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Two Minute Crypto – Key Concepts 8 – Decentralization

August 8, 2019 Published by

Click the tab below to listen to the 48th episode of my weekly crypto podcast ‘Two Minute Crypto.’ These are intended to be short, single-topic ramblings on some aspect of the cryptosphere. Consider dropping a like and or a review on iTunes or Podbean if you enjoy the podcast. Comments and critiques welcome.

External Podcast Links

https://podcasts.apple.com/au/podcast/two-minute-crypto-key-concepts-8-decentralization/id1441492450?i=1000446320221

or

https://www.podbean.com/eu/pb-uuvqb-ba9d5d

Transcript

Two Minute Crypto – Key Concepts 8 – Decentralization

Welcome to Two Minute Crypto. This instalment of the Key Concepts series focuses on explaining crypto decentralization and the challenge of achieving it. While decentralization can be a very nuanced reality across a wide range of important metrics this discussion will dwell on a high-level explanation of the term as generally used in the crypto space. It is certainly one of the key components to understanding the appeal and potential of blockchain.

When a cryptocurrency is described as decentralized the core of that claim is that it has no single point of failure and no over-arching authority. There is no controlling entity, no headquarters, no management team, no single set of servers or data repository and no- permission is required in order to use that crypto in any way an individual or business might choose. It is live in the wild and free – at once accessible and unassailable. You cannot shut down a distributed network precisely because it is very widely dispersed and easily propagated.

On paper, a decentralized network has obvious appeal. It is robust and inherently democratizing. Each participant in a decentralized network has the same set of ‘rights’ as every other user of that system and access to the network is permissionless -if you want to use it you can – there is no-one to ask and critically no individual with the power to deny you.

However, key to understanding decentralization in terms of crypto is an awareness of how incredibly difficult it is to achieve. Talk is cheap – the moniker of decentralized on the vast majority of blockchain projects is just a title – smoke and mirrors intended to gloss over a centralized reality.

At best, most crypto projects exhibit only one or two qualities of decentralization – they may be open-sourced or the network may be secured by thousands of distributed nodes. However, the vast majority of these projects are subject to points of failure. For example, there is a founder or founders who control development, or there is a small team of active developers who in reality drive the project without whom it would die. Perhaps the supply is controlled by a small number of individuals who effectively own the system or network validators are centrally appointed. To date, in reality, only a veneer of decentralization is achieved by the vast majority of projects.

The primary example of a decentralized crypto in practice is, of course, Bitcoin. There is no founder to target, no company, no centralized record keepers, permission to use is not required, supply is fixed and though development can and does take place it requires the acceptance of a majority of the distributed nodes for these proposals to actually be enacted on the mainchain.

However, even Bitcoin is an imperfect version of a decentralized network. Miners validate the currencies transactions; these miners tend to congregate into mining pools (groups) for greater efficiency and the majority of these pools are located in China. This is a clear centralization of a key component of the network creating a pinch point for Bitcoin should China enforce a ban or move to shut-down these mining pools. Would this kill BTC, absolutely not but it would adversely affect it in the short-term as the network moved to rebalance its mining system.

To recap decentralization offers many advantages but attaining such a state is incredibly challenging and to date very rarely achieved.

Thanks for listening. 

Related Resources

Two Minute Crypto -Key Concepts 7 – Oracles

Two Minute Crypto – Key Concepts 6 – Smart Contracts

Two Minute Crypto: Key Concepts 5 – How is Crypto different to State Issued Currency (Fiat)?

LINK technical analysis

August 7, 2019 Published by

LINK seen from the temporality of 1D we can see how the structure of candles has found support within an important area of demand marked on the chart with a blue rectangle located within the price range of 1.9628 – 2.0597, the smaller figure shows a trend reversal setup, however, the price has found resistance in the blue horizontal located at 2.4909 so we could see an ABC structure approaching the support located at 2.1250, so we can see a change in trend, the price has to mark an HH above the blue horizontal mentioned above.

LINK seen from the temporality of 4H we can observe more closely the current movement of candles, we see that the price falling below the blue horizontal has made a pullback confirmation bearish which should cause the price to fall towards the area of demand indicated within the chart with a blue rectangle located within the price range of 2.1250 – 2.2027, the price should find strong demand in that zone so that we can see an upward momentum to position the price above 2.4909 and we can see a change of trend.

