RSR TA Sunday — Edition 14
Happy Sunday Rangers! After some excellent and expected consolidation over the last week, we have bullish formations on every front, as well as a wrap up to a March rollout of the app in Venezuela that surpassed expectations.
Before we get into the TA, I’d like to re-introduce an idea that has been conceptually explored more and more over the last year. The idea that money is time (and as the adage goes, time is money). This has been popularized by a number of avid bitcoiners, but I think is equally relevant to Reserve. In some respects, even more so. Although there are plenty of examples in the bitcoin community, Robert Breedlove talks extensively about these concepts in his essays: Bitcoin and the Tyranny of Time Scarcity and his three-part series Bitcoin, Money, and Time. In short, these introduce a concept that mediums of exchange are nothing but vehicles used to store human productivity for future consumption. And that, as every good finance person knows, borrowing and debt are vehicles that enable us to pull forward that productivity (at a cost) in favor of using that stored time for pursuits that will generate more productivity in the future. An easy example is a loan for higher education or borrowing to shore up capital investments for starting a cashflow-producing business. Being able to store one’s efforts in a liquid medium of exchange for future use (or borrow against one’s future efforts for current use) is arguably the most powerful concept humanity has gifted to itself. And it’s one that has been hijacked. We see central banks printing money. Negative interest rates on deposits. Money earned one day that buys half as much the next day. This isn’t purchasing power being taken away. It’s not some complicated economic model being employed that we don’t need to worry about. Those with hard assets — land, equities, gold, businesses — can simply reprice accordingly. But for another group — those earning and spending and simply trying to get by day-to-day— their time is literally being stolen. I can’t emphasize this enough. The single most finite resource — time — is being taken away through inflation. Across the board, it’s a policy implemented by a small group of individuals benefitting a slightly larger group of insiders, and is done so at the detriment of many. Which is the reason I and many others support bitcoin, and projects like Reserve, which seek to end what I can only imagine history will look back on as nothing short of criminal.
Given Reserve’s focus on eradicating hyperinflation, I began thinking — why is it that bitcoin has not become more fully adopted in areas of the world where this time is melting like an ice cube in the desert? Aren’t people aware that they have an alternative? Certainly, there is adoption, but it is not as prevalent as one might imagine. Bitcoin is used primarily as a speculative vehicle rather than as a wealth preservation tool. Bitcoin maximalists would argue that bitcoin is the solution. They may be right, but then why does the problem persist? I would argue there are four main issues:
- Bitcoin is still volatile, and therefore not a good store of value in the short-term.
- Fiat on-ramps to bitcoin in nation-states experiencing high levels of inflation are not robust enough to support mass adoption of bitcoin.
- Bitcoin itself does not exist in these areas in a pervasive enough way — often in the places it is needed most, it trades at a premium over other jurisdictions.
- The onboarding, storage, and transfer mechanisms, including self-custody and UI/UX, are still difficult for the average person to understand and adopt bitcoin quickly.
These issues create an environment where users don’t have bitcoin, and merchants don’t broadly accept it. Fiat rails exist in broken ways, and more often with the goal of conversion or remittances to the dollar rather than to bitcoin.
Enter Reserve’s solution, RSV. A decentralized stablecoin engineered to combat these very issues. Perhaps eventually RSV could even be a second layer solution that employs bitcoin as a primary component of its collateral. But for now, it is dollar-backed, with the goal of adding more stable assets over time, as the world ebbs and flows.
So all of this begs the question, how do we know that something like Reserve is a better solution for regions battling inflation, at least in the short-term, compared to bitcoin? Well, we didn’t really know. Until March, 2021. After a month, Reserve’s app became the #1 finance app in Venezuela, and the #5 app overall in the country with tens of thousands of downloads. Why is this important? Well, Venezuela is a part of the world where crypto has been promised to be able to help so many, and until now has seen limited mainstream success. If you don’t believe me, you need to ask yourself why a crypto-focused consumer application hasn’t been #1 in the app store until now, in one of the countries in the world where it is needed the most.
