Updated: May 13, 2019
Digital Asset Space
November began with BTC at $6,250 and closed at $4,000. This month saw one of the swiftest downward slides in recent months. We see an opportunity here, not because of the price but because of changes that have taken place. One of those was a reduction in the dependence on Tether as the only stable coin. The other we believe was a reduction in seller inventory. We think these two developments lead to upside in the near future. The duration of that movement could be confined to how soon certain improperly issued ICO’s need to liquidate to refund investors.
About mining, you may hear that the breakeven for Bitcoin mining is at a higher price. Mining cost moves with competition and if more miners unplug then competition will reduce thus lowering the breakeven price. Miners do not create a floor in the price as we’ve seen. Alternative thinking is that when competition is high and the price is falling more of the miners rush to sell to cover whatever they can salvage thus putting added pressure on any “floor.”
We continue to notice that people are still hoping that the CBOE ETF gets approved and that the Bakkt launch will drive prices higher. We do not think that the ETF gets approved for at least a year and even when Bakkt launches it will not change the risk appetite of most institutions. Additionally, Bakkt wants to hold the private keys and this is something that we believe goes against the overall idea of digital assets and something that most investors will relinquish giving up. We think that when the next wave rolls in it will be generated from retail again.
Morgan Stanley says that Bitcoin has become an institutional investment class. Last month a blockchain cell phone was made and could only be purchased with Bitcoin now Hublot is making a luxury watch you can only buy with Bitcoin. Here's the novelty, there will only be 210 made, this should reveal some large hodlers. Gwyneth Paltrow on her goop blog posted a piece about the basics of Bitcoin, (could popularity be rebuilding?) Poloniex was allowing users to trade the Bitcoin Cash fork tokens before the fork actually happened. This is one of the most innovative plays we’ve ever seen by an exchange. We complement the innovation but in general, do no see forking as beneficial to the space as a whole. Here is some context on Poloniex, it is backed by Goldman Sachs and was once the top exchange, but it has fallen to the wayside in recent times. The exchange is trying to rebrand itself as an institutional-grade exchange and this move may show sophisticated investors that they stand apart. Another thing they are doing is de-listing coins that they conclude do not meet qualifications to be listed. We would like to see more of this by other exchanges.
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Digital Asset Investment Management is a licensed Registered Investment Adviser specializing in Bitcoin for 401k's, IRA's and Traditional Brokerage accounts. Learn more at www.daim.io