League of Traders Weekly Report (1st week of May 2023)
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 May!
- Bitcoin Chart/Ethereum Chart
The price of Bitcoin rose from about 27K to 30K last week, following positive earnings from major US IT companies. However, it fell below 28K due to the First Republic Bank’s forced sale issue. Despite ongoing macroeconomic uncertainty, Bitcoin still hasn’t been able to break through the resistance line at the upper 30k range. The primary support line is around 26k, and if it breaks below that level, there is a possibility of a decline to 22k.
Ethereum also experienced a simultaneous decline from the resistance line from around 1960 to 1820. However, volatility has decreased since the recent Shapella, resulting in a smaller decline than Bitcoin. This week, there is a high probability that Ethereum will show similar or relatively small volatility compared to Bitcoin.
This is a Bitcoin dominance chart in terms of market capitalization. Bitcoin still maintained a dominance, fluctuating around 46% following last week. The recent altcoin strength accompanied by the expected decline in dominance by some traders appears premature.
2. Major Economic Indicators
- US100 (Nasdaq 100)
The NASDAQ index has slightly recovered as major IT companies’ earnings exceeded expectations. However, the possibility of a downward correction is higher than last week due to increased concerns about a financial crisis caused by the bankruptcy of First Republic Bank. The market is expected to be mixed until the FOMC announcement, and the stock market will be affected by the direction of the Fed’s Wednesday announcement.
- US Dollar Index
The dollar index has rebounded slightly from the lower end of the range. Like the NASDAQ index, there is a high possibility of no significant changes until the FOMC announcement.
- Gold Futures
The price of gold futures has dropped below 2000 and is currently in consolidation after undergoing a correction. As the correlation between the prices of Bitcoin and gold remains high this year, it is expected that this trend will continue, and there is a possibility that it will update its high point following the rise of dollar alternative assets becoming preferable due to the financial crisis.
- US Bond Yields
The US 10-year bond yield maintained at around 3.5%. There will be no significant changes until the May FOMC meeting, and volatility may expand before and after the announcement.
3. Bitcoin Market Data
- MVRV Z-Score
The MVRV Z-score is around 0.6, similar to last week. If Bitcoin doesn’t break 30K it can be expected to slightly decrease though the score has been rising since the beginning of the year.
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-core 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
Currently, aSOPR is hovering around 1, and there is a possibility that a gradual downtrend may continue.
*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 is moving up and down, and there is a continuous decrease in open interest due to liquidation. This is advantageous for future price increases, but it should be noted that it is still high compared to early April, and a price drop may occur as additional open interests are resolved.
4. On-chain data
- Exchange inflows and outflows
Last week, there was an increase in Bitcoin inflows into exchange wallets. We should be cautious as this volume may lead to selling.
- Number of Whale Wallets
The number of whale wallets holding Bitcoins over 10k has slightly decreased. One would not expect the whales to accumulate significant BTC at its current price level.
5. Last week’s major news
- First Republic Bank crisis, finally acquired by JP Morgan
First Republic Bank, a regional bank that triggered the US financial crisis, will be acquired by JP Morgan Chase, the largest bank in the US. Following SVB and Signature Bank, it is the third major bank collapse in the US this year. On Monday, May 1, local time, the authorities intervened and proceeded with the sale of First Republic Bank, making it the second-largest bank failure in US history. JP Morgan has announced that it will acquire all deposits and assets and protect depositors according to deposit limits.
- Major US IT companies exceed earnings expectations
Major American big tech companies such as Microsoft and Google have announced their earnings for the first quarter of the year, which exceed market expectations. This has created a sense of relief in the market and has been a major driving force behind last week’s short-term rise.
6. Major economic events
- Major economic events last week
Last week, the Bank of Japan decided to maintain large-scale financial easing at its policy decision meeting on April 28. As a result, the yen did not show a strong trend following the expected end of financial easing, and still maintained a weak trend against global major currencies such as the euro and the dollar, which did not have a significant impact on the asset market. Although new unemployment claims in the US were lower than expected and employment still showed a solid performance, the provisional home sales (March) figure was lower than expected at -5.2%, indicating a rapid deterioration in economic indicators, including the housing market.
- This week’s major economic events
This week, we should pay attention to the US interest rate decision and the FOMC press conference scheduled for May 4th. The Federal Reserve’s continuous interest rate hikes have led to the bankruptcy of three major US banks, and with the added pressure of further rate hikes, it is important to carefully observe what opinions FOMC will express during the press conference. If FOMC shows a hawkish attitude even in such a situation, it could cause confusion in the asset markets, including the stock market. On the other hand, if the expected 25bp rate hike is implemented in this interest rate decision and Jerome Powell, the chairman of the Federal Reserve, mentions a rate cut in the second half of this year, it could bring a tailwind to the asset market.
Positive indicators: Open Interest
Negative indicators: First Republic Bank bankruptcy, net inflows and outflows of Bitcoin exchanges, and the number of wallets holding over 10K Bitcoins.
Summary: Last week, the asset market showed a momentary recovery, following the earning reports of major US tech companies being better than expected. However, it stumbled due to the First Republic Bank’s bankruptcy issue. As many market indicators show more negative signals than positive ones, we should be cautious about short-term corrections. However, since there is also the possibility that FOMC, which is aware of the increased likelihood of a financial crisis due to the bankruptcy of major banks, may hint at the end of tightening, we need to pay attention to this event.
