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 January!

1. Bitcoin Chart/Ethereum Chart

On January 10th, Bitcoin was finally approved by the Securities and Exchange Commission, and as a result, the price of Bitcoin rose to nearly $49k on Binance. It has since seen significant volatility and failed to break through that resistance, now down to $42k.

In last week’s report, we explained that gains triggered by good news can be pulled back by declining bullish expectations and arbitrage selling, even if good news materializes. In this situation, after the fading of Bitcoin’s short-term good news, we need to take a sober assessment of whether this is the end of the uptrend. The continuation of the trend will be assessed in the final analysis after looking at other indicators.

We can technically identify 39k, where the CME gap occurred, as primary support, and 49k, which was the all-time high on the upside, as resistance.

BTCUSDT Chart (Binance)

Ethereum’s price rose from last week’s $2225 to this week’s $2509, despite Bitcoin’s lackluster performance. Ethereum’s trend being Bitcoin can be attributed to the Ethereum Denkun upgrade scheduled for the 17th and the anticipation of a Bitcoin spot ETF shifting to Ethereum. The decision of whether or not to approve an Ethereum spot ETF is still a long way away in May, so if the Denkun upgrade gets a lot of media exposure, it’s likely to continue the positive trend for the short term.

ETHUSDT Chart (Binance)

Bitcoin dominance dropped significantly since the approval of the spot ETF, from 54% to 51%, most likely as a result of profit-taking from material destruction and the strength of Ethereum. While the approval of the spot ETF significantly increased the volatility of the dominance, it was a short-lived move, so the volatility will likely continue its downward trend and consolidate on the downside. It is important to keep in mind that Bitcoin’s dominance could shift back to the bullish side depending on when the issue of Bitcoin’s upcoming halving in April surfaces.

Bitcoin dominance chart (CoinMarketCap)

2. Major Economic Indicators

• US Bond Yields

The US 10-year bond rate fell back below 4%, from 4.053% last week to 3.941% this week. Consumer prices in the U.S. beat expectations, which is not good for inflation, but falling producer prices and declining crude oil inventories helped push rates down slightly. We expect this week’s U.S. bond rates to be a mixed bag, depending on inflation-related data such as crude oil inventories, retail sales, and new jobless claims.

US10YPrice Government Bond Rate (TradingView)

• US Dollar Index

The U.S. dollar index fell slightly from 102.530 last week to 102.427 this week. Like the US Treasury rate, the dollar index is likely to fluctuate based on key macroeconomic indicators.

US Dollar Index (TradingView)

• US100 (Nasdaq 100)

The US100 rose from 16200 to 16800, with some experts predicting that this year’s earnings could provide numbers that do not reflect a recession in terms of nominal growth, and operating margins, and that major tech companies will have earnings surprises. As such, the bullishness could be attributed to a preference for major US tech stocks. However, the correlation between Bitcoin and the Nasdaq 100 has dropped to almost zero, suggesting that the cryptocurrency and the Nasdaq index may move independently for the time being.

US100 (TradingView)

• Gold Futures

Gold futures have risen slightly from 2027 to 2050. Unlike the NASDAQ index, the correlation between gold and bitcoin increased in 2023. With interest rate cuts expected this year, the price of gold is expected to reach new All-Time Highs (ATHs). Therefore, if the price of gold reaches new highs, the price of bitcoin is expected to follow suit.

Gold Futures (TradingView)

3. Bitcoin Market Data

• MVRV Z-score

The MVRV Z-score decreased from 1.54 last week to 1.38 this week, a correction of just enough to give the briefly overheated market a breather, but not enough to say we’re still in overvalued or undervalued territory.

• 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 ATH in 2021, scores of 6 or higher were shown.

Bitcoin: MVRV Z-Score (Glassnode)

• aSOPR

Bitcoin’s aSOPR decreased from 1.014 last week to 1.005 this week, which is nearly 1. As we mentioned last week, it’s important to note that when the aSOPR falls below 1, it can indicate a short-term trend break.

• 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.

Adjusted SOPR (Glassnode)

• Open Interest

The exchange aggregated open interest in perpetual futures increased slightly from $9.68 last week to $9.83B this week. The exchange aggregated estimated leverage ratio also increased slightly from 0.179 last week to 0.187 this week. With the uncertainty of a Bitcoin spot ETF approval removed, the leverage ratio appears to be on the rise, and with leverage ratio lows relative to history, we may see leverage ratios rise for some time. Open interest is also still high but is not showing a sharp rise, so it is likely to remain at current levels or rise further.

