DIGITAL ASSET DIGEST - Sept 2019

Introduction

Welcome to SINEGY Research’s inaugural Digital Asset Digest, a monthly report which will present our readers with extensive analysis of the major digital assets, as well as some general discussion of the prevailing macro-economic climate in global financial markets.

The information presented in this newsletter is our opinion only and should not be treated or interpreted as facts. This is not a recommendation nor is it financial advice, SINEGY cannot be held responsible for any losses incurred from trades that were initiated as a result of information contained herein. Please read through the full disclaimer at the end this report.

Where do we go from here?

According to our Research Team’s latest forecast, the House View (Yellow Line) on spot Bitcoin (BTC/USD) prices, is still a continuation of the current sideways price action for approximately two more weeks, before a breakout through the first key overhead resistance level (@11,369) in the second week of October (Monday 7th).

BULLISH SCENARIO

BTC-Prediction-2-septeber-17

Our analysts believe that such a breakout would re-confirm the long-term uptrend and set the stage for another round of accumulation, within the 11,369 to 12940 range, before another breakout to full year highs and a new wave higher.

BEARISH SCENARIO – Always Have a Plan

Bearish-forecast-BTC-09_18-1

The Research Team is also considering an alternative bearish scenario for Bitcoin illustrated by the Red line in the chart above.

This scenario would involve a flash crash (mass liquidation event) similar to the price action we experienced last November 14th- 19th (See yellow lines).

Whilst this scenario may seem farfetched, the similarity of the price action between November 2017 to November 2018 versus that from May 2019 to September 2019 is uncanny.

Bearish-forecast-BTC-09_18-Chart-structure-comparison

It would appear to be the same pattern both times, with differences only in length of time and magnitude.

Key levels of support and resistance are listed below.

BTC/USD KEY LEVELS

BTC-chart-september-17-Digital-digest-all-levels-snip

Key Technical Levels

  • $12,940
  • $11,361
  • $10,300
  • $9350
  • $9100
  • $8800
  • $8290
  • $7900

VIEW FROM THE TRENCHES

From time to time, the Research Team will interview the Company’s traders for a more granular ‘street-view’ of the order book activity. According to our experienced traders, their view is also for a sideways trending market.

They noted that the BITMEX funding rate is rewarding the short side of the market, suggesting that the overall positioning is skewed to the buyers. Our trader Kelvyn Chuah, noted that BITMEX trading volume when compared to the current Open Interest indicates that overall leverage is quite low.

The numbers suggest the market is about 2X levered versus an average of 8-10X in normal market conditions. Therefore, the futures market order books are also reflecting uncertainty or wait-and-see trading conditions.

BITCOIN DOMINATING

dominance

Alt-coin lovers will be pleased to note the topping out of the Bitcoin Dominance around 71%. We would be very surprised to see it go any higher from here. (WHISPERS: “ALT-SEASON” under breath)

In general, sentiment has been negative in the ALTCOIN sector over the past few months, as the strength in Bitcoin dominance was compounded by negative fundamental developments including:

BEARISH FUNDAMENTALS

  • Facebook Announce Libra (competition)
  • Binance Hack
  • Plus token (exit Scam)
  • TRX Troubles in China (Justin Sun cancels lunch with Warren Buffet)
  • Binance futures (ability to short Alts)
  • Bitfinex/Tether (legal battle with US authorities)
  • FATF Travel Rule (de-listing)

Market Sentiment

A positive narrative is simply a bullish investment theme, an eye catching, easy to understand, digestible headline, which influences the investing public, and encourages them to participate.

We’d like to point out to our readers, clear signs of a narrative that has been building recently in the financial media… I.e. Bitcoin is becoming a “safe haven” asset.

CNBC-BTC-Safe

Bloomberg-BTC-Safe-haven-search

For a brief period, as fears of US/CHINA trade war caused global stock markets to fall precipitously, the Bitcoin price was rising sharply, leading many analysts to draw the conclusion that investors were treating Bitcoin as a safe haven or hedge.

Whilst this was indeed a noteworthy and interesting coincidental correlation…

Let us be very clear, Bitcoin is a risk asset – Bitcoin is not a safe haven!

When you trade Bitcoin, you take on enormous risk. The volatility in the Bitcoin price is like that of commodity derivatives (e.g. oil futures) or stock options, markets that are usually reserved for investment professionals only.

In fact, internally, we DO see the potential for Bitcoin to one day become Digital Gold, but this possible future is still many years away from fruition.

