Cryptocurrency Newsletter December 27th, 2018
Trading Launch of the First Digital Equities
Owned by Overstock.com, tZero in October closed a $134 million private security token offering. On January 10th, the tokens will come available for trade on tZero’s trading platform by accredited investors. In August, trading will open up to all investors. Overstock CEO Patrick Byrne plans to have as many as 60 blockchain-based security offerings on tZero by the end of 2019.
Takeaway: The January launch of trading is important for two major reasons. First, it will be the first time an SEC-approved digital security token will be traded via a public blockchain. Second, it is the start of an independent, secondary market where individual investors will be able to buy and sell private equities. According to Byrne “It sounds almost too big to believe, but what we’re talking about is upending the nation’s capital markets and introducing a better mousetrap. It is a better capital market.”
Facebook Is Developing a Stablecoin for WhatsApp Transfers
According to Bloomberg, Facebook is developing a way to use cryptocurrency to transfer money on WhatsApp messenger in India. Facebook plans on using a stablecoin pegged to the U.S. dollar. Facebook now has about 40 people in its blockchain development team. A Facebook company spokesman commented, “Like many other companies, Facebook is exploring ways to leverage the power of blockchain technology. This new small team is exploring many different applications. We don’t have anything further to share.”
Takeaway: Facebook, Amazon, J.P. Morgan, Walmart, IBM and many others are exploring the possible applications of blockchain technology. While many companies are developing their own blockchains, we believe that in the long run they will choose to develop applications on public chains such as Ethereum. BlockWolf is continuing to bet on the Ethereum ecosystem and believes that it has the best risk/reward ratio at current price levels.
Bitmain to Lay Off Staff
The world’s largest producer of cryptocurrency mining chips, Bitmain, may start a massive round of layoffs this week that could impact more than 50% of its employees, according to a report by CoinDesk on Tuesday. According to the report, the layoffs will likely occur across all divisions — including Bitmain’s core crypto mining product.
Takeaway: Layoffs at Bitmain could start a wave of selling in Bitcoin Cash and Litecoin markets, according to crypto investor Kyle Samani. The bearish theory is based on Bitmain’s alleged financial report which was leaked in August this year. If genuine, it revealed that the company was holding close to 931,000 Litecoin and 1,000,000 Bitcoin Cash. If Bitmain is running out of cash, they may need to liquidate BCH and LTC to pay the bills.
Stock Market Sell-Off
In a video titled “Bad Market Crash Coming 2018!” released on July 9th, 2018. BlockWolf accurately predicted a stock market sell off at the end of 2018. While there may be a relief rally in the short term, we still believe that a stock market crash and recession are coming in the near future. We think equities are in a bubble that was created by low interest rates and quantitative easing. As the Federal Reserve continues to raise rates and perform quantitative tightening, asset bubbles will deflate. The figure below illustrates that five credit crises and four recessions in the U.S economy since 1975 were all preceded by a period of loose monetary policy, followed by a period of tight monetary policy. A boom period followed by a bust.
Takeaway: As concerns of a global economic slowdown increase, cryptocurrency may be seen as a safe haven asset. If the Fed is forced into more Quantitative Easing, it is possible that the dollar will fall significantly during the next recession. Investors will seek assets such as precious metals and cryptocurrency to hedge against a loss in purchasing power.
Litecoin Sponsors UFC Event
In an effort to increase cryptocurrency exposure, Litecoin has become the first official cryptocurrency partner of the UFC. The deal will see the Litecoin logo displayed in the octagon at an upcoming event on Dec 29th.
Takeaway: Litecoin is making marketing efforts in order to increase brand awareness. We do not believe that this will have any material effect on price in the short term.