VF Bitcoin & Cryptocurrency Market Report Authors
Jeff Guzzi (Founder): Jeff has acquired hands on experience in Portfolio Management, Venture Capital and Private Equity. Between Merrill Lynch / Edge and a mid-sized asset manager in Chicago, he earned a Series 7, Series 63 and Series 65. Jeff started investing, researching & mining cryptocurrency in 2013. He founded Visionary Financial because he strongly believes Crypto & Blockchain are going to change financial infrastructure.
Kenny Cheung (Analyst): Kenny is a senior trader at a market neutral Crypto Fund. He has worked in traditional finance with experience in fixed income trading, investment banking and equity research at bulge bracket firms including Merrill Lynch, Credit Suisse and CIBC World Markets. He holds a Bachelor of Commerce degree from the University of Toronto and has completed the Chartered Financial Analyst Program ( CFA )
Sudarshan M: (Analyst): Sudarshan M is a long time crypto-enthusiast. Pulled in by bitcoin early on, it didn’t take long for Sudarshan to divert all of his academic attention from business studies to blockchain by doing his Masters and eventually pursuing his PhD in the subject. He is currently a researcher at the University of Nicosia. He is also the author of two research papers and a book on Blockchain’s future in Education titled: An Academic Overview of Blockchain - Applications in Educational Institutions. Sudarshan is an entrepreneur, blogger, educator and researcher.
Jordan Daniels (Head Business Development): Jordan is an experienced creative professional and has provided production support to major studio film/tv production companies including Marvel, Fox, CBS, and NBC. he’s also lead and produced events for clients such as Gulfstream Jets and Zoo Atlanta under Tony Brewer & Company.
Bitcoin & Cryptocurrency Analysis As Of 9/6/19
Crypto Return Comparisons
Many have talked about the Bitcoin price surge this year, which have left some alt-coins under the radar. If we take a look at the comparison below, we will see several alt-coins that are struggling this year. On the flip side, we can see some outliers other than Bitcoin. Both Binance Coin and Litecoin are having very good years. Binance is outperforming Bitcoin this year which may be new news to many. Binance exchange has continued to enhance their offering models this year stemming from their crypto BNB. The catalyst for Litecoin this year seems to be its “halving” it experienced last month. “Halving” is a mechanism where supply is essentially reduced, creating the argument of additional value being created. Bitcoin will be witnessing its 3rd halving next year. Bitcoin has rallied the year before both halvings so far which we have outlined in previous research reports. BTC is following the same protocol this year, posting a strong rally 1 year before its third halving.
Bitcoin Network Momentum
By monitoring the Blockchain momentum we are able to identify when we are closing in on the start of the next BTC price bull run.
Month over Month Change: -17.0%; YTD Change: -28.8%
Bitcoin Network Momentum continues to decline and is currently approaching Oct 2018 lows at ~218k. On-chain volume (proxy for long term investor activity) continues to diverge from the price movement of BTC. This could be due to a rise in short term market participants in relation to longer term investors since short term traders have transactions that typically happen off-chain.
As we mentioned in earlier reports, previous BTC market cycles have gone as follows:
Early Bear Phase: Daily transaction value have dropped down to 100K BTC a day. Price is falling.
Late Bear Phase: Daily Transaction values are rising. Price is broadly flat
Bull Phase: Daily Transactions have reached a sufficient minimum value (220K in the last market cycle, 150K in the one before) where the market finally responds and price increases.
BTC Market Value to Realized Value (MVRV Ratio)
Market Value: (AKA Market Cap) is equal to the latest price multiplied by the number of Bitcoin units outstanding. Instead of counting all the mined coins at equal, current price, Realized Value (RV) refers to the aggregated market price of all BTC UTXOs when last moved.
Realized cap adjusts for lost coins and coins used for “HODLING.” MVRV is calculated by dividing Market Value by Realized Value on a daily basis. Two historical thresholds emerge: 3.7 (which denotes overvaluation) and 1 (which denotes undervaluation).
Month over Month Change: -5.6%; YTD Change: +121%
Bitcoin’s MVRV fell 5.6% in the past month with BTC’s price ranging between $9,300 and $12,300 (currently at $10,800). The current value of 1.87 and is well below the overvalued threshold of 3.7 but above the undervalued threshold of 1.0.
