League of Traders Weekly Report (2nd week of February 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 February!
- Bitcoin Chart/Ethereum Chart
Bitcoin’s price continued to strengthen last week, rising to $50,000, its highest price in more than two years, as miner selling tapered off as expected last week. Large outflows from the Grayscale Bitcoin exchange-traded fund (ETF) following the launch of the Bitcoin spot ETF weighed on investor sentiment, but sentiment has improved as outflows have slowed and the spot ETF has seen inflows. Over the past nine days, the ETF has bought more than 12,000 bitcoins, surpassing MicroStrategy’s bitcoin holdings and outpacing the rate of bitcoin mining, which averages more than 1300 bitcoins per day. However, with 93% of Bitcoin holders currently in the profit zone, it is unlikely that Bitcoin will reach its historic highs (close to $69,000) in the near term without resistance, as there could be significant take-profit selling near $50,000.
Ethereum’s price has rallied significantly from last week’s low-2300s to this week’s mid-2600s, paralleling Bitcoin’s gains, with a strong rise after last week’s news of a large whale transferring ETH out of exchanges. With demand for Bitcoin spot ETFs driving the price of Bitcoin higher, it seems likely that the anticipation of Ethereum spot ETFs will continue into May. Therefore, we expect Ethereum to remain strong alongside Bitcoin.
Bitcoin dominance rose from 52.58% last week to 53.88% this week. With continued inflows from Bitcoin spot ETFs and only about two months until Bitcoin’s halving, we expect Bitcoin dominance to remain strong for the foreseeable future.
2. Major Economic Indicators
- US Bond Yields
US Treasury yields rose slightly from 4.127% last week to 4.185% this week, though the change is small. US Treasury yields have remained firm after Fed Chairman Powell’s negative stance on early rate cuts last week. Stronger US employment data has further reduced expectations of an early rate cut. Until US employment and economic data show signs of slowing, expectations for a rate cut are likely to remain low.
- US Dollar Index
The strong dollar phenomenon continues as expectations of an early interest rate cut in the US recede. The US Dollar Index was flat at 103.235 this week, down from 104.315 last week. As with US Treasury rates, the dollar index is unlikely to move much lower until US employment and macroeconomic data slow down.
- US100 (Nasdaq 100)
The Nasdaq 100 is back to new historic highs, rising from 17600 to 17800. AI stocks like Palantir and semiconductor stocks like Nvidia and AMD are driving the gains. With the S&P 500 also hitting historic highs, US equity indices will likely make additional new highs as US stocks are favored in global investment markets for the foreseeable future.
- Gold Futures
The price of gold futures fell slightly from 2027 last week to 2017 this week. If U.S. Treasury rates don’t fall, it’s likely to weaken or trade sideways for the foreseeable future. What is noteworthy about the relationship with cryptocurrencies is that bitcoin’s price has risen even during periods when gold, a typical low-interest-rate asset, has traded sideways or weakened, indicating that bitcoin’s favorability is strong regardless of macroeconomic conditions.
3. Bitcoin Market Data
- MVRV Z-score
The MVRV Z-score rose from 1.39 last week to 1.88 this week. While this is not a concerning level, it could be argued that the score is entering the overheating zone. However, historically, the MVRV Z-score has peaked around level 6, so there is still plenty of upside left. While a short-term correction is possible, the medium to long-term uptrend is likely to continue.
- 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 been consistently above 1, rising from 1.015 last week to 1.050 this week, showing that the uptrend has not broken.
- 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 aSOPR 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-traded perpetual futures is at its highest level in over a year, rising from $9.72B last week to $12.7B this week, indicating an increased risk of liquidation from positions. Additionally, the exchange-traded estimated leverage ratio, which has been consistently low this year, has risen from 0.185 last week to over 0.200 this week, indicating increased risk. However, the leverage ratio has not reached the 0.22+ levels seen during last year’s correction, so there is still room for more growth.
4. On-chain data
- Exchange inflows and outflows
Bitcoin positions on exchanges have shifted from being dominant in inflows to dominant in outflows, a phenomenon that can be interpreted as asset managers like BlackRock buying Bitcoin due to the launch of ETFs. At the current price point, outflows of Bitcoin can be seen as very positive for the market.
- Number of Whale Wallets
The number of whale wallets holding more than 10K Bitcoin has remained steady since the spike in late January. With Bitcoin’s price rising towards the 50K mark in such a short period, there may be concerns about short-term arbitrage by whale wallets. However, the number of whale wallets would need to be monitored carefully as it could be interpreted as a signal for more gains if it remains stable or increases at the current price.
5. Last Week’s Major News
- Cryptoquant CEO “BTC inflows to Coinbase Prime surge…entering reaccumulation phase
CryptoQuant CEO Ji-Young Koo explained that BTC inflows to Coinbase Prime have recently surged and even when excluding GTBC trading volume, there is still a significant volume. Koo went on to explain, the market is currently in the early stages of rebuilding for the next market cycle, while also predicting BTC’s rise.
- Bitcoin tops $50,000 for the first time in two years
The price of Bitcoin has surpassed $50,000 for the first time in two years, driven by strong inflows into Bitcoin spot ETFs, which saw net inflows of more than $1.1 billion last week. Bitfinex analysts wrote in a report that this upward trend coincides with a period of declining outflows from GBTC and increasing inflows into other spot ETFs. Additionally, excluding GBTC, the remaining spot ETFs now hold more than 192,000 BTC, surpassing MicroStrategy’s 190,000 BTC in a month.
- Playdab (PLA) confirms issuance of 15.9 billion additional PLA after hack…watch out for volatility
Upbit announced on its official site that they have confirmed an additional 1.59 billion PLA were issued related to the security incident. The situation will continue to be monitored, and users should stay vigilant regarding the increased volatility in PLA prices. The additional PLA issued today is valued at approximately KRW 342.8 billion based on the price on the Upbit KRW market. Meanwhile, Coinness reported that 200 million additional PLAs worth approximately $31 million were issued after a security issue.
6. Major economic events
- Major economic events last week
Last week, markets reacted negatively to Chairman Powell’s speech, with US Treasury yields rising and negative comments about an early rate cut. Since then, US Treasury yields have stabilized as the Services Purchasing Managers’ Index came in lower than expected, and crude oil inventories rose. However, new jobless claims came in below expectations, showing that US employment remains strong. Inflationary concerns remain on the back of strong employment rates in the US.
This week’s major economic events
This week marks the release of the monthly Consumer Price Index for the United States. As a direct measure of inflation in the U.S., if the number comes in lower than forecasted, the market may rise in anticipation of a rate cut. However, if the data released this week shows that inflation in the U.S. is still persistent, expectations for a rate cut will be further diminished, which could hurt the market.
Summary
Positive indicators: Bitcoin dominance, aSOPR, exchange inflows, and outflows
Negative indicators: Open interest, U.S. bond rates, U.S. dollar indexes
Overall Review: Bitcoin’s price has hit a two-year high after surpassing $50,000. While we may see a temporary correction in the near term due to high open interest, other indicators suggest that Bitcoin is entering a full-blown bull market. As such, it seems that the current price is unlikely to be a long-term stop. Strategies to buy in installments with further upside in mind, or buying on the downside, will yield good results.
