PM End of Week Market Commentary - 12/29/2017

By davefairtex on Sun, Dec 31, 2017 - 1:33am

On Friday gold rose +7.90 [+0.61%] to 1305.10 on moderate volume, while silver rallied +0.07 [+0.44%] to 16.98 on moderately light volume. The buck sank further, losing -0.52%, which accounted for almost all of gold's move higher. The dollar downtrend continues to accelerate, and commodities continue to move higher. Looking at the commodity charts, it appears as though the rally switch was flipped on or about Dec 11th in the commodity complex.

This week – last week of trading in 2017 – was positive overall for the metals, but there were some warning signs as well. While silver led gold, the miners were clearly lagging. Juniors outperformed seniors, which was good, but both miner ETFs did not do as well as gold. That's not a great sign. Copper appears to have slowed its mad rush higher – not so much palladium, which is up a massive 56% in 2017. Cold fusion? Who knows. Most elements are now back above their 200 MA lines.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Silver $SILVER 3.25% 4.85% rising falling falling rising ma200 on 2017-12-29 2017-12-29
Palladium $PALL 2.36% 56.49% rising rising rising rising ema9 on 2017-12-07 2017-12-29
Gold $GOLD 2.03% 12.61% rising rising rising rising ma50 on 2017-12-22 2017-12-29
Junior Miners GDXJ 1.79% 1.94% rising rising falling rising ma200 on 2017-12-22 2017-12-29
Silver Miners SIL 1.62% -3.35% rising falling falling falling ma50 on 2017-12-20 2017-12-29
Platinum $PLAT 1.61% 3.54% rising rising falling rising ma50 on 2017-12-26 2017-12-29
Senior Miners GDX 1.53% 6.85% rising falling rising falling ma200 on 2017-12-22 2017-12-29
Copper $COPPER 1.48% 32.52% rising rising rising falling ma50 on 2017-12-15 2017-12-29

Gold rose +26.00 [+2.03%], ending the week blasting through round number 1300. Since the lows set back on Dec 11th, gold is up $62. Is anyone paying attention? While the forecaster faded during the week, ending at +0.20, Friday's long white candle was a bullish continuation. Gold's RSI7 is 86, which is significantly overbought. That's because gold is up 10 of the last 12 days.

Gold is now in an uptrend on both the weekly and the interim-monthly timeframes – buy signals for both. Only caveat is that the monthly is still awaiting some banking information from the Fed before it is finalized.

The March rate-increase chances closed the week at 56%.

COMEX GC open interest rose +38,739 contracts this week. That's 120 tons of new paper gold – probably the commercials going short as gold rises in price.

Silver rose +0.54 [+3.25%] to 16.98 on the week, running into a bit of resistance at round number 17 on Friday. Candle print Friday was a shooting star, which had a 54% chance of being a bearish reversal. However the forecaster wasn't worried, ending at +0.35. Silver ended the week right at its 200 MA.

Silver's weekly forecaster remains in a strong uptrend (+0.38), but the Dec monthly still remains in a modest downtrend. Silver still appears to be underperforming gold – longer term anyway. It has some work to do to catch up.

The gold/silver ratio fell -0.50 to 75.62, which is bullish.

COMEX SI open interest fell -7,774 contracts.

Miners underperformed, rallying strongly on Tuesday but then succumbing to selling pressure for the remainder of the week. Still, buyers still showed up and bought the dips all week long, even though the miners are hovering around RSI7=80, which is overbought. The XAU forecaster wasn't pleased with the selling, issuing a sell signal of its own on Thursday, ending the week at -0.29.

On the weekly charts, XAU remains in an uptrend (+0.33), and while the monthly forecaster remains in a downtrend (-0.09).

The GDX:$GOLD ratio fell -0.84%, and the GDXJ:GDX ratio climbed +0.26%. Looks a bit bearish to me.


The buck plunged -1.10 [-1.19%] to 91.82, making a new low on Friday. The move lower in the buck appears to be accelerating, with a meaningful support break happening on Friday. Money is definitely fleeing the dollar, which appears headed to a re-test of the 91 low set back in September. Friday's black marubozu candle might be a reversal (35%) but probably isn't. Forecaster closed the week at -0.54, which is a relatively strong downtrend.

