Satoshi-cited Adam Back advises Innovators to Focus on developing Bitcoin
Hi everyone,
It’s time to attack the day again, but before that please take a moment to follow me on Twitter as I just noticed a massive discrepancy between newsletter subscribers and Twitter followers!
In this edition, we’ll delve into the latest bombshell news that saw MicroStrategy put down $250 million worth of its capital on bitcoin — and notably not on any other coin.
Meanwhile, the man mentioned in Satoshi’s white-paper had a few things to tell entrepreneurs and developers in the space. Admittedly, his comments might not win him too many friends, but it’s food for thought nonetheless! Last but by no means least, we’ll take a look at the bitcoin charts.
Let’s dive right in.
MicroStrategy purchases $250 million in bitcoin in fresh capital allocation strat
A fresh SEC filing from MicroStrategy disclosed that the firm purchased a total of 21,454 bitcoin in a revamped “capital allocation strategy” in order to protect from negative returns on the US Dollar.
In doing so, the billion-dollar publicly traded company has now set a major precedent for industry peers to join the fray as it revealed a two-pronged approach strategy to investors during its Q2 2020 earnings call.
The first prong is about returning excess cash to stakeholder, while the second involves investing in alternative assets such as bitcoin. Since the company expects more fiscal stimulus from the Federal Reserve and a low-interest rate environment in the future (as often covered here), the firm expects a negative return on real yield on US Dollars.
“ It would not be prudent to continue to hold a large portion of USD as our treasury strategy,” said Michael Saylor, Microstrategy’s CEO, during the earnings call. He also argued that hopes of large dollar reserves eventually having positive yields have now faded and that gold, silver, and Bitcoin are showing strength.
In essence, this means that bitcoin’s properties, it’s status as a limited digital asset with total network dominance as well as its technical usefulness have been recognised by a publicly traded company on a grand scale. This is a major green flag.
In fact, one should expect more firms to take a similar stance on bitcoin in the near future as the quiet bitcoin bull slowly awakens into mainstream consciousness.
Adam Back: developers should focus on bitcoin
In a recent interview with Cointelegraph, Adam Back commented on the perceived “bitcoin maximalism” concept.
The Blockstream CEO thinks that bitcoin is enough and that there is no need for more derivative projects, as he compared bitcoin to the Internet’s TCP/IP technology.
He said: “I think it’s like TCP/IP the internet exists. We don’t need 5800 TCP/IP copies trying to monetize and profiteer off pumpanomics or such. It detracts from value (I gather there are about 5,800 altcoins as of today)”
Instead, Back advised innovators to focus on bitcoin:
“It’s modular, you can build anything you want using it, if you’re trying to innovate, go ahead and innovate”, adding “bitcoin is electronic cash for the internet.”
Back was also asked whether there are any crypto or blockchain projects that he was eyeing aside from the all-mighty bitcoin. Interestingly enough, he noted a fondness for some of technologies out there, but refused to name names.
He continued: “There are some technologies I like, in formal security, cryptography like bullet-proofs, simplicity (formal provable smart-contracting), some privacy tech. I don’t like to name coins though some have deployed tech I invented over the years.”
Back’s opinions are unlikely to make him very popular within the cryptocurrency community, but his commitment to bitcoin isn’t unwarranted and is in many ways commendable. After all, bitcoin is not only the first mover, but has the largest network with the best transparency and predictability one could ever hope for.
At the same time, however, the problems that stem from maximalism might eventually lead to the “gold-bug” perception which should be avoided. Nobody should be lauded for taking the stubborn Peter-Schiff stance till death do us part.
However, the possibility is there, and bitcoiners should take it seriously as innovation requires open-mindedness and a willingness to try (and fail). More specifically, if bitcoiners do not take up the mantle of progress, then other projects will, and this wouldn’t mean that anything that isn’t bitcoin is a scam. After all, success is born from failures — though admittedly this is more of an attitude than anything else.
Still, ethereum should be held accountable to questions of supply issuance, and influencers should forgo the temptation for eth-apologetics when the facts speak for themselves. Having covered this in the last newsletter, I’m looking forward to Pierre Rochard’s work on attempting to verify the eth supply, because who wouldn’t want to know the truth ultimately? This would also help quell excessive etherean exuberance on ethereum being “money” or some such nonsense.
