Weekly Market Report March 17th
Interdax’s overview of the cryptocurrency market, including fundamental metrics for bitcoin (BTC) and ether (ETH), technicals and sentiment.
Fundamentals
Key drivers of value.
Fundamentals: Top 5
The table below shows key metrics for the top 5 cryptocurrencies by network value.
Coronavirus continues to take a heavy toll across asset classes, including cryptocurrencies. Many European countries have closed their borders and encouraged their citizens to quarantine as the outbreak begins to take its toll on the continent.
Correlations between stock markets and Bitcoin reached new highs last week although it seems to have de-coupled somewhat in recent days.
The 90-day correlation between the S&P 500 and BTC reached a high of 0.58 on March 14th as a market-wide sell off depressed asset prices. “Black Thursday” also saw liquidations force BTC as low as the $3,850, with the crypto-asset experiencing its second largest drop in a single day. Ether saw its worst daily performance since inception.
As a result of falling prices, inflows into exchanges increased substantially as traders/investors went short or sold off their crypto-assets for cash. Because of the sharp moves in the market, the Ethereum network became congested and had an adverse effect on DeFi player such as MakerDAO. The average gas price increased by a factor of 10 and this is bourne our by the table above, which shows an almost 50% jump in average fees on the Ethereum network.
On Sunday, the US Federal Reserve cut interest rates by 100 basis points and introduced a $700 billion package to buy treasuries and mortgage securities, which should be a positive, long-term fundamental for bitcoin given its rules-based, algorithmic monetary policy.
Fundamentals: Bitcoin
A summary of key metrics for bitcoin.
- Mayer Multiple = 0.61
The Mayer Multiple has historically been higher than today’s value 89.72 percent of the time.
The Mayer Multiple has decreased from 0.91 last week to 0.61.
Typically, tops in the price of bitcoin are indicated when the Mayer Multiple exceeds 2.4 (shown on the chart).
The average value over Bitcoin’s trading history is 1.37.
- Market Value to Realised Value (MVRV) ratio = 0.90056
The MVRV ratio indicates that the market is likely to be overvalued when it exceeds 3.7. On the other hand, the market is suggested to be undervalued if the ratio is less than 1 (shown on the chart).
The MVRV ratio has continued downwards and has breached the important 1.0000 level — historically a buy signal. The MVRV ratio moved below 1 for the first time since March 2019 on March 12th as bitcoin fell more than $3,000.
- Network Value to Transactions Signal (NVTS) = 47.89548
A high NTVS (above 72) indicates that the network value is over-valued in relation to the daily transaction value on the Bitcoin network and identifies tops in the market.
Conversely, a low NVTS (below 38), suggests that bitcoin is under-valued in relation to the daily transaction value andidentifies bottoms in the market.
The NVTS continues downward this week, suggesting BTC-USD is still overvalued when comparing the network value and daily transaction value. We’d want to see a test of the 38 level for a strong buy signal.
- Days until next halving = 55
The highly anticipated block reward halving for bitcoin is estimated to occur during May 2020. The market has typically responded positively, reaching new all-time highs 10–20 months following previous halving events in 2016 and 2012.
You can find a countdown here.
- Metcalfe’s Law Fair value of Bitcoin = $4,935.43 (based on Daily Active Addresses)
- Metcalfe’s Law Fair value of Bitcoin = $6,167.10 (based on Transaction Value)
(Source: TradingView)
Technicals
The recent price action for bitcoin and ether.
Bitcoin and Ether Snapshot
Volume
The recent price decline from $8,000 to lows below $4,000 was accompanied by a large increase in trading volume across spot and derivatives exchanges. Daily trading volume reached highs not seen since BTC-USD topped near $14,000 in summer 2019 (shown below).
Volatility
The chart below shows the 30-day volatility of returns for BTC and ETH.
Over the past week, volatility has increased significantly for both BTC and ETH.
CME Futures
The CME’s bitcoin futures contract gapped down following the large swing to the downside on March 12th. The chart below shows the gap between $9,060 and $8,280.
The chart below shows the prices of different futures contracts for bitcoin on the Chicago Mercantile Exchange (CME).
Technical Outlook: BTC-USD
Bitcoin has established fresh lows for 2020, swiftly moving from $8,000 to the $4,000’s on March 12th. In the process, BTC-USD has broken below key Fibonacci supports at $8,501.14, $7,231.73 and $5,661.10.
The only Fibonacci support left is the 100% retracement level at $3,122.28 — the 2019 low. However, if the price manages to close above $5,661.10 by the end of March, this should open up an attempt at $7,231.73.
Last week saw BTC-USD move below the 200-week moving average.
The price of bitcoin has only tested the 200-week moving average four times previously and has never moved below it for too long. If the price fails to move back above the moving average (currently at $5,534.09), then it could point to further weakness ahead.
The daily chart below shows the weekly Fibonacci support/resistance levels and the MACD oscillator. The pivot point lies at $5,789 while the firt weekly support is seen just above $4,000.
The MACD is negative suggesting downward momentum will continue to dominate. A cross-over could indicate the start of a new uptrend.
Technical Outlook: ETH-USD
The monthly chart shows the long-term outlook for ether, with prices almost hitting $83.00. This level should act as strong support, but a monthly close below $83.00 would hint at further weakness.
On the other hand, a monthly close above $83.00 should open up the next Fibonacci level at $149.15.
The daily chart below shows the weekly Fibonacci support/resistance levels and the MACD oscillator. The pivot point lies at $5,789 while support is seen just above $4,000.
The MACD is negative suggesting downward momentum will continue to dominate. A cross-over could indicate the start of a new uptrend.
Sentiment
How is the market feeling?
Crypto Fear and Greed Index
The Crypto Fear and Greed Index is currently at 8 = ‘Extreme Fear’, below the low established on December 18, 2019 (15). The index is at lowest level since August 2019, where the reading reached as low as 5.
The Index has also fallen from last week’s reading of 17. The Crypto Fear and Greed Index is down against last month’s reading of 50.
Telegram/Twitter Sentiment
The chart below shows the number of positive, neutral and negative tweets about bitcoin along with the price.
The chart belows show the same statistics but for Telegram.
Disclaimer: This blog post is for informational purposes only and should not be taken as financial advice.
About Interdax:
Interdax — the first competitive crypto trading platform. Trade crypto derivatives with up to 100x leverage while competing to win big prizes in matches and tournaments. Built by former NYSE / Nasdaq engineers.
