League of Traders Weekly Report (1st week of July 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 July!
- Bitcoin Chart/Ethereum Chart
Bitcoin experienced a sharp drop to $58,400 on Binance on June 24th, but has since recovered, reaching $62,700. The initial drop was triggered by news related to Mt. Gox’s compensation.
QCP Capital, a digital asset trading firm, commented, “The cryptocurrency market is facing challenges not only from regulatory bodies but also from the potential sales of Mt. Gox’s holdings. While BTC could test $50,000, we believe the expected selling volume is likely overstated. Therefore, we anticipate the market will move sideways within a box range.”
Conversely, Julio Moreno, Head of Research at CryptoQuant, suggested that Bitcoin miner capitulation indicates a market bottom, predicting a future rebound for Bitcoin.
Given Bitcoin’s weak performance over the three months since the halving in April, some believe the correction is nearing its end. However, as QCP Capital noted, a sharp market rebound remains unlikely due to anticipated sell-offs. Therefore, a sideways movement between $58,000 and $70,000 is probable in the short term. If Bitcoin falls below $58,000, it could drop to $51,000, the level from which it surged last February.
Last week, Bitcoin spot exchange-traded funds (ETFs) saw a shift from outflows to inflows, though the inflow volume was lower than previous averages. Since the ETF’s launch, daily inflows have averaged $124.1 million, but last week’s daily inflows peaked at $73 million.
Ethereum saw a slight increase, rising from $3,367 last week to $3,437 this week. The SEC recently returned the S-1 filing for the Ethereum ETF to its issuers, who must resubmit revised applications by July 8 to address the comments. At least one additional submission will be required. While the launch of the Ethereum spot ETF is not imminent, the ongoing procedures suggest increasing likelihood. Experts are divided on the potential fund inflows from the Ethereum spot ETF, but until its approval, the event may positively impact Ethereum compared to other virtual assets.
Bitcoin’s dominance fell from 55.40% last week to 54.79%, as major altcoins like Ethereum and Solana performed well relative to Bitcoin. Solana, in particular, rebounded by more than 10% following VanEck’s application to the SEC for a Solana ETF. In the short term, major altcoins may continue to perform stronger than Bitcoin, which faces potential sell-offs due to government sales and Mt. Gox compensation.
2. Major Economic Indicators
- US Bond Yields
The US 10-year bond yield increased from 4.250% last week to 4.394% this week, driven by stronger-than-expected economic data, including higher-than-anticipated first-quarter GDP growth and lower-than-expected new unemployment claims. Meanwhile, most central banks in major economies, including the Eurozone, are lowering interest rates or preparing to do so. According to Bloomberg, Japan is the only major country among 23 global economies unlikely to cut interest rates within the next 18 months. Consequently, the market anticipates that the US Federal Reserve will also reduce interest rates in due course, with significant focus on the timing and magnitude of these cuts.
- US Dollar Index
The US dollar index has remained stable, moving slightly from 105.740 last week to 105.620 this week. Notably, the yen/dollar exchange rate has surpassed 161 yen per dollar, its lowest level in 37 and a half years. As market sentiment suggests that the US Federal Reserve is in no rush to cut interest rates, there is increased buying of dollars and selling of yen, driven by the interest rate differential between the US and Japan. The Biden administration prefers that the Japanese government refrain from intervening in interest rate policy. However, reversing the yen’s weakness appears challenging as long as the interest rate gap between the US and Japan remains significant. Unless US interest rates decrease or Japan rapidly raises its rates, the yen is expected to stay weak for the immediate future.
- US100 (Nasdaq 100)
The Nasdaq 100 index remains stable at around 19,700 this week, similar to last week. Leading tech stocks like Amazon and Alphabet have hit record highs, driving the rally. However, concerns about high stock valuations and a potential peak persist. The Nasdaq has shown a continuous rise for over a year, except for the third quarter of last year, warranting caution regarding the timing of a significant correction occurring.
- Gold Futures
Gold futures prices are moving sideways, from $2,323 per ounce last week to $2,326 per ounce this week. Unless there are any major changes in US interest rate policies or substantial gold purchases by central banks like China’s, gold prices are likely to continue trending sideways. Cryptocurrency analyst Benjamin Cowen noted that Bitcoin also trended downward after gold peaked in 2021. He suggested that if gold prices fail to surpass their previous high in May, it could indicate an upcoming correction in Bitcoin prices.
3. Bitcoin Market Data
- MVRV Z-score
The MVRV Z-score has shown a slight decline, moving from 1.99 last week to 1.95 this week. This level, an MVRV Z-score close to 2, can be seen as a potential inflection point for further decline or rebound.
- 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
The aSOPR increased to 1.011 this week from 1.002 last week. However, the daily aSOPR has fallen below 1 since last week, indicating that the bull market is not continuing. A consistent fall below 1 could signal the onset of a full-fledged bear market, so if this trend persists, it is important to prepare for a long-term bearish period.
- 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
Bitcoin perpetual futures open interest decreased from $16.59 billion to $15.65 billion last week but then rebounded to $17.1 billion in the short term. In the same period, the estimated leverage ratio decreased from 0.203 to 0.196, before rising to 0.201. Since the estimated leverage ratio did not increase significantly compared to open interest, it can be inferred that additional funds flowed into the perpetual futures market. However, given the open interest size is excessive relative to the price increase, caution is advised due to the potential for additional declines from liquidations.
4. On-chain data
- Exchange inflows and outflows
Bitcoin on exchanges continues to experience net outflows, though the size of these outflows has decreased to nearly zero. This trend in Bitcoin exchange inflows and outflows can be viewed as neutral.
- Number of Whale Wallets
The number of whale wallets holding more than 10,000 Bitcoin fluctuated slightly last week but did not show any significant changes. As Bitcoin prices continue to rise, this period could either see a final rally accompanied by a decrease in whale wallets or a rebound initiated by a short-term increase in whale wallets.
5. Last Week’s Major News
- VanEck files Solana (SOL) ETF Application with SEC
VanEck has applied to the U.S. Securities and Exchange Commission (SEC) to create a Solana ETF. However, cryptocurrency industry experts believe approval is unlikely under the Biden administration.
- Blast Token Debuts with $3 Billion Market Cap; 17% Airdrop to Early Users
CoinDesk reported that Blast, a layer 2 blockchain, airdropped 17% of its total supply of native tokens to users who farmed points through Ethereum staking earlier this year. According to Ambient Finance, the Blast token debuted at approximately $0.03 per token, with a fully diluted initial market capitalization of $3 billion.
6. Major economic events
- Major economic events last week
Last week, the US first-quarter GDP was announced at 1.4%, surpassing the forecast of 1.3%. Additionally, new unemployment claims were reported at 233K, below the expected 236K, indicating strong economic performance and leading to a rebound in interest rates.
This week’s major economic events
This week, Federal Reserve Chairman Jerome Powell is scheduled to give a speech. On Friday, the US non-farm employment index and unemployment rate will also be released. With many significant economic indicators due this week, market fluctuations are likely.
Summary
Positive indicators: Bitcoin spot ETF fund inflows
Negative indicators: US bond yields, aSOPR
Overall Review: This week is pivotal due to major economic events, including a speech by the US Federal Reserve Chairman. Bitcoin’s open interest has increased, suggesting the potential for high price volatility. Although Bitcoin’s price rebounded last week due to inflows from spot ETFs, it is premature to declare a trend change. It is advisable to follow the market trend: consider buying if Bitcoin’s price rises strongly above $65K, or aim to buy at a lower price if it falls sharply below $58K.
