March 15th Update on Cryptoassets, by Van K. Tharp, Ph.D.

van tharp bkCryptoassets have had a flat three months (nearly 100 days) compared with their normal behavior but that’s a good sign and most of the major cryptoassets are up at least 20% from mid-December. That’s easy to see just looking at a long term chart of Bloomberg’s Galaxy Crypto Index. So, at this point I’m recommending that my Super Traders who are interested in cryptos establish their core positions. For an idea of what “core positions” might mean see the second article below.

CU March Chart 1
Bloomberg’s Index tracks ten major cryptoassets and Bloomberg started the index in May, 2018 at 1000 — at about the dotted vertical line on the chart. They must have added historical prices from before that to create the chart. It’s clear that the market has been relatively flat to slightly up since mid-December, 2018. Four months of flat with a slight uptrend is almost always enough to get me into a market.

The table below tracks the price of five major cryptoassets across three generations of the technology —

  • Bitcoin, a 1st generation crypto asset,
  • ETH and NEO, 2nd generation cryptos, and
  • Iota + Skycoin, 3rd generation cryptos

Just because BTC is a 1st generation crypto does not mean it is likely to die off and be survived by the later generation cryptos. It’s hard (impossible?) to predict which cryptoasset will thrive or even survive as we move forward as there are so many variables in play. Technology, use case, adoption, support, and multiple other factors come into play. For now, we monitor these five cryptos because they represent several relevant aspects: public ledger — BTC, smart contracts — ETH+NEO, scalable contracts at minimal cost — IOTA+SKY.

CU March Chart 2

Date of the All-Time High Closes
*Dec 16, 2017 ** Jan 13, 2018 ***Jan 15, 2018 **** Dec 8, 2017 ***** Dec 29, 2017

All five of these cryptos are up significantly from mid-December. Right now, in my mind, we have a low-risk time to enter the market. Does that mean we have seen the bottom? Not-necessarily, but I doubt that there is much more downside with all the strong institutional bias to also enter into the market. Most pension funds want some exposure to cryptos just because they are a strongly non-correlated asset class that can give them a huge upside potential through investing only a small portion of their assets.

The market cap table below shows a similar market based pattern to the individual cryptos in the table above. The total market cap for cryptos is the highest it has been since November.

CU March Chart 3

* Bitcoin was as high as 90% of the market cap of all cryptos at the beginning of 2017 to as low as 32% at the top of the market. Part of the difference is that there are now nearly 2000 cryptocurrencies. So the number keeps going up even though the market cap goes down.
** This was the peak of the crypto market in terms of market cap. Data via Tama Churchouse, Asia West Investor email on 4/11/18

The data in both of these tables comes from

Model Results

We have two models which help us evaluate cryptos using the Market SQN methodology. Here are the top 15 cryptoassets by the Market SQN score (100 days) from the first model —

CU March Chart 4
Notice that we now have 13 cryptos with a Market SQN® score above 1.0. And we have one strong bull coin, BNB, which is also one of my favorites. Last month, not a single crypto scored above 1.0, however, it’s probably a healthier sign for the market that all top fifteen cryptos have positive Market SQN scores this month (green).

Our separate crypto market model has a different top fifteen list with some overlap from the table above. Like the above results, the top fifteen are all positive this month — and above 1.0. The worst performing cryptos in the model are on right and what’s most interesting to me is that only two coins of the bottom 15 are strongly bearish (red). The other cryptos on the bottom list are brown and #15 is yellow. Again, I see this as a very strong sign that the bull is about to start raging.

CU March Chart 5
The crypto model map also looks quite different this month compared to recent months. Instead of being all red and brown, now it’s yellow, green, with just a hint of brown. So, again this looks quite encouraging.

CU March Chart 6
In looking at various categories, you see some clear trends. Social media coins are now bullish. And so is advertising and gaming. It wouldn’t surprise me in the least if everything were very green and dark green by the crypto-update in mid-April.

CU March Chart 7
We are looking to add a number of crypto symbols to the model’s database and I hope to show you the fruits of that work in the coming month or two. I’ve been in India for the last six weeks so it’s harder to get all of these things done under those circumstances.

Looking Forward

This first thing to look forward to this month is Fidelity opening up the crypto market to its institutional investors. You and I won’t be able to do anything through Fidelity, but the big boys will.

They second thing to look forward to is the opening of BAKKT — ICE’s platform for allowing institutions to trade cryptos safely and have someone else secure their assets. The federal government shutdown delayed BAKKT a little but it should happen soon.

And then probably before June, we will see the first crypto ETF opening up and that will have a huge impact.

Everyone has probably heard that Facebook is planning its own cryptoasset. Remember that social media cryptoassets are among the best performing groups right now.

Beliefs and Looking Further Ahead

I was basically wrong about cryptos turning around last year. 2018 saw a crypto market meltdown which has allowed institutional investors to acquire a large inventory of cryptos inexpensively. By the end of 2019, my guess is that the coins with real value will be at new highs and a lot of others will come along for the ride.

We are not, however, a prediction newsletter — there are other newsletters for that. I have a fundamental belief that blockchain technology and cryptoassets are the next institutional revolution and that their impact will dwarf the impact of other recent technology advances. With that belief in mind and the fact that even the 15th worst coin is yellow says to me that now is a good time to take some core positions in the market. In addition, could the front page headline story below from the site yesterday be a buy signal?

CU WSJ Article
It’s easy for me to assume that a bull market will begin shortly but who knows what the market will actually do?

Remember also that cryptoassets are a dangerous game. Even those who know what they are doing could lose their entire cryptoasset portfolio. There are many ways such a loss could happen — even if you do everything correctly. Most of you have probably heard that a Canadian crypto-exchange CEO died recently and now all of the exchange’s cryptos are missing. (By the way, he died in a part of the world where death certificates are relatively easy to fake.)

There will be much more of that kind of occurrence before cryptoasset investing becomes a lot less risky. Nevertheless, if you have a similar belief about blockchain technology changing everything, you could take a small amount of money that wouldn’t hurt if you lost it completely and open up some core crypto positions.

The purpose of this report is not meant to give investment recommendations or to be predictive in any way. It is meant only to give you a status quo of the cryptoasset markets. Until April 15th, this is Van Tharp.

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