🤔How’s Your Crypto Day Today? Trade cryptocurrencies in centralized exchange or dex? Do some Defi yield farming? Explore fun blockchain products on our website? Here's a crypto enthusiast's daily routine, is it the same as yours?
🤔How’s Your Crypto Day Today? Trade cryptocurrencies in centralized exchange or dex? Do some Defi yield farming? Explore fun blockchain products on our website? Here's a crypto enthusiast's daily routine, is it the same as yours?
Former investment bank FX trader: Risk management part 3/3
Welcome to the third and final part of this chapter. Thank you all for the 100s of comments and upvotes - maybe this post will take us above 1,000 for this topic! Keep any feedback or questions coming in the replies below. Before you read this note, please start with Part I and then Part II so it hangs together and makes sense. Part III
Squeezes and other risks
Crap trades, timeouts and monthly limits
Squeezes and other risks
We are going to cover three common risks that traders face: events; squeezes, asymmetric bets.
Economic releases can cause large short-term volatility. The most famous is Non Farm Payrolls, which is the most widely watched measure of US employment levels and affects the price of many instruments.On an NFP announcement currencies like EURUSD might jump (or drop) 100 pips no problem. This is fine and there are trading strategies that one may employ around this but the key thing is to be aware of these releases.You can find economic calendars all over the internet - including on this site - and you need only check if there are any major releases each day or week. For example, if you are trading off some intraday chart and scalping a few pips here and there it would be highly sensible to go into a known data release flat as it is pure coin-toss and not the reason for your trading. It only takes five minutes each day to plan for the day ahead so do not get caught out by this. Many retail traders get stopped out on such events when price volatility is at its peak.
Short squeezes bring a lot of danger and perhaps some opportunity. The story of VW and Porsche is the best short squeeze ever. Throughout these articles we've used FX examples wherever possible but in this one instance the concept (which is also highly relevant in FX) is best illustrated with an historical lesson from a different asset class. A short squeeze is when a participant ends up in a short position they are forced to cover. Especially when the rest of the market knows that this participant can be bullied into stopping out at terrible levels, provided the market can briefly drive the price into their pain zone. There's a reason for the car, don't worry Hedge funds had been shorting VW stock. However the amount of VW stock available to buy in the open market was actually quite limited. The local government owned a chunk and Porsche itself had bought and locked away around 30%. Neither of these would sell to the hedge-funds so a good amount of the stock was un-buyable at any price. If you sell or short a stock you must be prepared to buy it back to go flat at some point. To cut a long story short, Porsche bought a lot of call options on VW stock. These options gave them the right to purchase VW stock from banks at slightly above market price. Eventually the banks who had sold these options realised there was no VW stock to go out and buy since the German government wouldn’t sell its allocation and Porsche wouldn’t either. If Porsche called in the options the banks were in trouble. Porsche called in the options which forced the shorts to buy stock - at whatever price they could get it. The price squeezed higher as those that were short got massively squeezed and stopped out. For one brief moment in 2008, VW was the world’s most valuable company. Shorts were burned hard. Incredible event Porsche apparently made $11.5 billion on the trade. The BBC described Porsche as “a hedge fund with a carmaker attached.” If this all seems exotic then know that the same thing happens in FX all the time. If everyone in the market is talking about a key level in EURUSD being 1.2050 then you can bet the market will try to push through 1.2050 just to take out any short stops at that level. Whether it then rallies higher or fails and trades back lower is a different matter entirely. This brings us on to the matter of crowded trades. We will look at positioning in more detail in the next section. Crowded trades are dangerous for PNL. If everyone believes EURUSD is going down and has already sold EURUSD then you run the risk of a short squeeze. For additional selling to take place you need a very good reason for people to add to their position whereas a move in the other direction could force mass buying to cover their shorts. A trading mentor when I worked at the investment bank once advised me: Always think about which move would cause the maximum people the maximum pain. That move is precisely what you should be watching out for at all times.
Also known as picking up pennies in front of a steamroller. This risk has caught out many a retail trader. Sometimes it is referred to as a "negative skew" strategy. Ideally what you are looking for is asymmetric risk trade set-ups: that is where the downside is clearly defined and smaller than the upside. What you want to avoid is the opposite. A famous example of this going wrong was the Swiss National Bank de-peg in 2012. The Swiss National Bank had said they would defend the price of EURCHF so that it did not go below 1.2. Many people believed it could never go below 1.2 due to this. Many retail traders therefore opted for a strategy that some describe as ‘picking up pennies in front of a steam-roller’. They would would buy EURCHF above the peg level and hope for a tiny rally of several pips before selling them back and keep doing this repeatedly. Often they were highly leveraged at 100:1 so that they could amplify the profit of the tiny 5-10 pip rally. Then this happened. Something that changed FX markets forever The SNB suddenly did the unthinkable. They stopped defending the price. CHF jumped and so EURCHF (the number of CHF per 1 EUR) dropped to new lows very fast. Clearly, this trade had horrific risk : reward asymmetry: you risked 30% to make 0.05%. Other strategies like naively selling options have the same result. You win a small amount of money each day and then spectacularly blow up at some point down the line.
We have talked about short squeezes. But how do you know what the market position is? And should you care? Let’s start with the first. You should definitely care. Let’s imagine the entire market is exceptionally long EURUSD and positioning reaches extreme levels. This makes EURUSD very vulnerable. To keep the price going higher EURUSD needs to attract fresh buy orders. If everyone is already long and has no room to add, what can incentivise people to keep buying? The news flow might be good. They may believe EURUSD goes higher. But they have already bought and have their maximum position on. On the flip side, if there’s an unexpected event and EURUSD gaps lower you will have the entire market trying to exit the position at the same time. Like a herd of cows running through a single doorway. Messy. We are going to look at this in more detail in a later chapter, where we discuss ‘carry’ trades. For now this TRYJPY chart might provide some idea of what a rush to the exits of a crowded position looks like. A carry trade position clear-out in action Knowing if the market is currently at extreme levels of long or short can therefore be helpful. The CFTC makes available a weekly report, which details the overall positions of speculative traders “Non Commercial Traders” in some of the major futures products. This includes futures tied to deliverable FX pairs such as EURUSD as well as products such as gold. The report is called “CFTC Commitments of Traders” ("COT"). This is a great benchmark. It is far more representative of the overall market than the proprietary ones offered by retail brokers as it covers a far larger cross-section of the institutional market. Generally market participants will not pay a lot of attention to commercial hedgers, which are also detailed in the report. This data is worth tracking but these folks are simply hedging real-world transactions rather than speculating so their activity is far less revealing and far more noisy. You can find the data online for free and download it directly here. Raw format is kinda hard to work with However, many websites will chart this for you free of charge and you may find it more convenient to look at it that way. Just google “CFTC positioning charts”. But you can easily get visualisations You can visually spot extreme positioning. It is extremely powerful. Bear in mind the reports come out Friday afternoon US time and the report is a snapshot up to the prior Tuesday. That means it is a lagged report - by the time it is released it is a few days out of date. For longer term trades where you hold positions for weeks this is of course still pretty helpful information. As well as the absolute level (is the speculative market net long or short) you can also use this to pick up on changes in positioning. For example if bad news comes out how much does the net short increase? If good news comes out, the market may remain net short but how much did they buy back? A lot of traders ask themselves “Does the market have this trade on?” The positioning data is a good method for answering this. It provides a good finger on the pulse of the wider market sentiment and activity. For example you might say: “There was lots of noise about the good employment numbers in the US. However, there wasn’t actually a lot of position change on the back of it. Maybe everyone who wants to buy already has. What would happen now if bad news came out?” In general traders will be wary of entering a crowded position because it will be hard to attract additional buyers or sellers and there could be an aggressive exit. If you want to enter a trade that is showing extreme levels of positioning you must think carefully about this dynamic.
Retail traders often drastically underestimate how correlated their bets are. Through bitter experience, I have learned that a mistake in position correlation is the root of some of the most serious problems in trading. If you have eight highly correlated positions, then you are really trading one position that is eight times as large. Bruce Kovner of hedge fund, Caxton Associates For example, if you are trading a bunch of pairs against the USD you will end up with a simply huge USD exposure. A single USD-trigger can ruin all your bets. Your ideal scenario — and it isn’t always possible — would be to have a highly diversified portfolio of bets that do not move in tandem. Look at this chart. Inverted USD index (DXY) is green. AUDUSD is orange. EURUSD is blue. Chart from TradingView So the whole thing is just one big USD trade! If you are long AUDUSD, long EURUSD, and short DXY you have three anti USD bets that are all likely to work or fail together. The more diversified your portfolio of bets are, the more risk you can take on each. There’s a really good video, explaining the benefits of diversification from Ray Dalio. A systematic fund with access to an investable universe of 10,000 instruments has more opportunity to make a better risk-adjusted return than a trader who only focuses on three symbols. Diversification really is the closest thing to a free lunch in finance. But let’s be pragmatic and realistic. Human retail traders don’t have capacity to run even one hundred bets at a time. More realistic would be an average of 2-3 trades on simultaneously. So what can be done? For example:
You might diversify across time horizons by having a mix of short-term and long-term trades.
You might diversify across asset classes - trading some FX but also crypto and equities.
You might diversify your trade generation approach so you are not relying on the same indicators or drivers on each trade.
You might diversify your exposure to the market regime by having some trades that assume a trend will continue (momentum) and some that assume we will be range-bound (carry).
And so on. Basically you want to scan your portfolio of trades and make sure you are not putting all your eggs in one basket. If some trades underperform others will perform - assuming the bets are not correlated - and that way you can ensure your overall portfolio takes less risk per unit of return. The key thing is to start thinking about a portfolio of bets and what each new trade offers to your existing portfolio of risk. Will it diversify or amplify a current exposure?
Crap trades, timeouts and monthly limits
One common mistake is to get bored and restless and put on crap trades. This just means trades in which you have low conviction. It is perfectly fine not to trade. If you feel like you do not understand the market at a particular point, simply choose not to trade. Flat is a position. Do not waste your bullets on rubbish trades. Only enter a trade when you have carefully considered it from all angles and feel good about the risk. This will make it far easier to hold onto the trade if it moves against you at any point. You actually believe in it. Equally, you need to set monthly limits. A standard limit might be a 10% account balance stop per month. At that point you close all your positions immediately and stop trading till next month. Be strict with yourself and walk away Let’s assume you started the year with $100k and made 5% in January so enter Feb with $105k balance. Your stop is therefore 10% of $105k or $10.5k . If your account balance dips to $94.5k ($105k-$10.5k) then you stop yourself out and don’t resume trading till March the first. Having monthly calendar breaks is nice for another reason. Say you made a load of money in January. You don’t want to start February feeling you are up 5% or it is too tempting to avoid trading all month and protect the existing win. Each month and each year should feel like a clean slate and an independent period. Everyone has trading slumps. It is perfectly normal. It will definitely happen to you at some stage. The trick is to take a break and refocus. Conserve your capital by not trading a lot whilst you are on a losing streak. This period will be much harder for you emotionally and you’ll end up making suboptimal decisions. An enforced break will help you see the bigger picture. Put in place a process before you start trading and then it’ll be easy to follow and will feel much less emotional. Remember: the market doesn’t care if you win or lose, it is nothing personal. When your head has cooled and you feel calm you return the next month and begin the task of building back your account balance.
