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 first week of May!

1. Bitcoin Chart/Ethereum Chart

Last week, Bitcoin’s price showed weakness, dropping from $65,900 to $62,800. Should this downtrend persist, it is likely to revisit $59,000, long passed since March. ****Conversely, if we were to see an uptick instead, resistance is anticipated at the previous high of $73,000. Nevertheless, without a positive signal regarding the US interest rate cut, challenging the previous high in the short term may prove to be challenging.

BTCUSDT Chart (Binance)

The waning influx of funds into the Bitcoin spot ETF, a driving force behind this year’s price surge, is also attributed as the primary cause of the recent decline. While outflows from Grayscale’s GBTC continued, the total inflows from BlackRock’s IBIT, previously recording continuous inflows, recently tapered off to zero, tilting the balance toward outflows across all spot ETFs.

Spot Bitcoin ETF flow (The block)

However, amidst the search for positive indicators, it is anticipated that this halving will also yield a robust surge post-adjustment. Historical data from the past three Bitcoin halvings indicate a rise starting at 284% and going as high as 8,069% within 12 months post-halving.

Bitcoin price after 12 months of halving (CoinMetrics)

Ethereum’s price saw a slight increase from $3,214 last week to $3,234 this week, exhibiting a favorable trend compared to Bitcoin’s decline. Analysts at Santiment observed that Ethereum’s circulation volume has experienced deflation over the past five months, with transaction fees recently hitting a six-month low, potentially signaling the onset of an altcoin rally. While approval for the Ethereum spot ETF is approaching in May, the prevailing macroeconomic conditions, marked by elevated interest rates and geopolitical tensions, suggest that Ethereum, along with Bitcoin, may continue to face weakness in the near term.

ETHUSDT Chart (Binance)

Bitcoin dominance marginally decreased from 55.04% last week to 54.45% this week. Post-halving, Bitcoin’s movement is expected to fluctuate within the range of 53% to 57%. A scenario where Ethereum, boasting multiple short-term positives, exhibits strength against Bitcoin could further diminish Bitcoin's dominance.

2. Major Economic Indicators

• US Bond Yields

Last week, the U.S. 10-year bond yield climbed up from 4.648% to over 4.7%, before experiencing a slight dip to its current 4.667%. Chairman Powell’s adoption of a hawkish stance during the meeting on the 16th shifted market sentiment regarding interest rate cuts. The focus has shifted from predicting how many times the Federal Reserve would cut interest rates this year to the possibility of any rate cuts occurring within this year. This week’s interest rate decision by the U.S. Federal Reserve (Fed) and Chairman Powell’s statements will serve as pivotal moments that will largely influence interest rates.

US10YPrice Government Bond Rate (TradingView)

• US Dollar Index

The US dollar index reached 105.983 this week, an increase from last week’s 106.242. Although the index saw a minor decline compared to last week, it remains within proximity of the strong dollar we saw from last October to November. This week’s upcoming US interest rate announcement will likely provide clarity on the continuity of the strong dollar trend.

US Dollar Index (TradingView)

• US100 (Nasdaq 100)

The US100 index rebounded from last week’s 17,100, surging to 17,700. Despite persistently high U.S. government bond yields and ongoing geopolitical tensions stemming from the Middle East, prominent technology stocks such as Alphabet and Nvidia experienced notable gains, driving the index’s recovery. Additionally, this week’s earnings announcements from tech giants Amazon and Apple may heighten volatility in the Nasdaq 100 index.

US100 (TradingView)

• Gold Futures

Gold futures have weakened from $2,345 last week to $2,324 this week. Despite a robust performance since February, fueled by international instability and China’s affinity for gold, gold prices have recently faltered due to the sustained high-interest rates in the United States. Until U.S. Treasury yields stabilize, gold futures prices are expected to remain range-bound or exhibit mixed movements.

Gold Futures (TradingView)

3. Bitcoin Market Data

• MVRV Z-score

The MVRV Z-score dropped down to 2.2 this week from last week’s 2.37. If the score were to stabilize around 2, it could signal a potential upward trend, possibly pushing into the overvaluation zone. This current phase appears to reflect some adjustments within the bullish market, indicating a resolution of the overheating pattern.

• 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.

Bitcoin: MVRV Z-Score (Glassnode)

• aSOPR

The aSOPR increased from 1.015 last week to 1.037 this week. Maintaining levels consistently above 1 over the past week would suggest that the long-term bullish market trend remains intact.

• 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

Bitcoin’s combined perpetual futures open interest on exchanges saw a slight decline from last week’s $14.22 billion to this week’s $14.18 billion, with the estimated futures leverage ratio on exchanges remaining unchanged at 0.180. While open interest shows some stability, caution is warranted as a potential decline in Bitcoin’s value could lead it down to $12 billion, the level seen at the beginning of this year. However, given the still-low leverage ratio, the likelihood of a sharp drop due to liquidation, even in the event of a decline, seems minimal.

