League of Traders Weekly Report (2nd week of April 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 second week of April!
- Bitcoin Chart/Ethereum Chart
Bitcoin experienced a temporary drop from about $70,800 to $64,500 before bouncing back, and now hovering near $69,000. Last week’s decline in Bitcoin prices is attributed to the U.S. government selling approximately 10,000 BTC seized from Silk Road. The announcement of plans to sell confiscated bitcoins four more times in 2024 has sparked significant market concern, likely contributing to the price drop. While various speculations circulated about other factors influencing the decline, reduced excessive open interest occurred, and Bitcoin began to climb again.
The fund flow of the Bitcoin spot ETF, recently a major price influencer, remains positive. On Friday, net inflows into the Bitcoin spot ETF reached $203 million, marking a fourth consecutive day of increase. However, Shiliang Tang, CEO of Abeloth Markets, noted the emergence of trading algorithms becoming active in the Asian market due to these inflows. There’s a high likelihood that the inflow and outflow of funds from the Bitcoin spot ETF will amplify Bitcoin price volatility in the future.
Last week, Ethereum experienced a decline from approximately $3,600 to $3,200, but subsequently recovered to about $3,420. Ethereum’s outlook appears promising leading up to May, with anticipation surrounding the possible approval, akin to Bitcoin’s spot ETF approval expectations. However, there has been a shift in Ethereum’s previously deflationary trajectory towards inflation in recent days, warranting close monitoring to determine if this trend persists. A strengthening inflation trend could lead to a long-term decline in the Ethereum network’s value, especially considering the decrease in on-chain activity, which primarily triggers fee burn.
Bitcoin dominance increased from 53.56% to 54.41% this week. With the Bitcoin halving on the horizon, it’s anticipated that Bitcoin dominance will climb to approximately 55%, nearing the upper boundary of its range. There’s a chance of a temporary breakout in Bitcoin dominance when Bitcoin surpasses its previous high.
2. Major Economic Indicators
- US Bond Yields
US bond yields surged significantly from 4.204% last week to 4.418% this week, largely attributed to the diminishing expectations of an interest rate cut amid robust US economic indicators. March’s manufacturing Purchasing Managers’ Index (PMI) of 50.3, surpassing the 50 standards for expansion, notably exceeded the previous forecast of 48.5. Following Chairman Powell’s statement on the 29th indicating no urgency for interest rate cuts, the resilience of US economic indicators suggested that the US Federal Reserve (Fed) might not be as proactive as the market anticipated in lowering the base rate come June. As speculation circulates that this might not materialize, interest rates have climbed.
- US Dollar Index
The US dollar index briefly spiked above 105 from 104.518 but then retreated to 104.408. Bloomberg interpreted this as a shift in the dollar’s strength to weakness, with investors adjusting their expectations for a June interest rate cut as they digest the latest robust economic indicators of the US economy. While the US dollar pauses, the euro and yen see marginal upticks. Nevertheless, given the ongoing solidity of US economic indicators, the resilience of the strong dollar trend seems likely to persist.
- US100 (Nasdaq 100)
The US100 rests at 1810, slightly lower than its previous 18300. This is possibly due to the sharp uptick in US interest rates, dampening investor sentiment. There’s also speculation that profit-taking selling occurred amidst the Nasdaq 100 index’s sharp rise last November. Particularly, Tesla, a significant technology stock, reported only 386,810 units for first-quarter car deliveries, an 8.5% decrease compared to the same period last year, resulting in a temporary drop of over 7% in its stock price, negatively impacting the index. Until the visibility of an interest rate cut emerges, the US100 index is anticipated to exhibit a weak trend rather than a robust one.
- Gold Futures
With the likelihood of a slowdown and inflation in the United States expected to be minimal, gold futures prices continue to surge, surpassing $2,300 for the first time in history. Major central banks like China are actively purchasing gold, and with the recent significant spike in gold prices, private investment firms are swiftly introducing gold investment products for individual investors. Consequently, the upward momentum in gold prices is anticipated to persist, albeit with increased volatility due to the influx of individual investors.
3. Bitcoin Market Data
- MVRV Z-score
The MVRV Z-score saw a slight decrease from 2.89 last week to 2.72 this week. When Bitcoin prices dropped on the 2nd, the MVRV-Z score also experienced a notable decline, but partially recovered thereafter. A current figure of less than 3 amidst a bull market indicates a favorable condition, suggesting potential for further upside before the market reaches an overheated state.
