Today is the 19th weekly update of the Diversification Protocol. This protocol is designed to allocate a weekly income or funds to be invested mostly to BTC when it is undervalued and mostly to gold and optional stable coins when BTC is overvalued. It also tells you to spend gold for living when BTC is undervalued and BTC for living when it is overvalued. This will create higher returns on your investment through a full cycle and reduce stress in a bear market. HERE you can read the protocol in dept.
The valuation is done by using the Mayer Multiple and compare it to historical values. The Mayer Multiple is the current BTC price divided by the 200 day moving average. We use data from mayermultiple.com. When you want to be updated on the multiple several times a day you can follow THIS twitter account.
Because I just started the protocol, I didn't accumulate gold and stable coins yet. In this update I will exactly follow the protocol, but since I only start saving gold and stable coins from a multiple of 1.6, I will only be able to execute it 100% according the rules after that point is broken. Funds invested in BTC today will eventually at least partly be converted to gold, since the BTC accumulates in the same wallet and a percentage of the total BTC in this wallet will be allocated to gold at higher valuations.
The current multiple
Weekly allocations of funds
The protocol will be slightly boring till we get to a multiple of 1.6, till then we allocate 100% in BTC because it is undervalued. With the current 200 day moving average we need a BTC price of over 13,317 USD to start allocating to gold and Stable coins. This can take days or months, but it is good to be prepared already.
Important news of the week
ICE will bring Bitcoin to Wall Street in November 2018
ICE, the owner of the NYSE announced that they are setting up a startup to deliver futures based on real Bitcoin. The startup Bakkt will also create a worldwide digital exchange platform. ICE partnered with Starbucks to enable customers to buy coffee with Bitcoin and a partnership with Microsoft is established to use the cloud to build the exchange. The launch is planned for November 2018, this will give long term institutional investors like pension funds a way to invest in Bitcoin and make an ETF much more likely to be approved because proper custody will be build.
Fear for a second takeover attempt is rising
The announcement of ICE was celebrated by the Bitcoin community, but the price hardly reacted and the sell off even didn’t stop. In an amazing podcast with Trace Mayer was mentioned that the entrance of ICE in the Bitcoin market could be a negative form of financialisation, it could be the beginning of unbacked paper asset trading what would increase the supply. This way the price could be manipulated down like is the case for gold and silver for years already. Of course it will be way harder to do with Bitcoin since the blockchain is super transparent and storage and transport of Bitcoin is much easier. As Bitcoin HODLers we can make it harder for them to do so by always storing our own private keys and never lending them out!
The Bitcoin price is down this week
The Bitcoin price was in a downtrend this week and tanked from 8158 to 7070. The sentiment turned negative after the SEC announced that the Winklevoss ETF was rejected again. The mega bullish news about ICE didn’t do anything to the sentiment, this can mean that we are still in a bear market and good news simply get ignored or bankers are manipulating the price down to enable themselves to accumulate as much as possible Bitcoin before a huge bull run is starting.
Fundamentals and valuation
In the history of Bitcoin the multiple was lower than today only 18.18% of the time. Since the multiple today is 0.84 while the moderate is 1.54, there is 45.45 % discount on BTC according to this valuation method!
Long term the prospects are still extremely bullish. Lightning Network and Segwit adoption are still growing and improving faster than expected and can boost adoption for day to day payments, micro transactions and Dapps. Wall Street, governments and central banks are on the sidelines to come in and could inject huge amounts of money. Furthermore, the Mt. Gox selling fear is off the table and an ETF is coming closer. Short term sentiment is neutral to bullish, but for the long term almost everything is very bullish.
This is no financial advice, just my view on the market.
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