Tradecipher is a crypto investment app that combines an intuitive trading platform with useable, relevant research available for users in 100 countries. Every weekday (M-F), we publish a weekly report covering XLM, EOS, Industry, BTC, and ETH (in that order).
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In this issue: View the PDF here
- Price Reports: Ethereum is up +7.95% over the last 7 days - it has not kept up with Bitcoin (+27%) but it has outperformed other top coins like Litecoin (-11.8%) or EOS (-9.9%).
- Tradecipher Take (TT) #1: A full rebuild of the ETH blockchain is launching next year. Great for Vitalik but it might not be enough to save them from Zuckerberg.
- Tradecipher Take #2: Ethereum hits Wall Street in its first-ever appearance. ETHE coming to an OTC trading desk near you!
- Tradecipher Take #3: Blockchains - the final solution to the supply chain: How transparency and trust can build a brand & increase the price of ETH.
- Tradecipher Take #4: Technical Analysis: After this week's crazy flash crash - ETH starts to show weakness. But will it continue?
- Tradecipher Take #5: Sentiment Analysis: Traders who get greedy, get broke. Learn about "irrational exuberance" and when to sell.
- See you on Monday for the XLM report. Subscribe now to get it in your inbox, or if you want to join Tradecipher early, become an early member.
TT #1: Libra might kill Stellar - Will it Kill ETH too?
In this week’s Stellar Report, we mentioned that Libra might kill XLM. Libra also competes with ETH since both are platforms for decentralized computing. Essentially, ETH has until next year - when the Libra network launches - to build a platform and user base that will retain users and keep them from moving to Libra.
- Both blockchains are open source - permitting for innovation from developers worldwide
- Both have programmable smart contract languages, however Libra is expected to have two key advantages
- Libra’s programming language - Move - is expected to be relatively easier to use.
- Libra has a network of 2.6B users - allowing developers to sell apps to a much wider audience
- Libra is expected to have 50 times the transaction speed of ETH
- Libra’s transaction fees are expected to be near-zero whereas ETH can get expensive to use during peak use
Tradecipher Take: ETH 2.0 is being launched next year as an entirely new blockchain model but it may not be enough to fend off Libra. ETH 2.0 addresses existing scaling issues by incorporating higher transactions per second and lower fees. However, ETH 2.0 doesn’t address the rest of Ethereum’s disadvantages as compared to Libra.
However, ETH has a major advantage.
As we covered in our industry review, the Libra Association is currently comprised almost entirely of American corporations, and two individuals - Mark Zuckerburg and Ben Horowitz - control 14% of the association’s voting power.
It’s safe to say the Libra Association exists to further interests of American corporations. However The Ethereum Foundation - ETH’s governing body - has one goal: promote ETH adoption.
Governments and corporations that do not have ties to Libra Association members will likely prefer working with the product that does not act to benefit specific entities - especially if those entities are competitors.
ETH may not be able to compete with Libra for retail users - but it will have a strong chance to keep gaining corporate adoptions, if the Libra Association is seen as biased.
TT #2: ETH moves on to Wall Street
Grayscale's Ethereum Trust Product - ETHE - Is Now Trading on OTC Markets
- ETHE is the first U.S.-based publicly quoted security based entirely on ETH
- Grayscale obtained federal approval to list ETH in OTC markets from FINRA
Tradecipher Take: Unlike many traditional assets, cryptocurrencies often require investors to take custody of the asset itself. An investor in orange futures probably doesn’t want barrels of oranges. Similarly, crypto derivatives and ETFs are a good way for institutional clients to take a position in a cryptocurrency asset, without having to hold the asset. Larger institutions may not want to spend hundreds of millions of dollars building infrastructure to safeguard cryptocurrency wallets and keys, they just want to trade and take advantage of crypto’s volatility.
Thus, products like ETHE are essential to getting institutional investors into crypto - a requirement for continued growth.
Products like ETHE also make price discovery easier. Up to 86% of trading volume, and up to 95% of quoting volume on crypto exchanges is likely fake or malicious. Trading on regulated exchanges - governed by the Securities and Exchange Commision - help remove the effects of market manipulation and fake volume.
TT #3: Why is everyone putting their supply chain on the blockchain?
EY helps Bofrost Italia to build one of the first blockchain platforms that trace frozen foods in supply chains.
- The platform details Bofrost’s products' story, from origin to dining table
Third Millennia uses the ETH blockchain to track authentic Star Trek collectible memorabilia.
- Third Millenia tracks collectibles starting from the point of manufacturing through the sale to consumers, even following peer to peer sales
Treum partners with Verified Organic so CBD farmer can track crop yield data on the ETH blockchain
- Treum will track a wide set of data, including fertilizer, seed type and irrigation.
Tradecipher Take: As more corporations use the ETH blockchain to track supply chain and run smart contracts, they must buy ETH tokens to act as “gas” to power their transactions - driving demand and price higher for ETH investors.
It’s important to note that while news of partnerships would raise both token and stock price - those phenomena do not happen for the same reasons.
In the case of a standard publicly traded company - another corporation using their service would directly increase revenue. This in turn would increase their earnings per share - a typical valuation metric used for stock pricing - driving prices higher as the company takes in more money.
Ethereum however is not priced off the Ethereum foundation’s revenue but is instead priced based on the expected use of ETH tokens. The more users and use cases that the ETH blockchain has, the higher the price of ETH tokens, since people will have to buy more ETH to use the Ethereum network. So while partnerships are good news for both stock and token price, it’s important to remember that utility tokens - like ETH - aren’t a traditional equity.
In this weeks Industry Review, and last weeks ETH report - we discussed corporations moving their supply chains onto the ETH blockchain. But why are we seeing such an increase in major corporations - EY, Microsoft, Nestle, and more - using ETH for their supply chain management?
Supply chains are getting more complicated year over year as manufacturing and distribution goes global.
Therefore it’s very difficult for wholesale buyers or individual consumers to verify the authenticity or origin of a finished good. They must typically put blind trust into the manufacturer, who may be using illegally sourced goods, or unethically raised natural products. Using blockchain technology makes a supply chain transparent to retail and wholesale buyers alike.
This is because a blockchain is a public, uneditable record of every transaction or event that has occured. They can account for every major and minor data point in a company’s supply chain. If users can verify all the steps of a company’s supply chain, they can trust that company’s process. This trust provides companies who make their supply chain public a competitive advantage - especially in emerging markets, where faked goods are increasingly commonplace.
Sentiment: When everyone starts talking about an asset - SELL
This past week ETH sentiment was relatively quiet until the flash crash occurred (1). We can see that just before the initial sell off there was another spike in mentions of ETH (2)
These spikes usually indicate an impending price decrease - making it a good time to sell. Investors who sold at (2) were up by 23.58% from our June 21st price. Whereas investors who sold at (1) are only up 9.47%
Most investors would not have viewed (2) as a sell signal after such a positive movement in price - even though it was a relatively clear one. This is because of a phenomenon called “irrational exuberance.” When prices go up quickly, traders feel positively - since they’re making money - and they keep chasing the momentum of the market, getting greedy.
But markets don’t run forever - don’t let the fear of missing out cause you to ignore a clear signal to sell.
That’s it for the ETH weekly report from June 21 - June 28, 2019. Make sure to subscribe to get tomorrow’s ETH report. Full reports are free until July 9, 2019, at which they will only be available for Tradecipher Members.
Additional Readings And Sources
TT#1: Libra might kill Stellar - Will it Kill ETH too?
TT#2: ETH moves on to Wall Street
TT#3: Why is everyone putting their supply chain on the blockchain?