Today is the 9th 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 16,461 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

Investigation market manipulation

US regulators will start investigating the BTC and ETH market on manipulation like spoofing and wash trading. The price of Bitcoin tanked on this news, it is important to note that 2000 BTC was market sold exactly 15 minutes before the news was published. I think it is mostly FUD and an attempt from the government to create excuses for extra regulations.

Long term Bitcoin doesn’t care about regulations. Beside that it is an global network so the USA is only a part of the market. Regulation will not stop innovation on Bitcoin, but only move it to other areas in the world.

https://www.bloomberg.com/news/articles/2018-05-24/bitcoin-manipulation-is-said-to-be-focus-of-u-s-criminal-probe

Bitcoin hash rate all time high

Although the price of Bitcoin is down around 60% from the recent peak and mining is less profitable the hash rate is still growing and even reached a new ATH. Hash power is the fundament of the security of the network and thus one of the most important drivers of it’s value. The fact that hash power is still rising could indicate positive future expectations.

https://cryptona.co/bitcoins-hash-rate-is-telling-a-bullish-story/

Segwit adoption peaks 40%

Segwit adoption reached 40% and multiple 2MB+ blocks are found already. This indicates that scaling through Segwit is working while there is still improvement ahead! Segwit is the biggest break through in the history of Bitcoin: The on chain capacity is certainly increasing and innovative tech like Lightning Network, Schnor Signatures, MAST and more can now be build.

http://bitcoinist.com/segwit-now-comprises-almost-half-bitcoin-transactions/

Craig Wright under negative attention

Craig Wright, the guy who claims to be Satoshi and one of the best known Bcash scammers managed to catch the attention of the crypto community twice this week and it was not that positive at all.

First on a conference in Taiwan:

And later he told Rwanda: I have more money than your country.

This doesn’t really look like the profile we all have in mind of Satoshi LOL

Bitcoin Gold and Verge 51% attacked

A successful 51% attack is carried out on Bitcoin Gold and Verge as well. This is a clear lesson for the crypto community that being a minority PoW chain doesn’t make sense and comes with huge risk. When you want to store your value in a crypto currency NEVER store it in a minority PoW chain. A 51% attack can be very rewarding for the attacker, they can steal from an exchange first and profit from a short position when the cryptocurrency is suffering on top of that.

https://www.crowdfundinsider.com/2018/05/133936-verge-bitcoin-gold-and-monacoin-hacked/

The Bitcoin price down again

The Bitcoin price went down more than 10% from 8283 to 7330 dollar this week. Except for the news about the investigation on manipulation of the Bitcoin price not much happened, I think it was mostly caused by whales dumping BTC (chart looks funny, very flat with instant strong drops). Many are speaking about rich entities manipulating the market down to accumulate as much cheap BTC as possible, and this makes a lot of sense to me.

Fundamentals and valuation

In the history of Bitcoin the multiple was lower than today only 8,5% of the time. Since the multiple today is 0.71 while the moderate is 1.56, there is 54,5% discount on BTC according to this valuation method!

Long term the prospects are still extremely bullish. Lightning Network is still growing and improving and can boost adoption for day to day payments. Wall Street, governments and central banks are on the sidelines to come in and could inject huge amounts of money. Short term sentiment is neutral, but for the long term almost everyone is bullish.

Disclaimer
This is no financial advice, just my view on the market.

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