Needless to say, it will be interesting to see how things develop from here — and keeping communication lines open as it happens is a must.
Technically speaking
Bitcoin dominance primed for a bounce HTF weekly
As alluded to in prior newsletters, bitcoin dominance appears to be getting ready for a strong bounce, and with all the news surrounding decentralised finance and the fresh ethereum debacle, the conditions are perfect both technically and fundamentally.
As per the above chart, the weekly MACD (moving average convergence divergence) is flashing a slowdown in downwards pressure — i.e. traders and becoming more weary of buying altcoins on dodgy money markets with increasingly exuberant fees both on ETH and uniswap. At the same time, the Stoch RSI — which is useful for indicating relative momentum cycles is currently slammed in oversold territory, striking a similar tone as in April 1st 2019 — just before bitcoin went on it’s mini-bull run that saw it top out at $14,000.
To my mind, many market participants are underestimating bitcoin and overestimating altcoins (and their longevity). After all, alt-season does not last forever, but comes and goes with shiny new projects — of which most have historically proven to be vaporware.
Bitcoin daily HTF: have we seen this before?
Bitcoin broke down from $12,000 to around $11,100 during Tuesday trading — in conjunction with Gold and Silver which also took a hit.
Since the breakdown though, bitcoin has seemingly found support on the 20-daily EMA, printing two notable wicks to the downside as bulls stepped in to avoid a potential catastrophe.
In a prior mail out, I drew an adjusted consolidation pattern which in hindsight was incorrect. Admittedly, outside influences prompted me to adjust the analysis and this made no sense. Having said that, it’s worth paying more attention to horizontal support and resistance zones as well as pivot points rather than trend-lines — I’ve found that they’re more reliable overall.
With that out of the way, bitcoin has managed to find support on the $11,000 psychological level. Presently, it appears that bitcoin might range between $11,000 and $12,000 until one side gives way. While, bitcoin technically broke out of the previous pattern, the trend has developed a similar continuation structure that potentially increases the timeline for a breakout above $12,000 (or a breakdown towards $10,500).
As alluded to previously, bitcoin appears to be in a fractal that is playing out within a much shorter time-frame, as demonstrated above.
If recent history is a guide, then one could expect yet another re-test of the $12,000 level within the coming days. Bitcoin has already closed three bullish weeks and provided that it keeps on trading above the $10,000 psychological level then the sky is the limit. From a technical perspective, the only noteworthy levels of resistance (on a macro scale) are the $14,000 (2019 high) and the $20,000 all time high.
Of course, the eventual up-move does not preclude a re-test of lower levels, and bitcoin could continue this correction towards $10,500. But given the noteworthy bounce at $11,000, bitcoin could retrace the downward move entirely within a few hours. The correction towards $11,000 seems to have been exacerbated by a slide in commodities (gold and silver) and the strengthening of the USD index (DXY).
However, from a fundamental perspective, there is little reason to expect the US Dollar to continue strengthening indefinitely given that the Federal Reserve has repeatedly said that it will not stop supporting financial markets for the foreseeable future. Until this changes, it’s reasonable to expect gold, silver and bitcoin to keep rallying as investors seek inflationary hedges and stores of value against fiat debasement.
On the flip side, should bitcoin close a weekly candle below $10,500, then one would be forced to take medium-term bearish projections more seriously. Until then, dips are for buying — or as Crypto Twitter would say: BTFD!
Time to liquidate shorts?
While the frenzy of long-liquidations continues on both a weekly and monthly time-frame (weekly chart below), it’s worth noting that this futures activity is occurring within a confirmed bull-market.
Indeed, whether it’s price-action, technical indicators, bitcoin fundamentals or even traditional market behaviour, every data point tells a story of an emerging bitcoin bull that hasn’t even account for retail yet. While anything is possible, it remains likely that this correction will be short-lived (provided bitcoin remains above $10,500).
In such a scenario, there would also be a strong case to be made for tapping the all-time-high before the year ends.
May your gains be high and your losses low.
Catch you next time.
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Read More: Bitcoin volatility takes flight as price flirts with $12,000
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Christopher Attard
Founder of Chris on Crypto
Contributor to www.cityam.com
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Originally published at https://mailchi.mp.
