League of Traders Weekly Report (4th week of August 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 fourth week of August!
- Bitcoin Chart/Ethereum Chart
Bitcoin’s price increased from $58,500 last week to $64,000 this week, buoyed by dovish remarks from Federal Reserve Chairman Jerome Powell during the Jackson Hole meeting, which positively influenced global asset markets.
While the influx of funds into Bitcoin spot ETFs remains strong, the scale is still relatively small. Barring any significant external events this week, the cryptocurrency market is likely to experience a period of weak consolidation in line with current trends.
However, should volatility arise due to unforeseen events, the $52,000 level, which saw high trading volume during this year’s earlier price surge, is expected to serve as a major support level. For Bitcoin to continue its upward trajectory, it will need to break through the $70,000 mark to overcome the persistent downward trend that has been in place since May.
Ethereum’s price also saw a rebound, rising from $2,600 last week to $2,750 this week, though its gains were more modest compared to Bitcoin. The supply of Ethereum has been steadily increasing since April, which has contributed to its inability to escape the downward trend.
With no major updates scheduled for the Ethereum network in the near term, the supply is likely to continue growing. To absorb this supply and potentially recover previous highs, a strong inflow of capital, such as through spot ETFs, is essential. However, the current inflow into Ethereum spot ETFs remains modest, suggesting that the value of the Ethereum network may remain stagnant or weaken in the near term.
Bitcoin’s dominance in the cryptocurrency market rose from 56.89% last week to 57.51% this week, largely due to its stronger rebound compared to major altcoins like Ethereum. The short-term resistance level for Bitcoin dominance is expected to be around 58%. If this level is breached, it could trigger a rally across the entire cryptocurrency market, starting with Bitcoin.
2. Major Economic Indicators
- US Bond Yields
The U.S. 10-year Treasury yield declined from 3.892% last week to 3.790% this week, driven by remarks from Federal Reserve Chairman Jerome Powell at the Jackson Hole meeting, which hinted at a potential shift in interest rate policy. The market now largely anticipates a rate cut in September, with debate centering on whether the reduction will be 0.25% or a more substantial 0.5%.
Gradually lowering rates by 0.25% could help stabilize the market. However, a 0.5% cut might be interpreted as an indication that the U.S. economy is weaker than expected, potentially leading to volatility across major asset markets, including U.S. equities. In the short term, markets are likely to trend sideways or decline slightly as the September rate decision approaches.
- US Dollar Index
The U.S. dollar index saw a significant drop from 102.386 last week to 100.618 this week. According to Convera, a global payments company, the dollar index fell below 101 for the first time this year after the U.S. Department of Labor released revised employment figures, reaching its lowest level since December 28 of last year.
MarketWatch highlighted that Wall Street experts attribute the sharp decline in the U.S. dollar this month partly to shifts in the U.S. presidential race, with some analyses pointing to the rising approval ratings of Kamala Harris as a factor behind the dollar’s unusual decline in August.
Thierry Wizman, Macquarie’s global foreign exchange and interest rate strategist, described the dollar’s weakness since early August as unusual, particularly given recent market data showing relative strength amid concerns about an economic downturn. He suggested that growing prospects for a Democratic victory in the presidential election may also contribute to the dollar’s decline.
- US100 (Nasdaq 100)
The US100 index edged up from 19,500 to 19,700. CNBC reported that NVIDIA’s stock rose in anticipation of its upcoming earnings announcement on Wednesday. Additionally, the Federal Reserve’s release of accommodative July FOMC minutes, which suggested a high likelihood of a rate cut if economic indicators remain stable, lowered U.S. Treasury yields and positively impacted the stock market. However, if NVIDIA’s earnings fail to meet expectations, it could signal the potential bursting of the AI bubble.
- Gold Futures
Gold futures prices rose from $2,498 per ounce to $2,512, breaking the $2,500 barrier. Following Powell’s remarks, the weakening dollar and the decline in U.S. Treasury yields exerted upward pressure on gold prices. Gold continues to rally as rate-cut expectations grow, reinforcing its status as a safe-haven asset.
The strength of gold prices and their rally to new highs could also serve as a powerful catalyst for Bitcoin, often referred to as “digital gold.”
3. Bitcoin Market Data
- MVRV Z-score
The MVRV Z-Score increased from 1.615 last week to 1.927 this week. Although it has not yet surpassed 2, this rise may signal that the market is edging toward an overheated state. It will be crucial to monitor market movements closely to determine if the MVRV Z-Score will exceed 2 and approach the overheated threshold of 6.
- Indicator explanation: The MVRV Z-score measures the difference between Bitcoin’s market capitalization and its realized value, divided by the standard deviation. It serves as an indicator to assess whether Bitcoin’s market capitalization is overvalued or undervalued. A score below 0 suggests that Bitcoin is significantly undervalued, while a score of 6 or higher, as seen during the all-time high (ATH) in 2021, indicates an overheated market.
- aSOPR
The aSOPR indicator slightly increased from 1.008 last week to 1.010 this week. However, since there was a day this week when the indicator dipped below 1, it is too early to conclude that a bull market has begun. A sustained bull market can be confirmed only when the aSOPR indicator consistently remains above 1, and at present, the indicator is considered neutral.