So, traders should pay attention to the positive narrative for it will undoubtedly entice new buyers into the market. We’d also point out some upcoming catalysts and positive fundamentals:

Bakkt-tweet

  • BAKKT Launch (September 23rd)
  • ETF Approvals (Bitwise)
  • Record hash rate (Miners investing in new hardware)
  • BITCOIN DOMINANCE (Money flowing from ALTs to BTC)

CZ-miners-tweet.jpg

BITMEX VS BINANCE

Messrs. Arthur Hayes (CEO Bitmex) and CZ (CEO Binance) are (as always) very publicly bullish. Given that their companies’ bottom line rises in tandem with digital asset prices, nobody should be particularly surprised by this.

BITMEX-BINANCE-tweet-1

Arthur-ctrlv-tweet

It has however been amusing to observe Mr. Hayes publicly criticize CZ on twitter for copying BITMEX ‘s strategy so thoroughly, even down to the website disclosures. I’m sure CZ would argue that the ctrl-c/ctrl-v business strategy should be taken it as a compliment and validation of BITMEX’s success.

No doubt Mr. Hayes is quietly concerned that the world’s biggest digital asset exchange is knocking on his door ready to compete for his profit margin.

Meanwhile, as these two industry titans fight it out over the unregulated Bitcoin futures market, the only regulated institution still providing cash-settled Bitcoin futures, the Chicago Mercantile Exchange, has quietly applied to the CFTC to double its monthly open position limits.

CME has written to the U.S. Commodity Futures Trading Commission (CFTC) for the proposed move, which would increase the limit from 1,000 contracts per spot month to 2,000.

One contract is for five bitcoins, which means the change, once cleared by the CFTC, would increase a trader’s maximum exposure to 10,000 bitcoins from the current 5,000.

The change would then take place from the Oct. 2019 contract month and all contract months thereafter.

SOURCE – https://www.theblockcrypto.com/

Needless to say, that the impact is impossible to gauge, given that these limits apply to both Short & Long positions. However, the increase would tend to suggest that bigger players [whispers “institutions” under breath], are finally dipping their toes into the market.

IS ETHEREUM DEAD?

The short answer is that it doesn’t look too good for ETH/USD. ICO boom and crypto winter bust weighed far heavier on Ethereum than bitcoin.

ETH/USD Forecast & Key Levels

ETHUSD-forecast

  • Continued failure to deliver scaling solutions and proof of stake (Constantinople, Istanbul, CASPER, PLASMA, Phase 0 etc.)
  • Low dApp usage
  • declining demand from new ICO issuance
  • Moloch DAO

As such, the Research Team is treating Ethereum 2.0, Casper, Beacon Chain and the Serenity upgrade with a significant degree of caution.

Justin Drake: “One idea is to do a deposit contract ceremony at Devcon. One of the reasons of having this very public ceremony is so that we can all agree on the exact address of the deposit contract and avoid scam deposit contracts.”

The Ethereum Foundation’s annual gathering, Devcon, is scheduled to take place in Osaka Japan (8th to 11th) and looks set to be the key catalyst for imperiled blockchain.

From a trading perspective, recent price action has been positive, our analysts waiting to how the price will deal with resistance at 220-250, with buy orders set above to catch a breakout.

Global Macro Outlook

The market for Digital Assets, is the first truly global capital market with prices quoted 24 hours a day, 7 days a week, 365 days a year.

With global financial media providing constant coverage, the economic expectations of Digital Asset traders are constantly being priced into Bitcoin and its competitors.

Without doubt, Digital Assets have become a new investable asset class, with traditional money managers and traders gradually joining in the chaos. As this trend develops, Bitcoin’s importance and influence on global financial conditions will continue to grow in lockstep.

As such, the Research Team has provided a brief update on the prevailing economic narratives that will be driving traders & investors expectations of market prices for all markets over the next few quarters.

**GEO-POLITICAL RISK REMAINS ELEVATED **

  • Iran/Saudi Arabia, India/Pakistan
  • US/CHINA Trade War
  • BREXIT
  • US election campaigns kick off
  • Interest Rate Cuts (Fed Cut, ECB Restart QE, Asian CBs response etc.)
  • Uncertainty = Volatility

Despite the extensive uncertainty in the global macro picture, the Research Team is confident that the current period of volatility will eventually resolve itself with new all-time highs for equities, and new highs for Gold and Bitcoin.

Why? – “Excess Liquidity”

Central banks have restarted the money printing machines, with the Fed and ECB both cutting rates and restarting Quantitative Easing.

The aim is to drive down interest rates as much as possible (even negative), in order to encourage asset price inflation.
The mechanism: a continuation of the last decade’s trend – big corporations borrowing at super low rates to fund stock buyback programs - and push stock markets to new all-time highs. Stay safe out there.

Long Stocks

Stawks

Long Gold

Gold-forecast-09_17-1

Disclaimer

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Analyst Certification

The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.

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John

Formally a Fiat Finance guy. Currently Cryp-talking, and Crypt-walking, because that's what's up! Read my stuff for interesting views and insights on fiat and Crypto financial markets

KL