League of Traders Weekly Report (1st week of November 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 November!
- Bitcoin Chart/Ethereum Chart
On October 30th, the price of Bitcoin was trading near $34,300, down slightly from $34,700 last week. The price managed to break above the previous resistance level of 30k, so any downside movement is likely to be limited. Volatility has increased and price resistance on the downside may be found at around 30k, and 38k on the upside. On the charts, the chances of additional gains seem to outweigh the chances of correction, as the price has broken through to the upside on heavy volume.
Ethereum dropped slightly from $1,800 to $1,785. While Bitcoin has surpassed the highs it made back in July, Ethereum’s July highs were above $2,000, so it can be argued that it hasn’t yet broken through key resistance. However, with more than 10% left to go to meet this year’s previous high, it’s possible that Ethereum could move a bit higher before peaking, while Bitcoin moves sideways. Additionally, there has been some smart money activity, with Ethereum call options trading up, so Ethereum’s tendency to show relative weakness against Bitcoin may be lessened this week.
Bitcoin’s dominance over MarketCap is hovering around the 54% mark after last week’s big gains. Dominance has risen very steeply above 50%, so without additional news of a Bitcoin spot ETF, we may see a lull until altcoins, including Ethereum, catch up to MarketCap to some extent.
2. Major Economic Indicators
- US Bond Yields
The 10-year bond rate in the US is at 4.875%, similar to where it was last week, after rising to nearly 5% and then falling back. Rates are expected to move on Thursday this week, depending on the US interest rate decision and the content of the FOMC meeting, and we can expect to see mixed results until then. Some retail investors have been buying ETFs instead of US Treasuries, hoping for a break in rates, but given the generally robust US economy and unconvincing inflation numbers, remaining conservative about falling rates seems to be the best idea.
- US Dollar Index
The US dollar index rose slightly to 106.6 this week from 105.4 last week. The dollar index will also be heavily influenced by the US interest rate decision this week, and we expect it to be a mixed bag until then.
- US100 (Nasdaq 100)
The Nasdaq 100 has fallen from 14600 to the 14200s. The biggest stock market mover these days is still US interest rates. With plans for a new round of Treasury bond issuances in the US, there are fears that liquid funds will flow into government bonds. However, there is a demand to buy at current prices in big tech stocks that are performing well, so the US100 may be indicating a consolidation or a small short-term bounce rather than another big drop.
- Gold Futures
The price of gold futures broke above the 2000 level. This can be interpreted as a result of a preference for safe-haven assets due to the unrest in current international affairs, and it is likely to move in sync with the price of Bitcoin as an alternative asset. There was resistance at the 2000 level back in May, so it may be difficult for the price to move much higher until it breaks through that resistance. It would be worth watching closely in hopes that it can break above that level, using this year’s recorded all-time high of 2080 as a benchmark.
3. Bitcoin Market Data
- MVRV Z score
The MVRV Z-score is at 1.02, the first time it’s been above 1 since April 22nd. It has stayed at 1 for the last two years in the bull market, so a positive interpretation is that Q4 of this year could be the beginning of a full-blown bull market that includes a halving next 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-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 has risen to 1.06 and is now hovering around 1.02, but it is consistently above 1 which indicates a bull market. You can determine whether a short-term bull market is continuing by basing the aSOPR at 1 and seeing if the indicator is consistently above 1.
- aSOPR is short for Adjusted Spent 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 the 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
The open interest low for Bitcoin perpetual futures has surpassed $9B and stands at $9.19B. Looking at the size of open interest alone, we are currently approaching the zone that preceded this year’s big decline. However, if interpreted with the combined estimated futures leverage ratios of various exchanges, the interpretation could be slightly different. Even though the size of open interest increased, the leverage ratio did not increase, which could be interpreted as a large inflow of assets that could serve as collateral into the futures market. Additionally, since the leverage ratio is not high, the possibility of a downside due to liquidation will also be lower than before. Therefore, it can be assumed that futures buying power has been introduced to enjoy greater short-term gains, and it is necessary to carefully observe when the buying power is realized by monitoring the size of open interest and leverage ratio.
4. On-chain data
- Exchange inflows and outflows
Exchanges still have an outflow dominance, but the margin has narrowed. With Bitcoin flowing out of exchanges consistently since late May, the Bitcoin holdings of exchanges are at an all-time low since the market has been active, so the likelihood of spot selling pressure is very low.
- Number of Whale Wallets
The number of whale wallets has risen despite the spike in the price of Bitcoin. It could be interpreted that the big whales are buying more Bitcoin, betting on the possibility of further gains, rather than considering the current price as a high. These numbers are likely to be positive for the price, and it will be interesting to see if the number of whale wallets, which has increased as Bitcoin’s price has risen above $30K, will continue to rise or fall again in the short term.
5. Last week’s major news:
- MicroStrategy sees $746 million in unrealized gains on BTC rally
U.S. IT firm MicroStrategy (MSTR) has earned an additional $746 million in unrealized gains from the surge in the price of Bitcoin (BTC). According to look-on-chain data on Thursday, MicroStrategy held 158,245 BTC, increasing the value of its assets to approximately $5.4 billion. MicroStrategy’s average purchase price for Bitcoin is approximately $29,582, bringing its total purchase value to approximately $4.68 billion.
- ETF approval could bring $14.4 billion to market in the first year
Alex Thorne, head of research at Galaxy Digital, said on his X (Twitter) that if a bitcoin spot ETF is approved, he expects at least $14.4 billion in inflows in year one, rising to $38.6 billion in year three. In that sense, he believes the price of Bitcoin could rise 75% in the year following approval.
- USDT adoption surges in Brazil, accounting for 80% of all transactions
This year, the dollar-pegged stablecoin Tether (USDT) has seen a surge in adoption in Brazil. According to data from Brazil’s National Revenue Service on Monday, Tether’s trading volume accounted for 80% of all cryptocurrency trading in the country. As of mid-October, this year’s USDT trading volume in Brazil hit 271 billion Brazillian Real, nearly double the volume of Bitcoin. USDT trading has been on the rise in Brazil since 2021, but it first surpassed bitcoin’s trading volume in July 2022, at the height of last year’s crypto industry storm that saw crypto lenders Three Arrows Capital and Voyager Capital go bankrupt.
6. Major economic events
- Major economic events last week
Last week’s decline in building approvals, rise in crude oil inventories, and increase in jobless claims were expected to dampen inflation fears. However, the GDP came in at 4.9% which was well above the expectations set at 4.3%. This was interpreted as a sign that the US economy is still strong and that more inflation is possible. The market’s concerns were not extended as the underlying consumer price index came in line with expectations.
This week’s major economic events:
This week, you should be paying attention to the interest rate decision in the US, as well as the plans for further issuance of US Treasuries. Markets have been heavily influenced by US Treasury rates recently, so it will be interesting to see how the supply of Treasuries will be determined, which could affect the price of US Treasuries.
Summary
Positive indicators: MVRV Z-score, aSOPR, futures leverage ratio, number of whale wallets
Negative indicators: Nasdaq 100, open interest
Overall Review: Last week, Bitcoin entered a consolidation phase after rising, and with most on-chain indicators still positive for cryptocurrency, a strategy of maintaining a proportion of the cryptocurrency or adding to it in installments should work. However, it is worth paying attention to macroeconomic news and reacting quickly, as the international situation is likely to change rapidly due to changes in US interest rates and the escalation of the aggression in Palestine.
