Why I believe we’ve seen the generational bottom of bitcoin at $5743
Disclaimer: this isn’t financial advice, just some of my thoughts.
Written by: Ben Hu
Table of Contents
Preface
Introduction
Technical analysis
Fundamental analysis
Market sentiment
Economic context
Threats
The future
Credits
Special thanks
References
Preface — Why does my opinion matter?
To start off, here is a small introduction about myself, and why I think you’d be interested in what I have to say. I have been perplexed by market economies, human emotion and technological advances ever since I was young, and studied the parallels between the markets and psychology that can be observed in all of our lives. I’ve traded stocks since I was in middle school, started a successful bike business out of a garage in high school, pioneered the float value and sticker economy in Counter-Strike: Global Offensive during college: https://steamcommunity.com/id/benh321
As a hobby, I also swing trade both cryptocurrency and traditional markets purely off of price action and liquidity analysis. I personally have over 6 years experience in the cryptocurrency space, 12 years of experience in the markets, and am well-versed with a deep understanding of market dynamics, tokenomics, and ecosystem. My personal areas of interest are consensus algorithms, enterprise adoption, identity verification, supply chain solutions, zero knowledge proofs, scaling solutions — mainly lightning network/plasma, decentralized exchange protocols, stablecoins, blockchain utilization for distributed computing, distributed ledger technology, and more.
Introduction — What is this paper about?
I’ll break down this thesis into six categories; technical analysis, fundamental analysis, market sentiment, economic context, threats, and the future in regards to my thoughts on the space as a whole.
Under technical analysis, I’ll talk about the importance of the $6150 level, Tom Dante’s swing-failure pattern, and the shorts/longs ratio as well as the effect of derivatives.
The fundamental analysis section will go over valuation, including a talk about decentralization, deflation, anti-fragility or what I like to call the golden case argument, and old money.
Market sentiment will be about the roadblocks that lie ahead for adoption and worldwide acceptance, referencing a quotation from Gandhi.
Economic context will be about the pivotal point our global markets are currently in, mainly about the potential bubbles that are currently looming amongst us. I will also talk about bitcoin’s role in the event that our economy does have a pullback, and justify Steve Wozniak’s statement about bitcoin being gold 2.0.
The threats section will point out potential counter-arguments to my thesis, followed with my own rebuttals.
The final section will talk about some ideas on how I see the space developing over the next few years, and eventually decades. This includes predictions on the next tech leaders and innovators, drawing reference from our past.
Technical analysis
From a technical analysis perspective, we’ve had a massive bear trend since December 18 of 2017. What is noticeable, however, is that every single time we come to the 6000’s, we are met with demand. As a result, we have never closed a single weekly candle below the 6150 level, which in this situation I’m going to rely on as my magic number.
The main reason why I believe that 6150 is an important level is because we have formed a swing-failure pattern on the weekly time frame. As a price action/liquidity trader, the swing-failure pattern is one of the only two setups I trade, as they allow for high-probability trades with great risk to reward.
A swing-failure pattern is a pattern first coined by Tom Dante, a fantastic price action trader. The philosophy behind a swing failure pattern is this — once price on a large time frame nears a critical support, all eyes are watching the exact same number. What this leads to is a large amount of retail investors placing their stop losses at that number, and, once price breaks below the level, you generate large amounts of liquidity from three different kinds of traders, breakout short sellers, sells from stop losses being triggered, and capitulation from long term investors scared of a break in market structure. The combination of these three pools of engineered liquidity provides the opening for a large market maker or “smart money” to get in, before resumption of the uptrend.
The pattern is only confirmed, however, on a close of the candle; in this situation it’d be the 6150 low taken out by 5743, but closing above the low of the first critical support level.
I’ve personally found with cryptocurrencies that you need at least a 4 hour candle close or higher, the higher the time frame, the higher the significance and strike rate. This repetition in price action is derived from a fundamental idea that price is fractal, all prices move in the same pattern over and over, creating fractals that are observable on a large time frame.
They say history never repeats, but it often rhymes. This is wildly important when you introduce the price action in the past, the last bear market of bitcoin involved the same pattern on a break of the $167 level, and close above. I’m sure you can guess what happened after we closed above 167.
