November Newsletter
FAL Consulting is a cryptocurrency consulting company. We provide a wide variety of services related to cryptocurrency and blockchain. You can find a full breakdown of our services at cryptofal.com.
The FAL Cryptocurrency Newsletter is a monthly newsletter that focuses on the highlights throughout the cryptocurrency and financial technology (FinTech) industries.
Coins to Follow This Month
By Drew Feliciano
Bitcoin (BTC)
Bitcoin is the first cryptocurrency and the largest by market cap. Created in 2009, Bitcoin has grown astronomically since its launch and continues to lead the cryptocurrency industry while also often dictating overall cryptocurrency market movement. It also established the norm of using blockchain as a public ledger for tracking cryptocurrency transactions, providing a revolutionary level of transparency that the broader financial system has lacked.
In October, Bitcoin had an amazing month. After the stresses of September, October provided us with lots of excitement including new all-time highs. After BTC’s rallies, we saw altcoins and ETH move as well. On the technical side, for November BTC is looking like it could continue to test new all-time highs on the weekly chart. The MFI is near overbought territory and trending downwards however, momentum and the EMAs of the MACD look to be continuing to trend upwards. On the fundamental end, BTC and cryptocurrencies continue to gather attention from financial institutions and businesses alike, with banks looking to get involved.
Ethereum (ETH)
ETH daily candle chart, approximately 10 am ET, 11/1/21.
Ethereum is the second-largest cryptocurrency by market cap. It’s known for being the first cryptocurrency to introduce smart contract capabilities on its blockchain, setting the precedent for ecosystem coins into the future. As the most actively used blockchain, Ethereum has established itself as the largest ecosystem coin by market cap. Many other tokens are based on the ERC-20 protocol on Ethereum’s network.
Ethereum is an asset that directly influences a large portion of the overall cryptocurrency market. Oftentimes, Ethereum’s movement influences altcoin price action. Around October 27th, Ethereum’s Altair update is scheduled to go mainnet. This update will be for the ETH 2.0 blockchain and will be the first step of the eventual merger of Ethereum’s current POW consensus with its newer Proof of Stake consensus. The successful drop of this update may not directly influence gas fee issues on the current POW blockchain however, it is a necessary step in the longer-term transition to ETH 2.0.
The daily chart for ETH is looking fairly bullish as it continues its uptrend after finding a new all-time-high. Momentum from the MACD does look like it may be getting ready to settle however, it could also find itself preparing to swing upward once more. The MFI could be preparing to swing upward with the continuation of this uptrend. While in the short term, ETH may find resistance around its current ATH around $4,450, it could also find itself pushing past that resistance after testing it once more.
Ripple (XRP)
XRP weekly chart, approximately 10:15 am, 11/1/21.
XRP is Ripple’s token for their XRP blockchain. It’s both open-source and permissionless. Designed to help scale payment transfers globally with more energy efficiency, lower cost, and higher speeds than older coins such as Bitcoin. The cost of transfers can be as low as $0.0002. It often is used for remittance payments for individuals and is a more scalable bridge currency for financial institutions.
XRP is one of the largest as well as one of the most well-known cryptocurrencies. It has a strong community outside of the US and it maintains a strong connection with institutional players on the fiat side as a bridge currency. Part of Ripple, XRP is their native token. This month Ripple is hosting a large event with a myriad of speakers from their CEO Brad Garlinghouse, to their CTO David Schwartz, and even FTX’s CEO Sam Bankman-Fried. The event will take place virtually from November 9 - 10th. This could be a big event for both Ripple and the overall crypto space. Whether they make an announcement, or just speak about the things going on, it could prove to be influential on XRP price action.
On the weekly chart, XRP is consolidating in a pattern, while the MFI is dipping slightly and momentum remains fairly neutral. We could start to see some movement if this consolidation pattern holds.
Stellar Lumens (XLM)
XLM daily candle chart, approximately 11 am ET, 11/1/21.
The XLM token is based on the Stellar blockchain. It is a decentralized blockchain protocol and open-source network. You’re able to create, trade, and transfer digital versions of a variety of types of money. It helps act as an efficient intersection between global financial systems and assets. Stellar touts low fees and a swap on its native wallet.
XLM finds itself often following XRP’s movement to an extent. So one potential influential factor that could be at play is the event that Ripple is hosting. This event could be fairly influential on XRP’s price action which could then influence some price action on XLM’s side of things as well. Stellar is also expanding its already impressive list of partners by adding MoneyGram to the list of partnerships. Stellar Lumens will also be hosting their own event as well that will take place on November 17th and 18th.
