League of Traders Weekly Report (2nd 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 second week of June!
- Bitcoin Chart/Ethereum Chart
Bitcoin experienced a significant decline from $62,700 last week to the $55,000 this week. It dropped to $53,485 on Binance on the 5th, then rebounded to $58,475 the next day, but failed to sustain the recovery and appears to be trending downward again.
The primary reason for the recent decline is the news of the German government selling Bitcoin. According to Arkham, an on-chain data analysis company, the German government initiated the decline by transferring approximately 1,900 bitcoins to an exchange on the 4th and exacerbated the decline by transferring another 700 bitcoins externally on the 7th. The government’s wallet currently holds around 39,826 bitcoins, valued at approximately $2.21 billion at the current price. Additionally, the news of Mt. Gox’s bond repayments, which began on the 5th, may contribute to continued selling pressure.
Last week, it was suggested that if Bitcoin’s price falls below $58,000, it could drop to $51,000, where it began to surge last February. This aligns with historical correction patterns. In the last two up cycles, there has always been a 30% correction from the highs. The previous peak of this upward cycle was $73,777, and a 30% decline would bring the price down to $51,643. Many believe Bitcoin could fall to this level, which could trigger a buying trend in that range.
The Bitcoin spot exchange-traded fund (ETF) experienced an outflow of funds, with Grayscale (GBTC) seeing the largest outflow last week, totaling approximately $59 million. This outflow is relatively small compared to the average inflows and outflows since the launch of the Bitcoin spot ETF.
Ethereum saw a significant drop from $3,400 to $2,900 this week. The 8th marked the deadline for submitting the Ethereum spot ETF S-1 amendment, making it crucial to monitor whether the SEC will process it. Approval of the Ethereum spot ETF is anticipated to boost the prices of major altcoins, including Ethereum in the short term. However, some believe that the influx of funds from the launch of the spot ETF will be minimal due to the overall poor performance of the virtual asset market and the recent decline in Bitcoin. If the Ethereum spot ETF does not attract significant fund flow, there is a possibility of a temporary rebound followed by a downward trend.
Bitcoin dominance rose to 55.17% from 54.79% last week. Despite Bitcoin’s significant price drop due to the news of Mt. Gox’s bond redemption and the German government’s Bitcoin sale, altcoins experienced an even greater decline, leading to an increase in Bitcoin dominance based on market capitalization. Andrew Kang, founder of Mechanism Capital, stated that “only a few exceptions will be able to hit new highs between the fourth quarter of this year and the first quarter of next year,” predicting that most altcoins have already reached their cycle peak.
2. Major Economic Indicators
- US Bond Yields
The U.S. 10-year bond yield fell from 4.394% last week to 4.3% this week. This decline in U.S. Treasury yields is attributed to dovish remarks by Federal Reserve Chairman Jerome Powell, who stated that the Fed has “made significant progress” in combating inflation. Additionally, Austan Goolsbee, President of the Federal Reserve Bank of Chicago, remarked that maintaining the policy interest rate at the current level amidst a falling inflation rate would exert stronger downward pressure on demand, suggesting that interest rates should be lowered within the next few months. These statements have contributed to the decline in interest rates.
- US Dollar Index
The U.S. dollar index decreased from 105.620 last week to 104.926 this week. As the yen, which has been consistently weak, exhibited mixed trends, the U.S. dollar and bond yields moved in the same direction for the first time in a while. Given that major events related to interest rates, such as Chairman Powell’s testimony, are scheduled this week, it is highly likely that the U.S. dollar index will continue to move in sync with U.S. bond interest rates.
- US100 (Nasdaq 100)
The Nasdaq 100 index rose to 20,362, buoyed by the decline in U.S. bond yields. Tesla led this rise, continuing its rally for the eighth consecutive trading day after announcing strong second-quarter earnings. Apple also contributed to the rise by reaching a record high. However, since the Nasdaq 100 index has been climbing without a significant correction since last November, it is important to be aware that a market adjustment could occur at any time.
- Gold Futures
Gold futures prices rebounded from $2,326 per ounce last week to $2,385 per ounce this week. If gold futures prices exceed their previous high amid declining U.S. Treasury yields, there is a strong possibility that Bitcoin will also demonstrate strength.