We initiated a “digital gold rush” with mind-boggling returns on investment, fundamentally kick-started by the bankruptcy in Greece. Amidst economic turmoil, many people all over the world began hoarding bitcoin in efforts to hedge against the collapse of economy. Imagine thinking that bitcoin was going to 0 and selling then, you would have missed a price increase from $167 to $20,000, a near 12,000% move from bottom to top.
Another reason why I imagine the 6150 level to be so incredibly important is that it is also the level where the “parabolic” bull run started, or the beginning of the “get rich quick” era of bitcoin. This era can be characterized by celebrities beginning to talk about it openly, hearing about it from word of mouth through friends and family, your barber, or even uber driver. Before this era, the only people really involved in bitcoin and its ecosystem were early adopters, and people that believed in and genuinely understood its value. Early adopters are important because they realized the truth of the cryptocurrency space, they’ve witnessed firsthand the brutality of prolonged bear markets, as well as stood in awe of the face-melting, life changing riches bull markets can bring.
Having witnessed this, I believe anyone in the crypto space prior to the first break of 6150 and still currently in the space has been freshly minted as an OG. An OG, or “original gangster” has the confidence that no retail trader or speculative investor can dream of having simply because they do not understand what bitcoin and cryptocurrency is capable of. These same OG’s are the ones that sold to retail investors at 20,000 and are ferociously rebuying in the 6000 regions. They understand the possibilities of decentralization and its importance as a technology, and will NEVER let you take away their confidence in bitcoin. This belief and confidence is the same reason why they will never capitulate, and why they will be unbelievably wealthy when the time comes.
The final reason I believe that this support level will hold is because of the liquidity provided from the role that derivatives play, as well as the importance of the current shorts/longs chart. Something you may find interesting about the xbt perpetual swap contract from BitMex is that it was launched on Dec 10 of 2017, or the exact top of the current market cycle. This is correlated because it allowed for people that did not have an asset to sell it by shorting it using leverage. A simple way to explain this is that someone new to the space had the option of selling 100BTC even if their balance was only 1BTC due to the use of leverage.
This is extremely important because although btc’s capped supply sits at 21,000,000, what derivatives and futures trading allows you to trade is 100x of your available balance, eg selling with the perpetual overall market supply being 21,000,000 x 100, or 2,100,000,000. (2 billion). This ability to sell something you don’t possess, and on top of that being 100x of what you don’t have, is what I believe led to the first correction from 20,000 to 6000.
What this leads to is massive sell pressure that can easily shake weak hands, and causes a market-wide change in the emotions that leads to a cascade of liquidations and panic selling — illustrated clearly in the Wall street cheat sheet as capitulation.
The idea behind capitulation is simple — it’s much easier to convince someone to sell something than it is to convince them to buy something. It seems obvious to me that all of those that bought the top of bitcoin at $20,000 that trade on pure emotions are the same people capitulating now, selling their stashes in belief that bitcoin is truly going to 0. This is apparent in the market capitalization of altcoins.
It is also apparent in the shorts/longs ratio for bitcoin, which is possibly one of my favorite metrics to utilize while doing liquidity analysis. In the chart below, there are three specific dates that appear as clear outliers in this three day chart of bitcoin. Those dates are April 4, September 14, and October 13. These dates are important to me because they are the three dates with the highest shorts to longs ratio in the past year, being 1.15, 1.47, and 1.60.
The importance of this is understated because the thing about price is that it seeks liquidity. It would make way more sense for bitcoin to take the path of least resistance by going up rather than down. Once it starts creeping up due to a lack of sellers, short sell stops and liquidations will get triggered along the way, fueling the rocket ship even more. Why does this happen? To understand, we need to understand how a short order works — to open a short position, you sell something you don’t have. Now how do you close a position? You have to buy to cover your position. In simple terms — you can look at every short order as a person currently waiting to buy something. What happens when there are no sellers left then? Demand overtakes supply and you have the beginning of a trend reversal, paired with the 100x buy power that counteracts the 100x sell pressure that plagued bitcoin for the past 10 months.