That's a wrap on risk management
Thanks for taking time to read this three-part chapter on risk management. I hope you enjoyed it. Do comment in the replies if you have any questions or feedback. Remember: the most important part of trading is not making money. It is not losing money. Always start with that principle. I hope these three notes have provided some food for thought on how you might approach risk management and are of practical use to you when trading. Avoiding mistakes is not a sexy tagline but it is an effective and reliable way to improve results. Next up I will be writing about an exciting topic I think many traders should look at rather differently: news trading. Please follow on here to receive notifications and the broad outline is below. News Trading Part I
Why use the economic calendar
Reading the economic calendar
Knowing what's priced in
First order thinking vs second order thinking
News Trading Part II
Preparing for quantitative and qualitative releases
Data surprise index
Using recent events to predict future reactions
Buy the rumour, sell the fact
The mysterious 'position trim' effect
Some key FX releases
*** Disclaimer:This content is not investment advice and you should not place any reliance on it. The views expressed are the author's own and should not be attributed to any other person, including their employer.
$XTI - XSTAKE a DEFI platform you can yield farm by just holding! Universal Basic Income to holders
My apologies, i got the ticker wrong it is $XTK not $XTI
What is XTake ($XTK)?
Xtake.finance is born as a global DeFi ecosystem based on the XTK governance token. Essentially it is another easy and constant passive income / yield farming token.
So what makes it different?
To be an XTaker you only need register an ETH address and hold the XTK tokens. This means all you need to do in order to stake and yield farm is to just own the token! Different amounts of owned $XTAKE will yield more rewards which are posted below and are rewarded monthly: - XTAKER | 100.000 - | XTK 5% Yield - XTAKER | SILVER- 500.000 | XTK 10% Yield - XTAKER | GOLD - 2.000.000 | XTK 25% Yield Ideally, Xtaker wants to make this process of yield farming easy and accessible for all and as simple as just purchasing the token. To make this product accessible to all, they are planning on creating a mobile app, making it easy to connect your ETH wallet and see your yield rewards through a dashboard.
But wait can't I just buy it right before the monthly snapshot and get the yield rewards?
The Xtake team has created a smart contract that randomly checks your balance 3 times a day to see if you are holding your Xtake tokens in your wallet. The yield rewards are then collected based on the average of all the snapshots multiplied by the yield reward you are tiered in.
Liquidity Yield Farming?
The main goal of the $Xtake product is to provide the maximum amount of freedom to people using the platform. That is why with this program you won’t need to lock your tokens in Uniswap for a certain time, you are going to be able to add or remove your liquidity whenever you want. How does it work? (Taken from website) The system will evaluate all the liquidity provider addresses in Uniswap and make 3 dailly random snapshots at diferent hours to save the balance of the liquidity providers (their addresses). This will allow us to calculate a daily average of the 3 snapshots and so on during 7 days. By the end of each week we will have the weekly liquidity average balance of each liquidity providing address in the pool. XTK in liquidity: 0 to 499.999 === 2,5% weekly reward related to average balance500.000 to 1.999.999 === 5% weekly reward related to average balance2.000.000 or more === 12,5% weekly reward related to average balance
Are there any drawbacks to this system?
Yes, the people who get in early will profit much more from yield farming than those who get in later. Also the pool of yield farming will eventually be drained after the course of 7 years. Additionally, right now the price of entry for 2,000,000 $XTAKE for the sweet 25% yield reward is 7.5 eth. This can dramatically increase in price as the token grows in value and even a small 2x would make it now cost 15eth to get 25% yield rewards.
Can I trust the team not to rugflip / are tokens locked?
Currently the tokens are locked in unicrypt and the raised ETH is being pooled into the liquidity pool on Uniswap. The team has been working on this product for 3 months and just finally released it yesterday so you are still relatively early if you are finding this post now.
Other notes / FAQS
- What was the presale price? It was 0.0010$ / XTK for the public sale and 0.006$ / XTK for the presale (presalers bought into the product in june and there were not many). - Where is it currently traded? Currently the only way to buy the token is on UniSwap. (Link provided below as info) - What is the marketcap? Market cap at time of post is 300k ~ .0017$ per token - Is there a place I can go to join the community and ask more questions? https://t.me/xtakefinance (Where I hang out!)
I haven't been in many yield farming projects early because I just started trading crypto again last week. However, I think this is an opportunity to get into a project that is new with devs that are working hard and not going to rugflip (They are active on telegram). I personally enjoy the activeness of the community as well! My only complaint is that the website and the whitepaper is full of grammar issues and typos (which makes me reserved on saying how good their coding is). Other than that I am excited to see this project's growth and enjoy the idea of making crypto products easier to understand and accessible for all.
How to deal with an Ethereum investor who thinks he's my wife?
Hey so welcome. I'm having some trouble getting one of the biggest Ethereum investors to pay me for my work. Basically, one of ethereum's biggest investors has been profitting millions off my work without paying me. His name is Fred Ehrsam over at paradigm capital. I think it's EXTREMELEY relevant to Ethereum because he's investing my money all across the space, and i worry every night that other innocent people will be ripped off by him. I met Fred shortly after he left Coinbase. I had taken a year off from medical school to seek funding for a very proftiable crypto trading algorithm. I knew that if i could get funding for the trading algorithm, then i could use the profits to develop a blockchain-based clinical treatment platform, and in turn treat more patients than i would otherwise as a doctor. Although i was making a very high percentage per day doing this trading strategy, i didn't have enough base capital to completely cover withdrawal fees from more than two exchanges. After examining graphs and other materials i prepared for him, Fred encouraged me to fully drop out of medical school to start a hedge fund with him. Together we came up with the name Paradigm Capital along with about 48 other hedge fund names. So, after that, I worked extremely hard to expand the algorithm from two to five exchanges... At one point I was literally living out of my car in a Walmart parking lot to keep as much money in my trading algorithm as possible, because Fred kept saying he was going to send money to help see if it would scale to 5 exchanges. This guy had a net worth of $21 million at the time i believe. But he never wound up sending the money but kept promising he would. So after a lot more work I expanded the algo to 5 exchanges doing my part. After a few months of expanding the algorithm i stayed at Fred's for a second time a few months later, where he asked me to shower in his room and I then introduced him to a girl i was into, but then he changed gears and told me that i didn't have enough social awareness to start a hedge fund with him. I pretty much knew right then that Fred had stolen or was going to steal my algorithm. But I didn't have enough proof until this Forbes article came out this year. So, my algo is making 100% per month profits for Paradigm Capital, and Fred has stolen a lot of money from me, like millions. Why is Fred so comfortable profitting off my work, and feeding himself off it? Why am I doing all the hard work out in the fields, and he's sitting back and eating fruit and primping himself? Fred must have one of those delusions that he's my wife in the olden times. But I never wanted to have that kind of relationship with him. If I were an investor who wasn't involved in this, I would take into account that nothing Ehrsam has done aside from my arbitrage algorithm has worked. Augur, Veil, tBTC, MakerDAO... they've all been more problems than solutions. Why would you invest in an ecosystem who's philosophies give dozens of tries to a dishonest guy, while the honest, competent people are boxed out? Uhh... Fred literally killed the patients I could've treated as a doctor, and also those I could've treated on my blockchain platform. That's not good. Fred likes prediction platforms because they can be used to kill people through bounties. U think that's the best way to use a blockchain? Fred you will never kill me with a prediction market. You go try and do that with the money you stole from me. He's making decisions with money that's rightfully mine, spending it on projects that, in my opinion, won't be profitable nor do much to reduce suffering in the world. My opinion as a VC would be that if you're going to blow millions of dollars on high-risk projects, at least choose the ones that will have a positive societal impact. Not tBTC copycat projects and augur bounties etc Regardless of sexuality, having a dishonest guy like Fred in your "tribe"* only makes the rest of you look bad. Is it true that in SF you always have to have poke the noobs before doing business with them? Because that doesn't sound fair nor profitable. Divinity doesn't exclusively speak through people who love pretzel sticks. Now PTT wants to Pied Piper the 14-year-olds over at /forniteBR into supporting Ethereum through "community points", hoping a changing of the guard on the East Coast will give him an opportunity to rise up? PTT, He will never let that happen. Not because you're gay, but because your tribe destroys people's lives, like Gawker once did. I will die making sure you don't get Ethereum off the ground. What is it about Fred that makes him so proud to keep profitting off my work without paying me? He's not my wife. Maybe he's not much a man, but that doesn't make him a woman living with me on a farm with me in 500 B.C. Do u know how easy it is to lie and backstab people to get ahead when you're smart? Actual smart people don't shoot lay-ups, they don't take the easy way. They go for the D U N K S. Does Joe Lubin's backstabbing mantra account for that? I just want to be paid for my work. Edit: "Tribe" is a bit of an intellectual meme these days that appears fairly often in crypto circles. It's based on something called "Dunbar's number" which states that social circles max out at 150 people, and everything you do is for those 150 people (your "tribe"). It's not a reference to anything to do with sexuality, rather here it's meant to poke at one of crypto's main problems today. The "tribe" philosophy directly contradicts performing altruisitic acts for the good of humanity, or even for a group as large as a nation. Rather, you do selfish acts for people in your immediate social circle. References to what a "tribe" is: 1. https://en.wikipedia.org/wiki/Dunbar%27s_number 2. https://medium.com/@mmalmi/law-is-better-without-monopoly-778963880276 3. https://steemit.com/anarchy/@cryptogee/watching-child-porn-is-okay-says-ethereum-owner-vitalik-when-anarchy-goes-too-far 4. https://steemit.com/steemengine/@steem-eng/a-tribe-for-every-niche 5. https://acumen.org/moralrevolution/, first chapter 6. https://www.resilience.org/stories/2019-09-24/dunbars-number-and-genuine-community/
Don't blindly follow a narrative, its bad for you and its bad for crypto in general
I mostly lurk around here but I see a pattern repeating over and over again here and in multiple communities so I have to post. I'm just posting this here because I appreciate the fact that this sub is a place of free speech and maybe something productive can come out from this post, while bitcoin is just fucking censorship, memes and moon/lambo posts. If you don't agree, write in the comments why, instead of downvoting. You don't have to upvote either, but when you downvote you are killing the opportunity to have discussion. If you downvote or comment that I'm wrong without providing any counterpoints you are no better than the BTC maxis you despise. In various communities I see a narrative being used to bring people in and making them follow something without thinking for themselves. In crypto I see this mostly in BTC vs BCH tribalistic arguments: - BTC community: "Everything that is not BTC is shitcoin." or more recently as stated by adam on twitter, "Everything that is not BTC is a ponzi scheme, even ETH.", "what is ETH supply?", and even that they are doing this for "altruistic" reasons, to "protect" the newcomers. Very convenient for them that they are protecting the newcomers by having them buy their bags - BCH community: "BTC maxis are dumb", "just increase block size and you will have truly p2p electronic cash", "It is just that simple, there are no trade offs", "if you don't agree with me you are a BTC maxi", "BCH is satoshi's vision for p2p electronic cash" It is not exclusive to crypto but also politics, and you see this over and over again on twitter and on reddit. My point is, that narratives are created so people don't have to think, they just choose a narrative that is easy to follow and makes sense for them, and stick with it. And people keep repeating these narratives to bring other people in, maybe by ignorance, because they truly believe it without questioning, or maybe by self interest, because they want to shill you their bags. Because this is BCH community, and because bitcoin is censored, so I can't post there about the problems in the BTC narrative (some of which are IMO correctly identified by BCH community), I will stick with the narrative I see in the BCH community. The culprit of this post was firstly this post by user u/scotty321"The BTC Paradox: “A 1 MB blocksize enables poor people to run their own node!” “Okay, then what?” “Poor people won’t be able to use the network!”". You will see many posts of this kind being made by u/Egon_1 also. Then you have also this comment in that thread by u/fuck_____________1 saying that people that want to run their own nodes are retarded and that there is no reason to want to do that. "Just trust block explorer websites". And the post and comment were highly upvoted. Really? You really think that there is no problem in having just a few nodes on the network? And that the only thing that secures the network are miners? As stated by user u/co1nsurf3r in that thread:
While I don't think that everybody needs to run a node, a full node does publish blocks it considers valid to other nodes. This does not amount to much if you only consider a single node in the network, but many "honest" full nodes in the network will reduce the probability of a valid block being withheld from the network by a collusion of "hostile" node operators.
