The Rake Review: July 2020

Welcome to the Stormrake Monthly Australian crypto market & education update.
For sophisticated investors who want to expand their crypto knowledge.

Markets Live and Kicking

Melbournian's reluctantly go into lockdown this week. Restaurants who have spent money getting touch free systems and retraining staff go back to take away only or close down until the lockdown is finished. Staff go back to working from home and predictably shortages start to appear as supermarket chains reintroduce limits on key items. Unlike last lock down, we now have local transmission and suburban clusters as well as commission housing lockdowns.

It’s not all doom and gloom though with trials of vaccines going ahead around the world including here in Australia. People are also doing the right thing and displaying the right social distancing behaviour and hygiene practices. Most importantly, testing is readily available with almost 3 Million tests conducted Australia wide. Let’s hope this second wave can be contained for employers already stretched may find it difficult to hold onto staff the second time around without further government support.

It’s all very positive in the crypto world as a contrast though. The markets are buzzing with excitement both from the DeFi coins getting ready to “moon” and altcoins having a resurgence. This is creating new millionaires and seeing a general buzz around the market. This is coupled with news of greater adoption and demand with new companies joining the technological advancements of crypto. We cover that in the news below. Happy Reading! 

Video of the week

If you’ve never watched a crypto video, then this is a great place to start.  Anthony (Pomp) Pompliano was on Bill Burr's (worlds #1 comedian) podcast. The result is a perfect beginners video where two guys that know nothing about crypto ask every obvious question and get answers from one of the best guys in the business. It’s a bit long but it's entertaining along the way and a perfect beginners guide. So, use your quarantine time well and watch this instead of watching “The Floor is Lava” on Netflix.

https://www.youtube.com/watch?v=UbMaPYX52go

Markets 

From July we will be using CoinGecko to show you the top currencies in the Market. It shows 3 measures of short term performance and the turnover and Market Capitalisation.

* Top 8 Coins by Market Cap thanks to Coin Gecko

In the NEWS

Buy your Coke in Bitcoin

I’m talking of course about the announcement that Coca-Cola Amatil will partner with Sylo to allow every Coke Vending machine across Australia and New Zealand to accept Bitcoin as payment. Sylo has global plans for their services now that they have an established use case in Australia. This is a great example of how money can be made in crypto without speculating on price by providing innovative services and products. 

The reason this sort of news is so exciting is that it encourages new adoption and in turn demand for tokens / BTC. Remembering that supply of Bitcoin is limited and new Demand is likely to lead to price appreciation. Every new company that chooses to use crypto and every Wall St trader that decides to start trading crypto is another step towards crypto’s unstoppable growth.

Some Altcoins have started pumping

What a week we’ve had. The entire crypto market is looking for a new price level but especially altcoins. Here are a few:

BSV (Bitcoin Satoshi Vision) - $269.40 AUD up 17.2% in 7 days 

XRP (Ripple) - $0.2873 AUD up 13.2% in 7 days

DOGE (Dogecoin) - $0.0062 AUD up 101.9% in 7 days

VET (VeChain) - $0.0262 AUD up 107.1% in 7 days

ADA (Cardano) - $0.17 AUD up 31.5% in 7 days

LINK (Chainlink) - $8.78 AUD up 34.3% in 7 days

LEND (Aave LEND) - $0.274 AUD up 30.9% in 7 days.


The previous bull run was led by altcoins.  Could this trigger the next?

Let’s have a closer look at that list. LEND and LINK are experiencing a boom due to DeFi tokens becoming bigger and bigger. I flagged in the last report that DeFi was the next big thing, which could single handedly lead to the next crypto bull run. Those of you buying in on the back of that would have already seen stellar returns.

DOGECOIN was created somewhat as a joke back in 2013.   It has a dog as its symbol but is sometimes used legitimately to tip content creators.   It has had practically no code development since launch but has lived on strongly as an internet meme. And if we’ve learned anything from boaty mcboatface, don’t underestimate the power of the internet to achieve ridiculous things. Now it's doubled due to a tiktok challenge that went viral. Users were asked to buy just $25 of DOGE and off it went through millions of TikToc users. It’s craziness, but reality. Now, we would not want our clients going out and buying DOGE now or even trying their luck with similar shitcoins because there are literally thousands of them and finding the one that’s going to pump is looking for a needle in a haystack. Stick to Bitcoin, because you can trust in the long term value and truly decentralised security of the genuine article. Meanwhile, please remove TicTok from your phones.