Outstanding Open Interests by Exchanges (Glassnode)

Exchanges’ combined estimated leverage ratio (Glassnode)

4. On-chain data

• Exchange inflows and outflows

Bitcoin positions on exchanges maintain an outflow advantage, albeit with a decrease in weekly outflows. This decline appears linked to the reduction in Bitcoin spot ETF fund inflows. Should the Bitcoin spot ETF resume inflows and the number of Bitcoins held on exchanges continue to decrease, this scenario could trigger a notable surge in Bitcoin prices due to a scarcity of supply on exchanges.

Bitcoin: Exchange Net Position Change (Glassnode)

• Number of Whale Wallets

The number of whale wallets holding more than 10,000 Bitcoin remains at a low level with no significant changes. This suggests a lack of substantial buying or selling activity by Bitcoin whales within the current price range.

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

5. Last Week’s Major News

• Forbes, “20 coins including Ripple, Cardano, and Bitcoin Cash are zombie blockchains”

On the 27th, Forbes published a list of 20 cryptocurrency networks described as “zombie blockchains.” Among these networks are Ripple (XRP), Cardano (ADA), Bitcoin Cash (BCH), Litecoin (LTC), Internet Computer (ICP), Ethereum Classic (ETC), Stellar Lumens (XLM), Stacks (STX), Caspar (KAS), Theta (THETA), Phantom (FTM), Monero (XMR), Alweve (AR), Algorand (ALGO), FLOW, MultibugX (EGLD), Bitcoin Satoshi Version (BSV), MINA, Tezos (XTZ), and EOS. Forbes noted that these 20 blockchains collectively hold a market value exceeding $100 billion, despite their limited utility beyond speculative cryptocurrency trading. They described zombie blockchains as networks that sustain continuous operations and transactions without serving any practical purpose, identifying this as a distinctive characteristic.

• Consensys sues SEC… claims of “excessive regulatory application”

Consensys, a cryptocurrency company pivotal in supporting major projects within the Ethereum ecosystem, filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) alleging excessive regulatory measures. As reported by Fortune on the 25th, the lawsuit aims to counter the SEC’s legal action against MetaMask, a prominent cryptocurrency and Web3 wallet, incubated and supported by Consensys over the last several years.

• Wall Street Journal, “Even if the U.S. base interest rate is lowered, the final point is likely to be higher than before.”

On the 28th, the Wall Street Journal reported that even if the U.S. base interest rate were to be lowered, the eventual point may surpass previous expectations. Despite considerations for delaying the base interest rate cut due to ongoing U.S. inflation and the economy displaying robust trends, the Wall Street Journal highlighted that the era of ultra-low interest rates that we had seen in the past, has now concluded. With the fiscal deficit rapidly expanding and investment demands rising, it’s projected that the so-called neutral interest rate, which neither triggers inflation nor deflation, will likely be elevated beyond prior anticipations.

6. Major economic events

• Major economic events last week

Last week, signs of a slowdown in the U.S. economy emerged as both the Manufacturing and Services Purchasing Managers’ Index fell below expectations, and the first-quarter GDP was reported at 1.6%, significantly lower than the forecasted 2.5%. However, the core consumer spending price index surpassed expectations, reaching 2.8%, indicating that prices remain elevated. The conflicting economic indicators pose a challenge for the Federal Reserve in interpreting the current state of the economy, leaving room for speculation on their stance in the upcoming week.

Major Economic Events for the 4th week of April 2024 (Investing.com)

This week’s major economic events

The focal point of global economic activity this week centers on the FOMC meeting, where crucial decisions regarding the U.S. base interest rate will be made. Market sentiment leans towards an expectation of unchanged interest rates. Should rates remain static, investors will closely monitor Chairman Powell’s statements during the FOMC press conference. Concerns loom over the possibility of interest rate cuts within the year, depending on the Federal Reserve’s assessment of the U.S. economy’s current condition. All eyes are on whether Chairman Powell will provide insights into the timing of potential rate adjustments.

Major Economic Events for the 1st week of May 2024 (Investing.com)

Summary

Positive indicators: Ethereum price, aSOPR, exchange inflows and outflows, perpetual futures estimated leverage ratio

Negative indicators: Bitcoin spot ETF fund outflow, US bond yields

Overall Review: Given the significant impact of U.S. interest rates on asset markets, the most prudent investment decisions will have to consider the outcome of the U.S. Federal Reserve’s interest rate decision and the subsequent FOMC press conference this week. Historically, adjustments of up to 30% have occurred before and after Bitcoin halving events. Thus, in anticipation of a potential substantial decline, adopting a strategy of acquiring Bitcoin or Ethereum, which have exhibited positive recent trends, could be advisable, with a potential decline going down to $51,700.