League of Traders Weekly Report (3rd 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 third week of February!
- Bitcoin Chart/Ethereum Chart
Bitcoin’s price rose to $52,000 last week, extending its recent rally after passing $50,000, its highest price in two years. Buying from the US, spurred by the launch of a Bitcoin spot ETF, is thought to be the main reason for the rise. However, with more than 90% of Bitcoin’s long-term holders in profit at the current price point, we may see a short-term correction as long-term holders take profits. Though the current price is unlikely to be high at this rally, with further upside likely to challenge the $60K+ price around Bitcoin’s halving.
Ethereum’s price has rallied from the mid-$2600s last week to over $2900, with $3000 on the horizon. With the anticipation of an Ethereum spot ETF likely to last until May, we expect Ethereum to remain bullish.
Bitcoin dominance rose to over 54% last week from 53.88%, before falling back to 53.29%. Bitcoin has risen so much in the short term that profit-taking now tends to flow into altcoin longs, so we may see a volatile altcoin market sometime soon.
2. Major Economic Indicators
- US Bond Yields
U.S. Treasury rates have been getting stronger, rising from 4.185% last week to 4.283% this week. With the Federal Reserve hinting that the timing of this year’s first rate cut will be delayed from March to May or later, the number of rate cuts is also expected to drop from five to four this year, indicating that the high-interest rate environment above 4% could persist. Given the difference between the long and short-term interest rates, a significant decline in U.S. 10-year Treasury rates seems unlikely.
- US Dollar Index
The US Dollar Index rose slightly to 104.222 from last week’s 103.235. Until the U.S. economy shows clear signs of slowing and inflation lowers, the dollar index, along with U.S. Treasury rates, is likely to remain sideways or flat rather than plummet.
- US100 (Nasdaq 100)
The Nasdaq 100 rose to almost 18000 before slightly correcting, now sitting at 17700. It could be argued that the market is entering a correction due to fatigue from the sustained rise we’ve been seeing since November of last year. However, given that the decline is negligible compared to the rise, it is likely that the bull market will continue and attempt to meet new highs after a minor correction.
- Gold Futures
The price of gold futures has rebounded slightly from last week’s 2017 to this week’s 2021, though it remains largely unchanged. As expectations for low-interest rates are calming, we expect the price of gold, a classic low-interest asset class, to fall as well.
3. Bitcoin Market Data
- MVRV Z-score
The MVRV Z-score rose further to 2.01 this week from 1.88 last week, showing that it is moving into the overheating zone. However, it is a ways away from reaching the historical height of a score of 6 or higher, so a short-term correction is likely to push it back into the overheating 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-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 decreased slightly from 1.050 last week to 1.025 this week, though it remains consistently above 1. Since the aSOPR has been consistently over 1 since the fourth quarter of last year, we can say that the long-term uptrend remains intact.
- 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 exchange-traded open interest remains largely unchanged at $12.6B this week, down from last week’s $12.7B. The aggregated exchange-traded estimated futures leverage ratio also decreased slightly, from 0.201 to 0.194, but also remained largely unchanged. The fact that the leverage ratio has not increased as the price rose is a positive in terms of rally continuation, but could also indicate that some investors are taking profits at current price levels. It is important to note that the open interest of over $12B is at its highest level since observation and could be accompanied by large volatility.
4. On-chain data
- Exchange inflows and outflows
Bitcoin positions on exchanges continue to be dominated by outflows. This is likely to be positive for Bitcoin’s price as spot ETFs become more active.
- Number of Whale Wallets
The number of whale wallets holding more than 10k Bitcoin has been declining as the whales have been taking profits from the rising price of Bitcoin. With the lows seen in early January not yet reached, there could be more profit-taking, but with the number of whale wallets currently at a low, it is unlikely to change much.
5. Last Week’s Major News
- Glassnode, 87% of Bitcoin holders have realized profits
The supply of long-term holders currently in the loss zone totals 778,000 BTC. As the price of Bitcoin rises, their losses are shrinking and the amount they are losing is approaching zero. This means that only 6.5% of the total long-term supply is in a state of loss. The last time we saw a similarly low level of long-term holder losses was during the early bull market.
- Bitcoin tops $1 trillion market cap for the first time in 26 months
The price of Bitcoin has surpassed $52,000, marking the first time in 26 months that the cryptocurrency has surpassed $1 trillion in market capitalization. According to CoinDesk’s Bitcoin Price Index data, there have only been 145 instances that the price of Bitcoin has topped $50,000. Some traders have predicted that the price of Bitcoin will rise to $64,000 in the near term, based on technical analysis and institutional buying demand. “We are officially seeing the beginning of the Fibonacci pattern, with a target around $63,700,” said Alexander Kuptsikevich, chief analyst at FxPro. “This is close to historical highs and is unlikely to be the end point of a global rebound, although significant fluctuations are expected.”
- U.S. leads recent Bitcoin gains…premiums reach new highs
With the price of Bitcoin recently surpassing the $50,000 mark, analysis suggests that this rise has been driven by the U.S. market. Bitcoin is trading at its highest premium in nine months on U.S.-based cryptocurrency exchange Coinbase, as massive inflows have been trading into Bitcoin for over a month. The Coinbase Premium Index hit 0.12, the highest since May of last year, according to CryptoQuant. The Coinbase Premium measures the price of Bitcoin on Coinbase relative to Binance, and a high premium value indicates strong buying pressure from US investors.
6. Major economic events
- Major economic events last week
Last week, the U.S. core consumer price index beat forecasts, suggesting that inflation is not going away anytime soon. In response, U.S. Treasury yields have continued to strengthen, pushing back the expected timing of this year’s first rate cut from March to May. The timing of the first rate cut is critical because the longer it is delayed, the fewer rate cuts we will see this year.
This week’s major economic events
This week sees the release of the minutes from the last Fed meeting. The minutes may give hints about the timing of the Fed’s next rate cut, so it’s worth paying close attention to. Additionally, the U.S. purchasing managers’ indexes for manufacturing and services will be released, giving us a good indication of whether the U.S. economy is doing well.
Summary
Positive indicators: aSOPR, Exchange inflows, and outflows
Negative indicators: Open interest, U.S. bond rates, U.S. dollar indexes, Number of whale wallets
Overall Review: Bitcoin continues its bullish run after surpassing $52,000. While open interest remains high this week, as it was last week, and U.S. Treasury yields and the dollar index remain high, Bitcoin-related metrics such as aSOPR indicate that we are still in a bull market. Therefore, we believe the current price is unlikely to be a long-term top for Bitcoin. As Bitcoin dominance appears to be temporarily breaking down, we believe that altcoins will perform well in the short term.