3. Bitcoin Market Data
- MVRV Z-score
The MVRV Z score dropped significantly from 1.95 last week to 1.526 this week, indicating that the overheating of Bitcoin, which occurred due to the launch of the Bitcoin spot ETF last March, has nearly been resolved. Given the MVRV Z-score of 2 last week, it remains to be seen if it can trend back above this level.
- 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 fell slightly from 1.011 last week to 1.007 this week. Carrying on from last week, there are days when the daily aSOPR fell below 1, indicating that the bull market cannot be sustained.
- 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 significantly from $17.1 billion last week to $14.33 billion this week. During the same period, the estimated leverage ratio also decreased from 0.201 to 0.193, suggesting that the market is becoming healthier due to the liquidation of excessive leverage. However, it should be noted that open interest above $14 billion is still high. If Bitcoin’s price falls further, open interest may drop below $13 billion, which was the level last April.
4. On-chain data
- Exchange inflows and outflows
Bitcoin on exchanges showed a neutral trend last week but shifted to increased exchange inflows this week. This shift is linked to the return of Mt. Gox’s bonds, the German government’s sale of Bitcoin, and increased funds in Bitcoin spot ETFs. It is anticipated that Bitcoin’s trend will rebound when the inflow to exchanges stops.
- Number of Whale Wallets
The number of whale wallets holding more than 10,000 Bitcoin tends to increase slightly when Bitcoin’s price is below $55,000 and decreases when it is above $58,000, with no significant overall change. At the current price range, it is a positive sign that the number of whales holding more than 10,000 Bitcoin increases during price declines rather than continuously decreasing. Although there is no significant change in the number of whale wallets holding over 10,000 Bitcoin, their total holdings continue to increase, now at 319,000 BTC, the highest since November 2018. Whales demonstrated a buying phase by accumulating 21,000 Bitcoin over the past six weeks.
5. Last Week’s Major News
- Mt. Gox Begins Repayment of Bitcoin and Bitcoin Cash
The Mt. Gox bankruptcy administrator has announced the commencement of repayments to creditors in Bitcoin and Bitcoin Cash. Nobuaki Kobayashi, the Mt. Gox bankruptcy administrator, stated on July 5th that they have started repaying some creditors in Bitcoin and Bitcoin Cash through designated cryptocurrency exchanges. Additional repayments will be made to investors who meet the specified conditions.
- German Government Transfers Another $40 Million Worth of Bitcoin
The German government has significantly increased its Bitcoin remittances over the past day, continuing a trend that began last month. A Bitcoin address linked to German authorities transferred an additional 700 BTC, worth $40.47 million, to the ‘139PoP’ address this weekend. This transaction was confirmed by the on-chain analytics firm Arkham.
- Ethereum Spot ETF Expected to be Approved as Early as July 8
The Bithumb cryptocurrency exchange reported in its latest ‘Easyconomy’ report that foreign experts anticipate the approval of the U.S. Ethereum spot exchange-traded fund (ETF) as early as July 8th.
6. Major economic events
- Major economic events last week
Following Chairman Powell’s dovish speech last week, employment-related indicators such as non-farm payrolls and new unemployment claims showed poor results, leading to a significant drop in U.S. bond yields. However, potential factors that could drive price increases remain, such as a substantial decrease in crude oil inventories.
This week’s major economic events
This week, Federal Reserve Chairman Powell’s testimony and the release of the U.S. consumer price index are scheduled. If Chairman Powell continues his dovish stance from his last speech, we can expect a positive trend in the asset markets, including Bitcoin. Conversely, a hawkish stance could trigger a correction in the asset market, along with a decline in the U.S. stock market, which is currently reaching new highs.
Summary
Positive indicators: U.S. bond yields, U.S. dollar index, Gold futures, Perpetual futures open interest, Estimated leverage ratio
Negative indicators: German government Bitcoin sales, Mt. Gox bond redemption news, BTC spot ETF fund outflow, aSOPR
Overall Review: Last week, major macroeconomic indicators were favorable, and both the stock market and gold prices showed upward trends. However, Bitcoin failed to rise due to selling pressure. Most overheating indicators, including open interest, have shown a downward trend, and the current price is near the bottom of the correction range compared to the previous high. Despite this, ongoing sell-offs by the German government and Mt. Gox bondholders make it uncertain if this is the market bottom. We recommend buying in increments starting from the current price, with a more active buying strategy if Bitcoin’s price falls below $51,000.