What I find fascinating though, is that even with this extremely exaggerated volume of selling pressure, is that we failed each time to successfully close a weekly candle below that magic 6150 level. This signals to me that whenever we reach that level, nobody else wants to sell. Not a single person in the market believes that the price of 1 bitcoin is worth less than 5743 enough to keep price below that level. Instead we are greeted with massive amounts of demand, and in my next section, I tell you why.
Fundamental analysis
For fundamental analysis, its difficult to find a solid metric to justify its valuation as it’s an asset that doesn’t have financial statements, political stances, or opinions. As a result, what I like to use when fundamentally evaluating bitcoin is what I believe gives it value, which is decentralization, deflationary aspect, anti-fragility or the golden case argument, and a new theory of mine, which I like to call old money.
In terms of decentralization, the idea I like to connect it with is gun control in the United States. For a moment, imagine being a foreign entity and your goal is to take over the earth. You look at the obvious candidates to attack, the countries with the largest access to resources, and the weakest defenses. You look at China, and think okay, that might be a good idea because their defenses are all centralized throughout the country; there are specific bases and weaponry every span of say, 100 miles or so as a guesstimate. Risk for reward in this situation is fair, because you are attacking a massive country with disseminated defenses that will require both time and resources to utilize effectively, with the reward being to gain one of the world’s economic powerhouses.
Now compare this with the United States, and you might already see where I’m going with this. When you attack America, there is no weakness in defense. You have proud, gun-carrying American citizens at every corner, willing to fight to the death to defend their country and their beliefs. There is no logical area to attack, and now you may have a little more insight as to why government spending on security in America trumps every other country by a long shot. It is fundamentally important, as it is the first thing you think about on an instinctual level in any fractal or scale imaginable. Survival comes #1 in the hierarchy of needs, you don’t need to take a psychology course to realize that.
This same reason is why bitcoin remains #1 by market capitalization and will do so for a very long time, due to it’s decentralization. In comparing the current financial medium of the United States, we have wealth centralized by banks, which are fully controlled by the Federal Reserve. Now consider this parallel with gun control that I just mentioned, but instead, you’re the Joker from The Dark Knight, conspiring to take down the financial markets. Think of where to attack — your first targets would be the banks and the federal reserve, however with decentralization this is impossible. Wealth now has the ability to be spread amongst every single American citizen, nobody knowing how much each person owns. As a result, the Joker would have nowhere to target, rendering his attempts futile.
The deflationary aspect is for it’s future valuations, and a good way to describe why deflation is important for a store of value is through comparing it to real-estate. Real-Estate and Bitcoin are two of the few stores of value that have a concrete fixed supply. What this leads to is a biased curve of supply and demand, since there isn’t going to be a supply increase in land on this earth anytime soon, it becomes incredibly valuable over time due to the increasing supply of people on this earth, all needing somewhere to live.
This same concept can be applied to bitcoin, because with a finite supply pegged at 21,000,000; the increasing demand for a potentially world changing, emerging asset classes grows higher everyday.
The defense mechanism of bitcoin can be defined by the enormous amounts of energy, time and money required to attack it, and the best part is that once compromised, bitcoin becomes worthless. I like calling this the golden case argument. Imagine buying an extravagant, beautiful golden case with history and recognition for being impossible to open. The fallacy is this — once it is opened, it is no longer valuable. Excalibur is a similar situation, famed for being stuck in a rock for ages, however once pulled out, is just a sword.
Once you sum up the resources, money and time to hack bitcoin and it’s SHA-256 algorithm, there is no reward. By compromising it’s security you defeat its value and purpose. Nobody would ever have the incentive to sacrifice all of their resources in exchange for nothing.
Finally, the last measure I like using to fundamentally valuate bitcoin is this latest theory of mine, called old money. The rationale behind it, is that once bitcoin and its value have propagated to a large enough percentage of the people with power, be it political power, intellectual power, or even monetary power, it is against their own interest to ban it or have it die off. In other words, the people important enough to dictate its future have enough of their own time, money or brand invested into it that it wouldn’t make sense for them to ban it or reject it’s potential to change monetary policy and civilization as a whole. You could argue that enough old money has successfully infiltrated Bitcoin and Ethereum, however for other alternative currencies it gets a bit hazy.
