By lightspeed

Current market depth (BTER):

Bids: 0.29 Million NXT
Asks: 0.24 Million NXT

Prognosis: April’s price profile has continued its slow bleed and we may now re-test the mid-march low of 4100. The month’s trading so far has been characterised by many small trades interspersed with some very large buy-ins which, in a few cases, moved the price a full 500 NxT in a single trade. In the absence of any other news, the current trend would be expected to continue, however, it’s the ‘any other news’ bit that will form the theme of this report.

Reach on BTER at the moment: (Averages in brackets)

10,000 NXT = 4800 (4799) Satoshis
50,000 NXT = 4900 (4877)
100,000 NXT = 4900 (4888)
200,000 NXT = 4897 (4998)
500,000 NXT = 5000 (4958)

Meanwhile, a 500,000 cashout right now would take us straight to 3000. So good liquidity on the buy side (there is currently someone waiting to get 255,000 offloaded @ 5000 Satoshis  ) but not so great if your checking out.

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ENGINEERS vs ECONOMISTS
– and BLOCK 76000

Before reading on, I’d like readers to ask themselves this question: What does “Block 76000” in the NxT testnet blockchain mean to you ?

If the answer is ‘nothing’ then you’re possibly in the ‘economists’ trading category from the perspective of today’s report. If the answer is ‘something’ then you’re more likely in the engineer’s category. Hopefully, knowing which group you fall into will help you decide if you’ve over or under valued your investment and interpret the report accordingly.

If you ask an engineer for a description of an aeroplane, they’ll likely say something like “a flying machine”. On the other hand, if you ask an economist, they’re more likely to answer “an expensive asset”.

These two perspectives on the same object come from disciplines which are inherently independent and yet they form complimentary accounts such that without either, we don’t have the full picture as far as an investment proposal is concerned. It’s not enough for an airline to know that the ‘flying machine’ works and can get its customers to the correct location for sipping their ‘Bahama Mama’s’, they also have to know how much it will cost them.

Conversely, there’s not much point in knowing the price of something without also knowing what it is you’re buying. Imagine a supermarket where all the shelves only had prices and no products. You’d need a strategy to infer the nature of the product from its price. So maybe you only buy the expensive stuff because that must be the ‘good stuff’. You then checkout only to find you’ll be feeding your family of 5 this month on a couple of organic smoked salmon, 15 tins of fois gras and a few bottles of champagne followed by 3 weeks of starvation.

When the engineer’s and the economist’s views are in balance, we have a correct valuation for the asset. In other words, the market has full information about both the cost and potential revenue of that asset. When these views are out of balance, we have a miss-valuation. i.e. the market is trading without full knowledge of the asset’s properties and our view is distorted in either the economist’s or the engineer’s direction. (We are either looking at the price only without knowing what the asset is or we are only looking at the function without knowing the price).

WHAT HAS THIS GOT TO DO WITH NxT ?

During the last few weeks, some strange trading patterns have appeared. Firstly there is a background ‘noise’ of very slow price decay over lots of sub-10,000 NxT trades. However, superimposed on this are 2 distinct categories of trade observed having very different behaviours:

[1] – some very large, almost desperate looking, buy-ins which temporarily pushed the price up by about a months worth of ‘background noise’ at a time

[2] – some very large and equally desperate looking cashouts

TESTNET BLOCK 76000

As a background to all this, there is some industrious and highly strategic activity going on by the developers of the NxT network services.

About an hour prior to the writing of this report, we passed block 76000 on “testnet” (NxT’s auxiliary ‘offline’ blockchain used for testing new technology). This is possibly the most significant single event to have occurred in the evolution of the network since launch because it signifies the blockchain’s asset publishing service going live for testing purposes. For this to have been achieved, many challenges have been faced and solved by the developers including the implementation of new server side and client side technologies which will now start undergoing some heavy testing. Block 76000 therefore probably represents the point at which NxT reached its highest ever utility value as a technology and whoever the trader was that cashed out 11553 NxT right at that point at a multi-week low price of 4322 deserves my thanks since it was them that provided the inspiration for this week’s report.

On the face of it, therefore, the 2 categories of trading above would appear to follow the distinct and contrary profiles of the “2 sides” of this coin:

a) – engineer’s category: traders who are following its technical evolution and ‘buying in’ as it attains an ever higher utility value

b) – economist’s category: traders who are following its price evolution only and ‘selling out’ based on the decaying market valuation

THE PARALLAX VIEW (Apologies to Warren Beaty)

As we observed earlier, both the engineer’s and economist’s view are relevant and in fact essential in forming an appropriate valuation. But when one is out of balance with the other, we either have airliners with no price tag or supermarket shelves with no product description. In the case of NxT’s valuation, Market Report notes that one of these views is plastered over every cryptocurrency exchange, graph, ticker and forum on the internet, while the other is buried away where only interested parties care to roam (and still have to do some digging at that). In fact, you have to go to an obscure forum, 11th down from the News and Announcements section on nxtforum.org in the ‘Technical Discussion’ section called ‘Testnet’ to find this:

This major imbalance in the two sources of information in the view of your humble commentator is likely to cause a distortion in the price valuation of the NxT technology – a kind of ‘parallax’ which may account for the bi-directional spikey trading behaviour we’re seeing. (Exemplified by our friend who dumped their 11553 NxT at the precise moment of highest value and lowest price).

Finally, just in case you haven’t yet guessed by now which is the under-stated view then here’s some stuff I’d like to sell you ! 

Usual health warnings apply. In the meantime, as always..

Happy trading !

p.s. countdown to the ‘live network’ asset exchange launching is here: http://www.nxtcommunity.org/