy at a given price and forget about their investment.
Having said that, there is a belief or a narrative out there that is quite simply misleading, and speaks to the possibility of bitcoin being overtaken by Ethereum, when in reality the cryptoverse has already chosen its winner and there is no denying it.
The same way your average investor bought Apple stocks rather than a basket of tech indexes in 2009, one would also buy bitcoin rather than Ethereum and other altcoins. This is also true of Google and DuckDuckGo or other search engines. This is to say that a winner already exists in crypto and it will most probably take the lion’s share of capital when this thing hits mass market. This does not mean that Ethereum and other projects won’t succeed, but it means that they won’t perform as well as the fastest horse in the race — bitcoin.
While I don’t discount the possibility that I might be wrong, this is as clear as the existence of gravity for me.
Secondly, there is also the psychological aspect of the feeling that one has “missed the boat”, when in reality, the boat is still docked. This is the idea that all upside has already been exhausted in bitcoin, which leads people to cling onto something else while denying that a winner already exists and holds 65% of the total market cap in a mere $260 billion asset class.
In this respect, ethereum is to bitcoin what DuckDuckGo is to Google. Mind you, DuckDuckGo has been very successful and I even use it to get around Google algorithms, but Google is clearly much more widely utilised.
Even ethereum marines know this, having recently boasted all over crypto Twitter about securing 10,000 btc on ethereum. There’s a reason why it’s not the other way around, and probably never will be.
Bitcoin is the category winner, and while there is room for other projects — whether it’s DeFi, token-based social media platforms, etc — mass market always chooses the winner, and I see no reason why it would be different this time.
Gold Scandal: 83 Tons of Fake Chinese Gold bars uncovered in massive scandal
In a major gold counterfeiting scandal, more than $2.8 billion in gold bars — originally used as collateral for 16 billion Yuan in loans — were found to be nothing but gilded copper.
The fake gold came to light in February when Dongguan Trust Co. Ltd. set out to liquidate Kingold collateral to cover defaulted debts. In late 2019 Kingold failed to repay investors in several trust products. Dongguan Trust said it discovered that the gleaming gold bars were actually nothing more than gilded copper alloy.
The 83 tons of allegedly pure gold stored by Kingold, which backed the 16 billion Yuan of loans as of June, would be equivalent to 22% of China’s annual gold production and 4.2% of the state gold reserve as of 2019. In essence, over 4% of China’s official gold reserves may be fake.
This development comes under the assumption that Chinese gold producers and jewelry makers are not engaging in similar fraudulent behaviour. Given the history of Chinese gold fraud, nobody would really be surprised at this point.
Interestingly enough, the website for Wuhan Kingold Jewelry Inc described itself as “A company with a Golden future”. In hindsight, it probably meant “copper” future.
Weekly (HTF) is bullish but a mild correction is possible
Bitcoin is decidedly one of the most stable assets anywhere right now, hovering just over the $9,000 area as it prepares to make a move that will set the tone for the coming weeks.
On the weekly chart it’s clear that both buyers and sellers are undecided as to which direction bitcoin should take after its 170% move to the upside since March 12th (from trough to peak). The levels to watch haven’t changed from prior newsletters and it’s only a matter of time before a decisive move is made.
Typically, bitcoin’s Q3 performance isn’t particularly remarkable, as per the below info chart. However, given that we are going through extraordinary times, it’s reasonable to say that past performance is even less relevant this time around than it otherwise would be.
On a weekly time-frame, bitcoin has tested the 50-EMA (currently at $8,300) twice in the last 2 months thus far. Another test of this level is not out of the question and would provide an opportunity for bulls to demonstrate long-term resolve in the burgeoning uptrend. From a “btc is going to zero perspective”, a breakdown to this level would be a defining moment for bearish price-targets and a failure to close beneath the 50-weekly EMA would present another great buying opportunity for holders.
If the price were to fall through, then the $7,500 level should offer decent buying pressure given its history acting as a price-pivot on high time-frames, as well as its recent significance in acting as resistance prior to the May breakout to $10,000.
Failing this, a retest of the 200-EMA is not out of the question, but is highly unlikely at this stage. Tapping this level would put a notable dent in projections for all time highs by the end of 2020.
Having said that, bitcoin is still in a clear up-trend and 1–4 candle correction on the TD-sequential indicator would be a healthy move in a broader uptrend until proven otherwise. A break above $13,700 would solidify bitcoin’s bull market, suggesting that fresh all-time-highs should be expected sooner rather than later.
Daily (HTF) poised to break out this week
On the daily time-frame, bitcoin is still trading beneath the $9,300 pivot point, signalling bearish continuation for all intents and purposes. A bounce from $8,600 at the bottom of the range (discounting wicks) is likely if bitcoin fails to reclaim the pivotal price-point.
Having said that, bitcoin is clearly trading within a falling channel on the RSI while printing higher lows on the broader 2-month long consolidation structure. A break of this RSI structure could reintroduce volatility as bitcoin shifts into a new trend. Bitcoin has recently printed two buy signals on the MFI, which were subsequently invalidated after bulls hesitated at the $9,800 level.
At the time of writing, bitcoin is trading beneath the 50-daily EMA. A decisive close above this resistance past $9,300 is required for bulls to assert market control. Otherwise, all eyes should be at the bottom of the range at $8,600 for a prospective bounce.
The biggest question here is whether bitcoin will correct now or later in Q3. A drawn-out correction is coming but the fact the market has not printed a technical blow off top suggests that further upside is still firmly in the cards. Discounting this probability would be irresponsible at this stage, lending credence to calls for dip-buying.
4-hour (LTF) fails wedge breakout — leans bearish
Thus far, bitcoin has failed to breakout of the falling wedge pattern on 4-hour chart as it meanders below the 200 and 50 4-hour EMA. This suggests that another leg down is likely in the short term, given that breakouts from falling wedges are supposed to be explosive and decisive moves.
However, it’s possible that the adjusted structure (as per the above chart) is playing out rather than the original. In this case, bitcoin would have to break to the upside within the next 24–48 hours. Failing that, $8,600 is the next support level which seems more likely until proven otherwise.
When putting it all together, it seems like while bitcoin’s macro structure is in tact, a further correction is possible in the short term before resuming the upwards trend.
From a hodler perspective, stacking satoshis is a no-brainer. From a trading perspective, clarity is needed before making any move.
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Full story: 83 Tons of Fake Chinese Gold bars found in huge scandal
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