Augur Price Analysis - Version 2 on the horizon
Augur is a decentralized oracle and prediction market protocol built on the Ethereum blockchain. REP is an ERC-20 utility token used on the Augur platform. The current REP/USD spot price is down 91% from the all-time high set in January 2018. The token has a market capitalization of US$116 million, with US$4.9 million in trade volume over the past 24 hours.
The Augur protocol was founded by Jack Peterson and Joey Krug in 2014 with an alpha version of the platform released in 2015. Peterson is a National Defense Science and Engineering Graduate Fellow and holds a Ph.D. in Biophysics from the University of California, San Francisco. Krug is a 2016 Thiel Fellow, which allowed him to drop out of Pomona College in order to work on Augur full-time. Krug also joined Pantera Capital in June 2017 as a technical advisor and co-chief investment officer. Notable Augur advisors include Vitalik Buterin, one of the founders of Ethereum, and Lightning Network founder Elizabeth Stark.
The Forecast Foundation, also founded in 2014, is a not-for-profit group of software developers dedicated to open-source trading protocols and decentralized applications that focuses on development work for the Augur protocol.
The protocol was initially written in Serpent, which was found to have several vulnerabilities, and lead to a rewrite of the platform in Solidity. A beta version was released in March 2016 and the mainnet version was released in July 2018. The Augur Core development team currently consistents of 12-15 people geographically dispersed across the globe.
The Augur ICO was one of the earliest, occurring from August to October 2015 and raising US$5.3 million by collecting 19,053 Bitcoin (BTC) and 1,176,816 Ethereum (ETH). Most of these assets were sold soon after the ICO. REP tokens were sold at a price of approximately US$0.63 each with about 3,500 users participating. Unofficial financial holdings of the Forecast Foundation, as of March 2018, included US$2.75 million, 35,000 ETH, 1,200 BTC, and 2.1 million REP. More recent financial information was unable to be obtained.
The REP token generation event created 11,000,000 REP tokens, 8.8 million sold through the crowd sale, and 2.3 million tokens allocated to founders and advisors for continuing operational costs. According to Crunchbase, Augur had an additional seed round in June 2016 and a venture round in October 2017, both for undisclosed amounts.
Augur markets follow a four-stage progression: creation, trading, reporting, and settlement. Anyone can create a market based on any real-world event. Trading can begin immediately after a market is created, and users are free to trade on any market. After the event on which the market is based has occurred, the outcome of the event is determined by Augur’s oracle. Once the outcome is determined, traders can close out their positions and collect their payouts.
REP is needed by market creators and by reporters when they report on the outcome of markets. Reporters report on a market by staking their REP on one of the market’s possible outcomes. By doing this, the reporter declares that the outcome on which the stake was placed matches the real-world outcome of the market’s underlying event. The consensus of a market’s reporters is considered the “truth” for the purpose of determining the market’s outcome. If a reporter’s report of a market’s outcome does not match the consensus reached by the other reporters, Augur redistributes the REP staked on the non-consensus outcome by this reporter to the reporters that reported with the consensus.
By owning REP, and participating in the accurate reporting on the outcomes of events, token holders are entitled to a portion of the fees on the platform. Each staked REP token entitles its holder to an equal portion of Augur’s market fees. The more REP a reporter owns, and reports correctly, the more fees they will earn for their work in keeping the platform secure.
Although REP plays a central role in Augur’s operations, it is not used to trade in Augur’s markets. Traders will never need to own or use REP, as they are not required to participate in the reporting process.
Several companion sites exist to access Augur market history or plug into the Augur markets with MetaMask, including; https://exploreaugur.com, https://predictions.global, https://reporters.chat, and https://guesser.com. The Augur platform also currently supports Metamask, Trezor, Ledger, and Edge.
The competitive advantages offered by Augur, compared to other betting platforms, include; no betting or winning limits, low fees, and pooled liquidity. Thus far, the Augur platform has struggled to address low accessibility, time to sync with the platform, poor design, lack of options, gas costs, and ETH price volatility. Over the past few months, Augur has added default sorts and filters to disincentivize bad wording and data, decreasing invalid markets from 14% to 3%.
Version 2 (V2) of the platform is slated for release early next year, with Dai (DAI) denominated markets being the biggest addition to the platform. V2 will also include new trading and betting UIs (see below), easier log in options, the ability to bet on whether or not a market will be invalid, and faster disputing periods. Krug talked more about the upcoming V2 changes in a recent podcast and gave a presentation on the upcoming changes during Ethereum’s latest conference, Devcon V.
V2 will also introduce a new REP price auction. Two double auctions will take place each week, where a pot of DAI and REP are sold for one another, and a REP price is calculated from the sale prices. The platform will mint a small amount of REP to compensate for any losses from the auction. This will introduce a small amount of inflation to REP in exchange for a decentralized price feed used to maintain platform security.
Two of the most popular betting markets are sports and political events, both of which fall under heavy regulatory scrutiny in the U.S. and elsewhere. The European Union, however, has far fewer regulatory guidelines surrounding online betting. According to Statista, licensed online sportsbooks worldwide account for upwards of $39.7 billion in revenue. In 2017, eSports betting alone generated over US$650 million in revenue, projected to create upwards of US$1.5 billion in revenue by 2020. In May 2018, the U.S. Supreme Court struck down the Professional and Amateur Sports Protection Act (PASPA), paving the way for all 50 states to offer legal sports betting. Investment firm Morgan Stanley also recently projected sports betting to become a US$7 billion to US$8 billion business in the U.S. within five years.
