What You Need to Know About The Uniswap Frenzy & Dave Portnoy Buys Bitcoin + Chainlink – Market Meditations #1
Market Meditations | August 14, 2020
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Uniswap Frenzy Sends Transaction Costs to New All-Tine Highs
BitMEX to Mandate ID Verification for All Traders
YAM’s Market Cap Falls From $60M to Zero in 35 Minutes
MicroStrategy Became the First Listed Company to Buy Bitcoin As Part of Its Capital Allocation Strategy
Dave Portnoy Buys Bitcoin and Chainlink After Winklevoss Pitch
With $16bn in Cryptocurrency, Ripple Attempts a Reset
Kamala Harris’s Indian Connections Spark Social Media Frenzy
A Faltering U.S.-China Trade Deal Is Now the Nations’ Strongest Link
Sudden Breakthroughs in AI Could Hold the Key to Digital Progress
4 Years Of Trading Experience in 1 Video
Optimising the Decision Making Process
A Pivotal Moment For CHAINLINK / DOLLAR
$16.48 – Key Structural Level. Losing this weakens our short term bullish bias
$15.24 – High Conluence Support Level. Both price action and the confluent 0.5 retracement make this a probable level for price to bounce
$12.68 – Danger Zone. Below this level we need to reconsider the trend, bearish arguments will start to hold more weight than bullish ones
Simple Bull Market Trading For ETHEREUM / DOLLAR
$401.31 – Potential Flip. Recently claimed resistance, prepare for a potential retest and flip to support
$372.40 – Key Structural level. Losing this level would present us with our first weakening of the bullish structure and potentially pause the trend
$317.61 – Danger Zone. Below this level we need to reconsider the trend, bearish arguments will start to hold more weight than bullish ones
Uniswap Frenzy Sends Transaction Costs to New All-Tine Highs
Uniswap has made people a fortune through yams and chicken tenders. Traders started blindly buying tokens with often no regard to fundamentals at all. Even obvious scams or simple memes saw price increases between 200-1000% in a matter of days.
Decentralized exchanges have been a popular theme in crypto for a few years now. The promise of being able to trade without KYC requirements and not depending on centralized exchanges to custody your assets is something that a lot of crypto traders have been excited about for years. Early concepts like Etherdelta worked, but could not offer an experience anywhere near the ones we are used to on centralized exchanges like Binance or Phemex.
Uniswap, completely changed the game this year. Put simply, the protocol is built around a simple math function, with price being a function of demand. Trading happens without an intermediary and anyone can add an ERC-20 token to Uniswap, as long as they fund the pool they created with an equivalent value of ETH and the new ERC-20 token. Traders do not have to deposit funds into the exchange and can directly buy any token on the protocol through an app like Metamask or their hardware wallet.
Because all transactions happen on the Ethereum blockchain, users have to pay a fee to buy or sell their token on the protocol. This wasn’t a problem until last month, when the protocol’s usage started rising exponentially and so called ‘gem-hunters’ searched for unpumped coins traded on Uniswap with marketcaps often between 1-5 million.
The volume processed through the protocol also rose to astonishing numbers. Last month, $1.7 billion was transacted on Uniswap. Two weeks into August, the protocol has already exceeded that number and looks to be finishing the month well over 2 billion dollars in volume, exceeding numbers of some of their centralized competitors.
This week, Uniswap became a victim of its own success and it looks like we saw the first signs of the speculative frenzy slowing down soon. Transaction costs to buy or sell went up towards $20-30 dollars, questioning the permissionless nature of the decentralized protocol. A trader in a Uniswap Telegram room argued: “Uniswap is for rich people who can afford to drop a few thousand dollars on a coin. If you’ve only got $50, you’ll barely make a profit once gas fees are accounted for. Basically another way of making the rich richer.”
Uniswap’s volume saw a small drop in volume simply because it became too expensive for the small trader to make a profit there. Traders seemed to have realized that this wasn’t sustainable and a lot of pairs saw a strong correction yesterday.
Uniswap and the automated market-making model is here to stay but yesterday’s sell-off might have marked a local peak. Will Ethereum be able to come up with a scaling solution in time or will we see value flow into these numerous so-called Ethereum alternatives, advertising their low fees and #DeFi possibilities?. I’ll be following this closely and update our readers when another exciting protocol sees the light of day.
