League of Traders Weekly Report (1st week of January 2024)
The Weekly Report is our summary of key indicators and recent events in the crypto world that professional traders are closely monitoring. This report and other relevant information are first shared via the official League of Traders Telegram channel.
Here are our notes for the first week of January!
This report was written on January 3, 2024, U.S. Eastern Time, and is based on data available up to that date.
- Bitcoin Chart/Ethereum Chart
Bitcoin’s value surged beyond the 45K resistance threshold, escalating from 42800 the previous week to its current position at 45800. The breakthrough can be attributed to heightened spot demand, fueled by market speculation indicating an 88% likelihood of approval for a bitcoin spot ETF in early January. MicroStrategy (MSTR) bolstered this upward trend by revealing a substantial investment of $615.7 million through a Twitter announcement, securing additional bitcoins at an average price of $42110 per unit. This move underscores the ongoing trend of corporate interest in acquiring bitcoin assets. Nevertheless, a note of caution is advisable, as some experts express concerns about a potential significant correction post-ETF approval. Sellers may engage in profit-taking, coupled with lower-than-anticipated ETF trading, leading to a downside risk in the market.
Ethereum is currently experiencing a marginal dip in price, resting at $2369 after achieving a new 2023 all-time high of $2445. Jordi Alexander, Chief Investment Officer at Selini Capital, expressed optimism on X (Twitter), stating, “Ethereum’s risk-reward is at an appealing level,” and suggesting that “Ethereum could absorb all liquidity in the crypto market come January.” The imminent Dencun upgrade slated for January further reinforces Ethereum’s positive outlook. Despite the possibility of a short-term correction, the overall trajectory for Ethereum is anticipated to remain favorable.
Bitcoin dominance witnessed a decline from 52.05% to 51% last week, rebounding to 52.58% currently. The resilience of Bitcoin is underscored by the prominence of major Layer1 altcoins like Solana (SOL) and SEI, which have entered a consolidation phase. As the approval of a Bitcoin spot ETF looms on the horizon for next week, the anticipated volatility in Bitcoin dominance is reminiscent of the fluctuations observed in the previous week.
2. Major Economic Indicators
- US Bond Yields
The U.S. 10-year Treasury rate has rebounded to 3.941% from 3.882% last week, propelled by the prevalent sell-off sentiment. Yields are facing escalating pressure following a robust rally at the close of the previous year. The commencement of the new year is poised to be a cautious “wait-and-see” period, as a consensus among most Wall Street lenders points toward a centrist scenario in the outlook for the U.S. economy for the current year.
- US Dollar Index
In tandem with U.S. Treasury yields, the U.S. Dollar Index has experienced a marginal rebound, rising to 102.155 this week from 101.607 last week. Investors are closely monitoring forthcoming U.S. jobs data and European inflation figures to discern potential shifts in central bank policy. Additionally, anticipation surrounds insights into the Federal Reserve’s trajectory for 2024, with market participants awaiting the release of minutes from the December Federal Open Market Committee meeting scheduled for Wednesday (local time).
- US100 (Nasdaq 100)
The US100 underwent a slight correction, retracting from 16800 to 16500. The pronounced decline in the Nasdaq 100 was primarily driven by a sharp fall in semiconductor stocks, coinciding with a surge in Treasury yields. The benchmark 10-year U.S. Treasury yield rose to 3.9%, up from 3.866% in the preceding trading session. Additionally, there is a growing sense of upside fatigue stemming from the rally that persisted until the conclusion of the previous year. Unless a significant bullish catalyst emerges, the correction is poised to persist.
- Gold Futures
Gold futures have experienced a modest increase, climbing from 2021 to 2063. According to an analysis by the World Gold Council (WGC), historical data from 1971 to the present indicates an average January price rise of 1.79% for gold. Furthermore, during this timeframe, gold has seen an increase in January 60% of the time, with 70% of Januarys since 2000 concluding on a positive note. If the U.S. Federal Reserve refrains from conveying hawkish signals on interest rates, there is statistical support for a positive trajectory in the price of gold futures for January this year.
3. Bitcoin Market Data
- MVRV Z score
The MVRV Z-score has experienced a slight uptick, increasing from 1.56 last week to 1.63 this week. Despite this rise, there is a belief that the current conditions do not indicate overheating, and the overall trend remains upward.
Indicator explanation: The MVRV Z-score is a measure that determines whether Bitcoin’s market cap is overvalued or undervalued by dividing the difference between Bitcoin’s market cap and realized cap by the standard deviation. If the MVRV Z-score is below 0, Bitcoin can be considered to be undervalued. In the overheated market that reached the All-Time High (ATH) in 2021, scores of 6 or higher were shown.
- aSOPR
Bitcoin’s aSOPR has demonstrated an increase, climbing from 1.013 last week to 1.049 this week. Notably, aSOPR has consistently remained above 1 for the past week, aligning with characteristics typical of a bull market.
*aSOPR is short for Adjusted Outfit Profit Ratio, a value obtained by dividing the price of received bitcoin in the past by the price at the time of transmission. When SOPR is less than 1, it indicates a downtrend, and when it is above 1, it indicates an uptrend. aSOPR is a more accurate value that removes meaningless transactions within the hour for adjustments.