Bitcoin Mayer Multiple
Introduced by Trace Mayer as a way to gauge the current price of Bitcoin against its long range historical movements (200-day moving average), the Mayer Multiple highlights when Bitcoin is overbought or oversold in the context of longer time frames. The MM is calculated by dividing the Bitcoin price by the 200-day Ma. The MM essentially quantified the gap between the price and 200-day MA to identify points where Bitcoin enters a speculative bubble. In other words: when its price significantly exceeds its intrinsic value or points of seller exhaustion. A Mayer Multiple above 1 could be considered a sign of a bull market and below 1 could be considered a bear market. Any multiple above 2.4 threshold has historically shown to signify the beginning of a speculative bubble.
Month over Month Change: -16.3%; YTD Change: +120%
After being rejected at long term resistance of 2.4 (dotted line), BTC’s mayer multiple fell to a low of 1.28 in September before recovering slightly to a current level of 1.39. We had previously noted that the multiple has a history of pulling back to 1.5 after reaching 2.4 over the past few years. If the multiple can put in a higher low, it could signal a potential rally for BTC.
Bitcoin Market Dominance
Bitcoin Dominance continues to push higher and is currently testing multi-year highs around 71% (+6.4 MoM, +34% YTD). BTC appears to be the primary asset of interest for newer and larger investors for the time being as alt coins continue to decline. In a recent interview with BloxLive TV, Jeff Guzzi ( Visionary Financial Founder ) mentioned that Bitcoin industry sentiment seems to be changing. Bitcoin continues to attract large money from all these institutions (Bakkt) that plan on offering Bitcoin futures. This movement is resulting in these firms needing to build up their BTC inventory by purchasing/owning. Aside from these offerings - BTC continues to be the only crypto that has enough liquidity to support these institutions.
It’s hard to justify a “alt-season 2.0” right now with Bitcoin momentum, but right now would be a perfect time if it were to occur. We mentioned in a previous article that these current BTC market dominance levels are what sparked the initial alt-coin rally in 2017. But with this being said, you could argue BTC has more momentum right now than it did in 2017.
Visionary Financial Interview With BloxLive TV
Bitcoin Safe Haven Right Now?
During our interview with BloxLive TV, we were asked if we see BTC as a store of value right now. We argued that BTC is too early in development stages to be considered a safe haven right now. We meant this in a positive way though. Jeff Guzzi ( VF Founder ) explained how BTC is only approaching the 3rd halving next year out of 33 total halvings until its fully mined. We argued that there will be continued up-side but this will occur with increased volatility over the next few years. We understand that BTC has been highly uncorrelated to the traditional markets, but we also need to remember what people look for in “safe haven assets.” Historically people deploy capital into safe haven assets because they are
- Low volatility
- Low growth (main goal is to just keep up with inflation)
People need to understand that this framework does not fit Bitcoin right now. With Bitcoins potential upside in our opinion, it's not going to experience low volatility and low growth. We argue it will act completely opposite to this. Expressing to the public that BTC is a “safe haven” right now could hurt future adoption if we act premature and introduce retail to an asset that acts completely different compared to traditional safe haven assets ( money market instruments, gold, low yielding interest rate products etc).
Bitcoin “Gold 2.0” Right Now?
Again we made the argument Bitcoin is too early to be labeled as Gold 2.0 right now. We did mention that eventually, we totally see BTC transforming into Gold 2.0 and even taking market share. With Gold being a 7 trillion dollar market, we argue that taking only 10% of that market would result in substantial upside long-term for BTC. As society switches to more “millennial” based environments, we argue they will put more value into BTC due to their fascination in the “digital age.” We understand that Baby boomers place much more value on Gold, but as society shifts and millenials are introduced to all use cases of cryptocurrency, we think this generation has massive opportunity to accelerate BTC adoption. Another important issue we covered is “liquidity.” With traditional hedge assets such as Gold and Silver, many of these products are packaged into financial securities that follow traditional market hours. This means when the markets are closed each day, investors essentially have no way of liquidating those positions until the markets open. With physical Gold/Silver it can be more of a nightmare as that process usually has to go through authentication before liquidation.
Sources: KoyFin, Charts.woobull.com, Buybitcoinworldwide.com, Thetie.io, Coinmarketcap, Blockchain, Morningstar, Messari & TradingView