Weekly forecaster remains in a downtrend (-0.20), while the interim monthly forecaster issued a sell signal. Ouch. That's down in all 3 timeframes. Is this because of the commodity rally? Increased inflation expectations? Its hard to say. So much for my “dollar rally” thesis.

US Equities/SPX

SPX fell -9.73 [-0.36%] to 2673.61. After three days of slow movement higher, SPX sold off hard right at end of day on Friday, the last trading day of the year. The bearish engulfing candle had a 43% chance of marking the top – but the daily forecaster was not worried, ending the week at +0.50. The move took SPX below its 9 MA for the first time since mid-November.

Weekly and monthly charts both show SPX remains in an uptrend although the weekly forecaster dropped -0.14 to +0.12. If it continues at this rate, it will emit a sell signal next week.

Sector map looks like the market ended the year moving back into yield, with tech and telecom the biggest losers. I'm not sure that means anything.

VIX rose +1.14 to 11.04.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Gold Miners GDX 1.53% 6.85% rising falling rising falling ma200 on 2017-12-22 2017-12-29
REIT RWR 1.48% 1.70% rising falling rising falling ma50 on 2017-12-28 2017-12-29
Utilities XLU 0.44% 7.86% falling falling rising falling ma200 on 2017-12-19 2017-12-29
Energy XLE 0.40% -4.34% rising rising rising rising ema9 on 2017-12-18 2017-12-29
Industrials XLI 0.36% 21.19% rising rising rising rising ma50 on 2017-11-27 2017-12-29
Materials XLB 0.31% 20.99% rising rising rising rising ema9 on 2017-12-18 2017-12-29
Homebuilders XHB 0.25% 29.79% rising rising rising rising ema9 on 2017-12-15 2017-12-29
Cons Staples XLP 0.04% 9.47% rising rising rising rising ma200 on 2017-11-28 2017-12-29
Healthcare XLV -0.28% 19.50% falling falling rising falling ema9 on 2017-12-29 2017-12-29
Cons Discretionary XLY -0.29% 20.22% falling rising rising rising ema9 on 2017-12-29 2017-12-29
Financials XLF -0.50% 20.30% falling rising rising rising ema9 on 2017-12-29 2017-12-29
Technology XLK -0.91% 31.21% falling rising rising rising ema9 on 2017-12-26 2017-12-29
Telecom XTL -1.14% -2.25% falling falling falling falling ma50 on 2017-12-29 2017-12-29

Gold in Other Currencies

Gold rallied in all currencies, rising +19.58 in XDR.

Rates & Commodities

TLT bounced back strongly, rising +1.68%. Boy, its smash one week, and rally the next. TLT forecaster issued a buy signal on Tuesday, and ended the week at +0.55. Of course, that could all change next week, the way things have been going. TY moved up +0.38%, with its forecaster issuing a buy signal on Wednesday. TY weekly and monthly remain in downtrends, however.

JNK rose +0.25%, moving higher off last week's buy signal. I'm still not sure about JNK, but the BAA bond yield charts remain in downtrends, both weekly and monthly, which suggests that lower quality debt still has plenty of buyers.

CRB shot up +3.19%, breaking out to a new closing high to values last seen in early 2017. As a reminder, this was only a 4-day week, and a holiday week at that – this was a large move. All 5 sectors rose, with energy leading (+3.77%).  Here's what that looks like: you can see that the rallies started (roughly) on Dec 11, and it appeared that industrial metals was the sector in the lead most of the time.

Crude rose +1.74 [+2.98%] to 60.10, breaking out sharply on Tuesday (because of Libya's pipeline explosion?) and managing to close above round number 60 on Friday. The move on Friday saw a failed rally, however, with prices dropping 40 cents off the highs, resulting in a shooting star candle which had a 45% chance of marking the top. Forecaster concurred, dropping -0.19 to -0.07, which is a sell signal. The weekly forecaster remains in an uptrend (+0.14), while the monthly is still in sell mode (-0.16). The EIA report was bullish this week (crude -4.6m, gasoline +0.6m, distillates +1.1m), and that helped prices to some degree also. Rig counts were down 76, mostly because of cold weather in Canada.