But surely this will not get attention here, and will be downvoted by those people that promote the narrative that there is no trade off in increasing the blocksize and the people that don't see it are retarded or are btc maxis. The only narrative I stick to and have been for many years now is that cryptocurrency takes power from the government and gives power to the individual, so you are not restricted to your economy as you can participate in the global economy. There is also the narrative of banking the bankless, which I hope will come true, but it is not a use case we are seeing right now. Some people would argue that removing power from gov's is a bad thing, but you can't deny the fact that gov's can't control crypto (at least we would want them not to). But, if you really want the individuals to remain in control of their money and transact with anyone in the world, the network needs to be very resistant to any kind of attacks. How can you have p2p electronic cash if your network just has a handful couple of nodes and the chinese gov can locate them and just block communication to them? I'm not saying that this is BCH case, I'm just refuting the fact that there is no value in running your own node. If you are relying on block explorers, the gov can just block the communication to the block explorer websites. Then what? Who will you trust to get chain information? The nodes needs to be decentralized so if you take one node down, many more can appear so it is hard to censor and you don't have few points of failure. Right now BTC is focusing on that use case of being difficult to censor. But with that comes the problem that is very expensive to transact on the network, which breaks the purpose of anyone being able to participate. Obviously I do think that is also a major problem, and lightning network is awful right now and probably still years away of being usable, if it ever will. The best solution is up for debate, but thinking that you just have to increase the blocksize and there is no trade off is just naive or misleading. BCH is doing a good thing in trying to come with a solution that is inclusive and promotes cheap and fast transactions, but also don't forget centralization is a major concern and nothing to just shrug off. Saying that "a 1 MB blocksize enables poor people to run their own" and that because of that "Poor people won’t be able to use the network" is a misrepresentation designed to promote a narrative. Because 1MB is not to allow "poor" people to run their node, it is to facilitate as many people to run a node to promote decentralization and avoid censorship. Also an elephant in the room that you will not see being discussed in either BTC or BCH communities is that mining pools are heavily centralized. And I'm not talking about miners being mostly in china, but also that big pools control a lot of hashing power both in BTC and BCH, and that is terrible for the purpose of crypto. Other projects are trying to solve that. Will they be successful? I don't know, I hope so, because I don't buy into any narrative. There are many challenges and I want to see crypto succeed as a whole. As always guys, DYOR and always question if you are not blindly following a narrative. I'm sure I will be called BTC maxi but maybe some people will find value in this. Don't trust guys that are always posting silly "gocha's" against the other "tribe". EDIT: User u/ShadowOfHarbringer has pointed me to some threads that this has been discussed in the past and I will just put my take on them here for visibility, as I will be using this thread as a reference in future discussions I engage:
When there was only 2 nodes in the network, adding a third node increased redundancy and resiliency of the network as a whole in a significant way. When there is thousands of nodes in the network, adding yet another node only marginally increase the redundancy and resiliency of the network. So the question then becomes a matter of personal judgement of how much that added redundancy and resiliency is worth. For the absolutist, it is absolutely worth it and everyone on this planet should do their part.
What is the magical number of nodes that makes it counterproductive to add new nodes? Did he do any math? Does BCH achieve this holy grail safe number of nodes? Guess what, nobody knows at what number of nodes is starts to be marginally irrelevant to add new nodes. Even BTC today could still not have enough nodes to be safe. If you can't know for sure that you are safe, it is better to try to be safer than sorry. Thousands of nodes is still not enough, as I said, it is much cheaper to run a full node as it is to mine. If it costs millions in hash power to do a 51% attack on the block generation it means nothing if it costs less than $10k to run more nodes than there are in total in the network and cause havoc and slowing people from using the network. Or using bot farms to DDoS the 1000s of nodes in the network. Not all attacks are monetarily motivated. When you have governments with billions of dollars at their disposal and something that could threat their power they could do anything they could to stop people from using it, and the cheapest it is to do so the better
You should run a full node if you're a big business with e.g. >$100k/month in volume, or if you run a service that requires high fraud resistance and validation certainty for payments sent your way (e.g. an exchange). For most other users of Bitcoin, there's no good reason to run a full node unless you reel like it.
Shouldn't individuals benefit from fraud resistance too? Why just businesses?
Personally, I think it's a good idea to make sure that people can easily run a full node because they feel like it, and that it's desirable to keep full node resource requirements reasonable for an enthusiast/hobbyist whenever possible. This might seem to be at odds with the concept of making a worldwide digital cash system in which all transactions are validated by everybody, but after having done the math and some of the code myself, I believe that we should be able to have our cake and eat it too.
This is recurrent argument, but also no math provided, "just trust me I did the math"
The biggest reason individuals may want to run their own node is to increase their privacy. SPV wallets rely on others (nodes or ElectronX servers) who may learn their addresses.
It is a reason and valid one but not the biggest reason
If you do it for fun and experimental it good. If you do it for extra privacy it's ok. If you do it to help the network don't. You are just slowing down miners and exchanges.
Yes it will slow down the network, but that shows how people just don't get the the trade off they are doing
I will just copy/paste what Satoshi Nakamoto said in his own words. "The current system where every user is a network node is not the intended configuration for large scale. That would be like every Usenet user runs their own NNTP server."
Another "it is all or nothing argument" and quoting satoshi to try and prove their point. Just because every user doesn't need to be also a full node doesn't mean that there aren't serious risks for having few nodes
For this to have any importance in practice, all of the miners, all of the exchanges, all of the explorers and all of the economic nodes should go rogue all at once. Collude to change consensus. If you have a node you can detect this. It doesn't do much, because such a scenario is impossible in practice.
Not true because as I said, you can DDoS the current nodes or run more malicious nodes than that there currently are, because is cheap to do so
Non-mining nodes don't contribute to adding data to the blockchain ledger, but they do play a part in propagating transactions that aren't yet in blocks (the mempool). Bitcoin client implementations can have different validations for transactions they see outside of blocks and transactions they see inside of blocks; this allows for "soft forks" to add new types of transactions without completely breaking older clients (while a transaction is in the mempool, a node receiving a transaction that's a new/unknown type could drop it as not a valid transaction (not propagate it to its peers), but if that same transaction ends up in a block and that node receives the block, they accept the block (and the transaction in it) as valid (and therefore don't get left behind on the blockchain and become a fork). The participation in the mempool is a sort of "herd immunity" protection for the network, and it was a key talking point for the "User Activated Soft Fork" (UASF) around the time the Segregated Witness feature was trying to be added in. If a certain percentage of nodes updated their software to not propagate certain types of transactions (or not communicate with certain types of nodes), then they can control what gets into a block (someone wanting to get that sort of transaction into a block would need to communicate directly to a mining node, or communicate only through nodes that weren't blocking that sort of transaction) if a certain threshold of nodes adheres to those same validation rules. It's less specific than the influence on the blockchain data that mining nodes have, but it's definitely not nothing.
The first reasonable comment in that thread but is deep down there with only 1 upvote
The addition of non-mining nodes does not add to the efficiency of the network, but actually takes away from it because of the latency issue.
That is true and is actually a trade off you are making, sacrificing security to have scalability
The addition of non-mining nodes has little to no effect on security, since you only need to destroy mining ones to take down the network
It is true that if you destroy mining nodes you take down the network from producing new blocks (temporarily), even if you have a lot of non mining nodes. But, it still better than if you take down the mining nodes who are also the only full nodes. If the miners are not the only full nodes, at least you still have full nodes with the blockchain data so new miners can download it and join. If all the miners are also the full nodes and you take them down, where will you get all the past blockchain data to start mining again? Just pray that the miners that were taken down come back online at some point in the future?
The real limiting factor is ISP's: Imagine a situation where one service provider defrauds 4000 different nodes. Did the excessive amount of nodes help at all, when they have all been defrauded by the same service provider? If there are only 30 ISP's in the world, how many nodes do we REALLY need?
You cant defraud if the connection is encrypted. Use TOR for example, it is hard for ISP's to know what you are doing.
Satoshi specifically said in the white paper that after a certain point, number of nodes needed plateaus, meaning after a certain point, adding more nodes is actually counterintuitive, which we also demonstrated. (the latency issue). So, we have adequately demonstrated why running non-mining nodes does not add additional value or security to the network.
Again, what is the number of nodes that makes it counterproductive? Did he do any math?
There's also the matter of economically significant nodes and the role they play in consensus. Sure, nobody cares about your average joe's "full node" where he is "keeping his own ledger to keep the miners honest", as it has no significance to the economy and the miners couldn't give a damn about it. However, if say some major exchanges got together to protest a miner activated fork, they would have some protest power against that fork because many people use their service. Of course, there still needs to be miners running on said "protest fork" to keep the chain running, but miners do follow the money and if they got caught mining a fork that none of the major exchanges were trading, they could be coaxed over to said "protest fork".
In consensus, what matters about nodes is only the number, economical power of the node doesn't mean nothing, the protocol doesn't see the net worth of the individual or organization running that node.
Running a full node that is not mining and not involved is spending or receiving payments is of very little use. It helps to make sure network traffic is broadcast, and is another copy of the blockchain, but that is all (and is probably not needed in a healthy coin with many other nodes)
He gets it right (broadcasting transaction and keeping a copy of the blockchain) but he dismisses the importance of it
Despite the negative rebases and FUD that's been around since we dropped below $1 mark, I'm still bullish on this project and here is why:
As we know all markets go through cycles. After a string of around 28 days of positive rebases, it absolutely makes sense to retract into negative price as people start cashing in. Anybody with the right sense would be cashing in on some profits after the string of those +10% rebases. Can't blame the investors for taking profits either.
As we can see the protocol works as designed. Those that invested without reading up on Ampleforth or at least trying to understand its foundations have lost money simply because they were in for a quick buck. Invested at the top (in this case top of the market cap) selling at the bottom. Negative rebases are ugly but they are part of the protocol.
Removed Pausability - I can't stress enough but this is a huge step into full decentralization and zero governance. What's most important, this is the step that will allow more third-party integrations. I can see this being demanded by the biggest exchanges before the AMPL can be listed there.
It takes time for exchanges to list new coins and especially with AMPL, there are some technical difficulties that need to be overcome. One of them are obviously the nighly rebases where orders will have to be cancelled and tokens deducted/distributed to all holders.
Volume on AMPL - the volume is huge considering it's only listed on a few exchanges. Exchanges make money off trading fees so it makes absolute sense to have AMPL listed on as many exchanges as possible.
One of the biggest investors on this project is the CEO of Coinbase. I think you know where I'm going with it.
Based on the last few cryptos listed on big exchanges such as Curve, Band, Numeraire their prices have been pushed above $10 mark followed by a big selloff. At this point, I'm simply speculating but in case of AMPL being listed on either Coinbase or Binance we will see a huge upward momentum. The question is would we see a big selloff or would marketcap grow massively with the price and because of huge positive rebases investors would stay in for some time before cashing in?
Geyser Yield Farming - The more liquidity you provide, and for longer, the greater share of the AMPL pool you receive.
Deep Dive on the first Reddit Points, $DONUT Token 🍩 🍩 🍩Very Attractive, Low-Cap Opportunity 💎
DONUT TOKEN 🍩 🍩 🍩
$DONUT is an ERC20 token initially built at the behest of Reddit to trial out their Community Points initiative. Reddit is now scaling this up big time with the Reddit Scaling Bake-off. Once the winner is announced, DONUT will get some nice airtime. It has so far remained under the radar.
