League of Traders Weekly Report (5th week of July 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 fifth week of July!
- Bitcoin Chart/Ethereum Chart
On the 25th, the US Nasdaq market experienced a significant decline, leading to Bitcoin dropping to $63,500. However, Bitcoin swiftly rebounded the next day, currently trading at $68,800. The Nasdaq’s decline, mainly due to concerns about the performance of big tech stocks, recorded a 3.6% loss, the largest since 2022.
Bitcoin’s price recovery has been notable. It is crucial to maintain $65,000 to sustain the current upward trend. If this support holds, Bitcoin is likely to continue its positive trend. Conversely, if Bitcoin fails to break through $70,000 and falls, it may retest previous highs after another adjustment.
Ethereum spot ETF trading began on the 22nd, resulting in a significant inflow of approximately $526.7 million into BlackRock’s IBIT (Investment Bitcoin Trust). However, subsequent inflows into Bitcoin spot ETFs have been relatively modest.
Since last week’s launch of Ethereum spot trading, Ethereum’s price has dropped from $3,500 to $3,100, with a partial recovery to $3,290. The slower-than-expected fund inflow since the ETF’s launch suggests a typical “buy the rumor, sell the news” pattern.
A major drawback of spot ETFs is the lack of staking income. Staking allows Ethereum holders to earn additional income while supporting network stability, but spot ETFs do not offer this benefit, reducing their appeal for long-term holders. This limitation is expected to be addressed early next year, but until then, the attractiveness of Ethereum spot ETFs for long-term investment may be limited.
Recently, Bitcoin’s dominance in the cryptocurrency market increased from last week’s 55.46% to this week’s 56.71%, indicating a growing market share. While Bitcoin continues to rally, Solana has also performed well, whereas Ethereum has seen a significant price drop. Ethereum’s decline may be due to a combination of factors, including slower fund inflows following the spot ETF launch and the absence of staking returns. In contrast, Solana’s recent network expansion and its potential as the next spot ETF candidate has had a positive impact.
Bitcoin dominance has not surpassed the 57% mark this year, so it remains to be seen whether it can break through this resistance level along with Bitcoin’s continued strength.
2. Major Economic Indicators
- US Bond Yields
Last week, the yield on the US 10-year Treasury fell from 4.268% to 4.178%. This decline persists despite higher-than-expected US GDP growth, reflecting a market consensus that interest rates are likely to decrease.
Typically, strong GDP growth can lead to rising interest rates due to potential inflationary pressures from increased economic activity. However, the current yield decline suggests that investors expect a future economic slowdown or changes in monetary policy, despite the economic growth. Concerns about price stability and a potential economic slowdown are evident in the bond market.
- US Dollar Index
The US dollar index also fell slightly from 104.404 last week to 104.275 this week. This minor change occurred without significant exchange rate events. In general, US Treasury yields and the dollar index tend to move together: rising yields make US bonds more attractive, increasing dollar demand, while falling yields decrease dollar demand.
- US100 (Nasdaq 100)
The market correction continued from last week’s 19,600 to this week’s 19,100, particularly affecting semiconductor-related stocks. This correction is influenced by multiple factors, with political uncertainty playing a significant role.
Amid current political conditions, the possibility of Donald Trump’s re-election is increasing. One of his major supporters, Peter Thiel — an influential Silicon Valley figure and a key backer of Senator Vance, Trump’s potential vice-presidential candidate — is expected to push for stricter regulations on Big Tech to support startups.
This political backdrop raises the likelihood of increased regulations on Big Tech companies, negatively impacting technology stocks. Additionally, the semiconductor industry is sensitive to global supply chain issues and policy changes, necessitating close monitoring of market trends.
- Gold Futures
Gold futures prices rose slightly from $2,387 last week to $2,398 this week. Although the recent price has not surpassed its short-term all-time high, the long-term upward trend continues.
The future movement of gold prices is expected to be significantly influenced by macroeconomic factors such as US bond yields and the strength of the dollar. If US bond yields fall further, gold futures prices are likely to rise, as gold is generally considered an attractive investment during times of economic uncertainty. Moreover, gold is seen as an inflation hedge, attracting investor attention during periods of economic uncertainty or inflation concerns. Gold prices are likely to increase further if indicators of a slowdown in the US economy become evident.
3. Bitcoin Market Data
- MVRV Z-score
The MVRV Z-score has remained relatively stable, dipping slightly from 2.220 last week to 2.204 this week, indicating that the current market trend remains largely unchanged.