BitMEX to Mandate ID Verification for All Traders. Hong-Kong based derivative exchange Bitmex, one of the most popular in recent years, announced today that they will be implementing mandatory identity verification. Starting 28 August, ‘all customers will be asked to complete ID checks within the next 6 months.’ As regulatory pressure increases in the crypto industry, Bitmex is next in a long list of exchanges that have been implementing mandatory identity checks for traders. Read more
YAM’s Market Cap Falls From $60M to Zero in 35 Minutes. The latest yield farming protocol Yam Finance, which saw more than 500m being locked in an unaudited contract in less than two days, found a critical bug with regards to their token. The official Twitter account warned the community that a potential flaw had been found and despite a last-minute attempt to fix the issue, the token price crashed by more than 90% a few minutes after a first rebase happened. Read more
MicroStrategy Became the First Listed Company to Buy Bitcoin as Part of Its Capital Allocation Strategy. In a letter, MicroStrategy’s CEO said that “This investment reflects our belief that Bitcoin, as the world’s most widely-adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash. Since its inception over a decade ago, Bitcoin has emerged as a significant addition to the global financial system, with characteristics that are useful to both individuals and institutions.” Microstrategy acquired 21,454 bitcoins in total. The number is not important, the fact that we have a first to do this is. Others are likely to follow in the coming years. Read more
Barstool Sports’ Dave Portnoy Buys Bitcoin and Chainlink After Winklevoss Pitch. The founder of Barstool Sports who became famous successfully day trading the stock market this year, has bought $250,000 worth of bitcoin and Chainlink. In a vlog posted on Twitter yesterday, Portnoy was accompanied by the Gemini founders who helped him purchase the cryptocurrencies on the platform. With a Twitter following of 1.7 million and a small cult of day traders behind him, Dave is yet another influential person who publicly announced to be holding bitcoins for the foreseeable future. Should we be watching out for Davecoin? Read more
With $16bn in Cryptocurrency, Ripple Attempts a Reset
According to a Financial Times report, Ripple is on a mission to find a new purpose. Despite creating one of the most successful cryptocurrencies, it has long struggled to find a compelling use for the blockchain technology underpinning its currency. It will be interesting to see what impact, if any, this has on XRP.
Let’s recap. San Francisco start-up Ripple has created one of the most valuable cryptocurrencies: XRP. XRP has a value of $30bn (ranking behind only Bitcoin and Ethereum).
Ripple sits comfortably on 55% of the total supply ($16bn). The popularity of XRP has seriously benefitted Ripple and its leaders. In fact, they are far richer than most start-up software companies. For instance, the company has cashed in more than $1.2bn of its own holdings of cryptocurrency since early 2017.
Given the success of the coin, it remains a bit of a mystery as to why Ripple is still trying to find compelling uses for the blockchain technology underpinning its currency. A use/purpose would help justify the high figures.
As described in Cointelegraph, Ripple’s original aim was to create cross-border payments systems in partnership with national and international banks (the likes of Santander). Ripple didn’t make much progress on this front. All it really created for them was a lot of hate from the crypto world for cosying up to banks.
And yet, XRP was and still is highly successful! In terms of technical analysis, it is true that XRP didn’t quite benefit from the same jumps as Bitcoin and Ethereum throughout the year. However, the value of course soared almost 50% in the final week of July (putting them at their highest level since the C19 crisis hit).
According to the Financial Times report, Ripple has struck out a new direction: to try to become the Amazon of the cryptocurrency world – from “writing cheques to writing code”, implying that the company was planning to go big on promoting the creation of new applications on the Ripple network.
“Amazon started as a bookseller and just sold books. We happen to have started with payments. Two years from now, you’re going to find that Ripple is to payments as Amazon was to books.” – Brad Garlinghouse, Chief Executive, Ripple.
The report also mentioned that Ripple was working on developer tools to help with the creation of blockchain-based applications that explore new use cases on the Ripple network.
So will Ripple become the Amazon of the cryptocurrency world? Who knows. Certainly this year has shown us that anything can happen. Either way, it will be interesting to see how this works out for Ripple and what the impact will be for XRP… I will keep an eye on it for you.
