League of Traders Weekly Report (3rd 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 are first shared via the official League of Traders Telegram channel.
Here are our notes for the third week of November!
- Bitcoin Chart/Ethereum Chart
On November 14, 2023, the price of Bitcoin sat at about $36300. Last week, the price failed to break through the short-term resistance of 38k, sitting close to 35k, and it is now falling below 37k. However, there has been significant volume in the 34–35K area during this rally, where the 25-day moving average is located, so we can expect that area to act as short-term support. On the upside, we can still expect 38k to act as near-term resistance and a break above 38k will continue the uptrend.
Last week, Ethereum rose significantly relative to Bitcoin, from $1896 to $2048. This was the result of a combination of supply and demand considerations, which we mentioned last week, and the fact that there was relatively little resistance relative to Bitcoin before the all-time high, as well as news of applications for an Ethereum spot ETF from major asset managers such as BlackRock. This week, we expect to see a continuation of last week’s trend, with Ethereum maintaining its strength relative to Bitcoin.
Bitcoin’s dominance dropped slightly to 52.34% from 52.45% last week, which could be attributed to Ethereum’s strength. With new money flowing into the crypto market and major altcoins also showing short-term strength, we expect Bitcoin’s dominance to remain flat at current levels or continue its downtrend.
2. Major Economic Indicators
- US Bond Yields
The 10-year Treasury rate in the U.S. remained virtually unchanged, going from 4.647% to 4.640%, as we anticipate this week’s CPI release. Chairman Powell made some hawkish comments last week, so if the CPI release shows that inflation hasn’t picked up, it could reignite fears in the market of another rate hike.
- US Dollar Index
The U.S. dollar index has been mixed in the U.S., with a slight change from 105.26 last week to 105.663 this week. This is largely due to the upcoming release of the Consumer Price Index (CPI), which will provide a direct indication of inflationary pressures in the US, amid speculation that the US Federal Reserve will not consider cutting interest rates for some time. The US sovereign credit rating outlook being downgraded by Moody, a global rating agency, had a limited impact on the US dollar.
- US100 (Nasdaq 100)
The Nasdaq 100 rose from 15100 to 15500, with a growing number of investors expecting more gains led by tech stocks, as the recent short-term rally could trigger an outpouring of short-covering volume. One of Wall Street’s leading bullish analysts, Daniel Ives of Wedbush Securities, predicted a year-end rally in a report on Wednesday, saying that “spending on AI technology next year will be up more than 20% from this year.” “The market is underestimating the impact of AI on corporate earnings,” he said, adding that he expects Apple, which has benefited from a surge in spending on AI apps, to jump nearly 30% next year.
- Gold Futures
Gold futures fell slightly last week, from 1976 to 1945, as the war in Palestine continues and the international situation remains unstable, while riskier assets such as stocks and Bitcoin are becoming more popular choices for investors. However, given the expectation that interest rates will not rise further this year, and the possibility that gold may be chosen as a safe haven of value in countries at war or with unstable political conditions, we expect gold prices to support current levels rather than make any significant declines.
3. Bitcoin Market Data
- MVRV Z score
The MVRV Z-score rose further to 1.14, up from 1.04 last week. As mentioned last week, once the MVRV Z-score enters a bull market with a reading above 1, it tends to stay above 1 all the way to the overvaluation zone of MVRV 3 and above. Given that in past bull cycles, the true bull zone was between one and two years after Bitcoin’s halving, we can expect the MVRV Z-score to remain positive for at least another year and a half.
- 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 consistently above 1, at 1.017, similar to last week. This indicates that the short-term uptrend is continuing unabated.
- 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
Open interest in Bitcoin perpetual futures fell to $9.05B from $9.22B last week. The estimated leverage ratio for combined exchanges also fell from 0.214 to 0.20, the lowest since May. With open interest adjusting without significant price movement and the leverage ratio at a lower level, the likelihood of a decline due to position liquidation remains low.
4. On-chain data
- Exchange inflows and outflows
Bitcoin positions on exchanges continued to be dominated by inflows. Given that miners sold more bitcoin than what was mined in October, we can assume that the recent rally is a result of profit-taking on recently acquired bitcoin by miners and others. However, it is unlikely to have a significant impact on the market as the size of the inflow is significantly smaller than the size of the last outflow.
- Number of Whale Wallets
The increase in the number of 10k+ whale wallets has also been a positive sign for the price of Bitcoin. This is a positive development for the price of Bitcoin, as the number of 10k+ whale wallets is often a leading indicator for more gains.
5. Last week’s major news:
- BlackRock sees Ethereum spot ETF filing movement…surges more than 10 percent
Global asset manager BlackRock has announced that it is preparing to launch a spot ETF backed by Ethereum (ETH). According to CoinDesk US, BlackRock registered the ETH spot ETF, the iShares Ethereum Trust, on Delaware state’s corporate filing website on Monday. Eyeshares is the name of BlackRock’s ETF division. Following the news, ethereum prices rose to around $2100, up about 3% from just before the filing. Compared to 24 hours earlier, the price has surged more than 10%. According to the filing, US-based cryptocurrency exchange Coinbase will be the custodian of the ether held by the product, while an unnamed third party will hold the cash.
- CME Bitcoin futures open interest overtakes Binance
The Chicago Mercantile Exchange’s (CME) bitcoin open interest (OI) has surpassed cryptocurrency exchange Binance. According to CoindeskUS, CME has taken the top spot among futures exchanges with an open interest of $4.07 billion, up about 4% in the last 24 hours. CME’s market share stands at 24.7%, while Binance’s open interest fell by 7.8% to $3.8 billion over the same period. “The change in rankings occurred as the crypto market endured a major leverage flush-out amid wild price swings on Thursday. The aggregate bitcoin open interest dropped by $2 billion from $12 billion” the publication said, noting that the drop affected Binance traders more than CME market participants.
- Bitcoin crosses $1 billion in annual inflows
The cryptocurrency market saw net inflows for the third consecutive week, pushing year-to-date inflows past $1 billion. According to digital asset manager CoinShares, $293 million flowed into crypto products last week, bringing the year-to-date total to $1.14 billion. CoinShares expects this year will see the third-highest annual inflows on record.
6. Major economic events
- Major economic events last week
US Federal Reserve Chairman Powell, perhaps conscious of the recent stock market rally and over-optimism about the end of the rate hike cycle, signaled the possibility of further rate hikes to control inflation. However, interest rates were mixed, with no further significant declines, as a rise in new jobless claims suggested that the labor market was less overheated.
This week’s major economic events
This week marks the release of the October Consumer Price Index. With Treasury rates and the dollar in a lull right now, the consumer price index, a leading indicator of inflation, is likely to make a big difference in interest rates and currency markets. Forecasts for October’s CPI are lower than in previous years, but a higher-than-expected reading could shock markets with higher interest rates.
Summary
Positive indicators: MVRV Z-score, aSOPR, open interest, futures leverage ratio, number of whale wallets
Negative indicators: Exchange inflows and outflows
Overall Review: Bitcoin continued its bull run last week. Most on-chain data and crypto news are showing numbers that are consistent with a generalized bull market. However, we cannot rule out short-term risks, such as the increase in open interest on the CME and the release of the US CPI. Therefore, an increased allocation to spot rather than leveraged futures positions would be beneficial in the long run. Additionally, exploring assets that have seen lesser gains against Bitcoin this year, such as Ethereum, would be a good option.
