Basic Attention Token Price Analysis – Circulating supply provides downward pressure

Basic Attention Token (BAT) has dropped ~89% from the record high established in January 2018. The market cap currently stands at US$138 million with US$2.08 million in trading volume over the past 24 hours.

Currently, Google and Facebook largely dominate the online advertising industry. Together, the two companies and their advertising networks collect over 73% of all online digital ad revenue, and accounted for 99% of growth in U.S. online ad budgets from 2015 to 2016. Moreover, not only has the market turned into a duopoly, ads have significantly increased website load times. More and more users have also opted to use ad blockers, which has led to decreasing revenue for the majority of online publications.

BAT is an Ethereum (ETH) based ERC-20 token, designed to be exchanged between publishers, advertisers, and users, where direct payments negate the need for ad networks, fraud arbitration, and privacy violations. Brendan Eich, founder and CEO of BAT, is also the creator of Javascript and co-founder of Mozilla and Firefox.

To tackle page load times, provide BAT with more utility, and provide his investors with a return, Eich created the Brave web browser. The Brave browser, which decreases page load times by blocking all ads by default, aims to enable micropayments for publishers and content creators, providing an alternative to ad-based revenue streams, through the use of the BAT token.

The traditional revenue cycle for content creators and online publications has also given rise to publisher-specific subscription models. This has created a diminished user experience across the web broadly, as users need to manage these subscriptions individually on a site-by-site basis. The Brave/BAT combo, on the other hand, creates a seamless payment experience which occurs invisibly in the background while surfing the web. Brave users can also enable direct payment support for YouTube and Twitch streaming.

The Brave platform underwent two rounds of seed funding; a round in November 2015 raising US$2.5 million and a round in August 2016 raising US$4.5 million. The BAT token ICO occurred in May 2017 raising US$35 million in 30 seconds with 130 participants. Notable investors include Digital Currency Group and Pantera Capital. Each of the one billion ERC20 tokens available for the crowdsale was sold at a price of US$0.03. The BAT team holds 500 million tokens and according to the team, the total supply of BAT will never exceed 1.5 billion tokens.

Earlier this month, Brave announced opt-in "Brave Ads" within the browser’s Brave Rewards settings. The function will enter beta in June this year and allows users to be paid in BAT for viewing and interacting with ads curated by the Brave platform. Brave claims this system will all "users to receive 70% of the gross ad revenue". This week Brave also announced a partnership with Cheddar, a news and media organization, to provide free subscriptions to premium Cheddar content.

Creators and publishers do not need to use Brave to collect BAT payments, but can complete the verification process on Uphold, a payment processor, where audience contributions are kept in escrow. BAT can also be automatically converted to fiat currencies and transferred to the creator’s bank account on Uphold. However, Uphold has a minimum US$2.99 withdrawal fee, one of the highest for any crypto-related service.

Brave reported 5.5 million active users at the end of 2018 with 20% of users on desktop and 80% on mobile. Brave for Android has over 10 million downloads. In comparison, as of November 2016, Google’s Chrome browser reported two billion installs. However, in repeated head-to-head testing, Brave had the quickest load times amongst competitors Chrome and Firefox. The Brave platform also has 28,700 registered publishers listed to collect BAT funds from Brave users and nearly 43,000 publishers between YouTube, Website, and Twitch publishers.

Source: https://batgrowth.com/

There was some controversy recently regarding Brave collecting BAT donations for unverified publishers without their knowledge. YouTuber Tom Scott was angry to learn the platform was collecting donations on his behalf without his knowledge and called for all BAT to be refunded, which is impossible because the donations are anonymous. Scott also sent Brave a formal right-to-be-forgotten request under GPDR guidelines.

Eich responded by pointing to the BAT terms of service which acknowledges that funds donated to an unverified publisher are held for no less than 90 days before being sent to BAT’s user growth pool. Eich further acknowledged that no BAT has ever been clawed back thus far for this reason.

Additionally, there remains no opt-in option for publishers as, according to Eich, the feature would kill user-driven growth. Brave has changed the rewards system to make a clear indication of which creators haven’t yet joined through the verification process and has no images of unverified creators in the platforms tipping panel.

Brave also offers private Tor browsing on desktop, and DuckDuckGo for private mobile tabs, as well as the integrated ETH browser wallet MetaMask. Brave is continually upgraded to improve performance on all platforms and the browser is also the default web browser for the recently released HTC Exodus1 blockchain phone.

On the network side, BAT transactions per day (line, chart below) spiked dramatically through October and early November, likely due to speculative demand and/or transactions from a Coinbase listing at that time. Transactions per day have decreased substantially since the listing. The average transaction value (fill, chart below) has oscillated over the course of the past twelve months and is sitting at a yearly low.

