League of Traders Weekly Report (2nd week of March 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 March!
- Bitcoin Chart/Ethereum Chart
Bitcoin’s price is currently sitting near $68,500 after temporarily surpassing its historic high of $69,000. Bitcoin’s recent gains are largely attributed to inflows into bitcoin spot ETFs. BlackRock’s ETF, the most prominent bitcoin spot ETF, has been a major rally driver, with daily inflows topping $1 Billion. A breakout at around $70,000 could result in a significant short-term gain as there is no obvious resistance, but at the same time, it is important to keep in mind that there is currently the largest open interest in history, so a major correction could occur at any time.
Ethereum’s price has risen significantly from $3,483 to $3,845 this week. With both the approval of an Ethereum spot ETF and the issue of Ethereum burning still around, which built the case for last week’s bullish predictions, Ethereum’s price is likely to continue strengthening. However, given that Ethereum’s price has been rising for over a month now without a correction in addition to rising open interest, it’s important to note that a short-term correction could come at any time.
Bitcoin dominance dropped slightly from 54% to 53.64% this week. The dominance has been in a pattern ranging between 51% and 55% since late last year, so there is potential for both upward and downward movement from the current dominance reading. With strong buying from spot ETFs and the April Bitcoin halving approaching, we expect Bitcoin dominance to remain bullish for the foreseeable future.
2. Major Economic Indicators
- US Bond Yields
The U.S. Treasury rate has dropped significantly from 4.201% to 4.069% this week. Last week, US Federal Reserve Chairman Jerome Powell hinted at a possible pivot to lower interest rates, stating that “If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year,”. In response, markets have been pricing in the possibility of a rate cut since June of this year, pushing the US 10-year bond yield closer to 4%. Powell’s comments significantly increased the likelihood that the US benchmark rate would pivot within the year, sending US equities, gold, cryptocurrencies, and other major assets to record highs.
- US Dollar Index
The US Dollar Index fell from 103.860 to 102.719 this week, mainly due to lower US Treasury yields following Powell’s comments. US employment data supported the trend of declining inflation, and the Japanese Yen also strengthened, dragging the dollar down.
- US100 (Nasdaq 100)
The US100 broke above 18,000 to hit new historic highs before a slight correction under 18,000, most likely in the wake of a significant correction in Nvidia. The lower dollar index, coupled with the decline in U.S. bond yields, could put U.S. equities, which are dollar-denominated assets, at a disadvantage compared to equities in other major countries such as Japan. However, with interest rates lower and major assets such as the S&P 500 index and gold prices all making new highs, it is unlikely that the trend in the Nasdaq 100 will be significantly disrupted.
- Gold Futures
The price of gold futures has continued to rise from 2080 and is expected to hit 2179 this week. Gold, as a low-interest asset, is reaching new all-time highs as US bond yields are falling and the US dollar index is weakening as Powell talks about the possibility of rate cuts. Bitcoin is also rising to new all-time highs, so we may see some degree of coupling between crypto and gold prices this year.
3. Bitcoin Market Data
- MVRV Z-score
The MVRV Z-score rose from 2.66 to 2.96 this week. An MVRV Z-score of 3 or higher is considered overheating, and the last two bull markets have seen MVRV Z-scores of 6 or higher at the end of the uptrend. Therefore, the current number is in the middle of the bull market and we can expect further gains.
- 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 is currently at 1.061, which is higher than last week’s level, after a significant spike from 1.039 last week. The aSOPR remained above 1 last week, confirming the continuation of the long-term uptrend. However, it is important to note that in the past, after the aSOPR would spike above 1.17 and pull back, there has been a temporary correction. Last week’s spike was followed by a temporary drop in Bitcoin of more than 10% in the short term.
- 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 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 aggregated open interest on exchanges reached a new all-time high of $16.22B this week, up from $14.38B last week. The estimated futures leverage ratio also increased from 0.185 to 0.197. While the estimated futures leverage ratio has increased over the past week, there is still room for further upside compared to last year’s range above 0.21. However, open interest has the potential to drop significantly after reaching new all-time highs, so traders should be wary of adjustments as positions close.