Kamala Harris’s Indian Connections Spark Social Media Frenzy. Joe Biden recently announced his running mate for the US Presidential Election and it has certainly worked in his favour. The Biden campaign raised $48 million in the 48 hours after the announcement. On Social Media platforms such as Facebook and Twitter, many have been quick to rejoice her background. It certainly marks a significant moment in time: Harris is the first person of Indian descent and the first Black woman on a major ticket in a US presidential election. After BLM, there has certainly been a focus on the lack of ethnic diversity in positions of power and this marks a significant event for BAME groups. Investors have begun to speculate as to what a Biden-Hamali victory would mean for the markets. Many have predicted closer US-India relations which have already been markedly improved under Narendra Modi. Read more
A faltering U.S.-China Trade Deal Is Now The Nations’ Strongest Link. Top US and Chinese trade officials are expected to recommit to a Phase 1 trade deal drawing a review on Saturday, despite China’s promised purchases of US exports being far behind schedule. Tensions have been high recently. The Trump administration has: 1) sanctioned companies and individuals linked to a security crackdown in Hong Kong and human rights 2) banned a Chinese owned video app 3) penalised Chinese academics and 4) closed Beijing’s consulate in Houston in recent months. Beijing has responded by closing the U.S. consulate in Chengdu and sanctioning some members of Congress. Despite the escalating conflict, the Phase 1 trade deal won’t be dismantled, U.S. officials say. The markets reaction to the review will be watched. Some Trump administration officials have been wary of reigniting a tariff war that would disrupt markets and likely knock down the S&P 500, which traded close to record highs this week. Read more
Sudden Breakthroughs in AI Could Hold the Key to Digital Progress. TikTok’s recommendation algorithm and OpenAI’s language model are examples of key tipping points in deep learning. It has been recognised by many as the key to digital progress, which has garnered lots of attention (including unwanted political attention). The thing that has excited the techies most has been its use of AI to serve up the videos that are most likely to keep its audience hooked; this type of personalisation is also available to an extent on household names such as Amazon and Netflix, where the service is tailored to the customer. The results of its personalisation technology have been addictive, yielding the heightened engagement that is gold dust to a social media company. It is no surprise therefore that Microsoft were the front runners in the bid to Acquire TikTok. Read more
More Market Meditations
4 Years of Trading Experience in 1 Video
My trading systems are built around the underlying assumption that the trend will continue. This week I gave you two templates to apply this theory.
Early Breakout: This strategy revolves around identifying key resistance levels and entering either on the breakout or the retest of the key level.
Identify key level — Set conditions for level breaking — Set entry level — Set exit level
Trend Continuation: This strategy assumes continuation of the trend while market structure stays intact.
Identify Trend — Set entry level — Identify trend invalidation point (stop loss) — Set Take Profit
Like a pilot you need a strict checklist for each section of the system. Build this set of rules then start testing. You’ll be well on your way to creating your first profitable trading system.
There is immense value in understanding a decision making process that uses limited information. This skill is helpful for the likes of traders and poker players. Like traders, poker players have to make decisions with limited information and luck. Thinking in Bets gives us a poker player’s understanding of this process.
The trouble is that humans tend to judge the quality of their decisions based on the quality of the outcome. If we get a desired outcome, we assume it was a good decision. If we get a bad outcome, we assume it was a bad decision. This flawed thinking doesn’t take into account that we rarely have access to all the information in real-life situations. We can make a good decision and have a bad outcome and vice versa. Failing does not always mean we made a wrong decision.
So how do we optimise our decision making process? Good decision making starts with realizing that the world is oftentimes an uncertain and unpredictable place. Instead of trying to be sure, we should try to figure out how unsure we are and make the best decision according to the data we have. Open-mindedness plays a key factor here. When new information becomes available, one should be able to update their beliefs and act accordingly. Sticking to our decisions or beliefs when new information contradicts our story is a mistake that many people make.
And how do we make sure we continue to develop our decision making process? Feedback is an essential part of improving any skill in life. Deconstructing your decisions after the fact, having what Annie Duke calls a post-mortem on your decisions, is necessary to continuously improve your decision making. Recognising when luck, either good or bad, played a factor and continuously looking for ways where you could’ve made better use of the information that was available to us, prepares you for becoming a better decision maker one iteration at a time!
Two excellent podcasts on this book can be found here and here.