League of Traders Weekly Report (3rd week of October 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 October!
- Bitcoin Chart/Ethereum Chart
Last week, Bitcoin’s price dropped from $27,600 to about $26,500 before recovering to hold at above $27,000. It has been stuck at around 25k to 28k for about two months now, since mid-August. To break out of the range, the price needs to break through resistance near $28,500. If it does, we expect the price of Bitcoin to rise to almost 30K. On the downside, we expect to see primary support near $26,000.
The price of Ethereum has dropped slightly from $1,580 to $1,550 over the past week. As we mentioned in last week’s report, Ethereum has been more volatile than Bitcoin, as of late. Taking network-related news into account, such as the shrinking queue of Ethereum validators, it’s likely that Ethereum will continue to fare worse than Bitcoin in the short term.
Bitcoin’s dominance over MarketCap has continued to rise, reaching the mid-51% mark. As 2024 approaches, expectations for a Bitcoin halving are rising. With Ethereum, the altcoin with the largest market capitalization, showing signs of weakness, Bitcoin dominance is likely to be maintained or continue to rise for the foreseeable future.
2. Major Economic Indicators
- US Bond Yields
The US 10-year Treasury rate fell to 4.53% as a result of the current war in Israel, before rising again to 4.68%. If the Israeli-Palestinian battles escalate, we expect the preference for safe-haven assets, such as US Treasuries, to continue, limiting the upside of US interest rates.
- US Dollar Index
The U.S. dollar index fell to about 105.5 last week before rising again and is currently sitting around 106.5. The US dollar is also favored as a global safe haven, so it could continue to rise if the war in Israel continues.
- US100 (Nasdaq 100)
The Nasdaq 100 has been moving in the opposite direction of the dollar index, rising and then falling over the past week to sit near the 15000 level. With the geopolitical issues in the Middle East, it’s likely that the index, which rallied from the beginning of the year through the summer, will correct or consolidate at current prices rather than enter a year-end rally with further gains.
- Gold Futures
The price of gold futures has continued to rise, recovering to over 1900 from 1860. This significant rebound was thanks in part to the safe-haven phenomenon. If the current rebound continues, we could see a scenario where it becomes tethered to Bitcoin, which is often referred to as digital gold.
3. Bitcoin Market Data
- MVRV Z-score
The MVRV Z-score dropped slightly from 0.53 to 0.49. At the current price range, the MVRV Z-score is not showing much movement, so we recommend watching it as a secondary indicator rather than using it as a primary trading indicator.
- 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 dipped below 1 at one point last week but has since recovered and is currently hovering around 1. Like the MVRV Z-score, the aSOPR doesn’t fluctuate much, so it’s a good secondary metric to watch until we see some volatility.
- 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 now at $8.1B, up slightly from $7.9B. While open interest is trending higher, it’s not as high as it was in July and August of this year, so the likelihood of large price movements due to the liquidation of open interest is not high. If open interest reaches close to $9B, we can expect large price movements due to the liquidation of open interest.
The exchange-combined estimated futures leverage ratio rose slightly to 0.234 this week from 0.22 last week. The leverage ratio could also rise to the 0.24 level that was last seen in late March and August.
4. On-chain data
- Exchange inflows and outflows
Exchange Bitcoin holdings still show an outflow dominance, but outflows have decreased and are nearing zero. Currently, exchanges can be considered neutral in terms of Bitcoin inflows and outflows.
- Number of Whale Wallets
The number of whale wallets above 10k remained unchanged last week. A rise in the number of whale wallets at the current price levels could have a positive impact on Bitcoin’s price at the end of the year.
5. Last week’s major news:
- Alameda illegally misappropriated FTX customer assets since 2019
FTX co-founder Gary Wang, former chief technology officer of FTX, has revealed that FTX’s sister company Alameda has been using billions of dollars worth of FTX customer assets for trading purposes since early 2019. According to court records published by a Twitter/X account named Inner City Press, Gary Wang testified during a recent questioning by U.S. prosecutors that FTX’s other co-founder, Nishad Singh, added a “negative allowance” feature to FTX’s platform code in 2019, allowing Alameda to use more money than what was available in the account for trading purposes with FTX tokens (FTT).
- Ethereum sees validator queues plummet…first time since Shappella
The queue for new validators on Ethereum (ETH) has nearly been eliminated, making this the first time this has happened since Ethereum’s Shappella upgrade in April. According to Coindesk US on Wednesday, the number of validators currently waiting to enter Ethereum has dropped to 598, down from 96,000 in June. With the shrinking queue, the wait time to add a new validator has dropped to less than five hours as of Dec. 12. This compares to a 45-day wait for new validators due to the massive demand to stake ether.
- SEC unlikely to appeal Grayscale lawsuit
The U.S. Securities and Exchange Commission (SEC) will not ask a federal appeals court to reconsider its ruling against Grayscale Investments LLC’s spot Bitcoin ETF, Bloomberg reported on Thursday. The U.S. Court of Appeals for the D.C. Circuit ruled in August that the SEC’s decision to reject Grayscale’s proposal to convert its trust into an ETF violated the Administrative Procedure Act. Grayscale believes that investors will benefit from the conversion to an ETF because shares can be easily issued and redeemed. In its current closed-end structure, investors are unable to redeem their shares when prices fall, causing it to trade at a greater discount to its underlying asset, bitcoin.
6. Major economic events
- Major economic events last week
Last week’s Consumer Price Index slightly exceeded expectations. However, U.S. crude oil inventories rose by more than 10 million barrels, providing some relief from additional increases in oil prices. The current violence in the Middle East is also raising tensions as Israel continues to launch airstrikes on Gaza. Many market participants are taking a wait-and-see approach as other countries are not expected to join the fray or cause a dramatic change in the situation.
- This week’s major economic events
This week, watch out for European consumer prices on the 18th and a speech by FED Chairman Powell on the 20th, which may address how to respond to any changes that emerge internationally following the violence in the Middle East, which could move prices such as bond yields or oil prices.
Summary
Positive indicators: Bitcoin Dominance, Gold Futures
Negative indicators: US dollar index, open interest
Overall Review: After the last week, many indicators are showing neutral readings. The turmoil in the Middle East due to the Israeli-Palestinian war has led to increased uncertainty in oil prices, amongst other things, so we should avoid making hasty investments. Nevertheless, we believe that our strategy of continuing to buy Bitcoin spot remains valid due to the rising price of gold futures and the expected Bitcoin halving.
