League of Traders Weekly Report (2nd week of May 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 second week of May!
- Bitcoin Chart/Ethereum Chart
As of last week, the price of Bitcoin has risen since the release of U.S. employment figures the day before the FOMC, showing a slight drop below 30k. This supports the opinion that bad employment indicators positively affect the crypto market. Additionally, the FOMC announcement met expectations which affected the asset market positively.
The price of Ethereum, which had fallen to $1,820, seems to have recovered to $1,900. Since the last Shapella upgrade, volatility and adjustment have decreased, especially when compared to Bitcoin. This reinforces the opinions of some traders who anticipate the strengthening of altcoins and news that there is more Ethereum stakings ahead, rather than than withdrawals.
This is a Bitcoin dominance chart for market capitalization. Bitcoin dominance is currently around 47%. The continuous upward trend of Bitcoin dominance dating back to the start of the year must be monitored to see if it will live on. Though Bitcoin is expected to strengthen in 2024, there is a possibility that the market could favor short-term alt coins later on in the year and see a short pump. During that time, Bitcoin dominance could be adjusted before rising again. At the start of the altcoin surges, there was an expected increase in the price of Ethereum, while low market cap altcoins would also subsequently begin to rise. Therefore, it is important to closely monitor the relative price fluctuations of Ethereum compared to Bitcoin.
2. Major Economic Indicators
- US100 (Nasdaq 100)
This year, the NASAQ index was decoupled from the price of Bitcoin, and in the short term, the US100’s fluctuation shows a negative correlation with the price of Bitcoin. This decoupling is likely to continue for the time being.
- US Dollar Index
The US dollar index is currently on a downward trend and is currently at the bottom of the short-term trading range. If the US dollar index were to break below support levels and fall, both gold and Bitcoin, which are considered alternative value storage methods, may rise together.
- Gold Futures
The price of gold futures powerfully broke through the 2000s as the dollar index fell, though it did end up pulling back. However, there has been an increase compared to last week. Some argue that this phenomenon is due to institutions preferring gold as a hedge. In this regard, Cashwood expects that if Bitcoin is selected as part of institutional portfolios as a hedging measure against the banking crisis, it could positively impact the price of Bitcoin.
- US Bond Yields
U.S. 10-year Treasury yields edged down from 3.5% to 3.4% as the FOMC reported a 25bp rise that was in line with expectations.
3. Bitcoin Market Data
- MVRV Z-Score
The MVRV Z-score was 0.65, slightly higher than last week’s. From a long-term investor’s point of view, it appears to be a good value to buy at this point, and in the short term, it seems to be in a neutral zone.
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-core 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
Currently, aSOPR is trading sideways around 1. It is likely to stay close to 1 until a clear trend emerges.
- 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 outstanding contracts have both risen and slightly dropped. As the price of Bitcoin has remained stable, the possibility of a price drop, due to the resolution of outstanding contracts, has relatively decreased.
4. On-chain data
- Exchange inflows and outflows
This week, there is still an inflow into exchange wallets. While this volume is not a historically sizable amount, the Bitcoin could potentially be converted into a sell-off volume.
- Number of Whale Wallets
The number of whale wallets above 10k Bitcoin has slightly decreased since last week. We can expect that whales are not making additional active purchases at the current price range.
5. Last week’s major news
- U.S. Federal Reserve raises key interest rate by 0.25%
The U.S. Federal Reserve raised its key interest rate by 0.25% on May 3 (local time), announcing the same increases that occurred in both February and March, making the key interest rate 5–5.25%. The Fed raised its key interest rate again in response to high inflation, but a statement from the Federal Open Market Committee hinted at the possibility of ending the subsequent hikes in the future.
- Pepecoin Recovers $100M in One Day
In just one day, PepeCoin’s market cap has recovered to $100 million. In just three weeks since its launch, PepeCoin has become the third-largest meme coin behind Dogecoin (DOGE) and Shiba Inu (SHIB) in terms of market capitalization. Meme coin is a term used to describe a token that was created to pursue fun rather than practicality.
6. Major economic events
- Major economic events last week
After the FOMC raised its 25bp rate, as expected last week, Bitcoin’s prices edged up, forming short-term relief in the market as Fed Chairman Jerome Powell hinted at a possible halt to further rate hikes.
- This week’s major economic events
This week, along with the release of the U.S. monthly price index, we have a speech by the Bank of England Governor and decisions about interest rates up ahead. With the U.S. rate hike nearing its end, attention is being paid to what the U.K. rate decision will be.
Summary
Positive Indicators: U.S. Dollar Index, MVRV Z-score, gold futures
Negative Indicators: Net inflows on Bitcoin exchanges, number of whale wallets
Summary: Last week’s FOMC event went smoothly, and the US dollar index has been showing weakness which could be favorable for Bitcoin investments. However, since Bitcoin has not been able to break through 30k, it is advisable to check whether it eventually breaks through and then adjust the asset allocation.
We hope you find this weekly report informative and helpful in making your trading decisions. Thank you for reading.
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This report and other important information are first sent through the League of Traders official Telegram channel.
Disclaimer: This report is solely for informational purposes and should not be considered as investment advice or used to make financial decisions. League of Traders does not endorse or recommend any type of financial product or crypto asset.