$DONUT has 3 core utilities; 1) used to purchase banner space in the 230,000+ member subreddit (this is a very attractive place to promote). DONUT used on the banner space is burned, marking the deflationary aspect of the tokenomics. 2) new tokens are issued on a periodic basis which is sent to active users of the community (they can HODL or sell to the continuous stream of advertisers). 3) DONUT holders can vote on proposals such as issuance reduction in the integrated AragonDAO, i.e. fully decentralised and community-run.
$DONUT has remained under the radar since launching on main-net. This is similar to many projects where the ecosystem and product are great but simply isn’t commercially focussed i.e. no business development or marketing team. In other words, it is purely community-run (and the community is starting to push it). We’ve also been in a bear market where many have kept their capital in ETH, BTC or other tokens. In the last 4 weeks, as predicted some time ago, DONUT is now seeing some serious interest in what I believe is the beginning of an interesting journey. Marketcap broke $800,000, price reached ATH of $0.01, volume/liquidity on Uniswap broke $100,000. This is still very early days for a token which has real utility in an ecosystem that will inevitably see a lot of traction during the bull market. Imagine holding a lot of DONUT now, and being the guy to sell to the flock of advertisers during the bull market?
Following this last point, there is a positive feedback loop to consider. The more users hear about DONUT, the more they will join the sub, the more they join the sub, the more valuable the banner is, the more valuable the banner is, the higher the price of DONUT, the higher the price of DONUT the more of deflationary it becomes (due to the burn-rate surpassing issuance-rate).
How likely is it more people will hear about DONUT? Well, right now some of Ethtrader’s most active users are earning about $3000 per month in DONUT. Can you imagine the headlines and media attention? “Ethtrader users earn $XXX in DONUT."
There is also the meme-coin element to factor in. I don’t like mentioning this because DONUT has actual use-case and is not a meme-coin in the traditional sense. But, let’s be honest, meme-ability / marketability are both very important. Dogecoin got to where it did with zero utility.
I am not saying that Reddit will roll out DONUT across their entire site. DONUT will be just for Ethtrader. Other subs can have their own token and use their own tokenomics. There are some examples already, like MOON & BRICK. Neither of these has tokenomics close to as attractive as DONUT and at the moment, there is no reason for them to accrue in value.
Fun fact,@cslarson(head moderator of ethtrader and founder of DONUTS as far as I can tell) was actually hacking on SourceCred before DONUTS happened. He, along with@lkngtnand@jvlusohad recently coded upcredaoat a hackathon, a project that mints ERC-20 tokens in an Aragon DAO according to Cred scores, when he got the call from Reddit offering support for prototyping DONUTS on ethtrader. Can’t blame him:) ... 👇👇👇
Funnily enough, this is actually an alpha: right now you can ‘farm DONUT’ by contributing to ethtrader through high-quality memes, discussions, comments etc. Just by being an active member of the community, you can earn DONUT 🍩 tokens which you can sell for real $ETH. I’ll explain later why people would want to buy DONUT. Or, you can HODL them, which is highly recommended. Based on the last rewards distribution (https://www.reddit.com/ethtradecomments/i48u9g/new_donuts_distribution/) if you earned a mere 100 or so Karma points in the sub, you would have received 10,000 DONUT tokens which you can then sell for ETH on a growing list of exchanges, namely Uniswap (which has growing liquidity). This is an example of what DeFi and Ethereum are all about and is one of the more significant community-focused projects. You have all sorts of crummy community tokens out there but none have the ecosystem to back them up. Don’t get me wrong, I’m not saying DONUT is a $LEND, $COMP, etc but it ticks all the boxes to be considered a moon-shot: meme-worthy, existing network effect, undeniable utility, Reddit-backing, AragonDAO support, and more. ... The Ethtrader Group is a 100% community-run subreddit-collective where the governance token DONUT 🍩is used to vote on proposals regarding tokenomics. Slashing supply, changing tokenomics and other decisions can be made in their AragonDAO with the more DONUT 🍩 you hold resulting in higher voting power. It makes sense that Aragon was used seeing as the lead developer Carlson was working on Credao (a similar concept) using Aragon before he was approached by Reddit to work on the very first iteration of their Community Points system before rolling it out across the entire platform. Source. Any member of the community can propose changes by first gauging sentiment through polls in the subreddit (something you need DONUT for by the way), following up with proposals in AragonDAO which require voting (again voting power is tied to DONUT holdings). ... Growth over time: DONUT 🍩 has thus far followed similar growth trajectories of projects that start out organic, community and product-focused and over time attract real interest, real activity and real growth. This is in opposition to projects that market first and deliver later. DONUT hasn’t marketed anything as the community has focussed internally during the bear market and the ecosystem is relatively new, which is why it isn’t already worth more. I have been trading crypto since 2011 and ALTs since 2014 and I’ve learned to spot these nuanced differences between projects, and the all-important signals. The DONUT token launched in its current state in Jan 2019 with a volume of $30 and a price of $0.0019. But I am going to focus on December 2019 as the start date for a number of reasons: first, due to some teething pains with the direction of Ethtrader & $DONUT some of the team split off, the Token also underwent a shift and you can see on the chart this early phase does not reflect any organic price action. So, starting from the latter date, looking at the chart, you can see an organic price development typical of many promising projects. Slow, steady accumulation, followed by sharper ups and downs with the bottoms rising upwards. I saw this same pattern on pretty much every organic-driven ALT I’ve invested in with success. In the last 2 weeks, ATHs have been broken across the board. ... Similar successes: Let’s face it. In our funky community, tokens of all kinds can grow astronomically. Even those without a single use-case can grow simply because they are meme-worthy. Think $DogeCoin or $Garlicoin. More recently you have $TEND which is growing in popularity and is currently worth $1 (when I first started writing this post, it was at $0.50. DONUT was at $0.005 and is now touching $0.01). DONUT 🍩 is unique in that it has potential to be a significant Ethereum meme token on par with these examples but more importantly, it also has tangible use-cases which will ensure the project remains active over a longer course of time, with accessibility open to anyone with spare time to meaningfully contribute to the community. But that isn’t the clincher. The Ethtrader group is large and getting larger with almost a quarter of a million members at the time of writing. That is a valuable audience of highly relevant people interested in cryptocurrency, especially Ethereum. DONUT 🍩is used in a Harbinger Tax style system (whereby someone would use DONUT to buy ad space from the current owner for a price set by that owner. This person would then set a new price — this will be the cost someone who wants it back will need to pay — and then based on this new price there will be a 100% daily tax for as long as you choose to hold the banner for). This adversarial system will ensure you have projects (typically with deep pockets) buying up lots of DONUT 🍩 to ensure they can control the banner, spending those DONUT tokens on getting the banner, and the process will continue over and over. If we enter a new bull market for DeFi, this will be a significant value and liquidity driver as let’s face it, that is prime real estate for brand exposure. I'll draw your attention back to the feedback loop I mentioned in the TL;DR.
📸IMAGE:https://imgur.com/a/CnFpfQr *note, this is just a quick thing I slapped together and shows just one process and one use-case and is not a comprehensive diagram. Hopefully, it is useful anyway. Deflationary or inflationary? The DONUT used to buy the banner is always burnt, currently, 3 Million DONUT is burned per month. While there is monthly issuance (the source of contribution rewards), there is also frequent burn events. Currently, the banner is burning 100,000 DONUT per day compared to the 4,000,000 issued per month. This daily burn can increase or decrease depending on the cost of the banner which can increase or decrease based on what the owner sets it as. This means when demand increases (exchanges, dapps, projects bid for the banner space), the burn rate will exceed the issuance rate, resulting in deflationary tokenomics. Conversely, if the cost of the banner decreases and is below the threshold (as it currently is, only slightly) then technically it will be inflationary. The deflationary dominance has already proven to be effective seeing as the token started out with 100m units and now on around 90m. Furthermore, the issuance rate can at anytime be slashed if put to a community vote which anyone in the community can initiate, so long as they own DONUT. So, DONUT is also used here as a governance token, the more you have the stronger your vote on such decisions. To use DONUT to vote on community initiatives or a change in the tokenomics, you’ll need to visit their integrated AragonDAO and learn more about the process. This can be found here: https://mainnet.aragon.org/#/0x57EBE61f5f8303AD944136b293C1836B3803b4c0 and is also where DONUT is claimed from.
Own DONUT now and be the one to sell it advertisers who will be in bidding wars with each other. Advertisers in this industry are used to ridiculous prices and the banner is very cheap at the moment.
The DONUT used for the ads will be burnt and the advertisers, of course, won’t get them back. This means a continuous BUY-pressure for DONUT.
As a DONUT holder, you will have voting power in their AragonDAO integration. What does this mean? We can submit proposals and vote on tokenomics to change, e.g. reduce supply.
We all know this space, right? On top of the concrete utility, DONUT could and will become a popular ‘meme-coin’. Previous examples of these (that lack utility) are Dogecoin & GarlicCoin.
If you were an exchange, would you pay $3k per day to reach all the ETH traders? (They currently spend so much more than that on useless CMC banners) If so, that’s $1m per year. For example, you’ve all seen the endless crypto . com banners right? They spend millions on marketing. I will wager all my DONUT that they will be serious bidders soon.
Some people are already earning $3000 a month on Ethtrader via donut. You can take a look at the latest distribution list here.
Media attention is practically assured and the number of new people tweeting and talking about DONUT is rising rapidly, just take a look at twitter, 4chan, reddit and other places. DONUT was also listed on CoinGecko and CoinMarketCap within the last mont.
I hope this was in-depth and useful. I have tried to add as much as possible but I have no doubt missed some stuff as well. As always, DYOR and make an informed decision. For me, at this price, it's a no brainer.
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Necessary Disclaimer: no rule breaking intended. No price manipulation intended. I only want to share verifiable facts/links and my analysis. If I am doing anything against the rules please let me know and I will do my best to fix it ASAP. I trade crypto, including LINK, and I am currently short on LINK. This is not financial advice; this is just for my own record and to start a discussion for anyone who might want more transparency around LINK.
I believe there is a lot of misinformation, uncertainty, and unanswered questions about the LINK token, the Chainlink ecosystem, the SmartContract parent company. I also believe that LINK's current price is unjustified based on fundamental factors like usage/business case/current customers/future potential. So I'm raising some points and asking some questions. What is this post? Why should I care? How do I use it? Read or skim it. It's about the LINK token, the Chainlink ecosystem, and the parent company SmartContract. It's about why I believe the price of the LINK token may be currently driven mostly by hype and not backed by standard market fundamentals like usage/economics. Update 9 AUG: reorganizing, rewriting this post and moving supporting data/sources into "appendix" comments below on this post. The previous versions of this post and my comments elsewhere were too emotionally charged and caused more division rather than honest, evidence-based, productive discussion and I sincerely apologize for that. I have now rewritten it and will continue to update it.
