🧘♂️This Key Level
Market Meditations | August 6, 2021
It could change everything.
Dear Meditators
We have arrived at the end of a great week in the crypto markets. Today’s topics:
The EIP 1559 upgrade is live!
BTC and ETH technical analysis
Decentralized storage
Podcast with Burg, head of partnership at FTX: Crypto, Gaming and $100m FTX Partnerships
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Delighted to say this article is brought to you by FTX. Make sure to use our link to get a 10% discount. Based in the U.S? Here’s a discount link for you: FTX.US.
?A Fork in the Road
A much-anticipated milestone was just achieved for Ethereum. The ‘London’ hard fork, or EIP-1559, upgrade to the blockchain went live yesterday. This new technology has some far-reaching implications for the future of the cryptocurrency. With the explosive growth of DeFi and NFTs (many of which are based on the Ethereum blockchain), this has been arguably the most awaited improvement in ETH’s history. Let’s look at the major points of the change:
Prior to EIP-1559, users had to bid for selection by miners for their transactions processed, resulting in erratically high fees. Moving forward, an automated system using a base fee which fluctuates based on how much traffic is currently on the network will decide how transactions are processed.
The Ether previously paid to miners for processing transactions will now instead be “burned” (taken out of circulation). Depending on the volume of transactions, this could have a deflationary effect on the overall supply of ETH.
The block size has been doubled, though it has been designed to maintain 50% operating capacity. The purpose of this dynamic block size is to account for fluctuations in demand.
While most would agree this is likely to have a positive impact on ETH’s price, it’s important to remember that the news surrounding this kind of event can have an ephemeral effect. The real, lasting impacts of the changes to the protocol will be seen gradually. Perhaps most importantly, EIP-1559 lays the foundation for Ethereum 2.0, a complete overhaul of the protocol still in development.
Our Market Meditations are longer format educational segments. Each letter features a Market Meditation which will deep dive and analyse a relevant crypto event, theme or tool.
? Technically Speaking…
BTC/USD
Since the break of the $32.8k resistance level, BTC lower time frames have been bullish and in an uptrend. The same has been the case with ETH and a few other assets. We are now floating just above the $40k resistance level.
If we can break above $40k and continue, we can shift the macro outlook: above here, the long term moving average could flip and we would also experience a S/R flip. After here, we would likely experience a further rally. Finally, we would have broken the current market structure.
ETH/USD
Much cleaner than the BTC chart. We want to see a close above the $2.7k level. Continuation looks more likely above $2.7k.
Above $2.7k there is not much high time frame resistance. Perhaps the $3.2k level will be another significant level to reclaim in order to break the current market structure.
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? Do We Need Decentralized Solutions?
The 2008 Global Financial Crisis that incentivized Satoshi Nakamoto and friends to create a decentralized global store of value made accepting the need for decentralized money easier to grasp for the early adopters. At the time, and even more so now, we believed we needed a store of value that could not be inflated and was available globally. There was a widely viewed concept that governments and central bankers were devaluing our money.
If you are reading this you can probably see the case for money, but what about file storage or web hosting? Many centralized companies offer these products, so why would we need a decentralized blockchain for file storage? When using a centralized company:
They alone maintain control of what information is stored and whom they share that info with.
We must trust that there are appropriate internal controls to prevent data manipulation.
They alone choose whom they serve and how they serve them and they can revoke that service at any time.
In a US Senate hearing last week, Senator Pat Toomey highlighted the effectiveness of decentralized file storage. According to Senator Toomey, the Chinese Communist Party shut down the pro-democracy newspaper in Hong Kong, Apple Daily. The New York Times reported on the event, and not only was the company shut down but a warning was also issued to readers not to repost the articles online. Hong Kong has a national security law that would allow them to block or remove any online content deemed subversive or secessionist. One savvy reader was ready to preserve these articles by uploading them to the decentralized file storage solution ARWeave. ARWeave describes itself as a “collectively owned hard drive that never forgets.”
? Crypto, Gaming and $100m FTX Partnerships with Burg
Burg is head of partnerships at FTX. FTX is one of the world’s leading cryptocurrency exchanges, recently completing a series B fundraising round of $900 million, that values the company at $18 billion! Their partnerships consistently make breaking and international headlines, such as:
Teaming up with Dolphin Entertainment to create an NFT marketplace that will target brands within sectors such as sports, entertainment, gaming, esports and charity.
A deal with Major League Baseball (MLB) that involves FTX branding appearing on all umpire uniforms starting at the All-Star Game in Denver.
Buying the naming rights to the Miami Heat’s basketball arena!
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??♂️✍️ Stories in this newsletter were written by D. Beverly, Kyle F., Max P., Kimia K., Ellen B. and Koroush AK. Graphics were produced by Gerasimos P.
Not financial or tax advice. The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. We are not financial advisors. Every investment and trading move involves risk. Do your own research when making a decision. See our important security disclaimers here.
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