- 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 an All-Time High (ATH) in 2021, scores of 6 or higher were shown.
- aSOPR
The aSOPR remained relatively stable, changing marginally from 1.024 last week to 1.023 this week, consistently recording above 1 every week, signaling the continuation of the bull market. The observed decline in the last two days follows a typical pattern of aSOPR briefly spiking before receding. Last week’s decline appears to have mitigated the risk of abnormal aSOPR readings to some extent.
- 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’s exchange-combined perpetual futures open interest decreased from $17.13B last week to $16.49B this week. The sharp decline in Bitcoin prices on the 2nd led to significant liquidation of long positions, consequently reducing open interest. Although the exchange’s combined estimated futures leverage ratio saw a slight increase from 0.191 last week to 0.192 this week, overall, there’s no significant change. While open interest remains high, the lack of a substantial increase in the estimated futures leverage ratio indicates a relatively stable risk environment, which bodes well for upward movement.
4. On-chain data
- Exchange inflows and outflows
Last week, Bitcoin outflows from exchanges witnessed the most significant decrease of the last year, which, given the approaching halving, could be interpreted as a positive signal.
- Number of Whale Wallets
While the number of whale wallets holding more than 10k Bitcoin saw a slight decrease last week, there have not been any significant changes. However, there was a notable increase in the number of small whale wallets holding more than 1k Bitcoin last week, heightening anticipation for the Bitcoin halving.
5. Last Week’s Major News
- Tether Acquires 8,888 Bitcoins, Ranks 7th in Global Reserves
Tether, issued by Stablecoin, has acquired an additional 8,888 BTC, as reported by Cointelegraph on the 1st of April. This acquisition amounts to approximately $618 million. With this purchase, Tether’s wallet now holds a total of 75,354 BTC, valued at around $5.2 billion, placing it 7th in the global reserve. Binance holds the largest amount of BTC in the world within a single address, with 248,597 BTC, valued at approximately $17.3 billion.
- Bitcoin Hits All-Time High Amid Global Currency Devaluation
Cathy Wood, CEO of Arc Investment and renowned as the ‘Money Tree’ in South Korea, attributed Bitcoin’s recent record-breaking to global currency devaluation. According to CoinDesk, Wood stated in an interview with CNBC that global currency devaluation is one of the factors currently driving BTC’s strength and that “BTC serves as a form of insurance against dictatorships and failures in fiscal and monetary policies.”
- SEC Initiates Public Feedback for Ethereum Spot ETF
The U.S. Securities and Exchange Commission (SEC) has commenced gathering public feedback on the proposed Ethereum (ETH) spot exchange-traded fund (ETF). As reported by CoinDesk, the SEC intends to gather opinions regarding ETH spots ETFs from Grayscale Investment, Fidelity, and Bitwise. The SEC states its purpose is to solicit comments from stakeholders on proposed rule changes, however, optimism regarding the approval of the ETH spot ETD has waned. Bloomberg ETF analyst Eric Balchunas revisited the likelihood of an ETH spot approval by May, going from 70% to 30%/
6. Major economic events
- Major economic events last week
The standout market influencer last week was the ISM Manufacturing Purchasing Managers’ Index. With a recorded index of 50.3, it signaled the resilience of the U.S. economy and the potential for continued inflation, prompting a sharp uptick in U.S. bond interest rates. This week’s release of employment-related indices reinforces the solidity of the U.S. job market. However, the unexpected increase in new unemployment claims to 221k, surpassing the forecast of 213k, suggests a possible stagnation in job market improvement. Vigilant monitoring of future employment indicators is imperative.
This week’s major economic events
Key economic events this week include the publication of the U.S. Federal Reserve meeting minutes and the European interest rate decision. Specifically, any hints of an interest rate cut in the released meeting minutes could spur market reactions and heighten volatility.
Summary
Positive indicators: gold futures, MVRV Z-score, aSOPR, and exchange inflows and outflows.
Negative indicators: U.S. bond yields.
Overall Review: On April 2nd, virtual assets experienced a sharp decline due to soaring U.S. bond interest rates and rumors of the U.S. government’s potential Bitcoin sale, but gradually regained ground. While the increase in U.S. bond interest rates casts a shadow over the investment market, on-chain Bitcoin indicators like the MVRV Z-score, aSOPR, and exchange inflows remain positive. Therefore, we anticipate a strategy emphasizing Bitcoin allocation will prove effective until the Bitcoin halving.