Threshold signatures, staking, on-chain SLAs: How real are these, is there a roadmap, how will this benefit users, is there any evidence of users currently *wanting* to use chainlink but needing these features and actively waiting for Chainlink to launch these? Staking: for there to be a valid incentive for users to stake LINK, it has to return around 5% annually because anything substantially under that would have users putting their money elsewhere (https://www.stakingrewards.com/cryptoassets) (not counting speculative capital gains in terms of LINK's price, but price gain per token/coin applies to all other crypto projects as well). Currently, for stakable cryptos, around 30-80% of their total supply is staked, and a good adjusted reward is on the order of 5% as well (some actually negative, some 10%+). The promise of staking incentivises people to buy and hold more LINK tokens (again, many other crypto projects have staking already live). That 5% reward will ultimately have to come from the customers who pay Chainlink oracle nodes to use their services, so it's an extra 5% fee for them. Of course, in the near future, the staking rewards *could* be subsidized by the founders' reserve wallets. Threshold signatures: addressed below in a comment. On-chain SLAs: [TODO] Here's supposedly Chainlink's agile/project planning board. (TODO: verify that it is indeed Chainlink's, and then analyse it) https://www.pivotaltracker.com/n/projects/2129823
I manually traced EVERY single inbound transaction/source of funds for the above 4 (not counting #1 as 10 LINK is negligible). 2 & 3 are 99.99%+ genesis-funded, being ACTIVELY topped up by a genesis wallet, last tx 4 days ago, 500,000 LINK. #4 has been funded 36 times over the past year and a half (that's 36 manual exports and I did them all). They all come from the 0x27158..., 0x2f0acb..., and https://etherscan.io/token/0x514910771af9ca656af840dff83e8264ecf986ca?a=0x1f9e26f1c050b5c018ab0e66fcae8e4394eb0165 (another address like the 0x2f0acb that I went through and checked EVERY SINGLE inbound source of funds, and it's also >99.9% genesis-funded - one tx from Binance for 6098 LINK out of a total ~6,560,000 inbound LINK from genesis wallets), and two other addresses linked to Binance (0x1b185c8611d157a67d9a9d5261b0d2bd52c0bb78, 10,000 LINK and 0x039ac18afe298747c51c85e7c8f0d67c327f3883, 1,000,000 LINK) The 0x039ac... address funded the "Chainlink: Aggregator" address with 127,900 LINK, and the 0x1b185... with about ~9,600 LINK). So yes, it's technically possible that someone not related to Chainlink paid for the ETH / USD price feed because some funds do come from Binance. However, they only come from two distinct addresses. Surely for "240+" claimed partnerships, more than TWO would pay to use Chainlink's MOST POPULAR price feed? That is, unless they don't pay directly but to another address and then Chainlink covers this one from their own wallets. I will check if that's in line with Chainlink's whitepaper, but doesn't that throw doubt on the whole model of end-users paying to use oracles/aggregators, even if it's subsidized? I provide you this much detail not to bore you but to show you that I went through BY HAND and checked every single source (detailed sources in Appendix B) of funds for the OFFICIAL, Chainlink-listed "ETH/USD" aggregator that's supposedly sponsored by 10 DeFi partners (Synthetix, LoopSpring, OpenLaw, 1inch, ParaSwap, MCDEX, FuturesSwap, DMM, Aave, The Force Protocol). Yet where are the transactions showing that those 10 partners have EVER paid for this ETH/USD oracle? Perhaps the data is there so what am I missing? This ETH/USD aggregator has transferred out ~76,000 LINK to I guess the data providers in increments of .33 LINK. It has 21 data providers responding. I will begin investigating the data providers themselves soon. And those middle addresses like 0x1f9e26... and 0x2f0acb...? They have transferred out hundreds of thousands if not millions of LINK to exchanges. And that's just ONE price pair aggregator. Chainlink has around 40 of these (albeit this one's one of the more popular ones). SNX / ETH aggregator is funded 100% by genesis-sourced wallets, only 3 inbound transactions: https://etherscan.io/token/0x514910771af9ca656af840dff83e8264ecf986ca?a=0xe23d1142de4e83c08bb048bcab54d50907390828 Some random examples (for later, ignore these for now) *********** https://etherscan.io/token/0x514910771af9ca656af840dff83e8264ecf986ca?a=0x039ac18afe298747c51c85e7c8f0d67c327f3883 bought 1,000,000 LINK from Binance in Sept 12 & 15, 2019. (one of the possible funding sources for the ETH / USD aggregator example above) This address got 500,000 LINK from 0x27158... and has distributed them into ~5-10,000 LINK wallets that haven't had any out transactions yet https://etherscan.io/token/0x514910771af9ca656af840dff83e8264ecf986ca?a=0x5bcf3edc0bb7119e35f322ba40793b99d4620f1e ************** Another example with an unnamed aggregator-node-like wallet that was only spun up 5 days ago, Aug 5: https://etherscan.io/token/0x514910771af9ca656af840dff83e8264ecf986ca?a=0x2cbfd29947f774b8cf338f776915e6fee052f236 It was funded 2,000 LINK SOLELY by the 0x27158... wallet and has so far paid out ~500 LINK in 0.43 LINK amounts to 9 wallets at a time. For example, this is one of the wallets it cashes out to: https://etherscan.io/token/0x514910771af9ca656af840dff83e8264ecf986ca?a=0x64fe692be4b42f4ac9d4617ab824e088350c11c2#tokenAnalytics That wallet extremely consistently collects small amounts of LINK since Oct 2019. It must be a data provider because a lot of Chainlink named wallets pay it small amounts of LINK regularly. It has transferred out 20 times. The most recent transfer out: https://etherscan.io/token/0x514910771af9ca656af840dff83e8264ecf986ca?a=0xc8c30fa803833dd1fd6dbcdd91ed0b301eff87cf which then immediately transferred to the named "1inch.exchange" wallet, so I assume this was a "cash-out" transaction. It has cashed out via this address a lot. Granted, it also has transfer-out transactions that haven't (yet) ended up in an exchange wallet, eg https://etherscan.io/token/0x514910771af9ca656af840dff83e8264ecf986ca?a=0x88e5353a73f38f25a9611e6083de6f361f9b537b with a current balance of 3000 LINK. This could be a user's exchange wallet, ready to be sold, or could be something else. No way for me to tell as there are no out txs from it.
LINK overall transaction, volume, and tx fees
This is to understand how much $ moves through the LINK ecosystem through: nodes, data providers, reserve wallets, wallets linked to exchanges, others. A typical aggregator node tx (payout?): https://etherscan.io/tx/0xef9e8e6dd94ebe9bbac8866f18c2ea0a07408ced1aa77fa04826043eaa55e772 This is their ETH/USD aggregator paying out 1 LINK to each of 21 addresses. Value of 21 LINK ~= $210. Total eth tx fees: .233 ETH (~$88.5, ~42% of the total tx value. If LINK was $4.2 instead of $10, the tx fees would be 100% of the value of the tx). Transactions like this happen every few minutes, and the payout amounts are most often 0.16, 0.66, 1.0, and 2.0 Link. Chainlink’s node/job listing site, https://market.link, lists 86 nodes, 195 feeds, 801 jobs, ~1,080,000 job runs (I can’t tell if this is over the past 2 months or 1.5 years). Only 20 nodes have over 1000 job runs, and 62 nodes have ZERO runs. Usual job cost is listed as 0.1 link, but the overall payout to the nodes is 10-20 times this. The nodes then cash out usually through a few jump addresses to exchanges. Some quick maths: (being generous and assuming it’s 1mil jobs every 2 months = ~6mil link/year = $60,000,000 revenue a year. This is the most generous estimate towards link’s valuation I’ve found so far. If we ignore the below examples where on multi-node payouts the tx fees are more than the node revenue itself, then it’s almost in line with an over-valued (but real) big tech company. For example, one of the latest CHF/USD job runs paid 0.1 LINK to 9 addresses (data providers?) - total $14.4 payout - and paid 0.065 ETH ($24.5) in fees. That’s a $10.1 LOSS on a $14.4 revenue: https://etherscan.io/tx/0xa6351bab810b6864bfebb0f6e1e3bde3c8856f8aac3ba769dd2e6d1a39c0d23f Linkpool’s (one of the biggest node operators) “ETH-USD CryptoCompare” job costs 0.1 link and has 33 runs in the past 24 hours (once every ~44min), total ~78,000 runs since May 30 2019 (once every ~8min). https://market.link/jobs/64bb0845-c4e1-4681-8853-0b5aa7366101/runs (PS cryptocompare has a free API that does this. Not sure why it costs $1 at current link prices to access an API once)
Top 100 wallets (0.05% of ~186,000 total) hold 83% of tokens. 8 wallets each hold over 1% of total, 58 hold over 0.1%. Of these 58, 9 are named exchange/lending pool wallets. For comparison, for Tether (TUSD), the top 100 wallets (0.006% of ~1,651,000 total) hold 35.9% of the supply. 3 addresses hold over 1% of the supply and 135 hold over 0.1%. Of these 135, at least 15 are named exchange/lending pool wallets. LINK’s market cap is $3.5B (or $10B fully diluted, if we count the foundedev-controlled tokens, which we should as there's nothing preventing them from being moved at a moment's notice). Tether’s is $6.9B. Tether has 10 times more addresses and less distribution inequality. Both LINK and Tether are ERC20 tokens, and even if we temporarily ignore any arguments related to management/roadmap/teams etc, Tether has a clear, currently functional, single use case: keep 1 USDT = $1 USD by printing/burning USDT (and yet as of April 2019, only 74% of Tether's market cap is backed by real funds - https://en.wikipedia.org/wiki/Tether_(cryptocurrency))). Given that Chainlink's market cap is now 50% bigger than Tether's, surely by now there's AT LEAST one clear, currently functional use case for LINK? What is it? Can we *see* it happening on-chain?
Chainlink’s actual deliverable products
"What do I currently get for my money if I buy LINK 1) as an investor and 2) as a tech business/startup thinking of using oracles?” Codebase (Chainlink’s github has around 140-200,000 lines of code (not counting html/css). What else is not counted in this? Town crier? Proprietary code that we don't know about yet? How much CODING has Chainlink done other than what's on github? Current network of oracles - only ~20 active nodes - are there many more than the ones listed on market.link and reputation.link? If so, would be nice to know about these if we're allowed! Documentation - they have what seems like detailed instructions on how to launch and use oracle nodes (and much more, I haven't investigated yet) (TODO this part more - what else do they offer to me as an end consumer, and eg as a tech startup needing oracle services that I can’t code myself?)
Network utilization statistics:
Etherscan.io allows csv export of the first 5000 txs from each day. From Jul 31 to Aug 6 2020, I thus downloaded 30,000 tx from midnight every day to an average of 7:10am (so 24 hour totals are 3.34x these numbers if we assume the same network utilization throughout the day). (Summary of all LINK token activity on the ETH blockchain from 31.07 to 06.08, first 5000 txs of each day (30k total) shown Appendix A comment below this post.) If we GENEROUSLY assume that EVERY SINGLE transaction under 10.0 LINK is ACTUAL chainlink nodes doing ACTUAL work, that’s still under 0.1% of the LINK network’s total volume being used for ACTUAL ecosystem functioning. The rest is speculation, trading, node funding by foundedev wallets, or dumping to exchanges (anything I missed?) Assuming the above, the entire turnover of the actual LINK network is currently (18,422 LINK) * ($10/LINK) * (3.34 as etherscan.io’s data only gives first 5000 tx per day which averages to 7:10am) * (52 wk/year) = USD $31,995,329 turnover a year. Note: the below paragraph is old analysis using traditional stock market Price/Earnings ratios which several users have now pointed out isn't really applicable in crypto. I leave it for the record. Assuming all of that is profit (which it’s not given tx fees at the very least), LINK would need a PE ratio (Price/Earnings) of 100 times to justify its current (undiluted) valuation of $3.5 billion of 300 if you count the other 65% of tokens that haven’t been dumped by the founders/devs yet. For comparison, common PE ratios are 32 (facebook), 29 (google), 37 (uber), 20 (twitter on a good year), 10 (good hedge fund returning 10% annual).
Thoughts on DeFi & yield-farming - [TODO]
Why would exchanges who do their due diligence list LINK, let alone at a leverage? 1) that's their business, they take a cut of every transaction, overhyped or not, 2) they're not safe from listing openly bearish tokens like EIDOS (troll token that incentivized users to make FAKE transactions, response to EOS) https://www.coindesk.com/defi-yield-farming-comp-token-explained The current ANNUAL yield on liquidity/yield farming is something like 2% on STABLE tokens like USDC and TETHER which at least have most of their supply backed by real-world assets. If Chainlink LINK staking is to be successful, they'll have to achieve at LEAST that same 2% at end-state. IF LINK is in bubble territory and drops, that's a lot of years at 2% waiting to recoup losses.
