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"The greatest enemy of knowledge is not ignorance; it is the illusion of knowledge." - Stephen Hawkin
 

Satoshi&Co Daily Crypto Newsletter

March 23 · Issue #10 · View online
ZPX | Satoshi&Co Newsletters

“The greatest enemy of knowledge is not ignorance; it is the illusion of knowledge.” - Stephen Hawking

Amidst all the 24x7 ‘boom-gloom-doom’ coverage of all things crypto, definite concrete steps, cementing the creed of crypto deeper and deeper into the mainstream economy, continue to happen. Coinbase just tied up with Barclays in the UK. 
Almost as important, John Oliver’s episode on Crypto. They can’t ignore you, now they are laughing at you.
Also, the Winklevoss twins are proposing self-regulation. Definitely a move to be welcomed, not just as one of a piece with the overall mainstreaming of the overall crypto market, but also because this is the only form of regulation that will work in the crypto space, as opposed to disjoint patchwork regulations spread across regulatory jurisdictions ill-suited to the crypto context.
Among all this, Google’s banning of ICO and crypto ads seems a bit of a non-sequitur but actually makes sense. The last thing the space needs is the average investor losing his shirt in another scam coin ICO and inviting further regulatory scrutiny.
In this week’s newsletter, we touch upon the price behaviour of altcoins and their dependency on bitcoin. If you are a bitcoin maximalist, this is a vindication of a sort.
Bitcoin’s market leader status as the pre-eminent cryptocurrency largely remained unchallenged until the beginning of 2017, when Bitcoin’s dominance in terms of overall cryptocurrency market cap dropped below 75% for the first time. The arrival of Ethereum and the expectations around its potential increased Ethereum’s market share to 35%, For a brief period of time, bitcoin was less than 40% of total Crypto market cap. A number of cryptocurrency projects continue to outperform Bitcoin. This eroding away of Bitcoin’s absolute dominance is a good thing, it is a promising sign as it removes the asset class’ dependency on Bitcoin and distributes the value across multiple cryptocurrency projects. 
However, the price relationship between Bitcoin and other altcoins (all cryptos other than Bitcoin) is confusingly complex and has been a great matter of concern for fundamental crypto investors. When Bitcoin’s price soared in the last week of December on a stream of positive news around growing mainstream adoption and institutional interest, altcoins followed suit, albeit with a slight lag, and ended up more than doubling in market cap. This was consistent with historical trends; when Bitcoin moves up quickly, it ends up pushing down altcoins as money flows from altcoins to Bitcoin and altcoins then have to play catch-up with Bitcoin after some BTC price consolidation. Conversely, when Bitcoin’s price is on a downward trend, altcoins rise up in value as investors seek relief from the falling price of Bitcoin.
That being said, recent price movements seemed to have bucked historical trends, with Bitcoin and altcoins moving up and down almost in tandem. The Bitcoin dominance index has been relatively flat, around the 35-40% range in the past few months. 
One possible driver here could be the consistent regulatory headwinds and the broadly negative media coverage in the recent months, which continue to question long-term Crypto viability. Additionally, periodic reallocation of funds, which was historically between Bitcoin and altcoins, is now happening predominantly between Fiat and the whole Crypto asset class.
While the low to negative correlation between cryptocurrencies and traditional asset classes (SPX and Gold) makes a compelling case for higher risk-adjusted returns by adding cryptocurrencies to a portfolio of conventional asset classes, the strong inter-correlation between Bitcoin and altcoins underscores the fledgling nature of this asset class and the strong dependence that altcoins have on Bitcoin. While altcoins have gained from the overall rising-tide that is Bitcoin, the vast majority of altcoins have fundamental inherent weaknesses, such as fragile token economics, a concentrated token distribution, and most importantly, no real underlying product proposition. When altcoin valuations truly decouple from BTC valuations, most of these ‘vaporware’ projects will get wiped out and only projects that can carve out niches for themselves driven by substantive token utility and network effects will survive. 
Depressingly enough, among the major altcoins, the one with the lowest correlation with bitcoin is Ripple. As we have said before, Ripple is not even truly open blockchain, and is primarily intended to be a ‘bridge currency’ by a consortium consisting of a group of traditionally centralized entities. What is more, for transactions to go through on the Ripple network, XRP, the cryptocurrency, is not even mandatory!
Cryptocurrencies: Last Week Tonight with John Oliver (HBO) - YouTube
Cryptocurrency of the Week
Monero is an open-source cryptocurrency created in Apr 2014 with the aim of addressing the shortcomings of bitcoin and other peer-to-peer money transfer tokens. It exclusively focuses on privacy, decentralization, fungibility and scalability. It was launched as the first fork of the CryptoNote-based currency Bytecoin with two major changes. In contrast to many other peer-to-peer transfer tokens, which are mostly derivatives of Bitcoin, Monero uses a CryptoNote protocol and possess significant algorithmic differences pertaining to blockchain obfuscation. In comparison to Z-cash, where concealing the identity of senders and recipients and the transaction value is optional, Monero anonymizes all the transactions on its blockchain through an enhanced algorithm called “ring signatures.” Owing to the full-scale anonymity provided by Monero, darknet places such as AlphaBay and Oasis integrated Monero into their platforms, resulting in a six-fold jump in XMR’s price in the latter half of 2016. According to AlphaBay, Monero nearly accounted for nearly 2% of sales on its website.
Investment Positives
Upgrade to bitcoin due to its superior features: Monero provides the ideal solution to both transparency and scalability issues, currently seen as the drawbacks of the existing Bitcoin blockchain. Although transactions on the Bitcoin blockchain are pseudonymous, it is still possible to track the activities of an individual due to the fully transparent and publicly available ledger if one can map a bitcoin address to a real identity. Monero address this issue by deploying “ring signatures,” which allows each Monero spent to be mixed with hundreds of transactions so that spender’s address is grouped with addresses of strangers, making it almost impossible to trace it back to the source. Additionally, the “ring confidential transactions” feature conceals the amount of every transaction. Unlike bitcoin, Monero doesn’t have a hardcode 1mb limit on the block and uses an adaptive block size, with a penalty system in place to discourage too excessive block sizes.
Offshore Wealth Storage: Given the exclusive anonymity offered by Monero, it could be a preferred cryptocurrency, ahead of bitcoin, by HNIs for private wealth storage. With the private wealth market estimated to be as big as $20 trillion and growing at a consistent pace, the total upside for XMR from current levels is multifold even if it manages to capture a trivial amount of the market.  
Crypto News of the Week
Thailand Delivers First Draft Of ‘Digital Asset’ Regul... | News | Cointelegraph
'Fight fire with fire': IMF's Lagarde calls for bitcoin crackdown | Technology | The Guardian
India Can’t Regulate Bitcoin Says Official - Bitcoin News
UK-based Coinfloor to launch physically settled bitcoin futures | Reuters
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