Today is the 17th weekly update of the Diversification Protocol. This protocol is designed to allocate a weekly income or funds to be invested mostly to BTC when it is undervalued and mostly to gold and optional stable coins when BTC is overvalued. It also tells you to spend gold for living when BTC is undervalued and BTC for living when it is overvalued. This will create higher returns on your investment through a full cycle and reduce stress in a bear market. HERE you can read the protocol in dept.
The valuation is done by using the Mayer Multiple and compare it to historical values. The Mayer Multiple is the current BTC price divided by the 200 day moving average. We use data from mayermultiple.com. When you want to be updated on the multiple several times a day you can follow THIS twitter account.
Because I just started the protocol, I didn't accumulate gold and stable coins yet. In this update I will exactly follow the protocol, but since I only start saving gold and stable coins from a multiple of 1.6, I will only be able to execute it 100% according the rules after that point is broken. Funds invested in BTC today will eventually at least partly be converted to gold, since the BTC accumulates in the same wallet and a percentage of the total BTC in this wallet will be allocated to gold at higher valuations.
The current multiple
Weekly allocations of funds
The protocol will be slightly boring till we get to a multiple of 1.6, till then we allocate 100% in BTC because it is undervalued. With the current 200 day moving average we need a BTC price of over 14,077 USD to start allocating to gold and Stable coins. This can take days or months, but it is good to be prepared already.
Important news of the week
Lightning Network reached two important milestones!
Lightning Network is doing extremely well, the capacity recently reached 100 BTC and there are more than 10.000 open channels. The network is still improving every day and adoption is skyrocketing. Lightning is accepted by more and more merchants, CoinGate just added another 100 European businesses to accept Lightning in an trial.
World largest asset manager turns to Bitcoin
Blackrock, world biggest asset manager and ETF provider worth a staggering 6.3 Trillion dollars announced their intention to investigate investment opportunities on Bitcoin. The market immediately moved up around 10%. This surge makes a lot of sense, since 1% of capital from this firm could pump 63 billion dollars into the industry and this would certainly skyrocket the price. Furthermore, it greatly improves the reputation of Bitcoin among institutional investors, many other firms could follow.
https://www.nasdaq.com/article/blackrock-goes-bitcoin-cm993968
CME Bitcoin future volume almost doubled in the 2nd quarter
Despite the bear market and the declining volume on Bitcoin exchanges, the volume on CME Bitcoin futures rose 93% over the 2nd quarter. This shows that institutional interest is rising and and the ‘Wallstreet herd’ may come in soon. However, futures are also famous for market manipulation thus the rise in volume could also hold the markets down.
The Bitcoin price is slightly down again this week
The Bitcoin price rose 17.8% this week from 6292 to 7412. The announcement of Blackrock flipped the sentiment from bearish / neutral to bullish overnight. Beside the Blackrock news also a lot of other bullish news came out and many in the industry called the end of the bear market. Off course one negative announcement or event can switch the sentiment to bearish again, but at least we are on the right path again! With an ETF and big wealthy firms approaching there could be a huge bull market on the horizon!
Fundamentals and valuation
In the history of Bitcoin the multiple was lower than today only 18.31% of the time. Since the multiple today is 0.84 while the moderate is 1.54, there is 45.45 % discount on BTC according to this valuation method!
Long term the prospects are still extremely bullish. Lightning Network and Segwit adoption are still growing and improving faster than expected and can boost adoption for day to day payments, micro transactions and Dapps. Wall Street, governments and central banks are on the sidelines to come in and could inject huge amounts of money. Furthermore, the Mt. Gox selling fear is off the table and an ETF is coming closer. Short term sentiment is neutral to bullish, but for the long term almost everything is very bullish.
Disclaimer
This is no financial advice, just my view on the market.
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