Physical Supply Indicators

* SGE premiums over COMEX are at +2.42, down significantly as a result of gold's rally.

* The GLD ETF tonnage on hand was unchanged, with 837 tons in inventory.

* ETF Premium/Discount to NAV:

 PHYS 10.59 -0.76% to NAV [down]
 PSLV 6.34 -0.97% to NAV [up]
 CEF 13.40 -1.6% to NAV [down]

* Bullion Vault gold (!/orderboard) is at a slight discount for gold and a slight premium for silver.

* Big bars premiums were: gold [1kg] 1.1% and silver [1000oz] 2.77%.

Futures Positioning/COT

In gold, the commercial net position fell -21k contracts, which is just a moderate drop. Almost all were new shorts (+20k) but a few longs (-757) were sold too. Commercial long position is almost entirely intact. Managed money net rose by +27k, much of it short covering (-15k) but some long buying too (+11k). Commercials went short, managed money covered, but overall it still looks bullish.

Silver saw little change; commercial net fell by -2.1k, a tiny change – 10% of what happened last week. Mostly it was new shorts (+2.4k) with a few new longs too (+350). Managed money net fell by -7.2k which is also small vs last week, most of that being short-covering (-5.3k) but some new long buying too (+1.8k). Silver COT is much more bullish than gold.

Gold Manipulation Report

There were no after-hours spikes in PM this week.

Grey Swan Status


To me the overall commodity rally was the real news - the metals were just one component of a larger picture this week, and the plunging dollar certainly didn't hurt - more than half of gold's move was a currency effect.  The mining shares were the sole sour note, running into a fair amount of selling pressure for much of the week.  I suspect traders are ringing the cash register after the 13% rally.

Gold and silver big bar shortage indicators are showing no sign of shortage; premiums on big-bar gold and silver are normal, GLD tonnage was unchanged, and ETF discounts were more down than up. Shanghai premiums dropped substantially, as is normal after a gold rally.

Next week is the new year. We get FOMC minutes on Wednesday, a Non-Mfg ISM report on Thursday, and Nonfarm Payrolls on Friday.

Also starting next month: the Fed starts unwinding the balance sheet more seriously - 1.4 billion dollars per trading day.  Commodity rally = inflation, plus an increase in supply.  Do we think that's good for bonds?  No, it is not.

So anyone following my writings about PM over the last number of years knows that I'm not a gold cheerleader.  When the metal looks ugly, I say so.  And so now, when I tell you that I just have this feeling...well you can believe me or not.  But I do.  I have a feeling.  Perhaps now might not be the best entry point (after a multi-week rally higher), but the sentiment even here at PP about gold is utterly dismal.  Even Jim, gold champion for decades, is nowhere to be found.  (Not picking on Jim - he's just an indicator).  Mrees talks about dusty silver he never visits, "only grandpas buy gold", and the entire world is focused on bitcoin.  Its the future, after all.  Our gold chartists have deserted us.  Nobody comments about PM anymore.  People seem embarrassed to say they own gold.

And even though - truly - "nobody cares" among the public, gold is right around 1300.  And silver utterly failed to break below 15.50, and managed money had loaded up the boat to see if they could make that happen.  They couldn't.  When a market fails to collapse when "nobody cares" and the shorts are pounding the hell out of it, that's a very good sign.  When prices follow sentiment, then sentiment is right.  When prices stop following sentiment...well, that's why I have this feeling.

Michael Belkin has an algorithm that gives him guides as to what's low, and what's high.  He likes silver - and silver miners here.  Just doing the math, I have to agree with him.  Here's a KWN interview (try to ignore Eric's tinfoil hat bit at the start) to this effect:

Full disclosure: I am long both silver and silver miners here.

Happy new year!

Forecasting code – weekly – says:

Uptrend: gold, silver, crude, copper, miners, SPX.

Downtrend: 10-year treasuries, BAA bond yields, USD.

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Giant Elk's picture
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We're still watching

Dave - Regular reader, infrequent commenter. Many thanks for your commentary - extensive, objective, disciplined and consistent. An excellent learning experience. It is a gift. We may not be commenting but we are still reading. Best for 2018. Here's to another year of PM commentary!

