RSR Analysis Sunday — Edition 16

Phil Bon

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Reserve Lodge

8 min readApr 18, 2021

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What the FUD just happened? And thoughts on RSV.

In an effort to broaden and accurately name the scope of RSR TA Sunday, I’ve adjusted the title accordingly this week. Still planning to bring lots of good TA thoughts, but as the ecosystem grows I’d also like to incorporate more thinking on the fundamentals of the network and theory on business growth as we’ve done in the last few editions. This week we review FUD (again) as well as some initial thoughts on how RSV construction may work in the future.

FUD and Buying the Dip

A couple months back (January 24th), I wrote a short piece on FUD — fear, uncertainty, doubt — that in light of yesterday’s 20–25% (albeit brief) dip, is fitting to revisit here. Let’s see if any of it sounds familiar.

When this was written, RSR was fighting to break $0.04, and bitcoin was trading at $32K.

And now, at the start of the hour-long buying opportunity, many cited this tweet (which in turn cited no reliable sources) as the primary cause of Saturday’s sell-off.

However, the real story behind the dip is likely far more complicated. A large position liquidated, algo sell-offs ensue, stop losses get hit, and the entire market dumps. But try to find any other market where you can access liquidity on a weekend when most of the world is sleeping. You can’t. Adam Cochran has a great thread on what the reality may look like:

Like most things in life, especially complex ones, there is always more below the surface.

So what’s the point of all this? Well, that crypto is volatile, that simple narratives are usually wrong, and crypto is here to stay. So congrats to all who were brave and bought the dip.

Thoughts on the Future of RSV

Another topic I’ve been mulling over recently has been, what is my ideal stable coin? Let’s break it down:

What I want:

Accrue value into something that I can hold for the long-term, where I know value today will be the same as value in the future (this is key — with a shorter time preference than bitcoin).
A sovereign store of value — decentralized.
Stable purchasing power (known in macroeconomics as Purchasing Power Parity, or PPP).

What I don’t want:

Algo-backed stable coin. What are these things anyway, really?
Yield farming and other high-risk (from smart contract to counterparty) assets that serve as speculative vehicles.
US Dollars — in the short term this works, but fiat regimes controlled by a single entity or nation-state are not the right solution in the long-term. There are a number of these in the market already, each with its own set of drawbacks.

RSV is the stable coin that is already being used by tens of thousands of people to transact in the Reserve app. It’s currently backed by dollars, but it’s been architected to work with any number of underlying tokenized collateral. Currently, there are a handful of stable coin options, and even fewer that represent “real world” assets aside from currency in a bank account that gets audited and then tokenized. For example, we can see from previous analysis that most are inflexible or centralized, or are at the very least beholden to the US Dollar in perpetuity.

For now 1 RSV = 1 USD, which works well in the short-term. It’s battling hyperinflation in areas where USD is relatively stable. But let’s think about a future where 1 RSV = 1 RSV. What does the “perfect” unit of stable value actually look like?

To think about what “Purchasing Power Parity” means in this context, you should think about what the typical person might require in life. Although PPP adjusts for different geographies, which typically have different labor input costs, it would be more equitable to consider PPP on a global basis. The requirements for most individuals can be thought to generally follow Maslow’s Hierarchy of Needs (to the right of the image below).

The question then becomes, can the “perfect” stable coin ensure the stability of purchasing power against each of these needs? What would that even look like? Well, maybe it could something like this:

With an increasingly more likely “tokenization of everything” taking place via crypto networks, it becomes possible to create a pool of collateral assets that provide for a “market cap weighted” stable value store. This can align with filling a range of basic human needs, through higher order needs.

Obviously, this is just a rough exercise and in practice would probably look much different (some of the suggested assets are probably too volatile to include at the moment). And we can look at RSV through lenses other than Maslow’s. I do, however, think in the long-term this approach is how the ideal stable coin would be constructed. It could comprise assets that allow individuals to accumulate it and reach the short and longer-term goals that they have for themselves. There could be dozens or hundreds of assets underlying the stable coin. These would all tie back to the current market value for food, land, shelter, social progress, education, and a view of what would make one happy (although this becomes more subjective).

The longer-term, or lower time-preference collateral, would be something that is deflationary (or disinflationary) and widely accepted as having a stable value store over a long time horizon. This could be bitcoin, gold, blue chip art, and the like. Lower-time preference should be given a higher weighting, because everyone needs to eat and have shelter in the near-term, without which they would be unable to access the higher-order needs. A move away from the $1 peg would work similar to how EU member states joined the Euro in 1999. The weighting would be established and fractionalized to be worth $1, RSV would be converted accordingly, and then the underlying basket would be swapped for dollars. Pretty simple actually.

Obviously this is many years off, but I think developing a framework of how RSV may evolve is a useful thought exercise. This also vastly opens up arbitrage opportunities for RSR holders, where the core protocol would maintain or change weighting and assets as market conditions change. Arbitrage opportunities would look similar to how traders look for decouplings in the value of an ETF or index vs. individual stocks. The protocol could manage these automatically.

In the short-term, of course, there is a ton of work to do just to get RSV functioning in places where it is needed most. Where hyperinflation can be solved by introducing dollars. But in the longer-term these are the important discussions that will need to take place around how the collateral pools within the protocol are designed, and how RSV eventually moves away from its dollar peg to become a sovereign value store and medium of exchange.

Leave your own thoughts on RSV in the comments — would love to hear them!

Technical Analysis — Week of April 18th

Weekly Timeframe — USDT Pair

On the weekly timeframe, we are still looking for a close above $0.10 to confirm blastoff. You can see the strong consolidation and ascending triangle forming when we zoom out to the weekly timeframe.

RSR/USDT, Huobi, Weekly (Log Scale). A weekly close above $0.10 will be HIGHLY BULLISH, but may not happen for another week or so.

RSR/USDT, Huobi, Weekly (Log Scale). You can see strong consolidation and upward momentum here vs. prior weekly candles.

Daily Timeframe — USDT Pair

Last week’s intra-week highs of nearly $0.12 were short-lived, though not unexpected as a technical daily formation breakout occurred toward the back half of last week, as anticipated in last week’s analysis. To many, the Coinbase IPO fell flat from expectations, though still managed to propel most crypto assets higher before correcting over the weekend. RSR has so far recovered nicely and I would expect continued consolidation and retest of the $0.10 mark and above (by the way — it’s really nice not having to discuss RSR in three decimal places now!).

Daily long-term chart and MACD trends still look incredibly strong, and in my humble opinion seem poised to continue on the existing the RSR trend to realize prices of $1+ by the end of 2021.

We had two daily closes above $0.10 before wicking down to retest around the $0.075 mark on Saturday night/Sunday morning. Very healthy for purging the system of speculators and further confirms strong consolidation ahead at the $0.10 level. Price action here looks quite different than the floundering we saw at $0.01, as one would expect with a much more mature asset of $1B+ vs. a more volatile one worth around $100M..

We may continue to consolidate between $0.08 — $0.10 for the next several weeks.

Daily Timeframe — BTC Pair

BTC Pair action continues to look good, hitting six month highs against the largest cryptocurrency this past week. I would love to see more daily closes above the 160 mark, and above the 185 mark. We briefly wicked to 193 sats, but this was short-lived. However it does seem we have found strong support between the 130–160 range. I am looking for continued uptrend here, though it will likely be slow moving between now and May.