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Token Daily Capital Newsletter #7


TWEET OF THE DAY


"The product we're focusing on is Bitcoin. It has been up and running for over 10 years… but there’s still a lot that needs to be done before we reach mass adoption. - Steve" 

Square Crypto responding to the question "when do you expect to have a working product?" Catch the full AMA here.  


 
  

IN BITCOIN
 

⚡️ Bitcoin's price goes up
As the Fed cuts interest rates by a quarter point. Whether or not the event caused a bump, the inverse correlation is a positive signal.  


⚡️ UASF Day 


      

IN ETHEREUM

🔹 New MakerDAO CDPs via Coinbase Earn

The Coinbase Earn DAI educational campaign is causing a wave of new "tiny" CDPs. Coinbase is offering $6 in DAI for watching videos and answering simple questions about DAI and another $14 to try your hand and create a CDP on MakerDAO. Nearly 25,000 new CDPs were created in July which is almost 3 times the number of CDPs created in the previous 11 months.
 




🔹 0x Roadmap For Better DeFi Integrations

The Ethereum DEX protocol 0x announced a plan to introduce a new entity called "Coordinator" in their trade execution mechanism. A Coordinator is a centralized entity that is tasked with approving matched orders before they are settled on the Ethereum blockchain. The added benefit is that it allows for "soft order cancels" and prevents issues such as front-running to improve the experience of market makers. The ultimate goal is to allow 0x relayers to utilize an open order book strategy while having better trade-execution guarantees. Eventually, this can lead to better integrations with other DeFi protocols.  

 

      


It's All About Price
 

🔹 Tezos Price Jumps 25% On Coinbase Listing News

Reminiscent of the 2017 days, XTZ price jumped by 25% in less than an hour following the Coinbase announcement that XTZ will be listed on August 5th. A potential factor that seems to have contributed to the quick price hike is the limited XTZ liquidity on exchanges (since about 80% of the total XTZ supply is used for staking).


🔹 Algorand Price Swings

Our friends at the Global Coin Research have written an interesting report about the Algorand price crash and how trust in the project has been broken. Though some details in the report need to be updated, the tldr is that the strategy behind the token public offering didn't work well. The strategy was based on conducting a series of dutch auctions. It allegedly allowed a number of private-sale investors, who paid $0.05/Algo, to bid up the price of the first dutch auction so high (at ~$2.4/Algo) that they were able to later liquidate their positions at a huge profit and leave retail investors in the red. 
 

      

Read of the Day


📚 The Invention of Money

This New Yorker article gives a succinct history of paper money, fractional reserves and fiat.

 

📚 Zcash Founder Letter About Renewing the Dev Fund

Zooko Wilcox wrote an important letter to the Zcash community asking for the community's support to renew the Zcash Dev fund beyond the original expiration date of October 2020. This letter will be the center of community discussions for many months to come as the community members weigh the pros and cons of the decision.  

 
      

THOUGHT OF THE DAY

Halving != price pump

We've heard enough folks comment on how they're surprised bitcoin’s price is spiking before the halving in June 2020, so we figured we'd write about it. The halving is not some magical event where holdings 10x overnight. Discussions and articles around halvings have manufactured a sense of bullishness around fast price reaction happening immediately after the halving. However, if we look at the previous two halvings: Nov 28th, 2012 and July, 9th 2016, we can see this has not been the case. While we cannot derive conclusions or expect a trend from just two data points, we can observe how price action has empirically developed.

The following tables on the 30-day price average for Bitcoin* display a number of points in the one year preceding the halving and the one year after the halving. It can be easily observed that the positive price action in the 1, 3, and 6 months before and after the halving is moderate compared to the price action of 12 months. This means that the halving effect on price takes a longer time frame to materialize. In addition, the price changes related to the second halvening are smaller compared to the first halvening for the same time period. The cause is probably related to the smaller change of the Bitcoin inflation rate between the first and second halvings. The first halving changed the median inflation rate from ~60% to ~10%, while the second halving changed it from ~10% to around ~%4. For the same level of demand, a smaller inflation (supply) shock would require a longer time frame for the price to respond to the change. 

 

* Data from Tradingview using Bitstamp BTC/USD trading pair





If the price action around the third halving next year followed the same trajectory (median inflation changes form ~4% to ~1%), we may not observe dramatic price changes between now ( ~ 10 months before the halving) and June 2021 (~ 1 year after the halving).

While this may be bad news for the get-rich-quick folks, it's good news for Bitcoin. In our opinion, as Bitcoin builds a stronger presence in mainstream awareness, it may be better for Bitcoin economic growth to be realized over longer time frames, to gradually leave the speculative asset class and cement its position as a safe haven asset.

 

      

Disclosure: Token Daily Capital and/or its partners may have exposure to some of the cryptocurrencies mentioned in this newsletter.

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