Bitcoin on Exchanges at 2 year low

Yet more bullish news around Bitcoin held at exchanges hitting a 2 year low. Why does that matter you ask? Well often Bitcoin is transferred to exchanges in order to sell. Generally Bitcoin shouldn’t be held on exchange for long periods in big quantities because you open yourself up to exchange risk (insolvency or hacking of exchange).  So, the lower the coins on exchange the more likely coins are being stored in long term cold storage (the safest way to hold). So that leaves less coins to be available for sale on exchanges. The relationship between stock on exchanges and price can be seen in the graph below. 

Bitcoin Network Utilisation

From July we’re swapping the halving countdown (which is too far away) to the Clark Moody Bitcoin Dashboard (which also shows the next halving). The selected dashboard below adds a whole range of information some of which we will cover in the education section below. You will notice the money supply is at 18.4M of a maximum of 21M Bitcoin. 

Stock to Flow Valuation:

Current Long Term Stock to Flow (StF) Price: $16,300 AUD vs Current Price - $13,473 AUD. Market price is lower than the historical trend suggesting that Bitcoin is undervalued today. However the StF model also shows an increasing price every day for the next year to $140,000 AUD. According to the efficient markets hypothesis, a rational investor would buy today and wait for the $140,000 AUD price to materialise if you trusted the model. That’s why we rate Bitcoin as a Strong BUY

Crypto Class: Education

Key Bitcoin Metrics on the Clark Moody Dashboard

Now that we’ve included this dashboard in our monthly report pack we better take the time to explain some of the information contained in it. The dashboard changes from time to time but is always useful as a way of quickly evaluating the health of the network. 

Markets:

The first section is pretty straightforward showing you the Current Price in USD and in Satoshi’s (Smallest fraction of a Bitcoin) per dollar as well as the total Market Capitalisation of Bitcoin (Total Coins multiplied by price).

Blockchain:

The key figures here are Block Height (How many blocks have happened since the genesis block), Money Supply (Total Bitcoins mined so far as compared to the total Max of 21 Million) and the Percentage Issued. These figures are useful so that you know where we are in the progression of Bitcoin. The closer to 21Million the lower the inflation rate.

Bitcoin Network:

Reachable Bitcoin Nodes tells us how many live full mining nodes there are which is an important indicator of the decentralisation of the network. The more nodes the more truly decentralised Bitcoin is. Or in other words this is the number of nodes that would need to be shutdown to kill bitcoin (assuming no new ones start up while this is happening)

Lightning Network:

The Lightning Network is a side chain to the main chain. The idea is that it is more scalable but less secure meaning it would be great for a whole lot of small value transactions. A healthy lightning network serves to improve congestion on the main network. We might look at this in greater detail in a later education instalment but here's a short video to explain.

Transactions:

This section shows the total number of transactions contained in the Bitcoin blockchain so far. That’s half a Billion without a single chargeback!

Chain Security & Mining:

A couple of key metrics here. Hash Rate is the total computer power working on securing the network. 1EH is 1,000,000 TH’s and a TH is One Trillion Hashes. Mining Revenue is all Block Rewards plus all Extra Fees charged by miners over a year. So, 5.52B per annum to run the network or just over 3% of the value of Bitcoin. The Difficulty tells you how hard the mining algorithm is making miners work. The more miners the higher the difficulty ceteris paribus. And finally Block Time is how long a block takes. Currently running ahead of the 10minute aim.

Halvings:

Halving Estimate is the date that the next halving is expected but as we know that's not exact so we can also look at the number ofBlocks to Halving.

Economics:

Realised Monetary Inflation is the new supply vs existing supply over the last year. Forward Monetary Inflation is the expected inflation rate over the year ahead. Notice its half of the Realised inflation because of the halving we just had. Velocity of Money is also an interesting term. Here it means the total turnover over a year relative to coins in circulation. Bitcoin’s velocity is much lower than other coins because of the fees involved and the fact that it's used as a store of value.

Stock to Flow (S2F):

S2F Price is the USD price currently expected by the S2F model we’ve been banging on about every month. Given that it's showing a higher than Market price a believer in the model should buy now to gain from an expected appreciation.

That’s enough for now. You can also go to the dashboard itself and click on individual items for further clarification. 

Your Position: Mark to Market

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Monthly Memes 

Of Course we start with the crypto that literally started life as a meme. If you think its stupid you are probably right but this stupid meme is worth 500Million USD.

And Leo can take us home:

Until next month, Happy Investing!

Stormrake Team

custody@stormrake.com

General Advice Warning 

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