🧘♂️WARNING: How Low Will $BTC Go?
Market Meditations | September 20, 2021
Uncovered: Key Macro & Micro Levels
♦️ Everything is pretty red right now… Seemingly a combined impact of Evergrande in China, rumours of stablecoin regulation and caution ahead of the U.S. FOMC Meeting.
⛳️ Are you panicking? If you are, try to understand the reason. Too much leverage? Didn’t set a stop loss? Whatever it is, understand it and avoid it going forward.
? There is still plenty of opportunity in the space. For those who are level-headed and know where to look. We can help you with where to look. However, you are the master of your own psychology.
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Our Market Meditations are longer format educational segments. Each letter features a Market Meditation which will deep dive and analyse a relevant crypto event, theme or tool.
$44k is a key level. Indeed, it is confluent with the 0.382 level of the entire move down. We can see that the level has been broken (we are trading below $44k). This is not a good sign for bulls and it is possible to see continued downside from here.
$40k is the next obvious psychological level but in fact there are a fair few data points at $42k. It may be a bounce level.
Zooming out now… the macro market structure is not looking great. Why? We are starting to see lower highs and lower lows. Unsurprisingly therefore, this is not our preferred entry level.
We were watching $3k and $4k for a while.
ETH is looking a bit better than BTC. It’s the first real test of the $3k support level. Let’s see how she holds.
Could see justifications for an aggressive entry here, certainly compared to BTC.
And if she doesn’t hold… next real support at $2.6k and $2.4k.
Congratulations for those who got in on our previous shared opportunity: entry at $140 and exit around $170.
Going forward? Not looking great. We’ve not managed to hold the key $140 level.
Our next preferred entry? Either right down at $120 (0.5 level) or above $170.
Stepping out of the middle zone. We know when it’s time to take a step back.
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?? How Stable Is Your Stablecoin?
An article published by the New York Times on Sunday said U.S. regulators are concerned that stablecoins may become a source of volatility. So, how likely is it that they will be regulated and what would it mean if they were?
Mark Cuban said that stablecoins will likely be the first to get regulated because of their very nature. While bitcoin and other cryptocurrencies are seen as speculative assets, stablecoins are pegged to a reserve asset.
Cuban says that if stablecoins are “pegged” and “stable” then they need to be regulated in order to uphold and maintain a standard and definition of what a stablecoin is.
While some believe these questions about definition to be baseless and not particularly important, one should note that stablecoins are not created the same. Some stablecoins are commodity-backed, fiat-backed, crypto-backed, etc.
There are some questions about stablecoins that still need to be answered in terms of regulatory bodies: Are stablecoins securities? Are they fully backed reserves? If fully backed, what are they backed by? Do all stablecoins meet the same definition when talking about “stable” and “pegged to an asset?”
U.S. Treasury officials are working for a policy framework for stablecoins according to Bloomberg. Gary Gensler (chairman of the Securities and Exchange Commission) and Jerome Powell (Federal Reserve Chairman) have spoken out on stablecoins saying that there ought to be more regulations and that they too are currently susceptible to fraud.
Regulation is often considered to be an ugly word? What about the positive case for Crypto? Perhaps there is an argument to be made that it could actually allow for more creative minds to get involved. While it may seem harsh to leave stablecoins not meeting regulations on the sidelines, it could be very beneficial to continue the spread of cryptocurrency around the world. If stablecoins begin to be used more commonly because it is regulated, the public may get more comfortable with blockchain technology and the many crypto available.
? Old Dog, New Trick
With projects like Terra, Ethereum and Cardano getting upgrades, it’s easy to forget about BTC’s technical evolution. Fortunately for the perennial powerhouse, a major upgrade is in the works, scheduled to hit this November. Back in June, we called attention to bitcoin’s biggest upgrade in years. As November looms just around the corner, it’s time to look deeper into Taproot.
Taproot is an update for the Bitcoin blockchain aiming to increase real-world use cases including building apps, increasing scalability, privacy, transparency and fungibility aspects.
Schnorr Signatures are the most fundamental update included in Taproot. This is a change in BTC’s cryptography. Currently, BTC uses the Elliptic Curve Digital Signature Algorithm (ECDSA) to sign transactions. The problem with this method is its inability to be compressed. After Taproot, Bitcoin will shift to Schnorr signatures, which can be compressed and aggregated. This means reduced transaction size resulting in faster processing.
Merklized Alternative Script Trees (MAST) scripts compress transactional conditions into their simplest form, called a Merkle root. Using MAST, transactions are compressed into a single hash, minimizing memory usage to improve scalability. This will allow BTC developers to write more complex scripts for lower gas fees.
Lightning Networks stand to benefit the most from the upgrade. These layer 2 payment protocol solutions are networks made up of nodes that process transactions. They minimize the memory usage and gas fees associated with payments by using off-chain computation. Taproot will improve scalability and privacy to these networks by switching to point-time locked contracts and batched validation using Schnorr signatures.
Bitcoin has been relegated to primarily serving as a store of value because of its technical limitations. This undoubtedly factors into adoption, usage, and many other aspects limiting its potential. Taproot could solve this, transforming Bitcoin as we know it.
On Mondays, our ‘Scan The Week’ section is designed to show our community what events and headlines we will be keeping an eye on.
Monday, September 20
? Matrix ETF Public Offering on 2 IDO Platforms
Matrix ETF will launch Public Offering on 2 IDO platforms. MatrixETF will launch several ETFs designed to track the performance of high quality tokens in the blockchain and DeFi industry. More details here.
Tuesday, September 21
? Mainnet 2021
Mainnet is an immersive, agenda-setting annual summit hosted in-person and virtually by Messari. The summit gathers crypto leaders, operators, builders, and investors for three days of future-focused collaboration, networking, and programming including speeches from Meltem Demirors (CoinShares), Devin Finer (OpenSea), and more.
Wednesday, September 22
? PancakeSwap NFT Marketplace
PancakeSwap aims to launch the first version of its NFT marketplace alongside the minting of its original collection of PancakeSquad NFTs.
?? US FOMC Meeting
Chair Jerome Powell will give an update on plans for winding down pandemic-era stimulus measures. There is a possibility that the Fed may talk about the timeline for tapering, which could be as early as November, and that may lead to cautious moves in the equity markets globally.
Friday, September 24
? Cardano Summit 2021
A mix of virtual and live events including 20 local meetups across Berlin, Cape Town, London, Miami, New York, and Wyoming, as well as dozens of virtual discussions on everything from the Cardano universe.
??♂️✍️ Stories in this newsletter were written by Kyle F., Misael Calleja, Nick T., Max P., Kimia K., Ellen B. and Koroush AK. Graphics were produced by Gerasimos P.
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