SmartContract Team & Past Projects
Normally I don't like focussing on people because it leads too easily to ad-hominem attacks on personality rather than on technology/numbers as I've done above, but I came across this and didn't like what I saw. Steve Ellis, SmartContract's current CTO, co-founded and worked in "Secure Asset Exchange" from 2014 to 2016. They developed the NXT blockchain, issued 1,000,000,000 NXT tokens (remind you of anything?), NXT was listed end of 2013 and saw 3 quick 500%-1000% pumps and subsequent dumps in early in mid 2014, and then declined to . SecureAE officially shut down in Jan 2016. Then at some point a company called Jelurida acquired the rights to NXT (presumably after SecureAE?), then during the 2017 altcoin craze NXT pumped 300 times to a market cap of $1.8 BILLION and then dumped back down 100 times and now it's a dead project with a market cap of $13 million. https://www.linkedin.com/in/steveellis0606/ https://trade.secureae.com/ https://coinmarketcap.com/currencies/nxt/ https://www.jelurida.com/news/lawsuit-against-apollo-license-violations As an investor or business owner, would you invest/hire a company whose co-founders/CTO's last project was a total flop with a price history chart that's textbook pump-and-dump behaviour? (and in this case, we KNOW the end result - 99% losses for investors) If you're Google/Oracle/SWIFT/Intel, would you partner with them?
Open questions for the Chainlink community and investors:
Network activity: Are there any other currently active chainlink nodes other than those listed on market.link and reputation.link? If so, is there a list of them with usage statistics? Do they use some other token than LINK and thus making simple analytics of the LINK ERC20 token not an accurate representation of Chainlink’s actual activity? If the nodes listed on the two sites above ARE currently the main nodes, then
PR, partnership announcements: Why is the google tweet still pinned to the top of Chainlink’s twitter? Due to the frequently circulated Chainlink promotion material (https://chainlinkecosystem.com/) that lists Google as one of the key partners, this tweet being pinned is potentially misleading as there isn't anything in there to merit calling Google a "collaborator" or "partner" - just that blockchains/oracles *can* use Google's APIs (but so can most software in the world). Is there something else going on with the SmartContract-Google relationship that warrants calling Google a partner that we're simply not aware of yet?
By buying LINK, what backs YOUR money: If you have bought and currently hold LINK tokens, how comfortable are you that the future promise of your investment growing is supported on verifiable business and technological grounds versus pure, parabolic hype? If after reading this post you still are, I kindly ask you to reply and show how even one of the points I provided is either incorrect or not applicable, and I will edit my post and include your feedback in the relevant section as I have already done from other users.
What have I missed? Of course not 100% of what I've said is infallible truth. I am a real human, and I have plenty of biases and blind spots. Even if what I've provided is technically correct, there may be other much more important info that I've missed that eclipses what I've provided here. Ask yourself: if the current hype around LINK is indeed valid and points to a $100/$1000 future LINK price, then Where’s Chainlink’s missing financial/performance/usage evidence to justify LINK’s current valuation of $10+?
For your consideration, I have provided evidence with links that you can follow and verify, and draw your own conclusions. I have made my case as to why I believe the LINK token is currently priced much higher than evidence supports, and I ask you to peer-review my analysis and share your thoughts with me and with the wider LINK/crypto community. Thank you for your time, I realize this is a long post. All questions and feedback welcome, feel free to comment or PM. I won't delete/censoblock (except for personal threats, safety considerations etc). I am a real human but I am not revealing my true identity for obvious privacy/harassment reasons. (If anyone is wondering about my credentials ability to add 2+2 and work with basic spreadsheets: I have previously won a math competition in a USA state, I won an English-speaking country's physics olympiad, my university education is in mathematical physics/optimization engineering, and I worked for a few years in a global manufacturing company doing data analytics, obviously I'm not posting my CV here to verify that but I promise you it's the truth) I’m not looking to spread neither FUD, nor blind faith, nor pure hype, and I want an honest transparent objective discussion. I personally believe more that LINK is overvalued, but my beliefs have evolved and may continue to do so as I research more and understand more about Chainlink, LINK, Ethereum, DeFi, and other related topics, and as I incorporate YOUR feedback. If you think I haven't disclosed something, ask. As always, this is not financial advice and I am not liable for anything that may happen as a result of you reading this!
The next XVG? Microcap 100x potential actually supported by fundamentals!
What’s up team? I have a hot one for you. XVG returned 12 million percent in 2017 and this one reminds me a lot of it. Here’s why: Mimblewimble is like Blu-Ray compared to CD-ROM in terms of its ability to compress data on a blockchain. The current BTC chain is 277gb and its capacity is limited because every time you spend a coin, each node needs to validate its history back to when it was mined (this is how double spending is prevented). Mimblewimble is different - all transactions in a block are aggregated and netted out in one giant CoinJoin, and only the current spending needs to be verified. This means that dramatically more transactions can fit into a smaller space, increasing throughput and lowering fees while still retaining the full proof of work game theory of Bitcoin. These blockchains are small enough to run a full node on a cheap smartphone, which enhances the decentralization and censorship resistance of the network. The biggest benefit, though, is that all transactions are private - the blockchain doesn’t reveal amounts or addresses except to the actual wallet owner. Unlike earlier decoy-based approaches that bloat the chain and can still be data mined (XMR), Mimblewimble leaves no trace in the blockchain, instead storing only the present state of coin ownership. The first two Mimblewimble coins, Grin and Beam, launched to great fanfare in 2019, quickly reaching over $100m in market cap (since settled down to $22m and $26m respectively). They are good projects but grin has infinite supply and huge never-decreasing emission, and Beam is a corporate moneygrab whose founding investors are counting on you buying for their ROI. ZEC is valued at $568m today, despite the facts that only 1% of transactions are actually shielded, it has a trusted setup, and generating a confidential transaction takes ~60 seconds on a powerful PC. XMR is a great project but it’s valued at $1.2b (so no 100x) and it uses CryptoNote, which is 2014 tech that relies on a decoy-based approach that could be vulnerable to more powerful computers in the future. Mimblewimble is just a better way to approach privacy because there is simply no data recorded in the blockchain for companies to surveil. Privacy is not just for darknet markets, porn, money launderers and terrorists. In many countries it’s dangerous to be wealthy, and there are all kinds of problems with having your spending data be out there publicly and permanently for all to see. Namely, companies like Amazon are patenting approaches to identify people with their crypto addresses, “for law enforcement” but also so that, just like credit cards, your spending data can be used to target ads. (A) Coinbase is selling user data to the DEA, IRS, FBI, Secret Service, and who knows who else? (B) What about insurance companies raising your premiums or canceling your policy because they see you buying (legal) cannabis? If your business operates using transparent cryptocurrency, competitors can data mine your customer and supply chain data, and employees can see how much everyone else gets paid. I could go on, but the idea of “I have nothing to hide, so what do I care about privacy?” will increasingly ring hollow as people realize that this money printing will have to be paid by massive tax increases AND that those taxes will be directly debited from their “Central Bank Digital Currency” wallets. 100% privacy for all transactions also eliminates one HUGE problem that people aren’t aware of yet, but they will be: fungibility. Fungibility means that each coin is indistinguishable from any other, just like paper cash. Why is this important? Because of the ever-expanding reach of AML/KYC/KYT (Anti-Money Laundering / Know Your Customer / Know Your Transaction) as regulators cramp down on crypto and banks take over, increasingly coins become “tainted” in various ways. For example, if you withdraw coins to a mixing service like Wasabi or Samourai, you may find your account blocked. (C) The next obvious step is that if you receive coins that these chainalysis services don’t like for whatever reason, you will be completely innocent yet forced to prove that you didn’t know that the coins you bought were up to no good in a past life. 3 days ago, $100k of USDC was frozen. (D) Even smaller coins like LTC now have this problem, because “Chinese Drug Kingpins” used them. (E) I believe that censorable money that can be blocked/frozen isn’t really “your money”. Epic Cash is a 100% volunteer community project (like XVG and XMR) that had a fair launch in September last year with no ICO and no premine. There are very few projects like this, and it’s a key ingredient in Verge’s success (still at $110m market cap today despite being down 97% since the bubble peak) and why it’s still around. It has a small but super passionate community of “Freemen” who are united by a belief in the sound money economics of Bitcoin Standard emission (21m supply limit and ever-decreasing inflation) and the importance of privacy. I am super bullish on this coin for the following reasons:
Only $400k market cap
Supply started at zero, so there are no VC’s and team to dump on you into the pumps - all coins are mined into existence, just like Bitcoin.
It just had its first halving, reducing emission from 16 to 8 per block. Between now and 2028 there are FOUR (!) more halvings, from 4 to 2 to 1 and then finally 0.15 (I guess that would be an 85%-ing :p) and at this point the supply is the same as BTC and stays in sync forever until the last coin is mined in 2140. This simple supply curve is already accepted by the market as a winner, so why mess with success? (I)
Meets Andreas Antonopolous’ 5 pillars of open blockchains test: Public, Open, Borderless, Neutral, and Censorship Resistant. (How many coins can say this?)
Unlike Bitcoin, Epic created a multi-algorithm approach that enables people to mine on ordinary computers - 60% for CPU on RandomX, 38% for GPU on ProgPow, and 2% for ASIC’s on Cuckoo31+. The algorithms don’t compete with one another. This is essential for leveling the playing field and preventing massive farms from dominating. These percentages can change over time and new algorithms can be easily dropped in. You can mine today using an old laptop and in 5 years you will still be able to. Incidentally, there is nothing standing in the way of adding mobile phone-based mining, which ETN showed there’s a huge demand for.
Based off the excellent Grin codebase, which means they continue to pull in ongoing core code enhancements and focus on ease of use and market penetration instead. (Smart!)
Litecoin’s Charlie Lee is out there daily talking about their move to Mimblewimble, which provides free publicity. What people don’t realize is that you can’t just bolt on Mimblewimble to a legacy blockchain, that’s like putting a Ferrari engine into a school bus - it’s still a school bus, not a race car! LTC is doing it as an optional soft fork via “extension blocks” which will not be supported by all wallets and exchanges. Also, anyone using “optional” privacy features is declaring themselves to be suspicious, which kind of defeats the point for people who care about privacy.
The community is friendly and welcoming to new people coming in, with lots of helpful (independently created) tutorials and guides. (F)
It’s already a global phenomenon, with the whitepaper in 20+ languages (G) and (not bot-infested) active local-language communities on not only Telegram but also Wechat, LINE, QQ and other messenger platforms.
It’s only on two random little exchanges currently, Citex and Vitex. Vitex is actually a pretty good DEX with no KYC and a great mobile wallet.
They are very creative - since centralized exchanges want huge money to list, they created a non-inflationary ERC20 tracker token that’s exchangeable 1:1 for coins so that Uniswap trading is possible (H)
Because it doesn’t have a huge marketing budget in a sea of VC-funded shitcoins, it is as-yet undiscovered, which is why it’s so cheap. There are only 4 Mimblewimble-based currencies on the market: MWC at $162m, BEAM at $26m, GRIN at $22m, and EPIC at $0.4m. This is not financial advice and as always, do your own research, but I’ve been buying this gem for months and will continue to. This one ticks all the boxes for me, the only real problem is that it’s hard to buy much without causing a huge green candle. Alt season is coming, and coins like this are how your neighbor Chad got his Lambo back in 2017. For 2021, McLaren is a better choice and be sure to pay cash so that it doesn’t get repossessed like Chad!