- Open Interest
Open interest in exchange-combined perpetual futures has further increased, rising from $10.1 billion last week to $10.77 billion this week, nearing the December 5, last year, record level of $10.9 billion, which was the highest on record. Similar to last week, open interest in bitcoin futures on the Chicago Mercantile Exchange (CME) has also reached an all-time high, making it a crucial area to monitor for a potential correction as open interest unwinds. The combined estimated leverage ratio across exchanges stands at 0.191, marking the lowest on record and suggesting an influx of funds into the futures market. A low leverage ratio coupled with high open interest may signify a significant influx of speculative capital seeking short-term liquidity in the market. When examining open interest and leverage ratios, it is essential to be vigilant in responding quickly due to the heightened volatility in these areas.
4. On-chain data
- Exchange inflows and outflows
Bitcoin positions on exchanges have transitioned from being predominantly influenced by inflows to now being dominated by outflows. The absence of substantial inflows observed last week, coupled with the current dominance of outflows, indicates a reduced likelihood of a pullback stemming from spot selling of short-term Bitcoin inflows. This shift in dynamics suggests a potential resilience in the market against short-term selling pressures.
- Number of Whale Wallets
The count of whale wallets holding 10K+ Bitcoin has seen a minor decrease, following a recovery in their numbers observed last week. Within the current range, the fluctuations in the number of these substantial wallets appear to have a neutral impact on Bitcoin price movements.
5. Last Week’s Major News
- Buterin proposes streamlining Ethereum Proof of Stake…”Current System Overload”
Ethereum (ETH) founder Vitalik Buterin has proposed three ways to address the complexity of the Proof-of-Stake (PoS) mechanism. Today (Nov. 27), Vitalik Buterin announced on the Ethereum Research Forum that there is a need to limit the number of signatures per slot to reduce the load on the network’s systems. Signatures per slot refers to the number of digital signatures that must be processed in each slot (unit of time) on Ethereum. Validators on the network generate digital signatures to prove that each block or transaction is valid. “Currently, validators on Ethereum are required to generate a significant number of digital signatures to operate the network,” he explains, “This is a necessary task, but as more validators join the network, the number of signatures increases, and this puts a strain on the system.”
- Ethereum falls back after breaking $2400…hits new high for the year
The price of Ethereum (ETH), which hasn’t seen much of a price gain against Bitcoin (BTC), hit a new high this year, breaking above $2,400 (about $309) at one point on Monday morning. As of 3:50 p.m. on the 28th, ETH was trading at $2382 (about $306) on blockchain marketplace platform CoinMarketCap, up 6.99% from the previous 24 hours. The price rally has pushed ETH’s implied volatility (IV) to a yearly high, according to crypto (virtual asset) options analytics firm Griggs.com.
- BTC could reach $32,000 after spot ETF approved by CryptoQuant analyst
Bitcoin (BTC) could see a correction to $32,000 (about $41.3 million) following the launch of a spot exchange traded fund (ETF), according to an analysis. Citing a CryptoQuant report, CoinDesk US reported on Aug. 28 (local time) that most market participants are holding high unrealized gains after the price of Bitcoin broke through $40,000 (about $51.5 million). Unrealized gains are when investors have seen the value of their cryptocurrencies (virtual assets) rise above the market value but have not sold their holdings. “Unrealized gains, especially for short-term Bitcoin holders, are exceeding 30%,” the CryptoQuant analyst said, “which historically precedes price corrections.”
6. Major economic events
- Major economic events last week
The previous week remained uneventful, largely influenced by the holiday season. Initial Jobless Claims surpassed forecasts, registering at 218k, while Crude Oil Inventories were lower than anticipated at -7.114M. The elevated Jobless Claims figure could potentially contribute to a decrease in inflation, reflecting lower employment levels. Conversely, the decline in Crude Oil Inventories might lead to an increase in inflation, driven by higher oil prices. Considering the divergent impact of these indicators on inflation and their weekly release schedule, there were no significant market movements during the period.
- This week’s major economic events
The new year is poised for several significant events, commencing with the release of the first Federal Open Market Committee meeting minutes. Particularly noteworthy are the impending releases of crucial employment data, such as the ADP nonfarm payroll change, which are expected to play a pivotal role in shaping market sentiments and influencing financial dynamics.
Summary
Positive indicators: Bitcoin Dominance, Nasdaq100, Gold Futures, aSOPR, Exchange Outflows and Inflows
Negative indicators: U.S. Treasury rates, U.S. dollar index, Nasdaq 100, open interest in futures.
Overall Review: The initial week of the new year has presented a varied set of macroeconomic and Bitcoin indicators, featuring both positive and negative elements. The imminent approval of the spot ETF, which was a driving force behind Bitcoin’s surge last year, adds anticipation to the market, and Bitcoin futures’ open interest has reached an all-time high. In light of these developments, we suggest adopting a cautious “wait-and-see” approach, strategically adjusting portfolio weights both before and after the potential approval of the Bitcoin spot ETF. In the event of a correction, it may be prudent to consider increasing allocations to Ethereum, where expectations surrounding network upgrades and the potential for a spot ETF persist.