In October 2018, Commodity Futures Trading Commission member Brian Quintenz classified blockchain prediction markets, like those offered on Augur, as binary options, “the CFTC has generally prohibited prediction markets as contrary to the public interest, only permitting them in limited circumstances when it has found that they operate on a small-scale, non-profit basis, and serve academic purposes” also hinting at potential future enforcement actions.
PredictIt, a non-profit New Zealand-based political prediction market run, owned, and operated by Victoria University of Wellington, has seemingly navigated through these murky regulatory waters, becoming increasingly popular in recent months. The website requires KYC, has a US$850 limit per contract, charges a 10% fee on profits, a 5% fee on withdrawals, and reports any profit to the U.S IRS in the form of a 1099, all of which does not occur with the decentralized, no limit offering on Augur.
On the network side, Augur activity has continued to decline over the past year. The total USD value locked in Augur has also declined to new yearly lows, which is a function of both a decline in activity and a decline in ETH value. An increase in any of these metrics should be a sign of bullish momentum for the REP token.
REP token transactions per day (line, chart below) have mainly ranged between 100 to 600 over the past year with spikes to 1,600 in January and October. Average transaction values (fill, chart below) have ranged between US$500 to US$10,000 over the past year. Going forward, a consistent and sustained uptick in either measure should be seen as a bullish indicator for the asset.
The 30-day Kalichkin network value to estimated on-chain daily transactions (NVT) ratio (line, chart below) is currently 260 after rising rapidly over the past month. A rising NVT suggests the coin is becoming overvalued based on its economic activity and utility, which should be seen as a bearish price indicator.
Monthly active addresses (fill, chart below) have remained flat over the past two years, ranging between 150 and 500. Active and unique addresses are important to consider when determining the fundamental value of the network using Metcalfe's law. A sudden or sustained increase in MAA should be seen as a bullish indicator for REP token price.
The REP project has 40 repos on Github with 30 developers contributing nearly 4,000 commits to the main repo over the past year. Jack Peterson and Alex Nuevo have contributed most of these commits with Joey Krug’s commits almost non-existent on this repo over the past year. There are currently 22 issues labeled “V2 Audit” and 44 issues labeled “Bug”.
Most coins use the developer community of Github where files are saved in folders called "repositories," or "repos," and changes to these files are recorded with "commits," which save a record of what changes were made, when, and by who. Although commits represent quantity and not necessarily quality, a higher number of commits can signify higher dev activity and interest.
Exchange-traded volume has been led by the Bitcoin (BTC) pair on Binance, Coinbase, and Kraken. REP has had several listings and delistings this year. Coinbase listed REP/BTC and REP/USD pairs in April 2019 and added REP to the Coinbase card last month. Coinbase UK also added REP in October. Binance removed the REP/BNB pair in early November and Poloniex removed several REP pairs in May. REP is also on the shortlist for an addition to Binance.US
Technical Analysis
On the REP/USD daily chart, the 50-day Exponential Moving Averages (EMA) and 200-day EMA have been bearishly crossed since July, with the spot price mostly holding below the 50-day EMA since the cross. Over the past month, the spot price has definitively crossed the 50-day EMA for the first time since May, with a Golden Cross possible over the next few months.
Further support, based on the historic volume profile (horizontal bars), sits from US$7.50 - US$10.50 with resistance from the US$14 - US$15 range and US$18 - US$22 range. Above the US$25 range there has been relatively little volume historically. There are no active volume or RSI divergences at this time to suggest waning bullish or bearish momentum.
Turning to the Ichimoku Cloud, there are four key metrics; the current price in relation to the Cloud, the color of the Cloud (red for bearish, green for bullish), the Tenkan (T) and Kijun (K) cross, and the Lagging Span. Trades are typically opened when most of the signals flip from bearish to bullish, or vice versa.
Cloud metrics on the daily time frame with doubled settings (20/60/120/30), for more accurate signals, are neutral to bullish; the current spot price is nearly above the Cloud, the Cloud is newly bullish, the TK cross is bullish, and the Lagging Span is in the Cloud and below the spot price. A bullish Kumo breakout may occur over the course of the next week, the first since March, indicating a significant trend shift.
The REP/BTC pair on the daily chart also shows significant signs of a bullish trend shift. This markets spot price recently tested the 200-day EMA and is above the Cloud for the first time since April. A Golden EMA Cross may occur over the next month, should the bullish momentum continue. Significant overhead volume sits between the 0.0035 BTC - 0.0070 BTC range with the psychological zone of 0.0050 showing the most volume historically. There are no active volume or RSI bearish divergences to suggest immediate price reversal with in the current range. Additional price consolidation is likely needed before new local highs and a breach of the 200-EMA.
Conclusion
Despite a successful ICO raise in 2015, Augur has been slow out of the gate with a user-friendly protocol. Initially bogged down with coding vulnerabilities requiring a rewrite, the platform continued to be hampered by poor design, lack of options, gas costs, and ETH price volatility.
With the upcoming shift to version 2 in early next year, a whole host of improvements have the potential to breathe life into what has essentially become a ghost town of a decentralized application. A revamped trading and betting UI, along with DAI denominated markets and improved dapp accessibility, should give the potential for a popular decentralized betting playground in a massively growing addressable market. One remaining hurdle, however, is regulatory scrutiny in the eyes of U.S. lawmakers.
Technicals for both the REP/USD and REP/BTC pairs suggest an imminent bullish trend shift. Both pairs may have a bullish Golden Cross before year’s end with matching bullish Kumo breakouts. Near term upside targets for the REP/USD and REP/BTC pairs sit at the volume resistance of US$14 and 0.0019 BTC, respectively.
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via https://www.ohnocrypto.com
Josh Olszewicz, Khareem Sudlow