XLM is consolidating strongly on its daily chart, forming a wedge. Momentum is fairly neutral however, it may be preparing to swing upwards. MFI is going down slightly however, it does look like it may have found support. It’s likely that this strong consolidation could lead to a potential rally before the new year.
Crypto.com (CRO)
CRO daily candle chart, approximately 10:30 am ET, 11/1/21.
Crypto.com’s native token is called CRO. This coin was created with the goal of making it easier to accept crypto as a form of payment using a network of cryptocurrency projects. Through their wallet, businesses can directly receive payment in stablecoins or CRO. It’s meant to be a more cost-efficient and seamless alternative to traditional cryptocurrency payments while making it easier and more accessible to a wider array of users.
CRO is also having a new update that is going mainnet in early November. This update is intended to improve scaling across the network by creating another blockchain. This should make transactions both quicker, and cheaper which will help the network be able to handle more transactions per second as usage increases. This update institutes smart contract capability as well which will allow for apps and other things to be developed on the network. Cronos is scheduled to go mainnet on November 9th.
The CRO daily chart is continuing its uptrend that it started back in October. The MFI is nearing overbought territory however, momentum is swinging upwards on the MACD. With the update on the way, there could be a lot of attention brought to CRO this month.
Polkadot (DOT)
DOT daily candle chart, approximately 10:40am ET, 11/1/21.
Polkadot is a blockchain protocol with its official token DOT. Polkadot is an ecosystem token that allows for interoperability between blockchains. This allows for cross-chain computation and registries. This allows for an ecosystem of blockchains to interact with each other. Polkadot is made up of two types of blockchains, the main chain or relay chain, and the parachains that users generate.
Polkadot has a long-awaited update that is scheduled to release. The first parachain slot auctions are scheduled to be released on November 11th. According to Polkadot, this marks the final stage of their multi-phase launch. These parachains connect to the Polkadot relay chain which allows for the long-awaited multi-chain capabilities. Parachains have been running successfully on Kusama which is Polkadot’s “canary” network.
Polkadot is continuing its uptrend and is seeing massive gains following news of Kraken being ready to use Polkadot’s parachains once they’re released. The MFI looks as if it could be preparing to trend upward, and momentum is also looking to move upwards with the bullish market sentiment.
Features
The Nuances of Hyperbitcoinization
By Drew Feliciano
Atomic Bitcoin - Jason Lajara, FAL Consulting.
Cryptocurrencies and blockchain are revolutionizing both the tech and the financial industry. They’re providing solutions we didn’t know we needed, and opportunities we didn’t know we had. From their cheaper fee structures for transferring funds to blockchain’s ability to help make distribution and logistics more accurate, cryptocurrencies and blockchain are improving the world we live in. In a lot of ways, cryptocurrencies and blockchain technology provide a more equitable, more democratic, and more efficient financial system than the traditional fiat-based one.
Because of this, many (especially those in the cryptocurrency community) believe that there could be a time where cryptocurrencies and blockchain-based currencies may overtake the traditional financial system. This inflection point is often referred to as hyperbitcoinization, however, that term/idea is something that is interpreted in a wide variety of ways by its proponents.
Bitcoin magazine defines hyperbitcoinization as:
“Hyperbitcoinization is the inflection point at which Bitcoin becomes the default value system of the world. As more individuals and groups around the world realize the advantages of a borderless, censorship-resistant and natively digital system for transacting value, a critical mass of users will eventually fuel currency demonetization and the replacement of our world’s ingrained financial institutions and world powers with a more equitable, publicly-driven system.”
At this point of inflection, it is believed that it will become more costly to reject Bitcoin for both individuals and businesses than it would be to adopt it. This is one of the most common descriptions of hyperbitcoinization (albeit it is one of the most limited perspectives at times), and it is often shared by BTC maximalists.
Maximalists are individuals in the cryptocurrency space who largely believe in the growth of a single project over the growth of the larger cryptocurrency industry. These maximalists may often only support one coin, and one coin only. This limited view often does not come from a point of objectivity, and more from a point of tribalism. BTC maximalists believe that BTC will be the single (and in more extreme cases of maximalism, the only) most important and relevant coin there is for MOST cryptocurrency-oriented use-case scenarios.
The belief is that hyperbitcoinization will occur when BTC both “defeats” the other cryptocurrencies and societal adoption increases to the point where the vast majority are interacting with and using BTC on a regular basis.
Our issue with this view is that BTC maximalists often fail to understand the technical issues in the way of achieving a maximalist vision, as well as the technical prowess of a myriad of other worthwhile blockchain protocols. In many ways, it’s a very limited viewpoint that could stunt the growth of the overall industry more than help it. Objectively speaking, different blockchain protocols have different use-case scenarios/purposes. Having this limited view only stunts the growth of the broader cryptocurrency industry.