In conclusion, the price should retreat into the price range of 2.1250 – 2.2027 creating an ABC structure which would be the beginning of a game of (EW) of the next impulse of the major figure, if the price falls below that zone of demand we should wait for the reaction of the price in the major rectangle seen in the graph of 1D, if the price falls below that zone, the downward probailities will be greater, it is advisable to wait for confirmation in any of the areas indicated in the graphs above inside the rectangles and be very attentive to the movement of the next candles in 4H and closing the daily candle.

As I always say, you have to be aware of the movement, invalidations can occur, there is no 100% reliable analysis, take your own precautions when trading.

You can follow me on Twitter: https://twitter.com/armijogarcia

The SPDR Gold Trust ETF, GLD…Broke Out

August 7, 2019 Published by

This past Monday, while the DOW dropped over 800 points, gold rose 1.5% and in the process hit a six year high.  The gain yesterday is on top of the 15%+ gain since December.  Gold has a lot going for itself these days.  We are on the brink of a currency war between the US and China, the British pound may collapse if England leaves the EU and the addition tariffs imposed by Trump isn’t helping the global economy which is slowing down.

The best thing to do in these trying times is to obtain some hard assets if possible in form of gold / silver coins. The next best alternative, besides bitcoin is to invest in funds that mimic the performance of gold.

The 800 lb gorilla gold electronic traded fund is GLD.  It’s the largest fund in the space with over $32 billion in assets under management.

Five month ago I talked about GLD and laid out my projected price action for GLD.

Gold…The “Trade Of The Century”

Source

Although gold hasn’t broken out yet, from its recent consolidation,

the GLD has broken out.

But don’t chase price, usually breakouts return to origin of the break out. So for those who don’t have any exposure to gold, the chart suggests to go long on the pull back.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

The Oil Exploration & Production Companies Continue To Decline Too

August 7, 2019 Published by

When oil dip to a low of sub $30 in 2016 and came back from the dead, I assumed all the derivative play would follow, kind of like the tide rises all boats. 

It was only when I started analyzing the relative strength of the SPDR sectors against the SPY, that I notice the energy sector didn’t follow oil and has been on this steady decline. 

This means Wall Street is saying the valuation of energy companies today at $50 barrel oil is lower than the valuation of energy companies years ago at $30 barrel oil.  This is a really big deal if one can connect the dots.  One theme is cheap credit / junk bonds funding the expansion of the shale companies, who are having a hard time paying their debt back…this one theme has enormous consequence to the state economies of Texas, the Dakotas, etc.  However, that’s another post for a different time.

Last month, I spoke about VanEck Vectors® Oil Services ETF (OIH®) which seeks to track the overall performance of U.S.-listed companies involved in oil services to the upstream oil sector, which include oil equipment, oil services, or oil drilling and how the chart suggest OIH is headed lower over time.

The Oil Service Companies Continue To Decline

OIH ONE MONTH AGO

OIH NOW

I have another ETF that I think is worth shorting is the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).  XOP seeks to provide investment results corresponding to the total return performance of an index derived from the oil and gas exploration and production segment of a U.S. total market composite index.  Top holdings include: HollyFrontier Corp, Phillips 66, Marathon Petroleum Corp, Hess Corp, Valero Energy Corp and Marathon Oil Corp.

XOP looks very similar to OIH, with one exception.  XOP breached the monthly demand and is now at all-time lows.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Crypto Contest August 7: Promotion Coin

August 7, 2019 Published by

Promotion Coin (Huobi: PCBTC) has broken out of the triangle pattern in the four-hour chart.

(Chart courtesy of Tradingview.com (log scale))

Elliott Wave Analysis

In Elliott Wave terms, Promotion Coin began a wave one advance on May 23. The red wave one finished on July 9, and the red wave two correction ended on July 23. The red wave three advance finished on August 2, and the red wave four correction ended on August 6. If this wave count is correct, Promotion Coin should be heading next towards the August 2 peak in the red wave five.

(Chart courtesy of Tradingview.com (log scale))

Zooming out in the daily chart, I believe Promotion Coin is currently in the red wave three (blue sub-wave v). The red wave three began on May 23.

(Chart courtesy of Tradingview.com (log scale))

Funnymentals

Promotion Chain applies blockchain technology in the promotion industry.

(Sources: Promotion Coin and Whitepaper)

How can I vote? Where is the contest?

You can vote by following this link.

I’m Following The Smart Money, Are You???

