In this article, we will discuss fundamentals and technical analysis of Augur(REP), and the reasons why you should buy Augur(REP).
Augur is a DeFi (Decentralized Finance) based oracle and peer-to-peer protocol for prediction markets built on the Ethereum [ETH] Blockchain. It was founded by the Forecast Foundation OU, a not-for-profit entity. It does not own or lead Augur, but rather supports and develops the free, open-source protocol that is Augur. It was founded in 2014, and is aboutm to undergo a major update via a hard fork in the first week of June.
The prediction market platform maker has received a lot of criticism because of design flaws, ETH price volatility, lack of adoption, and biggest of them is the exploitation of ‘invalid contracts.’ Nevertheless, decentralized oracle markets have tremendous potential for growth in the future.
Token Distribution and Market Capitalization
Since it is a DeFi, REP tokens value based on the value locked in the blockchain, market speculation, future upgrades and growth of the cryptocurrency markets, especially Bitcoin. The total supply of the cryptocurrency is 11,000,000 REP. These are pre-mined tokens where 8.8 million were sold via ICO, and rest 2.3 million tokens distributed among founders, and advisors. Reportedly, the development team has also received undisclosed seed investment from a couple of VCs.
On-Chain Value
Presently, according to the predictions.global, the total money at stake is $3,826,869.75. At auger.net, the open interest for the prediction of republican candidates for 2020 U.S. presidential elections is around 100 ETH. There are a couple of other markets built on the platform like reporter.chat, augerexploere.com and so on.
Whereas, the total market capitalization of the token is around $140 million, it is currently ranked in the top 50 cryptocurrencies based on Mcap. It is listed on top exchanges which include Binance, Kraken, Bithumb, Coinbase and so on.
If we go back on the data, the value locked in DeFi is around $600k and the total money on the biggest prediction markets is around $4 million. With the market capitalization inflated to around $140 million there is sufficient reason to believe that speculation and manipulation of data is prevalent across the exchanges.According to Binance research, a large amount of Augur tokens is parked on Compound Finance and many centralized exchanges.
Nevertheless, the NVT ratio (market capitalization to on-chain transaction value) is signaling oversold conditions at the moment. In the last one year, it has traded around 100-200, whereas currently, the ratio is around 70.
The number of active addresses on Augur, however, has not seen any significant growth in the last two years. It continues to be in the 300-500 range, with momentary peaks. During the bull run of 2017, the number of active addresses reached a mere ATH of around 3,000 addresses.
Most Popular Open Predictions
The majority of the Augur Prediction markets focuses on betting on political events, most popular and highest money at stake being bet on the 2020 U.S. Presidential Elections. Back in 2016, Augur gained recognition as numerous people bet on the Hilary vs. Trump race.
Nevertheless, it falls under heavy regulatory scrutiny in the U.S and in India as well. Elsewhere in the EU, South Africa and other countries, has far fewer restrictions when it comes to online betting.
The Augur [REP] cryptocurrency rewards are based on the outcome of the result and the contributions from the validating nodes.
A lot of the current market seems to be betting on the outcome of the 2020 elections, with the controversial figure, Donald Trump, currently at the helm. Some of the other markets involve betting on the winner of major sporting leagues, and matches. While there is a lot of potential in the design, mainstream betting is still run on centralized markets.
V2 Hard Fork
Augur is set to undergo a hard-fork in the first week of June as the network will introduce an upgrade to a new V2 version. This new version will
- introduce a new DAI based marketplace,
- a token standard upgrade from ERC20 to ERC777, and
- a new design to reduce the risk associated with invalid markets
- it will include a REP price auction aimed at inducing inflation to the ecosystem
In the price auction DAI and REP will be exchanged for one another, like a currency exchange between USD (DAI stablecoin and REP tokens). This will help in the price discovery of REP from the sale prices. If there is a loss in the auction, new REP will be minted for compensation.
Invalid markets is a default setting in the blockchain which has been exploited by the design flaw attack and some unforeseen circumstances. According to the developers it is not possible to reverse the transactions if the market is invalid. Hence, by default, the pool money is divided equally among the outcomes.
“Unfortunately, due to technical limitations, Invalid markets cannot ‘unwind’ trading so that traders receive the exact amount of money they paid for their shares.”
This creates a ‘realistic discrepancy’ if some of the outcomes in the bet are unfeasible to bet on. Hence, the risk:reward ratio is very low. In case of invalid results, profit is almost guaranteed. Under the new regime, ‘Invalid’ will be one of the outcomes of the bet, which will be prices like any other. Hence, if there is a large amount of betting on invalid markets, there is a high probability that the market will be deemed invalid.
Moreover, the introduction of DAI stablecoin-based markets, the inefficiency in betting due to price volatility is effectively eliminated.
Since it is a hard-fork, REP holders must switch to the new protocol following the Augur upgrade. They will have 60 days to switch to Augur v2. At the end of 60 days, the chain with the majority (V1 or V2) of participants (> 50%) will win as the primary chain.
Price Analysis
On a weekly scale, the levels around $22 seems to be acting as the generational pivot for possible runs. The range below the resistance at $22 finds support around $5, with the pivot being around $12-$14.
W.r.t. Bitcoin [BTC], the pivotal point is around 0.0034 BTC. To qualify as an oscillator (or an efficient store of value), the price needs to find support around this pivotal point. Willy Woo, leading on-chain analyst who introduced this system of degenerates and oscillators notes.
It must oscillate around a horizontal line, for at least one full bull-bear cycle (around 4yrs). More cycles are better.
Augur qualified towards the end of the 2018 bear market. However, is failing to find momentum post the bear market in the second half of 2019. Presently, it seems to be facing resistance from the 50-period weekly Moving Average.
The daily chart w.r.t. BTC is at an inflection point as the 50-Day and 200-Day EMA (Exponential Moving Average) are at the verge of a golden cross. The price is also looking to find support above the 200-Day MA (Moving Average) around 0.0014 BTC.
The oscillating indicators on a weekly scale, reflects a bearish picture as it continues to stay below 0. The CMF ratio is particularly bearish, with the MACD looking forward to a bullish breakout. However, notice how the two charts have been on the negative side since 2019.
According to Statista, licensed online sports betting accounts for $39.7 billion in revenue. In 2017, eSports betting alone generated over $650 million in revenue, and projects an upward in revenue to $1.5 billion 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.
Nevertheless, these altcoins continue to be low liquidity projects funded by VCs with a possibility of success in the future. Due to flaws, volatility, regulatory hindrances, and lack of adaptability, it might take longer for the project to yield desired results for investors. Bitcoin bull runs and alt-season could help in uplifting the price in the short term. However, the expansion of the projects rests on larger volume of betting, active addresses, predictions markets and exchange volume.
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