Key people that come to mind when I think of “old” money in the current cryptocurrency ecosystem are SEC commissioner Hester Peirce and her belief in Bitcoin and potential etf representing the political power side of old money. Steve Wozniak, one of the most important people of the last 20 years in technology in my opinion, an absolute legend and godfather of modern computing, and his public declaration of co-founding Equi, a cryptocurrency specified venture capital firm, representing the intellectual power side of old money.
The final arm of theory under “old money” is monetary power. You don’t need to look too hard to understand that nearly everyone is hungry for a piece of the pie. You have Tim Draper, the Winklevoss twins, Brian Armstrong, CZ of Binance, Mike Novogratz, and a seemingly endless list of Venture Capital/Wall-street/Technology turned crypto-fanatics that are fighting daily for its success. You also have the introduction of Fidelity announcing the launch of an institutional platform for Bitcoin and Ethereum, and the intercontinental exchange of Bakkt being more catalysts for wall-street old money to jump into the mix.
Market sentiment
The world around us is changing, what once was ignored is now being recognized. To quote Gandhi, — “First they ignore you, then they laugh at you, then they fight you, then you win.” I believe this is an incredibly important quote because if you plotted the timeline of events juxtaposing the developments and value of bitcoin vs. the dollar, you have a new, emerging asset class making strides and fundamentally changing on a near daily basis, in terms of open source improvements to name recognition and hash rate, whereas 1 USD will always equal to 1 USD. We are currently in the “laughing” phase, now that the name is out there, I’d guess maybe 1 in 3 of modern Americans have heard of the word Bitcoin now, with 99% or so of them laughing at its feasibility or potential as a technology.
This is reasonable, however I believe they are just emotional from losing money on it and are characterizing bitcoin’s value based on how much money they lost. This is even more clear when you see what’s happened during the ICO era. During the monstrous altcoin rally we’ve recently had, investment returns of 100x within weeks or even months were not uncommon. This hope of financial freedom and endless riches to me adds additional confirmation of my idea that bitcoin is a digital gold rush. Think of the timeline of the gold rush — there were the first, “early adopters” that found the first, largest supplies of gold that had huge riches, stories which spread across the oceans in a time without internet or even cellphones (pretty amazing to me, to be honest).
In the cryptocurrency space, bitcoin would be real gold, and icos would be considered fool’s gold. Simple copy and paste blockchains based on ethereum’s erc-20 source code, these projects promised world-changing technologies but were far from the truth when you looked deep enough. Exit scams were commonplace, pyramid schemes such as Bitconnect promised the idea of passive income generation, and the list goes on and on for people looking for an easy route to early retirement that were blindsided by deceptive practices. For these reasons, it’s understandable how retail money was robbed after trading on hope and emotion rather than logic, and why they are the ones currently laughing at the plummeting price of bitcoin; expecting it to go to 0. What’s next though, the fighting phase, will change the landscape forever.
The fighting phase for me is the best part, because it’s the defining point as to whether or not what I’ve been studying for the past year is worth anything at all. It involves the slow decrease in people laughing at the space and increase of people fighting for the space. Looking at the space objectively and as a whole however, there are definitely roadblocks we need to consider when moving ahead and developing the ecosystem. Price wise, every single lower high made on the chart of bitcoin since $20,000 is now a massive support/resistance flip. This is simply because of how the human’s ability to memorize things works, those that got in at $12,000 that have been underwater for the past half a year are the same people that are going to sell once we breakeven. This liquidity in combination with short sellers shorting at resistances are going to play a large role in determining if we go higher.
Along with price, we have market sentiment as a whole. The introduction and talks about a potential ETF with SEC commissioner Hester Peirce can be game changing as a whole, allowing for government regulation and protection for those wanting to get into the space on a speculative basis. Fidelity’s launch of their institutional trading platform and Bakkt’s Intercontinental exchange should both play massive roles in determining the introduction of new money and new players in the space.