Without acknowledging the technical advantages one protocol may have over another, we steer away from objectivity and fall more into the “fan” category. Labeling everything other than one token a “shitcoin” is not how we keep the technology growing as an industry. Expecting that there is a “one-beats-all” token is unrealistic at best, and severely misguided at its worst. Some coins have better fee structures, some have staking, and some are better stores of value.
So What Will Hyperbitcoinization Look Like?
Hyperbitcoinization will more likely be something that’s more diverse and balanced than the visions of maximalists. It will likely be an inflection point where cryptocurrency as an industry starts to overtake the traditional fiat financial system. Meaning, it likely wouldn’t be just one, two, or three coins, but a myriad of tokens with strong communities dedicated to their specific technological use-case scenario. As adoption increases, and blockchain technology and cryptocurrency become more widely understood, the largest coins will likely be those with their own specific functions within the cryptocurrency space.
There will be more of an emphasis placed on the technology behind a project than there is today as people come to understand the technology more and more. Meaning, fundamental developments will likely translate to more direct influences on price action. Hype will always have an influence, however as investors understand more and more, the coins that are lacking the tech and use-case scenario will likely not last long past their hype. Of course, there will likely be anomalies as well after this inflection point (Dogecoin, SHIB, other meme/sh*tcoins).
We also believe that there will be broader categories of tokens as well that are more accurate and/or concrete (like ecosystem tokens, oracles, store of values, and more). These specific categories will likely all play an integral role in the future more decentralized/democratized financial system.
Ecosystem coins will likely be much larger than they are today. They will likely have more decentralized applications, sub-ecosystems within them, more smart contracts operating on the blockchain, and be significantly more efficient with unimaginable (in today’s terms) transaction volume. These ecosystem coins will likely have their own categories of tokens within their ecosystem. They may have their own lending coins, swaps, oracle coins, exchanges (CEX or DEX), NFT-based projects, and more! It’s hard to predict the potential of ecosystem tokens when basing them on our current technology however, there are some clear signs of these ecosystem coins expanding in these directions already.
Transaction-based coins will likely replace remittance payments and act as bridges for institutions moving money around. They’ll also likely replace traditional means of payments eventually as well with these coins able to transact at least, if not significantly more than traditional Visa and Mastercard tech. These currencies will likely be used globally (wherever cryptocurrency use is allowed) and users won’t have to worry about exchanging fiat currencies as much when traveling, allowing for a seamless transaction experience.
It’s also likely that the aspects of traditional finance that still exist during this period will likely be forced by competition to institute ways of interacting in the cryptocurrency space. We may start seeing more traditionally centralized institutions forced to take on a more democratic and decentralized (or more decentralized) stance in order to compete with DeFi protocols. Especially when these DeFi protocols are often more efficient and yield better results than their traditional fiat predecessors.
The overall cryptocurrency market will likely start to stabilize over time as more and more institutions enter the space with longer-term investment plans than retail traders. Coins that are used as a store of value like Bitcoin will likely also become more steady and less volatile. At this point, they would likely be even more stable than traditional fiat, especially with issues such as hyperinflation, etc., throughout the fiat system.
Like more traditional stores of value, as the market cap increases it will take more and more money to move it the same percentage amount as it previously did. This would likely be the case for many other cryptocurrencies as well, and not just the ones used as stores of value.
There will more than likely be features of hyperbitcoinization that we cannot even predict yet that will likely blow our minds. It will be interesting to see the developments that help bring the cryptocurrency industry to this inflection point.
False News and Crypto
By Drew Feliciano
The price action of cryptocurrencies can often be extremely volatile. This price volatility can be a reaction to a wide variety of factors. In comparison to the traditional fiat market, the cryptocurrency market is significantly smaller. This can contribute to a more volatile market, however, it is not even close to the only influential factor.
One of the main influential factors is news. News is a strong fundamental factor that can influence price action. It can drive price action in either direction as well depending on the news.
This is why the accuracy of the news is very important. It can directly influence price action. Unfortunately, sometimes there are inaccurate news stories or rumors that have a direct influence on price action. This can be a nerve-wracking phenomenon that can create a lot of confusion amongst investors and a lot of volatility.
One of the most recent occurrences of influential false narratives was the one surrounding Litecoin and Walmart. This was a fiasco that involved everything from crypto Twitter, to mainstream financial media outlets. Back in September, a false announcement was made about Walmart accepting Litecoin. This announcement sent ripples throughout the crypto space and eventually it was even thought to be reliable enough to be seen on mainstream sources. Even Litecoin’s own official Twitter shared this misinformation which added to the confusion.