4. On-chain data
- Exchange inflows and outflows
Bitcoin positions on exchanges maintain outflow dominance. Since the activation of the Bitcoin spot ETF, we’ve seen a steady stream of spot outflows from exchanges. Last week, we noted that large outflows of Bitcoin off exchanges can be interpreted as a bullish sign for the near future. This week, the outflows have remained large, so we can expect more gains in Bitcoin from an inflow/outflow perspective.
- Number of Whale Wallets
The number of whale wallets holding 10K+ Bitcoin is up slightly from last week and is now at levels seen in January of this year. Since January, the price of Bitcoin has risen from around $42,000 to $70,000, showing a rise of over 60%. With this in mind, the current level of the number of whale wallets holding 10K+ can be interpreted as an indication that more gains are on the way.
5. Last Week’s Major News
- Bitcoin plummets after hitting 846-day high
Bitcoin hit a 28-month high of more than $69,000 on Friday but has since plunged 10%. According to CoinGlass, $325 million was liquidated in Bitcoin over the past five days, with long positions accounting for about 75% of the liquidation. The “kimchi premium,” a measure of the gap in Bitcoin’s price in South Korean exchanges when compared to global exchanges, is hovering around 7% and is particularly overheated in South Korea.
- Kwon Do-hyung’s chances of going to Korea increased, U.S. still calling to extradite
A Montenegrin court has decided to extradite Terraform Labs CEO Do-hyung Kwon, a key figure in the collapse of the Terra-Luna cryptocurrency, to South Korea rather than the U.S. However, the U.S. Department of Justice has issued a statement saying it will continue to pursue Kwon’s extradition to the United States. On the 7th, Montenegro’s Podgorica High Court again decided to extradite Mr. Kwon to South Korea instead of the U.S. According to Bloomberg, the court had decided to extradite Mr. Kwon to the U.S. on the 21st but soon thereafter reversed its decision in less than a fortnight. The court did not disclose its reasoning for reversing its decision.
- BlackRock spot ETF buys nearly 200,000 BTC…MSTR aside
BlackRock’s bitcoin spot exchange-traded fund has surpassed MicroStrategy’s (MSTR) Bitcoin holdings, buying nearly 200,000 BTC just two months after launching. According to CoinDesk on Tuesday, IBIT’s holdings of 195,985 BTC surpassed MSTR’s 193,000, although MSTR recently announced that it would raise $600 million in capital through a convertible bond offering to buy more bitcoin.
6. Major economic events
- Major economic events last week
The most significant event of the past week was Chairman Powell hinting at the possibility of an early interest rate cut, rattling financial markets at home and abroad. Markets interpreted Powell’s comments as increasing the likelihood of a rate cut in June. The US Standard & Poor’s (S&P) 500 Index hit a new all-time high, while Bitcoin’s price also hit a new all-time high before slightly correcting.
This week’s major economic events
This week we’ll be looking at the monthly consumer price index and retail sales data. With Chairman Powell hinting at the possibility of a rate cut, if these inflation-related indicators show signs of picking up, the market could react positively.
Summary
Positive indicators: US bond rates, US dollar index, gold price, exchange inflows and outflows, number of whale wallets
Negative indicators: Nasdaq 100, Open interest
Overall Review: Bitcoin reached new historic highs last week after Powell hinted at a possible pivot in US interest rates. With fresh inflows from spot ETFs and the Bitcoin halving issue still at play, the price of Bitcoin is likely to continue its uptrend and reach new all-time highs in the near future. However, with a possible correction in major U.S. tech stocks including NVIDIA, and open interests in Bitcoin futures at historically high levels, investors should be wary of significant volatility. With volatile new highs, a spot-oriented holding strategy, rather than entering new futures positions, is more likely to yield higher returns.
