July 11, 2018 Market Update

Cryptocurrency Markets made highs for the week on Sunday July 8th right above the 280 billion dollar mark, then as funds and managed money came back from the holiday week in the US, they sold into the market putting prices near the lower end of the weeks range.

 

In contrast to the digital asset markets, US Equities rallied from the lows made on the 4th of July to trade near all time highs.

 

 

Over the past month digital commodities have seen support at current levels and at the recent bottom set a few weeks back.  Buying support comes in the 240’s while sellers surface in the 280-290 area.

Those who read this on a consistent basis may note my mentions of ranges.  These tend to be the key levels that larger macro investors look at, and when one of these levels is reached, you tend to see sharp follow through or an aggressive change in direction.  Using one week and one month levels has helped me through my career as “new” prices seem to attract both buyers and sellers.

 

As the digital asset market gave ground, Bitcoin market share, aka Bitcoin Dominance rose to 43.4%.

This benchmark had a high for the year at 45.7% and the low was 32.6%

In my opinion this number need to continue to move lower for a major market rally in cryptocurrencies.

Even at 32.6% this is a huge percentage for one asset to hold within a said asset class.

For those new to this blog or the crypto market in general, BTC dominance is the percentage of the entire digital asset market in which Bitcoin represents.  After all, it still is the only currency in which I  can actually exchange for a good or service in my local area.  BTC was the first of its kind and does have the most name recognition.

How would this change?

From a technical analysis perspective, as the entire blockchain group increases in value, wealth is created, and many investors and traders are willing to broaden their portfolio’s and move from BTC to other assets.  As the market decreases, owners of alt coins trade them back for Bitcoin hence how the BTC market share decreases on rallies and increases on selloffs.

The other major coins of importance to me are what I refer to as the Coinbase currencies.  I realize that many investors may not use Coinbase, but in the states, it still is one of the most used entry points into the cryptocurrency market.  Speaking from experience, it was mine.  Bitcoin, Ethereum, Bitcoin Cash and Litecoin are the four that Coinbase makes markets in, hence these four are the four assets I tend to look for technical analysis.

 

Below is a chart of Litecoin vs Bitcoin and below that, is the total cryptocurrency market over the same time sequence.  Although the charts are not exactly the same, the shape of the two have many similarities.

 

Litecoin vs Bitcoin

 

 

Total Digital Asset Market over the same time frame

 

The LTC vs BTC chart is a pair I follow, but look at relationships has been a valuable tool for me during my years in asset management.  It show how something is priced in a similar asset instead of simply thinking “something is cheap” or something is expensive.

Over time coins will come and go, some will move up the market cap chart, while other will fall, so I would urge you to look at a few of the major pairings, and this may help you in looking at the pairs for smaller assets.

 

The closing thoughts are about relationships between coins and how coins become tangible.

As many are aware, the cryptocurrency market is still extremely young and has massive volatility and a high degree of speculation.  In my eye, cryptocurrency is basically Venture Capital for small investors.  Much of what is being bought and sold is based on a belief of what may happen in the future, as many projects simply have an idea and not much else.

AS time progresses, these projects will need to show progress in order to move forward and as they move forward those that are making constant progress will ultimately see price increases as more and more people begin to research this space.

Many coins promise they can be the next Bitcoin.

They can’t.  BTC was the first and will always have a level of name recognition, but many projects who are making improvements in the blockchain space will attract attention and may also be used as a payment mechanism.  A coin that is making strides to be used in commerce and has a consumer friendly name is what I look for.  Coins that want to be one dimensional, ie “the coin for shoes or “the coin for toys” will most likely not succeed, as this would make it harder for consumers not easier.

 

Does the coin have the ability to be used globally in commerce, as a transfer of wealth and as a payment mechanism between individuals?

These are some of the most important questions I ask of any project I look at.

In closing, I will highlight the prices of two assets.  Ripple and PAC.

Ripple has a market valuation of more than 17 billion dollars.

PAC has a valuation of 17 million dollars.

The market currently believes that Ripple is more than 1000x more valuable than PAC based on a market capitalization basis.

Neither coin is on Coinbase, both have consumer friendly names, and both valuations have the number 17 in the front.  It intrigues me to think of what the future hold for this relationship.

 

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