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League of Traders Weekly Report (4th week of September 2023)
League of Traders EN
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Oct 24, 2023 02:42 (UTC+0)
Please note: The Weekly Report will take a short break for the first week of October and will return to regular scheduling by the week of October 9th.
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 September!
- Bitcoin Chart/Ethereum Chart
Last week, the price of Bitcoin temporarily surpassed $27k, but then fell back and it currently sits at about $26300. The macroeconomy is not doing well at the moment, with high interest rates in the US, a strong dollar, and high oil prices. This could be overcome by the news of Bitcoin spot EFT acceptance and next year’s Bitcoin halving acting as the groundwork for a crypto rally, though the current downtrend or some moderate sideways movement is more likely to continue as opposed to a sharp reversal any time soon.
BTCUSDT Chart (Binance)
The price of Ethereum has weakened against Bitcoin over the past week, as expected. This was already expected by many futures traders due to the news of Vitalik Buterin transferring his Ethereum to a centralized exchange, coupled with inflation concerns due to a decrease in the amount of fees burned on the Ethereum network. Unless there is an external change, such as the approval of an Ethereum spot/futures ETF, we should be cautious as Ethereum’s weakening could continue for the foreseeable future.
ETHUSDT Chart (Binance)
Bitcoin’s dominance to MarketCap is currently at 49.93%, down from 49.96% last week, after hovering above 50% at one point. The recent weakening of Ethereum is largely responsible for this, and Bitcoin will likely continue to outperform altcoins for the foreseeable future, increasing its dominance.
Bitcoin dominance chart (CoinMarketCap)
2. Major Economic Indicators
- US Bond Yields
The U.S. 10-year treasury rate rose from 4.347% to 4.552% last week, a 16-year high that hasn’t been seen since 2007. Individual investors who invested in bonds and the stock market, in hopes that interest rates would begin to fall early next year, are now facing losses as the high rates continue to soar. “If the Bank of Japan wants to move away from zero, it will have to leave the 10-year U.S. Treasury rate open to 4.7%,” some experts estimate.
US10YPrice Government Bond Rate (TradingView)
- US Dollar Index
The U.S. Dollar Index rose above 105, temporarily touching 106, and is now at its highest level of the last seven months. The persistence of a strong dollar has been accompanied by a parallel strength in dollar-denominated crude oil prices, fueling fears of a global recession in the second half of the year in addition to a slowdown in China.
US Dollar Index (TradingView)
- US100 (Nasdaq 100)
The Nasdaq 100 is hovering near 14700, having fallen below 15000 from the 15200 level last week. Many experts now expect a structure of sustained high-interest rates as the US economy is doing better than expected despite inflation. They are concerned that this could lead to higher financing costs for big tech companies in the U.S., which in turn would adversely affect their stock prices. Therefore, as long as the strong dollar and high-interest rates remain together, we may see the Nasdaq correcting more than other assets.
Gold Futures (TradingView)
3. Bitcoin Market Data
- MVRV Z score
The MVRV Z-score fell slightly from 0.45 last week to 0.44 this week, though it is largely unchanged. When looking at the MVRV Z-score changes over the past five years, we are currently passing through a relatively undervalued zone. However, the possibility of an event similar to 2020, when the MVRV Z-score temporarily dropped below zero as the price plummeted, should not be ruled out. We’d recommend approaching Bitcoin from a split-buy perspective rather than buying a large position at current price levels.
- 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 in 2021, scores of 6 or higher were shown.
Bitcoin: MVRV Z Score (Glassnode)
- aSOPR
The aSOPR temporarily rose to 1.03 before settling back under 1 at 0.99. In this current sideways trading range, the aSOPR is unlikely to change much.
*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.
Adjusted SOPR (Glassnode)
- Open Interest
Open interest in perpetual futures, which was around $7B last week, briefly rose to $7.6B during the week before falling back to $7.2B. Currently, open interest is down to levels seen in late January of this year, with liquidation risks being relatively low.