LTC chart from September.
In the meantime, LTC’s price jumped about 31% from around $175 to about $230. It wasn’t until Walmart themselves announced that this news was not true. After that, the price sunk back down to about $180. However, it wasn’t only Litecoin that had its price action influenced by this news. The news influenced the broader cryptocurrency market as well, including BTC and ETH. This made plenty of other plays in the cryptocurrency market react as well. And just as they went up with LTC, they saw a sharp decline downwards after as well. Luckily, most of them settled near where they had been before the news broke. Of course, this pump and dump was likely very good for some and devastating for many others. When people make financial-based decisions on news that turns out to be untrue the results can be devastating.
There was also a fake press release regarding XRP at the beginning of October. There was a fake announcement made on law.com, that said that the SEC dropped its case against XRP. This caused a 4% pump in XRP price. These instances of false news continue to influence investor decisions and due to the current status of cryptocurrency, there aren’t many control factors to keep these instances at bay.
These instances highlight the importance of ensuring that information is legitimate before using it as a factor in making investment decisions. It’s likely that this will continue to be an issue for the cryptocurrency industry (as it has been in traditional markets) however, hopefully, the space will figure out a way to minimize these types of occurrences as it grows.
Blockchain Updates
Polkadot Parachains
By Mike Viscera
cryptologos.cc
Polkadot is not only one of the top cryptocurrencies by market cap but they also boast a strong founding team headed by one of the original Ethereum founders, Gavin Wood. Ex Ethereum founders have branched off to have successful careers of their own with Wood and Cardano founder Charles Hoskinson also creating projects that are starting to eat away at ETHs market share. What makes Polkadot unique is that they are aiming to make the first “heterogeneous” ecosystem that would solve the current issue of cross-chain transactions. The expected launch of Parachains on Nov 11th will mark the completion of Polkadot's original roadmap.
Parachaining is the idea that you can connect many “relay” chains to the main Polkadot chain in an attempt to increase scalability and interoperability. According to the Polkadot protocol, there are no specific design qualifications as long as they follow the agreed-upon protocol. This will also make DOT more decentralized since the transactions are spread out over the entire ecosystem rather than through each individual blockchain. Interoperability will be seamless through the ecosystem because it will allow the transfer of tokens, data, and off-chain information from oracles which is currently difficult to accomplish for most projects.
Getting a parachain slot on Polkadots blockchain will be determined by how much DOT a project is willing to bid and lock up to secure that spot on the chain. Projects looking to list on Polkadot can also crowdsource funds from users who are willing to support their projects after doing their research. All of this, if everything works according to plan, will make Polkadot one of the most decentralized blockchains in the crypto space.
Ethereum 2.0 First Update
By Mike Viscera
Ethereum has had a strong month that nearly saw it reach another new all-time high. The new buzz circling Ethereum is the announcement of their Altair upgrade to the Beacon Chain or ETH 2.0. At the time of writing, ETH is sitting just above $4,000 and could see some more momentum with the update just around the corner. This will be the first scheduled update for the Beacon Chain set to roll out on October 27th. It is also important to note that this update does not affect the current structure of Ethereum; however, it is an indication of more progress towards the launch of ETH 2.0
The Ethereum Foundation stated that the upgrade will bring a couple of main features to ETH 2.0 including lower gas fees for light client functions. The second is reformations to the accounting of the network where the storing actions will use a more efficient bit field format that reduces the complexity, the “inactivity leak” quadratic is based per validator instead of globally which is insignificant for validators that participate more than 80% of the time and there are some bug fixes in the reward accounting. The co-founder of crypto exchange Huobi Global, Du Jun, said “Pre-Altair, if a chain stops finalizing for two weeks, fully inactive validators lose ~11.8% of their balance and validators active 75% of the time lose ~3.1%. Post-Altair, the fully inactive validator’s loss would be ~15.4% but the 75% active validator’s loss would only be ~0.3%.”
This update will not have a direct effect on ETH as it stands right now. The highly anticipated EIP-1559 update has been lackluster in its performance to reduce gas fees as now it is either cheap or expensive with no in-between. Altaire promotes optimism that ETH 2.0 is very close to its release and Ethereum will finally make the transition to full proof-of-stake. If Ethereum is able to successfully make the switch and ultimately reduce gas fees it could put DeFi on the map for a lot of users around the world. Until then the barrier for entry is too great for most people which is really holding the crypto space, as a whole, back from what it could be.