The MVRV Z-score, which compares an asset’s market value to its realized value, serves as a gauge of market overvaluation or undervaluation. A higher Z-score suggests potential overvaluation, while a lower score indicates undervaluation. A current score above 2 may imply slight overvaluation, yet it also reflects relatively stable market conditions.
- 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 Adjusted Spent Output Profit Ratio (aSOPR) indicator decreased marginally from 1.018 last week to 1.014 this week. Nevertheless, the indicator remains above 1, signaling that the market is experiencing more buying pressure than profitable selling pressure.
- 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
The Bitcoin perpetual futures market has recently experienced an increase in open interest, rising from $17.9 billion to $18.83 billion. Concurrently, the estimated leverage ratio has climbed from 0.189 to 0.197, indicating an elevated level of market risk.
4. On-chain data
- Exchange inflows and outflows
Bitcoin exchange inflows have been steadily increasing over the past five weeks. This trend could signal increased selling pressure, enhanced liquidity, or a shift in trading strategies, warranting caution.
- Number of Whale Wallets
The number of whale wallets holding more than 10,000 BTC has recently decreased, although without significant fluctuation. Meanwhile, holdings in individual wallets have been rising. If the number of wallets continues to increase, a market rebound might be expected; however, the market is currently displaying continued weakness.
5. Last Week’s Major News
- Bitcoin soars on Trump’s remarks: A “Strategic Asset of the United States”
The market closely watched former President Trump’s speech at the Bitcoin Conference 2024 in Nashville, Tennessee, on the 27th. In a groundbreaking statement, Trump declared his support for Bitcoin and the broader virtual asset industry, notably referring to Bitcoin as a “strategic national reserve of the United States.” He emphasized, “If elected, my administration will aim to own 100% of all Bitcoin currently held or acquired by the United States government, making it a permanent national asset for all Americans to benefit from its immense wealth.” The U.S. government currently holds approximately 210,000 Bitcoins, seized from criminals and other sources, which accounts for about 1% of the total issued Bitcoin of 21 million.
- WSJ: “Fed rate cut in sight… Powell to signal in September”
On the 28th, The Wall Street Journal reported that the U.S. Federal Reserve (Fed) is considering the possibility of a rate cut. The report indicated that Fed Chairman Jerome Powell is expected to signal the potential for a rate cut at the September meeting. While the upcoming Federal Open Market Committee (FOMC) meeting on the 30th and 31st is unlikely to result in immediate interest rate changes, it is considered crucial. The WSJ noted that Fed officials might signal a potential rate cut in September, depending on inflation rates, labor market improvements, and economic conditions influenced by current high interest rates. Particularly, it is anticipated that Chairman Powell, who is contemplating the timing of a rate cut, may decide to proceed with a cut following the conclusion of the meeting on the 31st.
- Solana Market Cap surpasses BNB, Ranks 3rd after Ethereum
Solana (SOL) has surpassed BNB in market capitalization, now ranking 3rd among cryptocurrencies, following Ethereum. According to CoinMarketCap, as of 10 am on the 28th, Solana’s market cap stood at $86.43 million, exceeding BNB’s $85.06 million. This marks the first time Solana’s market cap has overtaken BNB since the significant drop in Solana’s value following the FTX incident.
6. Major economic events
Major economic events last week
Last week, the most significant macroeconomic event was the announcement of the US second-quarter GDP, which grew by 2.8%, significantly surpassing the market forecast of 2.0%. Despite this robust growth, US bond yields remained stable, indicating sustained expectations for a rate cut.
This week’s major economic events
This week, attention should be directed towards the US interest rate decision and the FOMC press conference. Any mention of a rate cut will require close scrutiny to see if the timing and frequency align with market expectations. Delays or fewer-than-expected rate cuts could negatively impact the asset market.
Summary
Positive Indicators: US bond yields, Bitcoin spot ETF inflows, Adjusted Spent Output Profit Ratio (aSOPR)
Negative Indicators: Ethereum trend, Outstanding contracts, Exchange inflows and outflows
Overall Review: Compared to other markets, such as the US Nasdaq, Bitcoin is trending relatively positively. However, for Bitcoin to continue its upward trajectory, further positive news, potentially following Trump’s recent remarks, is necessary. Additionally, the increasing number of outstanding contracts and continuous Bitcoin inflows into exchanges call for caution. Given the current high risk in the virtual asset market, it is advisable to adjust portfolios, focusing on a rebound after a correction rather than continuing a bullish trend.