The trickiest thing for our future to me, however, remains adoption. This part is critical for the final phase, which is winning. Taking a step back and viewing of the space as a whole and ignoring things like price and liquidity analysis, look at the basic truths of cryptocurrency. It is incredibly difficult to understand, even with the supplementation of the internet and the modern availability of information, it took me over a full year of hard, hard research to get to a level of intermediate understanding of the ecosystem. The barrier to entry of the space is extremely high, which I’m partially thankful for because it allows for me to accumulate more bitcoin undisturbed.
With this barrier to entry in mind now, imagine explaining these paradigm shifts in the financial world to your closest coworker, friends, or even a stranger that you pass by; it’s definitely not easy. Now consider the possibility of explaining it to someone not born in the millennial era. Middle-aged people from the Baby Boomer generation, not born in the age of the internet would have a much more difficult time understanding the basics of consensus algorithms and their potentials to radically change how human beings interact.
The final boss now, would be the elderly. It seems nearly impossible to describe it in a way for the elderly to utilize on a day-to-day basis. Adoption of the internet and realization of its potential took roughly 25–30 years in my opinion, however due to the internet I believe adoption of cryptocurrency would be faster, taking a total of maybe 10–15 years. Our developed world has low to moderate signs of attention deficit disorder, nearly everywhere that you look thanks to the internet and abundance of screens. The benefit of this, however, is that we rarely stay in place and do the same things over and over. We are now more open-minded as a society and are always eager to improve in any way possible.
Not all hope is lost however, as I believe there are a few events that could accelerate this change. I’ll cover those in the next section, economic context.
Economic context
Now that we know the technicals and fundamentals of bitcoin, what about the surrounding financial landscape? I believe that the conditions where bitcoin is needed the most is during economic downturns and recessions. During recessions, where do people usually store their money? They usually store it in gold, in beliefs that it will appreciate as a hedge against traditional assets.
While this is partially true, I believe that bitcoin is a better version than gold in almost every way. Steve Wozniak stated that bitcoin is gold 2.0, for the same reasons that I went over in the fundamental analysis section. One more reason why bitcoin is better than gold is due to the fact that it’s immaterial, this makes it incredibly hard to be stolen, observed or confiscated, and has the added benefits of requiring virtually zero resources or time to move from place to place. If you were amidst a financial crisis and you are forced to move across the earth; would you rather carry $100,000 in gold bars, or in bitcoin? The answer is simple. Below I will get into sources of economic instability that are simple possibilities.
There are many events happening around us that can signal the possibility of a correction, interest rates are at all time lows, housing prices at all time highs, Amazon and Apple recently achieving massive trillion dollar valuations, will eventually reach a point where we will run out of buyers, and need a healthy pullback. The current trade war with China leading to rising tensions may also lead to a possible economic setback.
Other debt pockets I believe are worth noting are the current student loan bubble we’re currently experiencing, the amount of students coming out with degrees they never use are steadily increasing, with harder conditions of repayment compounding. We can also suffer from a car-loan bubble, the state of subprime auto loans are almost a perfect mirror to the housing crisis that we had that caused the economic recession of 2008.
The eventual pop of any of these bubbles may have cascading effects on our economy, and in the possible event of that happening, many people will flood towards bitcoin and liquidate their assets in order to hedge against a recession. Once the first wave of people come, more and more people will pile in and it may lead to a full paradigm shift.
All of these issues arising from outdated, sub-optimal methods of financial interaction may eventually lead to a change in market structure that will force the masses to evolve and adopt new processes. It sounds counter intuitive, but having an asset class that doesn’t actually represent anything is a novel idea because it prevents it from being directly dictated by societal events. Pair this with anti-fragility and its deflationary aspects and you can see why it will be incredibly valuable during economic turmoil.
Now that we have the conditions laid out in front of us that can drive the space as a whole towards massive growth, we need to understand the counter-arguments that can be made, and the threats that we may face.