August 7, 2019 Published by

The book, The Millionaire Next Door, published 1996 and having sold more than 3 million books in essence is about living below your means and being financially responsible in order to allow your cash to work for you vs. you working for cash.

If you don’t have one of these type of neighbors to mimic, just follow what the Smart Money on Wall Street is doing.

TIGER 21

Wealthy investors are trimming their stock positions, amid anxiety around a trade war and instability in Washington.

Members of TIGER 21, an investment club for high-net-worth individuals, reduced their stock allocation to 21% from 22% during the second quarter, according to the group’s quarterly report.

TIGER 21, a group of about 700 people with at least $10 million to invest, stands for The Investment Group for Enhanced Results in the 21st Century.

“They are concerned about the fact that the markets were priced to perfection; they thought they reached real highs,” said Michael Sonnenfeldt, founder of TIGER 21.

Source

Warren Buffett

Warren is the greatest investors of our lifetime.  Many don’t know he made the bulk of his money selling insurance.  Yes, he owns GEICO and many other insurance companies, but I’m talking about insurance in the form of options, where he collects premium with the right to buy the asset at a later day.  For example, during the Great Recession, Buffett loaned Goldman Sachs $5 billion.   Not only did Goldman agreed to pay a 10% dividend on preferred shares to Buffett, which cost Goldman about $500 million a year, but when Buffett finally cashed in, in total, Buffett made about $1.75 billion in cash and about $1.35 billion in stock, roughly a 62% return on a five-year investment.

With stocks at record highs, Berkshire Hathaway Inc. sold $1 billion more worth of stocks than it bought last quarter, its biggest net selling since the end of 2017. The result was that the company’s cash hoard — a major focus for investors in recent years — surged to a record $122 billion.

Source

Jeff Bezos

Between July 29th and Aug. 2nd the CEO of Amazon sold 1.5 million shares, while the stock sold off 6% during that same time frame.  But Jeff is by no means hurting, he’s still the richest man in the world.  Speaking of Amazon, the stock, well it’s sitting between daily supply and demand zones. 

Some folks on Wall Street have a $2500 target.  What I see is long term momentum decreasing.  It most certainly can break out, but it most certainly can break down too. Only time will tell, but in the meantime, I’m following the Smart Money.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Unusual Options Activity In Boeing

August 6, 2019 Published by

They say the measure of a man’s character is not determined by how he handles his wins, but how he handles his failures.  And so I give a lot of credit to the CEO of Boeing, CEO Dennis Muilenburg.  He dealing with the aftermath of not one, but two fatal Boeing plane crashes that happen within a span of six months.

In March, an Ethiopian Airlines crashed killing 149 passengers and eight crew members on board shortly after takeoff. The incident was the second deadly crash of the new Boeing planes in less than five months. A Lion Air Boeing 737 MAX 8 plunged into the Java Sea shortly after taking off from Jakarta in October, killing all 189 people on board.

The culprit, Maneuvering Characteristics Augmentation System (MCAS), suspected of reacting to errant sensor data, the solution, a software update. Today, all 737MAX 8 planes around the world remain grounded.

The CEO thinks by the fourth quarter Boeing will have a software fix and the 737MAX 8 planes will be in service again.  There’s only one issue, while actually two.  Boeing is running out of time in maintaining investor confidence and they are running out of 737MAX8 storage room.  To maintain investor confidence, Boeing decided to cut the production rate from 52 to 42 737MAX8s.  But one solution created another problem.  As planes are being built, there is no place to store them.

And now Boeing has been forced to resort to some creative storage places, like the employee parking lot.

Although the CEO remains confident, the Smart Money begs to differ. Yesterday I noticed some bearish unusual option activity where the Smart Money bought almost 7500 of the October put options with a strike price at $275. 

This means the Smart Money thinks Boeing has more downside.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Capital One reports data breach affecting 100m customers

August 6, 2019 Published by

Capital
One reports data breach affecting 100m customers (The WSJ)

  • Capital One, the 5th largest US credit card issuer, confirmed on Monday that a hacker accessed the personal information of around 106m card customers & applicants, in one of the largest data breaches of a big “bank”.
  • The bulk of the exposed data related to information submitted by customers and small businesses that applied for Capital One credit cards between 2005 & early 2019. It appears that the breach occurred as long ago as late March 2019, and that it was found by a so called white hat hacker, who emailed Capital One about the leak.
  • Capital One was an enthusiastic adaptor of the cloud for data storage, with the process of shifting all data to AWS due to be completed by 2020.
  • The data hacked apparently included social security numbers, bank account numbers, credit scores & payment histories but not credit card numbers.

