Monday Market Update (Apr 29, 2019)

CoinSheet #253

Dmitriy

Apr 29, 2019

The fire which enlightens is the same fire which consumes.
— Henri Frederic Amiel (1821-1881)

Weekly Bulletin

Hello folks,

Hope you’ve all watched Game of Thrones, because it’s excellent.

Like always, few bit of news to cover and then we’ll jump into the markets.

Let’s go.

New York Attorney General and Bitfinex

TL;DR - Bitfinex was facing a large loss and constructed a sketchy transaction to let themselves borrow money from Tether to cover the loss.

Tether might not actually be fully backed by USD and was sending clients' money (collateral) to another company.

Here are some great summary Tweets.

Alex Krüger @krugermacro

1/ Digesting the Bitfinex New York AG probe - Bitfinex has a $850M "hole" since late 2018 - The $850M are "stuck" with Crypto Capital, a third party payments processor used by Bitfinex - Crypto Capital argues the $850M have been seized by govt authorities of various countries

Alex Krüger @krugermacro

2/ - Bitfinex mgmt believes Crypto Capital's principals may be engaged in fraud - USDT were seemingly fully backed by USD until Nov/2018 - Between Nov/2018 and Mar/2019, Tether transferred $625M to Bitfinex => Tether ceased to be fully backed by USD

Alex Krüger @krugermacro

3/ - In Mar/2019 Bitfinex "returned" the $625M to Bitfinex - Since Mar/2019 Bitfinex is covering the hole with a $900M line of credit from Tether - The line of credit (which pays 6.5% p.a.) is secured by iFinex shares - Bitfinex has accessed $700M from the line of credit

Alex Krüger @krugermacro

4/ - Per the NY AG, Bitfinex and Tether are engaged in fraud Full text:

Alex Krüger @krugermacro

5/ New York AG objectives: - determine extent to which New York investors are exposed to ongoing fraud - obtain documentation from Bitfinex (including a weekly report) It does not seek to interfere with Bitfinex's or Tether's operations.

Alex Krüger @krugermacro

6/ Corollary: Tethers are now backed by - 75% USD (currency and cash equivalents) - 25% a loan secured by iFinex shares (other assets and receivables) That represents considerable credit risk.

What does any of this mean?

The risk here is that if tether collapses or people stop using tether, a significant amount of purchasing power will evaporate and liquidity will disappear.

Depending on who you ask, tether accounts for most, or second most trading volume of any cryptocurrency.

And since most coins have their market cap derived from tether dollars (as opposed to USD), this is a massive systematic risk in the crypto space.

So all of those people that have had concerns about Bitfinex/Tether printing as much Tether as they want might have been right.

E*Trade and TD Ameritrade and Bakkt

E*Trade Financial is said to be preparing to launch Bitcoin and Ether trading. They have a ~5 million person retail base.

TDAmeritrade could soon offer crypto trading to its 11 million retail clients via the upcoming ErisX crypto exchange (as early as sometime later this year, pending regulatory approvals).

Quote from Coindesk:

Pending bitcoin futures exchange Bakkt has acquired the Digital Asset Custody Company (DACC), secured insurance for assets it will hold in cold storage and revealed a partnership with BNY Mellon.

So what?

All three of these things are super bullish.

Market Sentiment

Bitcoin (Macro Trend Lines)

Many folks have previously said they would like to see this yellow trend line tested as support.

These people might end up getting what they wished for.

Bitcoin (Moving Averages)

Looking at the moving averages, we wicked above the 50 week moving average (on the weekly chart it was just a wick, on the daily below it’s showing a close and open).

Similar scenario as I mentioned above with the trend lines, folks are waiting to see the 200 day moving average act as support (4.3k-4.4k zone).

Shorts vs. Longs

Lots of shorts are pilling up, and a short squeeze looks unlikely.

The TD

Daily TD

3 Day TD

Weekly TD

Monthly TD

The following month is where I originally predicted we would bottom. Partly based on this perfect TD setup + count that didn’t materialize (the 9 + 13).