Threats
What if I’m wrong? I could absolutely be wrong, nobody can predict the future. I’m simply here to justify my beliefs that bitcoin has bottomed out at the price of 5743. There is a great fundamental analyst that I follow by the name of Murad Mahmudov that predicts a low of 2800 to 4300–4500 is the bottom.
“I lean towards ~4300–4500 as the bottom, but as low as ~2800 is possible if things go south. 2017 was, locally, a bubble. Things got way too overheated, in my view, even relative to the strength of the holders and true believers. This market needs at least one more flush.” He backs up his argument with a list of fundamental reasons throughout his twitter thread.
While Murad is a fantastic fundamental analyst and makes fantastic points, the reason I do not agree with him can be summed up quickly by the fact that he thinks too logically. In thinking that markets are rational, you lose instantly. If markets were based on logic, then trading would never exist.
To help explain, I’d like to highlight an anecdote from my freshman year in college at University of California, Riverside, where I joined a small finance club with similar students interested in the markets. We would gather once a week to discuss and share ideas related to them. This particular experience involved a pitch of your favorite stocks, and reasons why the club managed fund should invest in them.
One student’s idea was to invest in Disney, with his reasonings being that everyone loved the Avengers and Disney had just recently acquired the rights to Marvel. Nearly the entire room was skeptical, except for maybe me, at his presentation with pictures and videos that completely contrasted the boring, number filled presentations other club members came up with, with detailed financials and analysis. Our club advisor, Professor Hepler, urged to buy gold, believing that commodities are always a reliable investment. The whole room nodded in agreement, whereas I did not like his idea due to the lack of volatility that would be necessary to grow a portfolio that only lasted for a few years. I personally vouched for Nvidia, and still have my paper I wrote on it from 2013. I highlighted the potentials of the growing esports economy and dynamic shift from traditional sports to esports. In hindsight, cryptocurrency mining would have been a great reason as well.
Now here’s the kicker — what were the returns of those three options, Disney, Gold, and Nvidia? You’d probably be surprised.
Disney: +94.83%
Gold: -11%
Nvidia: +2126%
The proof is in the pudding — Markets do not behave rationally. To assume that markets move rationally, you’d expect 100% of everyone to do their due diligence and develop investment theses based on logic. But the thing is that that’s not what drives price, what drives price is a combination of fundamentals, supply/demand, and emotions.
Should it fall below however, there will be drastic ramifications on the entire ecosystem. The main threats that I see possible are: the tether collapse of the main spot-based exchanges, as well as competition.
The argument for the collapse of tether is based on the fact that speculators see massive amounts of tether, a USD-pinned stablecoin, being generated. This generation scares people because they are trying to picture millions, if not billions of USD in bank notes stacked inside of tether-based exchanges’ headquarters, and once their books don’t add up, the market will panic sell their holdings in beliefs that their portfolios are artificially inflated.
What this argument doesn’t account for is that nobody really uses cash anymore, to be honest. Especially in crypto, where everything is digital and nothing is material. Just take a look at modern banking, checkings and savings accounts aren’t represented by designated lockers that hold full balances in cash; they’re represented by numbers on a screen. Financial technology apps are emerging from nowhere, we have Venmo, Paypal, Square, Cash App, Apple Pay, Facebook money and even Snapcash. Bottom line is, nobody uses cash anymore, so why should we use that basis to determine the validity of a cryptocurrency based exchange?
Even if tether were to be determined insolvent, we are lucky to live in a capitalistic society full of competition. This includes Tusd, Gusd, USD//Coin and Paxos Standard. These are all audited by respectable companies according to a tweet by Larry Cermak. This transparency is important in the space, as it’s ultimately what will bring forth adoption and trust in the ecosystem. Should tether fall, it’s clear that we have many other choices readily available.
The next threat is competition, however there are many reasons why that won’t be an issue. Many of these reasons I’ve went over already in the fundamental analysis section, they include decentralization, it’s deflationary aspect, protection of its core blockchain thanks to SHA-256, antifragility, and first mover advantage. All of these reasons are why I see bitcoin remaining as the reigning king of its domain for a considerable amount of time, however this doesn’t mean that decentralized blockchains and centralized blockchains can’t coexist simultaneously, leading to a healthy balance similar to yin and yang. In the final section, I’ll dive into my favorite projects, and the potential they all hold for a better tomorrow.