Outstanding Open Interests by Exchanges (Glassnode)
The exchange-combined estimated futures leverage ratio has risen slightly but remains low. With futures leverage ratios low, the likelihood of leverage-induced price spikes is low.
Exchange combined estimated leverage ratio (Glassnode)
4. On-chain data
- Exchange inflows and outflows
Exchange Bitcoin holdings are showing an outflow dominance, though weekly outflows are down. It will be interesting to see if the outflow dominance of exchanges in this year’s Q3 can translate into an upward rally in Q4, as we saw in the first half of the year, following a large outflow last December.
Bitcoin: Exchange Net Position Change (Glassnode)
- Number of Whale Wallets
The number of whale wallets above 10K rose slightly last week. We’ll have to wait a few more weeks to see if the whales decided that the current level is worth purchasing, as Microstrategy bought more Bitcoin at the $27k level.
Number of Bitcoin wallets holding 10K or more (Glassnode)
5. Last week’s major news:
- SEC asks court to order Binance inspection
The U.S. Securities and Exchange Commission (SEC) urged a Washington, DC court to authorize an investigation into Binance US, saying in a court filing on August 18 that the company failed to produce documents sought by regulators in an ongoing legal case. The SEC also raised market concerns on August 19th when David Hirsch, head of the agency’s crypto assets and cyber division, said the agency is not finished pursuing Coinbase and Binance, as well as other exchanges and DeFi projects that have violated securities laws.
- BTC to ETH price at 14-month low
The price of Ethereum (ETH) against Bitcoin (BTC) has dropped to a 14-month low. According to recent data from Trading View, ETH-BTC fell to almost 0.0602, the lowest since July of last year, as holders, including Ethereum co-founder Vitalik Buterin, moved their coins to crypto exchanges. “Ethereum’s protocol revenue has been declining for the past three months,” Marcus Thielen, head of strategy and research at MatrixPort, told CoinDeskTV, adding that he expects BTC to outperform other altcoins, including Ethereum.
- MicroStrategy buys more than $200 million worth of BTC
US tech firm MicroStrategy purchased approximately $150 million of Bitcoin. “The average price of these BTC purchases, including fees and expenses, was $27,053” MicroStrategy said. MicroStrategy currently holds approximately 158,245 BTC, and the average purchase price for that amount is approximately $29,582, for a total purchase price of approximately $4.68 billion.
6. Major economic events
- Major economic events last week
The biggest event of the past week was the FOMC’s press conference. The US Federal Reserve left its benchmark interest rate unchanged on the 20th, as expected by the markets. However, Bitcoin was caught off guard, falling slightly, as Fed Chair Jerome Powell made hawkish comments that hinted at one more rate hike in the future. In addition, employment is looking better than expected, with new jobless claims coming in lower than expected, increasing the chances of another rate hike.
Major Economic Events for the 3rd week of September 2023 (Investing.com)
- This week’s major economic events
This week, watch for changes in US crude oil inventories and a speech by Fed Chair Jerome Powell. The recent rise in oil prices, despite the strength of the US dollar, created a triple whammy for countries outside the US: high-interest rates, high exchange rates, and high oil prices. Of these, oil prices need to come under control to lower consumer price inflation and lower expectations for the final interest rate in the US. Therefore, it is important that US crude oil inventories remain high enough, and that Powell’s speech is reserved for further rate hikes, which is beneficial for asset markets, including crypto.
Major Economic Events for the 4th week of September 2023 (Investing.com)
Summary
Positive indicators: open interest, exchange aggregated estimated futures leverage ratio
Negative indicators: U.S. bond rates, U.S. dollar index
**Overall Review: **U.S. interest rates and the U.S. dollar are hitting new highs, while international oil prices are also getting stronger, raising fears of a recession. With macroeconomic concerns, we don’t expect Bitcoin’s price to rebound significantly any time soon. Given the low open interest and leverage ratio, a sharp drop is unlikely, so we recommend taking a wait-and-see approach this week.