League of Traders Weekly Report (4th week of May 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 fourth week of May!
- Bitcoin Chart/Ethereum Chart
The price of Bitcoin has been fluctuating between 26 and 27k. If there is any more of a decline, we‘ll need to hope that it will find support around 25.5k. As you can see from the chart below, the trading volume and volatility are decreasing, indicating a consolidation phase that could potentially be followed by increased volatility. It would be wise to pay attention to any upcoming volatility in the near future.
The price of Ethereum is around $1800, similar to last week, with relatively lower volatility and downward movement compared to Bitcoin. In the short term, Ethereum may be more advantageous than Bitcoin in terms of price, as staking is increasing while it has also shown a relatively stable trend despite internal issues such as the recent suspension of the Beacon Chain.
The below chart is about Bitcoin’s dominance over market capitalization. Bitcoin Dominance is currently around 47%. Despite the recovery of the Bitcoin network due to decreased activity in BRC-20 tokens, there hasn’t been significant movement in dominance. Due to a decrease in the overall trading volume and volatility in the cryptocurrency market, including Bitcoin, dominance has been relatively stable. However, a short-term adjustment is possible, considering that it has been ongoing since the start of the year.
2. Major Economic Indicators
- US100 (Nasdaq 100)
Last week, the Nasdaq index increased due to a favorable sentiment surrounding the US government’s debt ceiling negotiations. This movement is distinct from the relatively stable performance of cryptocurrencies, indicating that there is still a decoupling phenomenon between the Nasdaq index and virtual assets.
- US Dollar Index
The dollar index has continued to rise, surpassing 103 points, following last week’s upward trend. This can be interpreted as a result of the dollar’s strength against other currencies thanks to a sense of reassurance following the debt ceiling negotiations.
- Gold Futures
The price of gold futures has once again corrected below $2000. This adjustment can be attributed to the strength of the dollar and the increase in US Treasury yields. The price of gold futures will likely continue to be influenced by the US dollar index and US Treasury yields until the conclusion of the US debt ceiling negotiations, leading to potential fluctuations.
- US Bond Yields
The US 10-year Treasury yield has increased by 0.21% compared to last week, now reaching 3.678%. Many investors are interpreting this positively regarding the possibility of a US default. Along with the dollar's strength, alternative investment assets have negatively impacted prices.
3. Bitcoin Market Data
- MVRV Z score
The MVRV Z score has slightly dropped to about 0.40, slightly lower than last week. If the downward trend continues, it could drop below 0.3. If the value approaches 0, active purchases might be worth considering.
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-core 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
Currently, the aSOPR is maintaining a value close to 1. It is expected to hover around 1 until a definitive trend emerges.
*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
The number of Bitcoin’s outstanding open interests remains similar to last week. Since the number of these open interests is not significantly high, the possibility of short-term volatility due to liquidation is low. Even if there was an event that could resolve these open interests, the price fluctuations are not expected to be substantial.
4. On-chain data
- Exchange inflows and outflows
The exchange positions have shifted from inflow to outflow, indicating the dominance of selling pressure. Consequently, concerns regarding selling pressure due to new inflows are considered to be low for now.
- Number of Whale Wallets
There is no significant change in the number of whale wallets holding over 10k Bitcoins. Looking back to November of last year, we can see that whales were accumulating heavily when the price of Bitcoin was below 20k. We can assume that they are still holding their positions without significant changes in the current price range. Given that many institutional investors are looking to buy at favorable prices before the expected halving event scheduled for next April and they intend to hold until the halving point, we can anticipate more purchases from whale investors in the event of a short-term decline.
5. Last week’s major news
- Tether Corporation Announces Bitcoin Investment Plan
According to Coin Desk, Tether has announced that starting this month, it will be regularly purchasing BTC, using a portion of its earnings (approximately 15%) as a part of its new investment strategy. Tether reported a net profit of $1.48 billion in the first quarter of this year and has previously disclosed holdings of BTC worth $1.5 billion. Tether’s CTO described this Bitcoin investment as a “reserve strengthening and diversification strategy.” Tether is expected to generate substantial profits as long as the high-interest rate environment persists, and the news of Tether’s Bitcoin purchases is seen as a positive signal for the Bitcoin price, garnering positive reactions within the community.
6. Major economic events
- Major economic events last week
On the 16th, productive negotiations took place between the Biden administration and the U.S. Congress regarding the debt ceiling, resulting in a strengthening of the U.S. dollar and a rise in U.S. Treasury yields, accompanied by a simultaneous increase in the NASDAQ market. However, since the debt ceiling has yet to be approved by the U.S. Congress, the risk of default remains while negotiations are delayed.
While the number of unemployment claims in the U.S. fell below expectations, indicating a solid employment rate, other indicators such as building permits and existing home sales fell below expectations, signaling a deteriorating economic situation, particularly in the construction industry.
- This week’s major economic events
A scheduled speech by the Bank of England Governor on Wednesday and the U.S. Core Personal Consumption Expenditures Price Index on Friday are major events for this week.
However, the ongoing debt ceiling negotiations in the United States are receiving more attention than any other key economic event. “X-Day,” the day designated by the U.S. Treasury Secretary Janet Yellen, as the day when available funds will be exhausted, is just days away. If the negotiations end in a “no deal” scenario, there are concerns that it could lead to a crisis more severe than the 2008 Global Financial Crisis, with potential repercussions such as a rise in mortgage rates and a banking crisis reminiscent of the Lehman Brothers collapse.
Summary
Positive indicators: MVRV Z score, exchange inflows and outflows
Negative indicators: U.S dollar index, U.S. Treasury Yields
Overall Review: Last week saw an increase in the U.S. dollar index and U.S. Treasury yields due to optimism surrounding the U.S. debt ceiling negotiations. However, gold futures and Bitcoin prices both saw a downturn. The crypto market is therefore likely to adopt a cautious stance this week, as the U.S. government is still at risk of defaulting until the U.S. debt ceiling is approved by Congress.
