League of Traders Weekly Report (2nd week of November 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 is first shared via the official League of Traders Telegram channel.
Here are our notes for the second week of November!
- Bitcoin Chart/Ethereum Chart
On November 7th, the price of Bitcoin rose to almost 35k, up from last week’s $34,300. The main resistance levels are likely to be 30k at the lowest and 38k at the highest. Jan Happel and Yann Allemann, co-founders of Glassnode, noted that Bitcoin’s 14-day RSI (Relative Strength Index) is now above 70, which could be a sign that Bitcoin may be about to rally. While there may be a temporary correction due to a rise in open interest, many experts believe we are in a long-term bull market.
Ethereum’s price has been trending stronger than Bitcoin since last week, rising from $1,785 to $1,896. As we said last week, unlike Bitcoin, Ethereum has not yet broken past its July highs, so until it does, it is likely to trend better as it has relatively less resistance than Bitcoin.
Bitcoin’s dominance dropped to 52.45% from 54% last week, which could be attributed to the strength of Ethereum and other major altcoins. In a typical bull market, Bitcoin, major altcoins, and other altcoins rotate upwards in a cyclical pattern, so we can probably expect further gains for altcoins, which could weaken Bitcoin’s dominance.
2. Major Economic Indicators
- US Bond Yields
The US 10-year Treasury rate fell from 4.875% to 4.647% as key employment-related data, including jobless claims and nonfarm payroll changes, both came in worse than expected. Markets interpreted this as pressure on the Federal Reserve to discontinue tightening. Investors believe that the US Treasury has begun to “pace itself” regarding the sale of longer-term Treasury securities. Markets, which had been anxiously awaiting the Treasury’s plans, responded with a reduction in Treasury rates as they saw less potential for supply expansion.
- US Dollar Index
The U.S. Dollar Index also fell from 106.6 to 105.26 as employment in the U.S. slowed. Markets weakened both bonds and the dollar last week, with the slowdown in employment data reinforcing the view that the Fed has ended its rate hike cycle. However, caution is needed to be sure that the Fed has ended its rate hike cycle.
- US100 (Nasdaq 100)
Stocks in major economies around the world, including the U.S., rebounded sharply due to hopes that the U.S. would end its interest rate hikes. The Nasdaq 100 rose from 14200 to 15100. Business Insider quoted the head of research at Fundstrat Global Advisors, Tom Lee, saying that recent macroeconomic data releases have been positive for equity markets and should support a near-term rally, adding that he expects gains to continue through the end of the year. However, Michael Wilson, both the Chief Investment Officer of Morgan Stanley and Chief Strategist for U.S. Equities, warned that the recent rally in U.S. equity markets is nothing more than a bear market rally, as businesses are becoming increasingly concerned about the threat of a slowdown and worried about the impact of prolonged high-interest rates on demand, Bloomberg added.
There is no disagreement that the downtrend that has been in place since July has reversed, so rather than a sharp turn to the downside, the market is likely to consolidate or consolidate to the downside.
- Gold Futures
Gold futures rose above 2000 before falling back slightly to 1976. After rising sharply in response to the unrest in the Middle East, the price of gold futures appears to have entered a correction phase as appetites for riskier assets have returned, with equity markets rising sharply. If the international situation stabilizes and appetites for riskier assets increase, gold prices could see further weakening this week.
3. Bitcoin Market Data
- MVRV Z score
At 1.04, the MVRV Z score is still above 1, continuing the bull market trend. As you can see in the 5-year chart below, the MVRV Z-score has been consistently positive, maintaining a number above 1 throughout the bull market out of the COVID-19 pandemic. While we could still see some short-term correction, assuming that we’re in a major long-term bull market now that the MVRV Z-Score has switched to an uptrend is reasonable.
- 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 at 1.02 and is consistently above 1. Since the number is above 1, we can conclude that the short-term bull market is ongoing.
- 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
Open interest in Bitcoin perpetual futures is at $9.22B, the highest level since late August. Every time the combined open interest of Bitcoin perpetual futures on exchanges exceeds $9B, there has been a pullback due to position liquidation. However, as we mentioned last week, the combined estimated leverage ratio low is 0.214, so the likelihood of a sharp pullback due to liquidation is relatively low despite the rise in open interest.
