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Week 34: August 15 - August 22, 2019

Bitcoin price this past week has performed in line with that Ethereum (-2.27%). Bitcoin however has outperformed Litecoin (-4.89%) due to the recent negative sentiment on Litecoin covered yesterday. We issue a SELL of BTC this week because:

Price is likely to break below frequently tested support

The market narrative of Bitcoin as a safe haven has worn off

Bitcoin on-chain transactions continue to decline suggesting declining use and market demand

Rating: SELL

Bitcoin Market Cap: $178.9B

Bitcoin Price: -1.4% ($10,311.55 to $10,167.50)

BTC Active Addresses: +11.9% (701.2k to 784.4k)

BTC On-chain Transactions: -10.8% (347.5k to 310.1k)

Technical & Sentiment:

Bitcoin price analysis suggests a small increase before selling off further

Sentiment analysis shows lack of speculative traders, hinting and lack of demand

Positive Price Drivers:

Bitcoin dominance may be much greater than currently reported, showing the true value of Bitcoin compared to altcoins

New Bitcoin Miner modeling shows the bottom of the network security is in, which has historically indicated a bottom in prices

Negative Price Drivers:

Bitcoin price is hovering right over several levels of support, the most times it tests them, the more likely it is to break below

Bitcoin price is failing to respond to the market narrative of “safe haven” while Gold rises to new 6 year highs

BTC Price Analysis: SHORT SELL BTC at $10,360 and $10,560.

Learn more about this trade: http://bit.ly/Aug22BTCTrade

On a macro level:

IF this happens, then we buy:

Gold and Bitcoin correlation increases again

Global Central Banks further cut interest rates into negative environments

IF this happens, then we sell:

President Trump and President Xi Jinping negotiate a trade deal that is productive for both economies

Bitcoin is banned by global banking authorities like FATF and prevented from being used as currency in a regulated financial establishment

BTC Sentiment: Dull but not likely to remain that way.

Sentiment trends the past month in Bitcoin have been rather lackluster

Price has risen and fallen, while sentiment remain near flat

While sentiment appears to be increasing in the near term, price will rapidly move should sentiment increase here given it’s positioning above key support

Price Drivers This Week

Bitcoin: It’s Whatever You Want It To Be

New research by @quantfiction has found a recent trend between the number of tweets about Bitcoin as a safe haven and those published my money managers. This interest trend does not suggest that Bitcoin is a safe haven, but merely that investors believe it to be. Bitcoin, often labeled the “social currency” is likely to have labels attached to it throughout its lifetime.

As per our research over the past weeks, there has been a disconnect between Bitcoin price and safe haven assets like Gold. While Gold price have just reached a new 6 year high, Bitcoin has been trending sideways for several months. Even as Hong Kong protesters have withdrawn funds from the Banks, the US and China discuss additional tariffs, and global economies drive interest rates negative, the market has not been increasing demand for Bitcoin. Chinese investors seeking to flee Communist China with their capital have been storing it in USDT and are likely moving it back into fiat currencies in international markets. The reality is that Bitcoin price moves for reasons beyond the public’s knowledge in addition to basic supply and demand.

As the Bitcoin markets become further institutionalized with regulation and derivative financial products, Bitcoin matures into less of a speculative commodity. There may eventually become a time when the Bitcoin market fully matures and has a strong correlation to Stock. This may be possible because the current price, not utility of Bitcoin, is driven by Speculators. Speculators have more discretionary spending power when the economy is doing well. When the overall economy is doing poorly, there are less people investing in markets who can afford to speculate with funds they may need for critical goods. No one is sure to how Bitcoin performance will be in the next economic recession, but given it’s predicable inflation rate it has become a global store of value that may become the flight to safety as 1 BTC will always be worth 1 BTC.

Bitcoin Miners Signal a Bottom

New Bitcoin Miner difficulty modeling performed by @100TrillionUSD suggests the bottom is officially in for Bitcoin. This chart represents the amount of computing power securing the network. Typically, the higher the price, the higher the computing power. When the computing power bottoms out, it is suggestive that price too has bottomed out. As we can see above, the past three times Bitcoin price has hit relative bottoms then sky rocketed to new highs. This trend is expected to continue deep into 2020 as price often increases both before and after block reward halving. While price may be volatile in the near term, the long term investment horizon appears attractive knowing that the trend may be able to repeat itself for the fourth time. Bitcoin economic seems very trend following based, given we have had two block reward halving in the past, let’s follow those trends going to the future.

Bitcoins Real Dominance

Arcane Research just published a new report on what crypto market map really means, and why it’s inaccurate. For many projects they analyzed, the price had little correlation to their success. However, of the largest companies by market cap, their high market caps typically represented a more successful project. While typical crypto information providers like CoinMarketCap and TradingView place Bitcoins market dominance at 70%, Arcane places that number closer to 90%. Based on liquidity, or the ability to sell your shares, Arcane believes much of the market to be comprised of Ghost Tokens.

These Ghost Tokens are ones that take up market capitalization on crypto price trackers, but have little to no real volume. The issue then becomes, if someone wants to sell their stake, they will drastically effect both market cap and price together. Unlike a highly traded product like Bitcoin, that requires several millions of dollars, before the market capitalization is changed. The issue Arcane has identified is that Bitcoin, which used to have a limited number of competitors, still may have a limited number of competitors when comparing real market cap. Arcane in effect is cleaning up the market dominance meter by removing the dead projects that price trackers aren’t. Unfortunately their Ghost Token blockchains if still producing new blocks, cannot be declared dead, so it is unlikely CoinMarketCap and the likes will submit to the new methodology. This research none-the-less reasserts Bitcoin as the most dominant coin in crypto, and likely to stay that way for years.

Negative Sentiment Driver

What the top personalities on Twitter are saying:

@CryptoGainz1 with 31.3k followers tells patient investors to wait for a move beyond two critical levels.

@CryptoDonAlt with 118.4k followers believes we are in a bearish trend.

@TortoiseTrading with 7,100 followers believes BTC is heading lower from here.

That’s it for the Bitcoin weekly report from Aug 15 - August 22, 2019. Make sure to stay tuned to get Fridays ETH report.