The natural extension of this is, why is Reserve the first? Well, let’s revisit the four issues above.
- Bitcoin is still volatile, and therefore not a good store of value in the short-term. RSV solves this by starting with a familiar and relatively stable currency used for storing value, the dollar, as its underlying collateral type.
- Fiat on-ramps to bitcoin in nation-states experiencing high levels of inflation are not robust enough to support mass adoption of bitcoin. The Reserve team has provided (in Nevin’s words) “convenient and decentralized electronic liquidity with the Bolivar, which took [them] an enormous amount of effort to get off the ground”. The gray market dollar system already exists in economies battered by inflation, so it’s a matter of repurposing them in a way that makes sense for what Reserve is trying to accomplish.
- Bitcoin itself does not exist in these areas in a pervasive enough way — often in the places it is needed most, it trades at a premium over other jurisdictions. Fiat rails to dollars are already plentiful around the world, due to the petrodollar system and the many years of experience from those seeking shelter from hyperinflation. And importantly, it’s not a big mental or operational leap to move from local fiat to dollars.
- The onboarding, storage, and transfer mechanisms, including self-custody and UI/UX, are still difficult for the average person to understand and adopt bitcoin quickly. The Reserve app is purpose-built and battle-tested through multiple iterations of testing to give non-technical users the experience of using a simple payments app but with the functionality of a crypto-native solution.
There is a ton to unpack here, but if there is something to keep in mind, it’s that adoption has started and users are flocking to the product as a solution for their hourglass of time being repeatedly smashed. I do think it is fair to say that Reserve is complimentary to Bitcoin, and for certain use cases, at least today, is superior. Personally, I couldn’t be more excited to see how Reserve develops in the coming months as a powerful tool for users to combat hyperinflation.
Technical Analysis — week of April 4th
Weekly Timeframe — USDT Pair
I always find it useful to zoom out into our longer-term timeframe to get a sense of where things are. As you can tell by the two arrows, not only was I feeling a bit lazy on this one, but also we are seeing more steady growth in a narrowing range vs. prior months’ weekly charts.
The log scale is something to keep in mind here — and as the Reserve ecosystem (and therefore network effects) continue to be built out among users, we can expect continuation of the trajectory shown on the blue lines, which have been holding the channel since November 2019. This is something I’ll be continuing to monitor closely over the coming months. Will be exciting to see how it plays out, along with what we’ll be able to extrapolate from a “bottoms-up” analysis once we have more data on adoption metrics from the team (hopefully soon!).
Daily Timeframe — USDT Pair
As you can see below, from trough to peak at the end of march was ~127% gain; if we were to repeat this over the next month, we can expect prices to reach $0.15+. To add to this, we can see a bullish formation on the daily with RSR consolidating around the $0.08-$0.09 mark. If we can break through higher, based on the previous $0.10 ATH and retrace (first green line), I do expect us to breach $0.10 and into the $0.12 range by mid-April (second green line), perhaps as early as the next 2–3 days as shown by the “expiration” of the bullish pennant.
Daily Timeframe — BTC Pair
If you refer to our last RSR TA Sunday, you’ll see the trendline of “Channel 2” was adjusted slightly to follow the weekend dip. I don’t think this invalidates anything in the targets below, but rather moves out the timeline a bit and reinforces the fact that the 160 sat level is a strong area of resistance. If we can move through that region and into “Channel 3” this month or next, I’d expect continuation of this through the summer to retest prior highs vs. the bitcoin pair at around 230–250 sats. Fundamentally, my case for this outperformance vs. bitcoin can be summed up in the writing at the beginning of the article — I think more and more we will see a real use case forming for RSV which supports RSR re-pricing higher vs. its BTC pair (despite what will likely be strong performance from bitcoin over the coming months).
