10th January 2022 > > Phishing scams and institutional adoption.

tl;dr

Technical analysis, PayPal and WeChat.

Market Snap (at time of writing)

Market Wrap

Goldman Sachs is now predicting four rate rises in the US, and an earlier date than July for reducing its balance sheet. On Wednesday we will see the latest CPI, with a median estimate of – wait for it – 7.1%.

After a decade of zero inflation, or even deflation, this is an extraordinary expectation.

The knock-on effects for the UK and the EU could be profound, and are unlikely to be in a positive vein.

Risk assets will struggle to perform with this macro background hanging over us.

Occasional Series – Publication schedule for the CCC

The CCC tries to be 7/365 but sometimes stuff gets in the way. I warn you now, there is no CCC this Sunday, Monday, or Tuesday. Back on Wednesday.

I have until now tried to be early in your inbox, to get your attention over tea and toast. The eagle-eyed may have noticed some alterations to this schedule in 2022.

For the next two months for, ahem, technical reasons, the CCC will be delivered at a random time each day.

After that, the CCC will mostly revert to an early morning newsletter with regular if infrequent disruptions.

Just keeping you all on your toes is all.

Curious Cryptos’ Definition of the Day – Technical Analysis (TA)

From Investopedia:

“Technical analysis is a trading discipline employed to evaluate investments and identify trading opportunities by analyzing statistical trends gathered from trading activity, such as price movement and volume.”

Chartists will spend hours analysing graphs of historical price action believing that this will give some insight into potential future price action. The true believers will forgo any sort of fundamental analysis or any consideration of wider market issues at all.

The CCC is not only highly sceptical of this approach, but also has its own resident techie, Larry Bloch. We are a broad church, with a revolutionary new idea that is set to change the world – we do not insist on total agreement and total uniformity of opinion by everyone all the time.

…

A key element of TA is the identification of support and resistance levels.

A breach of these levels is seen as a strong indicator of short-term future price action, in some circumstances. But also a failure to breach these levels is seen as a strong indicator of short-term future price action, in some circumstances.

Fibonacci levels play a strong role, the justification for which is no more than that there are many natural phenomena which appear to utilise the same ratios.

In my view, TA is self-defeating.

If there was a trading strategy that could be devised simply from TA that was guaranteed to make money, then once its existence is known and followed, then it would prevent itself from happening due to the sheer weight of market orders placed according to that strategy,

For example, if TA predicted with 100% accuracy that a BTC buy at say $39.3k would be followed by the opportunity to sell at $44k, then every exchange in the world would have huge bid orders at $39.3k. The price would never get there. Ditto in reverse for sell orders at $44k.

Adherents fight back against this argument by saying that TA merely gives guidance as to potential future price action. But the range of outcome is almost limitless, and TA does not give a probability weighted rating to that range of outcomes. It doesn’t even attempt to state that one scenario is any more likely than any other, at least not in any intellectually rigorous manner.

More details here:

https://www.investopedia.com/terms/t/technical-analysis-of-stocks-and-trends.asp

Curious Cryptos’ Commentary – PayPal

PayPal has been a leading innovator in the crypto space, allowing users to trade a variety of currencies including BTC, ETH, LTC, and BCH. Holdings can be left within the PayPal ecosystem, providing an easily accessible degree of security not readily available elsewhere, or withdrawn to hot or cold wallets.

PayPal are now developing their own stablecoin, which will be backed by physical US dollars, and presumably some short-term debt instruments now the USD yield curve is positive for all maturities.

There will be huge advantages that a PayPal stablecoin can bring over and above the current offerings such as USDT (Tether). Regular readers are aware that the assets backing USDT have not been fully disclosed, and the audits are performed by an off-share accounting firm operating out of a tax haven.

Those audits have made it clear that some of the assets involved are crypto-collateralised loans introducing correlation risk in exactly the place it should not be.

The authorities have been making a lot of noise about stablecoins, seeing them as a direct threat to Central Bank Digital Currencies (CBDCs). This is a potential stumbling block, as explained by Jose Fernandez da Ponte, PayPal’s SVP of crypto and digital currencies:

“We are exploring a stablecoin; if and when we seek to move forward, we will of course, work closely with relevant regulators.”

Curious Cryptos’ Commentary – WeChat

In stark contrast, messaging app giant WeChat is reported to be on the verge of supporting China’s CBDC. Known as e-CNY, WeChat is presenting this development as a move into the crypto space.

CBDCs are not cryptos in any sense of the word, though the Chinese state would like to convince its own citizens otherwise. Remarkably they seem to be doing so – the number of individuals who have opened a digital yuan wallet is over 140 million. Not for me buddy.

To be fair to WeChat, it has no choice in this matter. It would not be allowed by Xi and his henchmen who are merrily committing genocide on the Uighur Muslim population to go down the same route as PayPal and develop their own stablecoin.

I am confident that PayPal will not imitate WeChat. Way back on 27th April 2021 the CCC reported PayPal’s thoughts on CBDCs, with CEO Dan Schulman noting that “… they’re basically digitizing a fiat currency like the U.S. dollar”.

Dan, like the CCC, is wary of the whole CBDC concept.

Reserve Treasury Protocols (before they all go to zero)

Reminder – Olympus and Wonderland are, to the best of my knowledge, live viable projects. XEUS, FORT and JADE turned out to be scams, though they are still live scams. Scams are not uncommon in these Wild West fringes of Decentralised Finance (DeFi).

Photon appears to have won the prize for being the most extraordinary scam. In under 18 hours it went to zero. And as far as I can tell – and I am no blockchain analytics expert – they walked away with less than $30k.

It is very upsetting we have scumbags like that around.

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