The future
To quote Murad Mahmudov, “Bitcoin is a profound economic renaissance, falsely wrapped in a tech bubble, itself falsely wrapped in a Get-Rich-Quick Scheme. The complete takeover success of cryptocurrencies is inevitable destiny. It is mathematically inescapable. Once you see this, you can’t unsee it.”
I agree with Mahmudov fully here, because to me, the overarching thesis of cryptocurrency as a whole is that humans are subject to corruption, while math is not. This is not me doubting the potential or values of humanity, it is me pointing out a simple fact that humans make mistakes due to feelings of fear and greed, while computers do not. It is the same reason why algorithms can outtrade almost any retail investor, but would fail without someone at the helm of the ship because human beings are able to digest and read market sentiment/emotion, which I believe are critical for success in trading.
As a result, I see bitcoin and cryptocurrencies as a means to leverage humanity in a way to improve our corrupt, outdated financial systems, and usher in a golden era of safe, trust-less, low-fee, permission-less transactions, free of bias, political attachment or opinion. For the first time in history, we are able to rely on math to correct and supplement the problems that have plagued human beings from advancement and innovation, including the issues of byzantine fault tolerance, fraud, deception, trust and greed. Since first decentralizing currency on October 31, 2008 with the introduction of the bitcoin whitepaper, we have developed many more use cases for blockchain technology and decentralization as a whole.To conclude, I’d like to tell you about my favorite projects and people that I see being successful, drawing similarities from the internet boom and industrial revolution.
My favorite projects include Bitcoin, Ethereum, Zcash, 0x, Vechain, and Binance Coin. I’ve spent practically the entire paper talking about bitcoin, I’ll just assume you know why I think it’ll be successful by now.
Ethereum is a great project, it acts as a decentralized world computer through the issuance and utilization of smart contracts over its ERC-20 token contract. Vitalik Buterin is one of the most polarizing characters in the space, I’d connect him to Thomas Edison or Benjamin Franklin, one of the founding fathers of a massive paradigm shift in how we interact in the world. His work on ethereum and approaches to issues involving scaling, layering and consensus mechanism have been touted as ground-breaking and pure genius. In my prior discussion about old money, he would be classified as “new money” in my opinion, as a person who’s rise to fame came solely from his developments in the cryptocurrency space. Ethereum’s success will be attributed to its massive utility, connections to old and new money and to it’s co-founder, Vitalik Buterin.
Zcash is another project I really like, largely in part to its tokenomics, use case and technology involving zero-knowledge proofs. Zero-Knowledge proofs are my favorite development out of cryptocurrency in terms of innovation to date, as they have found a way to solve the issue of identity verification without having to reveal identity. It sounds simple, but in practice it is a herculean task in terms of cryptography. That in combination with having similar tokenomics with bitcoin, with the added insurance layer being privacy, in my opinion allows for Zcash to be one of the only plausible competitors of bitcoin.
0x, or ZRX is a protocol that facilitates the transaction of ethereum based tokens through decentralized means of transaction, or through decentralized exchanges. This is important in cryptocurrencies because with decentralization being the main driver in fundamental value, the eventual adoption of other forms of asset exchange will be a massive player in the future of the space. Decentralized exchanges currently allow for the buying and selling of ethereum-based cryptocurrencies through the utilization of atomic swaps, however I can imagine in the near future that that will change into allowing for the trading of all kinds of assets, whether it be traditional stocks and commodities, forex, futures, options and even derivatives.
This incredible protocol isn’t the sole reason I’m so supportive of the project, the existence of old money is all over this project and has it in their economic incentives to see this project flourish and succeed. The full advisory list is stacked full of “old money” consisting of early adopters currently working at coinbase, and more. I predicted the listing of 0x on Coinbase back in february, and it finally came true this month.
Vechain is probably my personal favorite project of them all, because of how many similarities I see between them and Apple. They make the argument that what changes humanity fundamentally isn’t based on the importance of technology, but on use case. Vechain versus Ethereum to me is synonymous with Apple and Microsoft, both having ground-breaking technologies capable of fundamentally changing how are world interacts.