Analysis and Comments

  • There was some early speculation that as the hacker had previously worked at AWS, that the hack might have come from there, but more recent filings by the FBI suggest that the Capital One data breach was the result of a configuration vulnerability in the Capital One system.
  • The Capital One breach came just days after credit reporting agency Equifax announced a c. $700m settlement with a number of US government agencies regarding their data breach  FTC blog on Equifax settlement. The settlement includes a sum of up to $425m for the c. 147m customers that were potentially impacted by the breach announced in Sept 2017.
  • Capital One was quoted as saying that they would make provision for costs of c. $100-$150m in 2019 to cover the notification of customers, credit monitoring & technology & legal costs. Although if the Equifax settlement is anything to go by this might not be all they end up spending.
  • According to the FT, news of the breach sent the shares of Capital One down 5.9% – a big move but not massive. This suggests to us that some investors are starting to view these breaches and the subsequent costs and fines, as just being a “cost of doing business”.
  • This approach may end up being risky. In the US, there have been increasing calls for more regulation of the way financial institutions protect their customers data Credit agencies must change how they manage data. Some commentators have drawn parallels with the European GDPR structure, where penalties of up to 4% of global turnover (up to E20m) can be imposed for breaches in processes around how client data is handled EU GDPR rules. In addition, much larger fines, such as the notice of intent to fine BA for a large data breach in 2018 ICO to fine BA £183m.
  • Consumers are increasingly looking to transact online – as more industries go digital, especially via the cloud, this is an issue that is going to take up more investor attention.

Capital One Stock Price

Volatility…..It’s BBBAACCCKKKK

August 6, 2019 Published by

The CBOE Volatility Index, VIX aka the stock market fear gauge, is a popular measure of the stock market’s expectation of volatility implied.

Devesh Shah, an applied mathematician and hedge fund manager who formerly worked for Goldman Sachs, was one of the creators of the CBOE Volatility Index

The VIX is quoted in percentage points and is the expected annualized change in the S&P 500 index over the following 30 days, with a 68% probability. VIX values greater than 30 represent investor fear or uncertainty, while values below 20 represent complacent in the Markets.

Source

Just in the past week, we have seen Fed Powell cut US interest rates in attempt to keep the party going, President Trump issue more tariffs on Chinese goods, 900 DOW stock plunge and what appears to be the start of a currency war.

Experts say there could be lots more bad news to come for stocks this month beyond Monday’s big selloff. That’s because August is typically the year’s weakest month for U.S. equities.

Stock Trader’s Almanac Editor Jeffrey Hirsh blames the month’s historically weak performance woes on summer vacations that take investors’ eyes off of the market. “Everyone is in the Hamptons, out playing golf or in the backyard with the kids,” he said. “So, you get a vacuum of lower volumes, and the path of least resistance is down.”

LPL Financial found that while the S&P 500 hasn’t fallen every August, in the years that it’s done so since 1990, losses have averaged 4.6% — the worst showing for any month during that period.

Source

So any one long the Equity Markets or who have family members with IRAs and/or 401ks, buy some protection and hedge your hard earn dollars.  One way to hedge your portfolio is to buy VIX call options if you think volatility in the Markets are going to increase over the next 3-6 months.

And the newest alternative at our disposal as a hedge, is to buy BITCOIN.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Crypto Contest August 6: Prometeus

August 6, 2019 Published by

Prometeus (Bittrex: PROMBTC) has broken out of the triangle pattern in the daily chart.

(Chart courtesy of Tradingview.com (log scale))

Elliott Wave Analysis

In Elliott Wave terms, Prometeus began a wave one advance on July 16. The red wave one (blue sub-waves i-ii-iii-iv-v) finished on July 22, and the red wave two (blue sub-waves a-b-c) correction ended on July 29. If this wave count is correct, Prometeus should be heading next towards the July 22 peak in the red wave three.

(Chart courtesy of Tradingview.com (log scale))

Funnymentals

Prometeus is a Blockchain & AI enhanced ecosystem for the people owned data markets. BlockchainBrad interviewed one of the team members back in June this year.

(Sources: Prometeus and YouTube)

How can I vote? Where is the contest?

You can vote by following this link.

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