Outstanding Open Interests by Exchanges (Glassnode)

Exchanges’ combined estimated leverage ratio (Glassnode)

4. On-chain data

• Exchange inflows and outflows

Bitcoin positions on exchanges continue to show an outflow dominance this week. Outflows on exchanges can be interpreted as an even more positive sign, as it followed the approval of a Bitcoin spot ETF last week. A steady outflow dominance leading up to Bitcoin’s upcoming halving in April this year would likely bode well for the price of Bitcoin in the medium to long term.

Bitcoin: Exchange Net Position Change (Glassnode)

• Number of Whale Wallets

The number of whale wallets holding more than 10k Bitcoins is unchanged from last week, which is in the lowest range of the recent 1-year data, so an additional decline in the number of whale wallets seems unlikely to cause a sharp drop in Bitcoin.

Number of Bitcoin wallets holding 10K or more (Glassnode)

5. Last Week’s Major News

• US SEC approves Bitcoin spot ETF

The U.S. Securities and Exchange Commission (SEC) announced on Tuesday that it has approved spot exchange-traded funds (ETFs) for bitcoin. In a statement, the SEC said it had approved 11 bitcoin spot ETFs, including Grayscale, Bitwise, and Hashdex. The approval opens the door for institutional and retail investors to invest in Bitcoin even if they don’t own any of the cryptocurrency directly. Bitcoin spot ETFs had a strong first trading day after the approval, with approximately $4.6 billion in trading volume on the 11th. However, with Grayscale’s trading volume accounting for half of the total, or $2.3 billion, some are concerned that the launch of the spot ETF will allow the Grayscale Bitcoin Trust (GBTC) to capitalize on the GBTC premium, which has been consistently negative since 2023.

• Spot ETF Approved…Ethereum rises more than Bitcoin

The price of Ethereum (ETH) has been more sensitive to the approval of a Bitcoin spot ETF. Since the spot ETF was approved, the price of ETH has surged from $2300 to the mid-$2600s, up about 13%. CryptoQuant CEO Ji-Young Koo shared a live trend of the SEC, Commissioner Gary Gensler and an X labeled Ethereum ETF to convey the current market sentiment.

• Bitcoin’s correlation with gold increases…safe-haven appeal grows

The correlation between Bitcoin and gold has increased over the past year, Cointelegraph reported on Wednesday, citing a Fidelity report. “Rising interest rates typically reduce demand for risky assets, but Bitcoin’s price has risen despite the steep rise in interest rates over the past year,” the report said, adding that “gold has followed a similar pattern to Bitcoin.” “This could be a reflection of the market’s anticipation of Bitcoin spot ETFs, but gold has followed a similar path, so the spot ETF effect cannot explain everything,” the report added.

6. Major economic events

• Major economic events last week

Last week’s Consumer Price Index came in above expectations, showing that inflation is still present as prices rose more than expected. New jobless claims were also lower than expected, indicating that employment is better than expected, which has had a negative impact on the market. However, crude oil inventories rose more than expected and the producer price index came down, showing that factors that can cause inflation on the supply side are under control.

Major Economic Events for the 2nd week of January 2024 (Investing.com)

This week’s major economic events

The third week of January will see the release of retail sales, initial jobless claims, and crude oil inventories. These are common indicators that are released on a weekly or monthly basis, but they should be watched closely as they could raise concerns about further inflation.

Major Economic Events for the 3rd week of January 2024 (Investing.com)

Summary

Positive indicators: U.S. bond rates, gold prices, exchange outflows and inflows

Negative indicators: Bitcoin Dominance, aSOPR

Overall Review: Following the approval of the Bitcoin spot ETF last week, Bitcoin has been weakening as the bullish ingredients have dissipated. However, macroeconomic indicators such as US bond yields and gold prices are not bad, and open interest in bitcoin futures is under control, so even if there is further correction, the long-term uptrend is likely to continue. Therefore, a strategy of buying more Bitcoin on the downside or increasing the allocation to Ethereum, which has been trending well recently, should work.