What are the use cases for borrowing besides trading/speculation
I get that defi is hot right now and there is a ton of value being locked into these lending/borrowing protocols, but with loans needing to be collateralized more than 100% and most at 150%, what is the use case for borrowers outside of trading/speculative leverage? You aren’t going to buy a car or house by borrowing Dai or usdc from compound because the rate is variable and can become too high. You aren’t going to stake eth in maker to generate dai for the same reason. I get that Aave has fixed rate lending so maybe there is a case where you want access to your crypto value to make a real world purchase and want to retain your exposure to the asset, but that seems like a very small niche since the vast majority of the world doesn’t have crypto exposure. What is the real world use case that is going to drive the average Joe to defi? Can someone explain? Because right now it looks like a hype fest with everyone borrowing more and more to lock into platforms to farm governance tokens and push the Total Value locked up higher to pump defi. Let me also say I understand the value of maker and generating stable coins giving unbanked access to usd denominated assets. I’m more talking about the lending/borrowing protocols.
Full disclosure I have been in $MEME fairly large since $5.50 but since I get fucking flamed everytime I post here, (despite all my calls being big gainz or neutral except sBTC which exit scammed) I just stopped bothering. Now that the news is out you guys can see for yourself. Anyways, this is just getting started, let me tell you why. What started as a friday night joke which airdropped everybody in the room 355.555 MEME and burned the LP keys which ensured fair distribution, was quickly adopted by a dev team from consensys. They have made clear that MEME has no association with consensys and I believe them, but the point is that this is crypto royalty that has adopted this product and is driving it forward to basically flip DOGE as the MEME coin of the upcoming DeFi bull run. I have also heard that devs from balancer are involved. This is top tier. So the website just dropped www.dontbuymeme.com and to put it short, it is a platform for farming unique NFT cards, they have common, rare and legendary. To get the common and rare you need to stake MEME (5 per day) to get pineapples to get the cards, and to get Legendary you need to stake Liquidity pool tokens. As of right now, the LP stake is live and they expect the MEME stake to be live shortly. ( i expect this post to have some longeveity so likely will be up by the time you are reading. ) Why this is important. Well more so than a meme coin and some rare NFT's, they have made a platform to power NFT trading and distribution specifically for the crypto community. I expect NFT's like this to catch on bigly and this is the power move to take a market share. Because of this I see no reason whatsoever that MEME won't flip the whole industry. oh, and dont buy meme. edit: coindesk just wrote about them https://www.coindesk.com/memes-defi-cryptocurrency-yam first NFT farmed sold for $250 DAI on Opensea https://twitter.com/JordanLyall/status/1298771923451535360
This is a new post after some interest in a comment why I believed the S&P is going to 1700. Update 3: I am going to limit my answers in the comments guys; as the post becomes more popular it is becoming more diluted with snark etc. I don't expect anyone to follow my opinions; I just want to share one aspect of why I am making the trades I am. I maybe wrong. Random walk and all that.. Original Disclaimer: This is based on historical precedence and we are in unprecedented times but, with history as our guide a strong argument can be made for the S&P to decline to a level that is currently inconceivable.I have disclosed all my positions near the bottom. Update 1: Slightly long; happy to be challenged in the comments, it is late in the UK (2am) so may tidy it up and add more references and charts tomorrow.Update 2:Have expanded the post to answer as many comments and requests for references wherever possible and tagged in the requestors.
Intro: Are we in a recession?
If you believe so, or that we are heading into a recession then there are four things needed to support a genuine rally out of a recession
Improving economic health indicators
Accurate pricing reflecting the end of the recession and tempered optimism
We are missing 2 out of those 4 criteria; the overwhelming monetary and fiscal policy (world-records) are compensating for lack of positive indicators and volatile and bullishpricing.
What do you mean by pricing?
It can be argued that the current price of stocks is not discounting for the acute and likely chronic harm to consumer sentiment and spending power. For example; the UK clothing retailer Next Group closed their bricks and mortar stores (share price increased 4%) then they cancelled all online shopping (share price increased 3%) and finally they cancelled all orders with their supply chain (shares leapt 12.8% during the rally.) There is the massive amount of second, third and fourth order effects that this one company does to the UK economy (and Turkish factories). Suppliers, shipping, design, marketing etc all cancelled and the staff furloughed. This is one example but the indexes are currently full of similar examples and some analysts are ringing the alarm bells.
Lazard Asset Management are concerned that the pandemic “will persist longer than many investors suspect and that the economic damage will be deeper and potentially longer-lasting”.
Reddit is quick to mention that stonks only go up but there is some truth to that sentiment at present since any negative factors are dismissed as being priced in and all positive factors are heralded as a cause for stocks to rally. If priced in was accurate then we would not see record-beating market rallies back to back. 10% volatility swings over 48 hours is the very definition of not priced in. There is evidence to suggest that, well, the bullish sentiment is wrong and mainly because it is retail investors being taken for a ride whilst funds re-balance and offload. Retail traders "buying the dips" is normally a contrarian signal, meaning that it's time to sell. This section is for u/lntoIerant in response to a comment.
Edit to answer some comments about this portion thus far.
Do retail investors move the market?
No, they act as a sentiment indicator that the market is reaching a peak absurdity. Similar sentiments have preceded major recessions in the past. When you hear a layman offering stock tips or googling how to buy stocks then we are reaching the precipice of a depression. new market entrants are not the same as traditional retail investors.
Are retail investors buying in greater volumes?
That is hard to say because the majority of retail trades are done off-book. The trades are mixed in with portfolio moves or using the retail service which is a dark pool.
Are retail investors dumb money?
Well, no. Kind of. It depends. This white paper indicates that retail investors are more knowledgeable, more profitable and better informed than previously thought. However, a lot of their trades, as mentioned above, are done off-book as part of a larger portfolio and they simply lose a fraction of a basis point because market timing is not that critical.
What does this have to do with the S&P dividend and the EPS?
Major indexes are comprised of stocks that pay handsome dividends; normally 2% yield a year. The companies have reached their limit of growth (HSBC haven't discovered 5 million new customers and Shell are not finding new fossil fuels) so investors hold the stock for income-seeking reasons. The FTSE 100 was priced in to generate £89 billion in dividends for 2019 and £90 billion+ in 2020. That has largely collapsed. The only companies that pay dividends are those taking on debt to do so like Shell. And they have; a 10Bn credit line to maintain dividends. The Bank of Englandhad to slap 5 UK banks from issuing dividends at this time. That means that their primary valuations as income-generating stocks are questionable... ...especially since the dividends are not expected to return to the 2020 levels for another 10 years now. Edit to add: This portion is taken from the market report by BNY Mellon. You can see the chart here. The analyst is John Velis of BNY. Thanks to u/flash_aaaah_ahhhhh for prompting me.
“By 2021, the market expects dividends per share for the S&P 500 to be down to under $38 per share (a staggering 41 per cent drop from recent highs of approximately $63 per share) and then to start slowly rising again. Going out 10 years to 2030, the expectation is that dividends will just about recover to pre-Covid-19 levels.”
Main body: Onto the S&P
In 2021 the market expects the dividends per share for the S&P to be reduced to $38 per share. That is priced in and common knowledge. That is a 41% drop from the recent highs of $63 a share and seems alarming for income seeking investors since we are not expected to recover to those prices for 8-10 years. Source. But DataTrek have noted that we are still currently trading at 21X the trailing 10 year earnings of $122 a share. Dividends per share normally don't fall as far as earnings per share. But they are inverted at present. For the S&P to be trading at 2,650 level (or even higher) it means the market does not believe the pandemic or recession will have any long-term damage. That puts us squarely at odds with items 3 and 4 in our list of factors needed to exit a bear market.
In other recessions, including 2008, the dividend price per share drops approximately 12-15% but the earnings per share drop by considerably more; as much as 85%. That means that in 2008 financial crisis and subsequent bear market; the dividends per share dropped by a lower percentage amount than the total index value drop. You can see that in this chart here.
The market drop was approximately 56% and the Dividend drop was 14%
The market drop was 56% and the earnings drop was 85%
Right now, we have the reverse. Dividend share drop in this market is 41% (which is chilling) and market drop was approximately only 30% and rallying heavily back to the mid-20's only. That makes no financial sense unless the assets were being propped up by buyers...
S&P ATH: 3386 to 2488 on April 4th (26.5% drop)
S&P ATH Dividend: From $63 expected to $38 (a 41% drop)
S&P ATH EPS:
If the S&P follows the same playbook at 2008-9, then we would expect to see levels of around 1400 at the bottom but that seems extremely bearish expecting that this crisis is worse than 2008. If previous indications hold true, then we would expect the S&P to drop by approximately 50-60%ish at the true bottom to reflect the 41% decrease in expected shares plus additional discounts and negative market sentiment. In reality, we are probably likely to pull back to between 13X and 15X trailing average which puts the S&P between 1600 (low side) and 1800 (high side).
You are putting a lot of faith in a re-run of the 2008 crisis
I am. No doubt about it. After October 2008, stocks fell for another four months, piling up 40% of losses before the recently ended bull market began in March 2009.
New market indicators
Since I wrote this post, the DJIA was up over 4% and closed down on the day. Thank you to theTwitter feed of Jim Bianco for this: Since 1925 (95 yrs!), up more than 4% and closing down on the day has happened only one other time ... Oct 14, 2008 (Tsy Sec Hank Paulson forced the banks to take TARP money). The S&P 500 was up 3.5% at the high and closed down on the day. Since April 1982 (daily H,L,C began) has happened three other times...Oct 3, 08, Oct 14, 08, and Oct 17, 08. This mkt continues to trade like Oct 08. It was six months and another 25% down before the low. Bezinga are also playing up the 2008 similarities.
Why is bullish sentiment so wrong?
The negative reports are so wildly negative that the almost defy belief. We are dealing with insane numbers way beyond our traditional frame of reasoning. This is topped only by the insanity of the scale of quantitative easing. Less than a year ago, a small movement in the non-farm payrolls would lead to a 2-3% move in the markets; now we are hitting 700K jobs lost, a truly ugly number and the market rallies hugely. Future economic students will study this to try and understand what was happening. In the space of weeks the majority of the Western economies have swung to being effectively state-sponsored, centralised economies and no one really knows how to unwind these positions. It is impossible to reconcile being a bull with a centralised state economy and blue-chip stocks that refuse to pay dividends but the share price remains at the same levels as when they paid a 2% yield. The UK forecast is for the deepest contraction since 1900. Business surveys have shown activity crashing faster in March than during the financial crisis. The Office for National Statistics has published experimental research on the impact of Covid-19 on the economy.
With entire swaths of the economy having shut down “traditional forecasting methods become irrelevant”, warned Chiara Zangarelli, economist at investment bank Nomura.
Michelle Girard, economist at NatWest, said that while there was huge uncertainty about the precise magnitude of the contraction in gross domestic product in the second quarter, “there is little doubt that it will be off the scale” That is not a bullish sentiment. It means markets are acting irrationally since fundamentals are being dismissed as priced-in. In reality; nothing is priced in.
I am long VIX to 78 (expected by end of Apri but ideally by 24/4)
I am short India to 7800 (expected by 15/05)
I am short S&P to 2200 (expected by mid-late of May)and will be to 1810-50
I am short Dow to 19000 (expected by mid-late May)and will be again to 17000
I am short FTSE to 5200 and will be again to 4800 (expected by mid-late May)
No current active hedges / all spreads due to being tax free profits in the UK
Further spread betting the swings to the upside where I can to scalp
I am holding a portfolio of streaming services and gaming companies
I am holding Microsoft and Disney
I own a very small quantity of crypto, primarily XRP
Edit to add: So, your entire thesis is totally destroyed if companies keep paying dividends?
Yes. In a nutshell. But something else will be destroyed; the western taxpayer and future growth.
If companies are using 0% interest rates to take out loans and then transferring those loans a small 1% of the populace via dividends; that bill will come due to the citizen taxpayer and/or shareholder of the future
If companies are taking federal or governmental aid to furlough workers but still paying dividends to shareholders? That bill will come due to the citizen taxpayer and effectively is an even more extreme form of socialising market losses; it means that we truly can never have a correction since the top 1% will lose. Not lose the investment itself, which can rebound, but will simply lose the yield on an investment and only for a short period of time. If we have reached a point where that is considered unacceptable then we truly are living in a new socialist, centrally planned world.