- SOPR, or Spent Output Profit Ratio, is calculated by dividing the price at which Bitcoin was previously received by the price at the time of transfer. A SOPR below 1 indicates a bearish market, while a value above 1 indicates a bullish market. The aSOPR is an adjusted version that excludes short-term transactions (within one hour), providing a more accurate representation.
- Open Interest
Open interest in Bitcoin perpetual futures rose significantly from $14.66 billion last week to $16.87 billion this week. The estimated leverage ratio for perpetual futures also increased, moving from 0.185 to 0.192.
4. On-chain data
- Exchange inflows and outflows
Bitcoin holdings on exchanges have recently shifted toward a net outflow, continuing this trend. Although the volume of Bitcoin leaving exchanges is not large, if this trend persists, it could be a significant secondary indicator pointing to a potential uptrend in Bitcoin.
- Number of Whale Wallets
The number of whale wallets holding more than 10,000 BTC has continued its decline, reaching a yearly low. If this decrease is linked to addresses associated with the U.S. government or Mt. Gox redemption volumes, increased caution is advised, as volatility could rise soon.
For Bitcoin to stage a rebound, a recovery in the number of whale wallets holding more than 10,000 BTC will be essential.
5. Last Week’s Major News
- [Jackson Hole Speech] Fed Chairman Powell signals potential policy shift
In his keynote address at the Economic Policy Symposium (Jackson Hole Meeting) held on the 23rd of August in Jackson Hole, Wyoming, Federal Reserve Chairman Jerome Powell signaled a likely rate cut next month. Powell stated, “The direction of our policy journey is clear,” and expressed increased confidence that inflation is moving sustainably toward the 2% target. However, he stopped short of making specific comments about the timing of the September rate cut, emphasizing that the timing and pace of any rate adjustment will depend on future data, the economic outlook, and associated risks.
- Tron withdraws 12,000 BTC from USDD reserves, converts to TRX as primary collateral
USDD, originally an algorithmic stablecoin similar to Terra’s UST, transitioned to a hybrid model after the Terra and Luna crash in May 2022, holding various assets as collateral, including algorithmic elements. Tron (TRX) tokens have recently become the primary collateral for USDD following the withdrawal of 12,000 BTC from its reserves. Tron founder Justin Sun stated, “USDD’s collateral structure is decentralized, allowing any collateral holder to withdraw freely,” adding that USDD’s collateral ratio remains above 300% in the long term.
- Bitcoin Steady Despite Mt. Gox’s $700M BTC Transfer; Analyst Predicts Minimal Selling Pressure
According to data from Arcam Intelligence, 13,265 BTC (valued at $784 million) was recently moved from an address associated with Mt. Gox, with 12,000 BTC transferred to an address known as ‘1PuQB’ and the remaining 1,265 BTC sent to Mt. Gox’s cold wallet ‘1Jbez’. Despite Mt. Gox still holding over 46,000 BTC, the recent repayment of digital assets to creditors has been a key factor in applying downward pressure on Bitcoin’s price. However, analysts believe this transfer will not result in significant selling pressure. “We estimate that only 1,265 BTC ($7.45 million) of the 13,265 BTC transferred in this transaction will enter the market, while the remaining 12,000 BTC has been moved to Mt. Gox’s new cold wallet,” said Alex Thorn, Head of Research at Galaxy Digital.
6. Major economic events
Major economic events last week
Last week, the most significant event impacting the asset markets was the dovish remarks made by Federal Reserve Chairman Jerome Powell at the Jackson Hole conference. While Powell’s speech has driven an upward trend in the markets, there is currently a lack of substantial factors to sustain this momentum. For now, developments within the virtual asset space are likely to play a more critical role in shaping market movements.
Typically, in the absence of a clear decision on rate cuts, the market follows the “bad news is good news” principle — where negative economic indicators increase the likelihood of a Fed rate cut, which generally supports asset prices. However, the current situation has shifted to a “good news is good news” scenario, where the ideal outcome is a combination of controlled inflation and low unemployment rates. This could foster stable economic growth and positive market reactions.
This week’s major economic events
This week, it is crucial to closely monitor key employment and inflation indicators. The number of new unemployment claims, in particular, directly reflects the health of the U.S. economy. If this figure comes in below expectations, it could signal continued strength in the labor market, likely boosting asset prices.
Additionally, the Personal Consumption Expenditures (PCE) price index — a key measure of U.S. inflation — plays a significant role in the Fed’s monetary policy decisions. A lower-than-expected or stable PCE index would indicate easing inflation pressures, potentially raising expectations for a rate cut. Conversely, a higher-than-expected PCE index could complicate the Fed’s interest rate strategy and negatively impact the asset markets.
Summary
Positive Indicators: U.S. Treasury yields, U.S. dollar index, gold futures, exchange inflows and outflows.
Negative Indicators: Open interest in Bitcoin perpetual futures, declining number of whale wallets.
Overall Review: While markets have generally risen since Powell’s speech, risks are emerging, particularly in the virtual asset sector. Concerns include increasing open interest in Bitcoin perpetual futures and a decline in the number of whale wallets holding over 10,000 BTC. Additionally, geopolitical risks, such as the Israel-Lebanon conflict, are influencing market dynamics. Although the current upward trend may persist, it is advisable to increase spot positions during any long-term corrections, preparing for potential adjustments or volatility.