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that tingly sensation

just to play Devil's Advocate --and as a disclosure, I share your feeling that PMs have finally done their building-a-base penitence, as does McClellan-- all the players who appear to want to see gold crushed like a bug at every turn--might they have the same feeling, in which case shouldn't we expect multiple attempts to crush the rally in the new year?

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btc: omg buy!

And now a buy signal.

I'm seeing in all timeframes.  Not financial advice, etc. :)

Its funny.  I no longer want to give my opinion on where it will go, because a) usually I'm wrong, and b) my code will figure out the answer in realtime - and do a much better job than I will. Which is embarrassing all around.

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The Distrubuted Ledger Technology Hashgraph


Anyone have any insight into the Distributed Ledger Technology called Hashgraph ?

The story is profiled on Mike Maloney's latest video in his Hidden Secrets of Money series which is mostly a real good explanation of how Bitcoin works. 

It sounds really innovative and more efficient than Bitcoin. 


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closed source vs open source

I'm just guessing but the sense I have is that a semi-closed-source system with patent protection on it will be less compelling as a "global resource" than something that's open source.

There is something mystical about everyone contributing to open source that gives a project legs, and helps foster buy-in.

Linux is a phenomenon because nobody really owns it.  Apache too.  There are so many open source projects that many people really aren't so happy with something that isn't open sourced.  It will be a tough hill to climb for hashgraph, I suspect.

Given bitcoin's "beta" nature (the protocol is very annoying to parse - words fail me) it is inevitable that there will be a replacement - either on the bitcoin codebase, or something else.  Bitcoin can't possibly survive as is.


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Only way to go...

but that's just my opinion (re: open source vs commercial or proprietary apps).  It just sets the antennae on my foil hat tingling.  Kind of like the "tingle" a well-renowned, news commentator had up his leg (recently and not so recently), only this sensation is in my head.  Weird, right?  Poof! (sound of exploding head). "Where ignorance is bliss, 'tis folly to be wise." or "a fool and his money are soon parted", or better yet, "you can't fix stupid". Yeah, baby. Love those mixed "metaphors".

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BTC buy

Looks like BTC has punched through your $13K support zone three times now and bounced back above $13K. So it seems to be doing a classic "basing" between $12K and $14K. 

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Thanks Giant Elk.   Its nice to know you guys still care.  Seriously.

Then again, if you *didn't* care, it would be a more bullish sign.  :)


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btc sell - again

Well we're back in sell mode in the 4h timeframe.  The daily has been in sell mode for the past 3 days - forecaster is down around -0.35.

I'm seeing a larger pattern of lower highs & lower lows.  That's bearish.   Aussie banks are pulling the plug on some bitcoin players.  South Korea too.  Anyone getting the sense that this might be an orchestrated bubble popping by the central banks - but slowly, starting in the peripheral markets first?

Michael Belkin suggested that a pullback to the 200 day MA (currently at 6123) would still leave bitcoin in an technical uptrend.  However it wouldn't feel much like an uptrend to those who bought at $19k.

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Hashgraph - The Goodrich All Terrain Tire.

Hashgraph is just one small piece of a much bigger problem. And it's centralized \ private company with seemingly nobody caring about it in the digital asset space. It appears to be just another 'me too' .

It's just one more consensus mechanism. There are already many. It's a copycat and unproven.  Consensus mechanisms are just one part of many, many, many of a real blockchain.   I.E. - if we compared a blockchain like Ethereum to a car, asking about the Consensus Mechanism - would be the equivalent of asking what kind of tires are on the car.

Then there are many brands and types of tires. So in this analogy - let's call Hashgraph a BF Goodrich - All Terrain. Except with all thing cryptographic, it is untested which means you need to battle test it for a decade before you can be confident it doesn't have unknown vulnerabilities.

It's supposedly a twin of IOTA which has already been guilty of faulty programming and security holes:

Here are just a few more of many:


  • Proof of work
  • Proof of stake
  • Byzantine fault tolerant
  • Deposit based consensus; Tendermint
  • Federated Byzantine Agreement (FBA)
  • Proof of Authority
  • Proof of Capacity
  • Proof of Importance
  • Proof of Burn
  • Tangle
Looks like Mike Maloney got side-tracked in his research. He forgot about the most important part of a blockchain - Social Consensus - Hashgraph has none.