Source: coinmetrics.io

The 30-day Kalichkin network value to estimated on-chain daily transactions (NVT) ratio (line, chart below) is currently sitting near an all-time low of 27. A clear downtrend in NVT suggests the coin is undervalued based on its economic activity and utility, which should be seen as a bullish price indicator. However, the Coinbase listing and subsequent flurry of BAT token activity has likely skewed this data significantly. Although historic data is minimal, a low NVT should also be an indicator of an undervalued asset.

Daily active addresses (fill, chart below) increased dramatically throughout October and early November but have declined by half since reaching for previous all-time highs. Again, this rise in active addresses corresponds with the Coinbase listing in mid-October. Active and unique addresses are important to consider when determining the fundamental value of the network using Metcalfe’s law.

Source: coinmetrics.io

Turning to developer activity, 23 developers have contributed a cumulative 1,100 commits to the BAT repos in the past year. Most of the BAT related commits have occurred in the publishers repo (shown below). 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.

Source: https://github.com/brave-intl/publishers/graphs/contributors

BAT was first listed on Bittrex in June 2017, followed by a Binance listing in November 2017, a Bitfinex listing in January 2018, a Poloniex listing in August 2018, and most recently, a Coinbase listing in November 2018. On Coinbase Pro, BAT/USDC is currently the only BAT pair, but BAT can be purchased for USD through Coinbase’s retail platform.

BAT exchange-traded volume in the past 24 hours has predominantly been led by the Ethereum (ETH) and Bitcoin (BTC) pairs with the Coinbase’s USDC pair representing 10% of total volume. The majority of trading has been conducted on LAToken, Binance, and Coinbase.

Google Trends data for the term "Basic Attention Token" spiked in early November 2018, corresponding with the Coinbase listing. Searches also spiked near the ICO date in May and June 2017, as well as in late 2017 when all crypto-related searches increased broadly. Spikes in Google searches often correlate with spikes in market prices. A 2015 study found a strong correlation between the Google Trends data and Bitcoin price, while a May 2017 study concluded that when the U.S. Google "Bitcoin" searches increased dramatically, Bitcoin price dropped.

Technical Analysis

The fiat markets for BAT are fairly new and lack price data, therefore charting the BAT/BTC pair is the most prudent. BAT has essentially ranged from 1200-5500 sats over the past year, a cyclical price chart which is similar to DOGE/BTC. If BAT breaks this range and a trend emerges, volume, exponential moving averages (EMAs), and Ichimoku Cloud can help determine optimal entry points. Further background information on the technical analysis discussed below can be found here.

On the daily chart, the 50/200EMAs have crossed several times over the course of 2018, with no sustained long term trend emerging. Overall, this suggests a largely trendless market. The volume profile of the visible range (VPVR) shows that, unsurprisingly, most of the volume has occurred at both extremes of the range. If multiple candle closes occur above the 5000 sat level with a spike in daily volume, price will likely continue higher. There are no active bullish or bearish volume or RSI divergences.

Turning to the Ichimoku Cloud, four metrics are used to determine if a trend exists; 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. The best entry always occurs when most of the signals flip from bearish to bullish, or vice versa.

The status of the current Cloud metrics on the daily time frame with doubled settings for quicker signals (20/60/120/30) are bearish; price is below Cloud, Cloud is bearish, TK cross is bearish, and Lagging Span is below Cloud and below price. A traditional long entry will not trigger until price is above the Cloud with a bullish TK cross, which has not been the case since October. All previous bullish Kumo breakouts have had very little follow through.

On the BAT/USD pair, the daily Cloud is bearish with the potential of a building falling wedge, a bullish reversal chart pattern. Hallmarks of the pattern include declining price in a tighter and tighter range. There is no bullish RSI divergence at this time. The flat Kumo at US$0.26 will also act as a magnet for price, should reversal occur. There is also historic volume confluence at that level (red horizontal line) which should act as resistance.

Conclusion

Fundamentals suggest that use of the BAT token has decreased dramatically after the Coinbase listing in November 2018. However, Brave browser users, and the number of listed publishers, has continued to grow through 2018, but this growth has not yet impacted the BAT token price. The supply of the circulating one billion BAT tokens are likely to continually provide downward pressure on price until active Brave users, active addresses, and daily transaction amounts increase dramatically.

Technicals for the BAT/BTC pair suggest continued ranging between 2200-5500 sats until a break the of the range highs or lows. Technicals for the BAT/USD pair suggest a buying opportunity due to oversold conditions ripe for mean reversion towards US$0.26. Overall, both pairs are currently holding within a bearish trend.