4. On-chain data
- Exchange inflows and outflows
Bitcoin positions on exchanges have slightly shifted to an inflow advantage, which could be interpreted as short-term Bitcoin holders depositing Bitcoin into exchanges to take profits. However, the inflows are relatively small compared to the outflows between May and October, so it will be worth monitoring whether this number increases.
- Number of Whale Wallets
The number of whale wallets above 10k has dropped slightly during the spike in Bitcoin’s price, which can be interpreted as short-term investor arbitrage, similar to exchange Bitcoin inflows and outflows. Since the number of whale wallets has historically been a leading indicator of incoming gains, it would ultimately serve the price of Bitcoin if the number of whale wallets were maintained or rose once more at current price levels.
5. Last week’s major news:
- Bitcoin rally sees biggest weekly inflows in 15 months
A rally in the price of Bitcoin drove net inflows of about $326 million into the cryptocurrency market last week, according to a report by CoinShares on October 30th. Expectations that the U.S. Securities and Exchange Commission (SEC) would approve spot ETFs sparked a rally among investors, noting that it was the largest single weekly inflow since July of last year. James Butterfill, head of research at Coinshare, also suggested Spot ETFs were likely to launch in the coming months which would become a major game changer for the industry from a regulatory perspective. However, CoinShares noted that while Bitcoin flows are currently positive, this week’s inflows were the 21st largest on record and that investors should continue to take a wait-and-see approach.
- Solana Rallies to the Upside…Led by Coinbase
Coinbase has led the Solana (SOL) rally over the past week, according to Kyco analyst Riyadh Carey’s X (Twitter) account. Kraken’s CVD (short for Cumulative Volume Delta, a metric that cumulatively shows the difference between buy and sell volume) showed more buy orders executed than sell orders on a 30-day basis. Binance and OKX also showed positive flows. However, Upbit’s Solana volume showed a slightly different story. SOL continued its upward rally, reaching a 14-month high. However, selling pressure may soon hit the market as FTX unstaked an additional $65 million worth of tokens.
- Hong Kong mulls allowing spot crypto ETFs
Hong Kong authorities are reportedly considering whether to allow ETFs that invest directly in cryptocurrencies. According to Bloomberg, Securities and Futures Commission chief executive Julia Leung said the commission is considering allowing retail investors to access such spot ETFs, provided regulatory concerns are met. “We welcome proposals that utilize innovative technologies that can improve efficiency and customer experience,” Leung said in her first interview with overseas media since taking office, adding, “We’re happy to give it a try as long as new risks are addressed. Our approach is consistent regardless of the asset.”
6. Major economic events
- Major economic events last week
The most notable indicators last week were those related to employment. The U.S. economy appeared to be slowing down, with both nonfarm payrolls and jobless claims coming in worse than expected. However, major asset markets, including U.S. equities, rallied sharply as the slowdown seemed like a “bad news is good news” story for equities, suggesting that the slowdown will dampen inflation and limit interest rate hikes.
The U.S. Federal Reserve also supported this trend by keeping interest rates unchanged and further lowering bond yields as the supply of government bonds is not expected to grow as much as expected.
This week’s major economic events
This week we have a speech from US Federal Reserve Chairman Powell and the UK’s GDP release. Stocks rebounded strongly last week on the prospect of a near-end to US rate hikes, so it will be interesting to see what Powell has to say.
Summary
Positive indicators: US bond rates, US dollar index, MVRV Z-score, aSOPR, futures leverage ratio
Negative indicators: Open interest, exchange flows, and whale wallets
Overall Review: Bitcoin and other major asset markets saw strong gains last week. We expect Bitcoin to continue its upward trajectory as there are several separate news items related to Bitcoin, including the official approval of a spot ETF and its halving next year. However, in the short term, it would be a good strategy to maintain a low-leverage long position or spot position, as open interest and exchange inflows are increasing, in addition to arbitrage selling by short-term investors.