Think about the phones or laptops released from both Microsoft and Apple. Microsoft likes to boast about technicals, talking about the biggest numbers in camera specifications, processing power, screen resolution, battery life, etc. Apple on the other hand doesn’t focus on specs, they specify on listening to the needs of the consumer and catering their developments in efforts to satisfy their needs. Do you know the exact amount of megapixels your iPhone has? I’d assume at least 95%, most likely more, have no idea. That’s because the mass majority of people don’t really care about specs. They care about the synchronicity and ease of use with all Apple products. I have to admit, how they all work together improve my quality of life a lot.
Now how does this relate to Vechain? Vechain has gone for an unconventional means of developing their blockchain. They thought of a fundamental problem first and how it can be solved with the use of blockchain technology. This is similar to most successful businesses today, that have streamlined and formulated their mission statements with the consumer having the utmost importance.
Sunny Lu in this situation represents Steve Jobs in this instance, he’s the charismatic leader with strong connections that is able to connect and demystify the potential powers of blockchain with the average consumer, similarly to how Steve Jobs connected Steve Wozniak’s Apple computer to the American home.
Old money is also all over this project, you have venture capital legend, Jim Breyer as an active advisor and investor. The partnerships for this project are unreal, I probably couldn’t fit all of them into this write-up. Main ones of importance in my opinion include LVMH, BMW, PricewaterhouseCoopers, and DNV-GL.
The last, but certainly not least of my favorite projects is Binance Coin, which is currently the #1 reported spot-based exchange by volume on earth. It’s leader, Changpeng Zhao, is the main reason why I love the project so much. He has went from a nobody to a billionaire within a year, one of the most astounding reports of growth I’d argue for anyone in history ever. He runs his exchange also with the consumer in mind, has fantastic customer support, and constant stream of development and innovations. Their team actually travels around the world and acts as a distributed web of connection, which is the first time I’d argue that any unicorn firm has run their business. It fully believes in its mission statement and motto which is to exchange the world, and operating in a decentralized manner is quite a feat to pull off.
My support of it is based on a comparison to the gold rush, the ones that made the most money were the ones providing the jeans, shovels, and equipment for the business. They aren’t directly liable to the growth of a volatile asset class, however clearly provide value for their consumers.
That just about sums up my favorite projects, hopefully by now you’ve learned something new about the space or began to understand why I’m so incredibly passionate about the space and ecosystem. Decentralize everything :)
Credits
If you got this far, thank you for taking the time to read my thoughts, I sincerely appreciate it. You can connect with me here:
LinkedIn via https://www.linkedin.com/in/ben-hu-13085476/
Twitter via @vlubtc
Discord via https://discordapp.com/invite/xEEyNX7
You can also follow my medium, I may or may not be posting more analyses like this in the future depending on how much free time I have.
Special thanks
My parents, for providing me with the opportunity and support to discover and learn about my passion.
Winford, one of my dearest friends that I treat like a brother, for always intellectually stimulating me and providing another perspective to look into.
Twitter accounts — Loomdart, Trader Mayne, and DonAlt for all being fantastic traders that have taught me everything I’ve needed to know to being a successful trader.
References
Steam account: https://steamcommunity.com/id/benh321/
6150: https://www.tradingview.com/x/4WpQ0Riq/
5873 SFP: https://www.tradingview.com/x/QHjZwuEQ/
167: https://www.tradingview.com/x/MnCPFDyV/
Shorts/Longs https://www.tradingview.com/x/6IPGua2E/
Murad BTC bottom https://twitter.com/MustStopMurad/status/1052611501813510145
Disney: +94.83% https://www.tradingview.com/x/82WoSnBI/
Gold: -11% https://www.tradingview.com/x/acaNVMhJ/
Nvidia: +2126% https://www.tradingview.com/x/fSfLYS4a/
Murad Renaissance https://twitter.com/MustStopMurad/status/985335762421010434
Larry Cermak Tether Alternatives https://twitter.com/lawmaster/status/1052664370096947201