Here is Tesco defending their decision today of £635m in dividends...despite receiving considerable amounts of VAT, Rates and Rental relief from the UK Government (£585m)...they have done an admirable job and are profitable but this market signal and their stated reasons for doing so are alarming.
CEO said 'every pound we receive [in rates relief] will be invested in ensuring Tesco is able to support British shoppers...' That is tax payers paying a subsidy to a free-market company for the ability to shop...and also... Mr Lewis said that the needs of savers and pension funds also needed to be considered in the debate around dividends. “We’ve thought long and hard about our responsibilities here . . . we are in a strong position to pay out for the benefit of those people
Edit to add: What about the FED and stimulus
u/tauriel81 and u/aliveintucson325 and u/100PERCENTYOLO_VEQT OK - to truly test my own assumptions; here is my argument AGAINST my position. The Fed have not quite printed money as Reddit loves to meme. They have issued liquidity and central banks worldwide have allowed banks to relax their requirement to hold reserves of cash. That injects money into the business world by allowing lending and borrowing to continue. It also reduces theoretical risk since the models are back within tolerance. When the time comes they will remove the credits gradually without causing hyperinflation. They do this by paying banks not to lend back into the system by holding a % of their assets at the Federal Reserve. So they pay the banks but the banks keep the deposit at the Fed and don't pass on the liquidity to potential borrowers..gradually and sustainably. https://www.aier.org/article/powells-new-monetary-regime/ That means the borrower of the future (home purchasers, entreprenuers etc) will have very few credit facilities available so RIP to the long-term economic growth. We also have unprecedented government support for citizens. The largest social security welfare plan since WW2, especially in Europe. If you believe that the Western economies can weather this storm using the bridging devices by central banks then it pays to dollar cost average into the market and keep buying the dips as a retail investor. Lots of buoyant news from European nations and China about the slowing pandemic is overwhelming the negative leading and lagging economic indicators about economic data. If you believe the economy can return to normal within 36 months, then it pay to be bullish and invest. If you are day-trading, swing-trading or short-term options trading then the overwhelming market moves are likely to crush people as the system flexes under lots of volatility. You are also likely prioritising the negative news and technical analysis in your filter bubble and de-prioritising the positive news particularly when that news is fiscal or monetary policy since those things are dry, boring and incomprehensible half the time. So you miss Fed backstops critical bankingi and instead hear UK Prime Minister in intensive care. If you want to know what is going on...
Look at the short term fundamentals
Zoom out. Re-look.
Zoom out to an even longer timeline. Re-look.
Zoom out to an even even longer timeline. Re-look.
Zoom out to an even even even longer timeline. Re-look.
Decide where you making a prediction. Plan your trade, trade your plan. How do the FED take money back out of the economy? They FED purchase the security initially to then sell it back to the asset-holder later. So the balance of credit-deficit merely swaps but by paying a small premium on the excesses that they hold, they can cushion the inflation or deflation of the currency. So, they effectively give the bank liquidity and then remove that liquidity later by passing the asset back...but also provide a small premium to cushion the blow; 50% of the premium is then held on Federal Reserve books so that the market is not flooded with new money. The FED previously reduced their balance sheet from $4.4 trillion to $3.7 trillion but it remains to be seen if they can unwind a position of this size.
2 out of the 4 necessities for exiting a recession are not present
S&P currently trading at 21X the trailing 10 year average dividend
In previous recessions a 50% drop in the market was accompanied by a 15% drop in dividends
Market analysts expecting for a 41% drop in dividends but only trading a 26% drop in the market. At present the S&P dividend per share drop is 41% but the S&P is rallying back to less than 20% drop...whilst dividends are not expected to return to 2019 levels of income for 8-10 years
In previous recessions the dividend per share drop is much less than the overall index drop
S&P highly overvalued, completely inverted when compared with dividend expectation and market dividend pricing
S&P pull back to 1600-1800 over short-medium time frame (1 month-6 months).
If market history is to be believed then 1400 is not unfeasible based on percentages but you have to be hoping for a total economic destruction for this to happen.; expect a total Governmental response if this happens.
If S&P continues to rise then it indicates companies are taking on debt or other instruments to pay dividends rather than innovate, upgrade or consolidate their business position which some are (Shell etc).
Economic data will eventually overpower the stimulus and the Coronavirus is not priced in; hardly anything is priced in and analysts are now saying so publicly.
Who are Shipchain Partners? Why are they important to Ship Token Holders?
Back in 2017, during the ICO craze, a new website was enough for a token to gain value. In August 2020, these delusional times are fortunately behind us (although doubt is permitted when observing YAM yield farmers...) and the crypto startups that haven't gone bankrupt yet either sold their own tokens to generate a revenue (did someone sneeze 'XRP'?) or did what any legit startups in the world usually do and hope to succeed at: focus first on product and business development. So, for the ones with a functional and commercialized product like Shipchain who launched its Track and Trace web and mobile platform and is about to move these transactions to its own sidechain which went live just a couple of weeks ago, using SHIP as the network native utility token, what token holders need to focus on are both the different developers willing to deploy their dapps on the Shipchain Sidechain *and* the current and future customers/users of these dApps. But make no mistake, utility tokens are not securities. There aren't any dividends directly linked to company's profits. A *utility* token will gain value only when demand for it exceeds the available (free to sell) circulating supply and while speculation of the incoming/future demand does represent a buy pressure of its own, the only sustainable way for the token value to grow on longer time frame is for the token to be effectively... USED ! Knowing that one needs to hold and use SHIP to vote/chose reliable validators, to deploy dapps on the Sidechain and/or to pay gas for transactions ran on that blockchain (feature coming in Loom's next update), the real significance to tokens holders is how many dapps are deployed and how many transactions are each of them performing on the Shipchain Sidechain. The purpose of this article is to go through each customers already publically announced by Shipchain to understand their needs, their purpose and their relative size in the logistics industry, which will help potential investors to evaluate the current and future demand for the SHIP token. Have a great read! CaseStack provides supply chain management (SCM) services, including warehousing, transportation, and supply chain management software (SCMS) to consumer packaged goods companies (CPGs). CaseStack works with some of the world's largest retailers, Fortune 50s, and brands, such as Target, Duracell and Amazon. CaseStack is a subsidiary of Hub Group, #3 ranked world-class supply chain solutions provider that offers multi-modal transportation services throughout North America, including intermodal, truck brokerage, dedicated and logistics services. A publicly traded company with $4 billion in revenue CaseStack is partnered with ShipChain by integrating tracking and tracing on ShipChain's blockchain based platform. "By integrating with the more than one million loads CaseStack transports every year to major retailers, there is opportunity to implement both ShipChain’s platform and driver rewards program. KeepTruckin provides drivers with the number one rated Electronic Logbook App for iOS & Android. For fleets, KeepTruckin's web dashboard automates log auditing, IFTA reporting, vehicle location tracking, and more. KeepTruckin is presently in use by 400,000 drivers and 13,000 fleets A ShipChain and KeepTruckin client is able to Pick up and deliver shipments in your organization with full transparency provided by the blockchain from the convenience of a smartphone. Monitor in-real-time, tracking updates simultaneously between web and mobile for any moving shipments. Upload signed documents, handling procedures, inventory lists, and shipment images with just a few taps. Share key shipment information and updates with the recipient through the life of the shipment. This integration allows KeepTruckin's GPS data to be added to the ShipChain ecosystem to provide a truly end-to-end track and trace. Distichain connects manufacturers, wholesalers, distributors, retailers, insurers, logistics providers, and banks through legally binding and financially supported smart contracts within a highly secured environment. Distichain smart contracts clearly define roles and responsibilities of buyers, sellers, service providers, and Distichain. The smart contracts backed up by blockchain trade finance secure credit given by sellers, eliminating all default risk. Integration of logistics, banks, and insurance companies eliminate intermediaries and minimize cost. ShipChain and Distichain plan to offer their services together on a larger, joint platform. Distichain’s technology will bring in their established marketplace to companies of all sizes, along with the documentation pertaining to different shipments to be stored on the blockchain. ShipChain will then track and trace the shipment with visibility heightened via blockchain technology through its delivery. Once the shipment has been tracked, payments are handled via Distichain’s system. ScanLog - Scandinavian Logistics Partners AB is a fully independent Swedish logistics company focused on international and global transport solutions for Scandinavian exporters and importers. Scanlog offers complete international freight forwarding and logistics solutions using all transportation modes: air, sea, road, rail, single and multimodal. Scanlog, which has been rapidly expanding its global reach, finds relevance in the ShipChain platform because it can help monitor Scanlog’s trucks – from the pickup point to the destination. ShipChain uses blockchain technology at its core and its flagship solution – the smart contract – helps bring transparency and visibility to supply chains, with the company running a successful pilot trial program partnering alongside Perdue Farms. ShipChain’s software can be fully integrated with most of the transportation management software (TMS) systems in the market, and can seamlessly track freight across any mode of transportation. Zinnovate International is a fast-growing IT and management consultancy company with its roots in empowering global logistics companies to realize the full potential of their IT portfolios. They were awarded The Best Management Consultancy in the Global Logistics Industry at the Business Worldwide Global Corporate Excellence Awards 2017. They offer systems, services and consultancy experts in three crucially essential areas ERP, BI and Integration. “Zinnovate is determined to maintain its industry front seat position and continues to team up with leading technology providers to deliver ‘unfair advantages’ to forward-thinking logistics companies,”says Zinnovate International CEO, Håkan Nilsson. “On behalf of the global team of Zinnovate, represented on all continents, we are extremely proud to support the visionary leaders of ShipChain.”. ParcelLive is a real time parcel tracking IoT service that allows you to track the location, condition and security of your shipments almost anywhere on the planet. The ParceLive sensors, developed by the UK-based IoT innovator Hanhaa, will be inserted directly into shipments, where they remain for the duration of the delivery. Once the device is activated, the sensors report their location, condition, and security to the user in real-time. The integration of ParceLive’s trackers into the ShipChain platform will allow both services to advance their common mission of increasing transparency and lowering costs for consumers. Under the new partnership, ShipChain will integrate ParceLive’s tracking technologies into its shipping and logistics system. The microsensors will enable customers to monitor temperature, moisture, light, impact, tilt, and GPS location to ensure quality control and monitor shipment progress. GTX Corp is a technology licensee that develops miniaturized Global Positioning System (GPS) tracking technology for a wide variety of consumer branded products. ShipChain will use GTX’s temperature enabled NFC smart tags to track temperature-sensitive shipments. The tag requires no scanners, or wires, and records temperatures based on customer-defined intervals and durations. In addition, GTX offers other NFC products that ShipChain will utilize to optimize its Track and Trace Platform. Significance to Token Holders: Ethereum in its current state (1.0) got clogged by a fairly reasonable peak of interest in Crypto Kitties and is today overwhelmed by the growing interest in DEFI + a couple of Ponzis. Let alone concerns from the industry on sensitive data storage and privacy, the prospect of tracking on Ethereum hundreds of thousands of shipments with a live GPS localisation every 5 km for each of them isn’t quite encouraging (eg. 1 mio drivers using the Keeptruckin app, each driving 2500 km per week on average, could trigger up to 800 transactions per second on the Shipchain network, this is x50 more than Ethereum’s current capacity). The Shipchain platform is all about blockchain transactions. Each customer who uses the ShipChain blockchain platform, triggers multiple transactions on that platform. Each transaction requires the use of ShipChain tokens to secure the platform thus placing organic demand for more tokens. It’s all about supply and demand.
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