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social consensus

I agree with Mark.  "Social consensus" is the critical element, bar none.  Without it, you've got nothing.

It is why Coke sells more sugar water than RC cola - not because Coke uses better sugar, better water, or even that the end result is better tasting.  In the Coke world, they call it branding.

Why does branding work?  How does it work?  Why does our little brain light up when we see that Coke logo?  Its because we identify with the product in some way.

The true genius of bitcoin launch was its grass roots marketing effort.  Word-of-mouth, grass-roots marketeers with a vested interest in the product's success, multiplied by a ponzi get-rich-quick element, with a liberal coating of "open source" plus a semi-subversive, counter-culture hose-the-bankers vibe added on for good measure.

Which of these "social consensus" (i.e. marketing-genius) elements does hashgraph have?

Or to put it another way - how will someone ever feel as though they are going to "identify" with hashgraph?

Hose the banksters?

Open Source Currency?

Get rich quick?

Vested interest in its success?

I get the sense people are looking for "the next bitcoin" pretty hard right now.  Reminds me of the book, "The New New Thing."  Back during dotcom, the striving to find "the next Netscape", or "the next Microsoft" had an incredible urgency to it.  Thousands of startups sought to be that new-new thing.  Of course, that all faded once dotcom blew up...

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... of course, that all faded once the dotcom blew up

Just a comment.

There never was another Microsoft;

There was Google, but based on almost magically coincidental continuous alignment of goals and source, I strongly believe Google is and always was the NSA.

And there was Amazon, but it wasn't software; it was sales.

And there was Papa John's, but that was pizza.

But those didn't fade. And they weren't startups trying to be the next Microsoft. They weren't trying to copy. They weren't trying to outmicrosoft Microsoft. They were simply trying to grow as fast as they could whereever the numbers made the most sense.

Oh, yes: there also was X-prize. That also was interestingly similar.

I actually do half think it's possible that Bitcoin also was/is NSA, but at a ten percent or less probability (I was going to say three, but remembered previous e-gold), and then only if the blockchain technology is actually transparent to them. Improbable, but not impossible, I think.

I also remember when electronic gold was initially being marketed, with the blockchain technology back in 1992. That got squashed, but it had its heavy proponents. The libertarian leader James Lark III was one of them, going all over talking about it. Indeed, the company that did this (starting in 1996) got squashed by TPTB without justice. Specifically, the company (e-gold... read about it in wikipedia) was squashed under ex-post-facto law change.

Actually, considering all that happened, and then how magically "right" the bitcoin startup was, I think maybe I'd better get rid of probabilities on whether bitcoin is NSA. It could be.

davefairtex's picture
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gold money flows

So I was over visiting our friends at today wrestling with how they measure scarcity.  Let's see if I can explain it.

Mostly, it boils down to this: what's the premium (or discount) applied to the preference of having your gold in your vault, vs. the promise of gold delivered N months from now.  Lots of names for this - basis, cobasis, backwardation, contango - different ways to talk about the same thing: the spread between spot and futures.  Gold now, vs gold later.

So instead of wrapping your brain around all of it, here's the simple story: when the red "cobasis" line rises, that means the spot price is rising faster than the futures price.  Traders are increasingly preferring gold now, to gold later.  When that happens alongside a rising gold price, then that tells you "spot buying" is driving prices higher, rather than "futures buying."  Traders are expressing a preference for gold now.

In the chart behind the link below, you can see that red cobasis line start to shoot higher on Dec 28th, jumping from -2% up to -1%, which is a pretty big move.  If we saw spot prices charted on top of the futures prices, you'd see the spot price up (perhaps?) $15, when the futures price was up only $10.  That's what the rising red line means.  Money flowed into the spot market, and that pulled futures prices higher.

Put another way, a rising cobasis line alongside a rising overall price means that COMEX wasn't doing the heavy lifting.

Unfortunately I don't have access to daily changes in the cobasis, or else I'd plug them into my AI to see if cobasis moves were useful in predicting price direction.  I suspect they probably would be.

I wonder if I could persuade our friends over there to part with a daily cobasis timeseries dating back to 1975...perhaps Bron is listening...I'd be happy to do an analysis on how much that helps my AI resolve price predictions... 

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Gold prices rose Tuesday for an eighth session in a row

"02:03 PM EST, 01/02/2018 (MT Newswires) -- Gold prices rose Tuesday for an eighth session in a row, settling at their highest level since September. Prices got a boost from a weaker dollar, with the ICE U.S. Dollar Index down a fifth-straight session, and concerns surrounding protests in Iran feeding safe-haven demand for the precious metal. February gold added $6.80, or 0.5%, to settle at $1,316.10 an ounce. That was the highest finish for a most-active futures contract since Sept. 20, according to FactSet data. Silver gained 0.3% to $17.20 per ounce while copper shed 0.7% to $3.28 a pound."

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Ok, let's say for fun sake bitcoin is form the NSA

Just for fun, say the inventor of bitcoin was an NSA guy.  Sure it is possible, maybe even plausible. But you have to understand the psyche of the school of cryptography.  There is the cypherpunk movement. Understanding the way these people think is extremely important.


In the 80s and 90s they dreamed of a world without the need for governments where functions could be done with cryptography itself – even the money. This was all started and written about in fiction novels popular in this sub-culture. Efforts to make a bitcoin-like money went on for decades. It wasn’t just sprung on the world. Satoshi Nakamoto was likely a cypherpunk as he released the whitepaper to the mailing list they used.

Since the world of cryptography is extremely small, and about the only work you can get in the job description is for one secret agency or another for nations – it is very plausible that Satoshi had a day job at some agency. He might have considered himself a ‘freedom fighter’. All of the mailing logs and forums are still there frozen in history so you can study his writing, attitudes and suspicion of all governments. He quit the project when he learned the people he had handed the project over was scheduled to speak with the CIA at their request.

Obama is said to have issued a secret request for the NSA\CIA to find out if Bitcoin was a Russian or communist plot to overthrow the USA banking system. They became convinced it wasn’t.  In likelihood it was Hal Finny who died of ALS in 2014 as his sickness was getting worse – Satoshi’s writing became less frequent until he quit altogether – roughly the same time as HAL was unable to continue as he was paralyzed. He was the first person \ only person Satoshi ever transferred a bitcoin during testing.

He wrote about his experience in his blog as one of the last things he was able to write. “Bitcoin and Me”. He likely didn’t do it alone – but Hal was stringent anti-government secrets and agencies and was a pioneer in PGP encryption for regular people to protect themselves.(My own tribute to Hal Finny:)


So, let’s say Bitcoin (poorly written code as it was) was a snoop. He left the code to a team of libertarian-leaning cyberpunks to finish and over 70% of the code has been completely re-written. Only the principals of how it works remain. Reading the white paper, yourself, you may be reminded of the constitution with its breakdown into three equal branches.

So then…what about the other 1300 blockchains. Some are somewhat copycat of the original bitcoin but many were completely rewritten from scratch (see Ethereum). So what is the point?  We don’t know who invented pants, but we wear them anyway. We don’t know who invented geometry but it works without knowing who came up with it.  Bitcoin glued a bunch of technology together that had been constructed over two decades by several teams in a novel way that created game-theory and an incentive system to encourage people to run the network (being paid in a bitcoin for the reward with the hope it may be worth something someday).

All these blockchains and distributed ledgers have various forms of cryptography. Some old, some new. The world of cryptography has exploded and companies working on blockchain solutions can’t find enough as new generations take on the challenge in school.

So if Satoshi was an NSA guy, let’s thank the NSA for unleashing a new wave and generation of innovation, business models, privacy, and the possible end to many of the government agencies that cause harm and friction in our lives. (See IRS). Smart contracts to automate taxes could make tax collection agencies obsolete and we can put that tax money to better use.

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cobasis and price predictions

Hi Dave. You "boiled" it down pretty good and yes, basis/cobasis is useful in predicting price direction. We use it in a proprietary algorithm to calculate the Monetary Metals Fundamental Price which we publish daily on our website (and to trade our hedge fund). BTW, the market data we need was not recorded prior to 1996.

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