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 second week of May!

1. Bitcoin Chart/Ethereum Chart

The price of Bitcoin declined last week, going from $62,800 to $56,552 based on the Binance price on the 2nd, though it has since rebounded and currently sits at $63,786. It briefly dipped below $59k, which typically serves as a support level for prices, but it swiftly recovered within a day, underscoring the significance of this support line. For the rebound to sustain momentum, Bitcoin must demonstrate an upward trajectory while maintaining the $61k threshold in the short term. Additionally, as it ascends, resistance is anticipated around $69k.

BTCUSDT Chart (Binance)

This year, there is a strong positive correlation between the inflow and outflow of funds in the Bitcoin spot ETF and the price movement of Bitcoin. Last week, outflows persisted from the Bitcoin spot ETF, but substantial inflows also started yesterday, shifting the net inflow/outflow dynamics into positive territory. This shift occurred because Grayscale’s GBTC funds, which had been experiencing continuous outflows, saw an inflow reversal for the first time this year. We can infer that institutional or individual investors utilizing ETFs for Bitcoin investment tend to favor longer-term strategies compared to those investing via virtual asset exchanges such as Binance. Consequently, the cessation of outflows from GBTC and the onset of new inflows could significantly benefit the price of Bitcoin.

Spot Bitcoin ETF flow (The block)

The price of Ethereum briefly dipped to $2,817, from last week’s $3,234, before eventually recovering to its current $3,090. Ethereum’s rebound rate is lower than Bitcoin’s, indicating the market’s perception of a low likelihood of approval for the Ethereum ETF scheduled in May. Furthermore, the deflation observed from November of last year to April of this year shifted to inflation due to declining fees and network activity on the Ethereum network. If Ethereum were to revert to a deflationary state, it is anticipated that the price would rally once again.

ETHUSDT Chart (Binance)

Bitcoin dominance saw a slight rebound from 54.45% this week compared to last week’s 54.83%. Post-halving, Bitcoin is expected to fluctuate between 53% to 57% for the foreseeable future. Given that funds currently flowing into virtual assets have yet to exit and numerous investors await liquidity, there’s potential for small and medium-sized altcoins to rebound this week, possibly weakening Bitcoin dominance.

Bitcoin dominance chart (CoinMarketCap)

2. Major Economic Indicators

• US Bond Yields

The US 10-year bond yield declined from 4.667% last week to 4.490% this week. During the May FOMC press conference, Federal Reserve Chairman Jerome Powell dismissed the possibility of an interest rate hike, stating that if the job market were to weaken more than expected, they might begin cutting interest rates. Since then, employment indicators like the U.S. non-farm employment index and the unemployment rate have decreased, signaling a deteriorating situation. With the potential for an interest rate cut looming, US bond yields saw a sharp decline.

US10YPrice Government Bond Rate (TradingView)

• US Dollar Index

The US dollar index saw a slight drop from 105.983 last week to 105.197 this week. Absent any major external factors like the conflict in the Middle East or a surge in oil prices, it is expected to move in tandem with US Treasury yields for the time being.

US Dollar Index (TradingView)

• US100 (Nasdaq 100)

The US100 index successfully rebounded from last week’s 17,700 to over 18,000 this week. The Nasdaq 100 surged as the US 10-year interest rate fell. Leading the charge were major semiconductor stocks such as Micron, NVIDIA, and AMD. The continuation of the Nasdaq’s upward momentum hinges on US interest rates. Short-term predictors of US interest rates include employment indicators. The US100 index is likely to sustain its positive trajectory only if the US employment indicator exhibits poor performance.

US100 (TradingView)

• Gold Futures

Gold futures prices are exhibiting a mixed trend, slipping from $2,324 last week to $2,320 this week. Given the minimal increase in gold prices compared to the significant drop in US Treasury yields, it is reasonable to assume that there are no new buying trends within the current price range. If interest rates show signs of stabilizing or declining, gold futures prices could initiate an upward rally again. However, it would appear to be challenging for gold prices to surge explosively in a period marked by sustained high interest rates, as we are currently seeing.

Gold Futures (TradingView)

3. Bitcoin Market Data

• MVRV Z-score

The MVRV Z-score dipped from 2.2 to 1.9 last week but then rebounded to 2.2. Observing the MVRV Z-score, it appears that the overheating observed before the halving has been somewhat alleviated. While there may be further declines in scores at this juncture, the extent of the decline is expected to be limited. Given the substantial variance from the MVRV Z-score peak in 2021, it is believed that the peak of the upward cycle persists post-halving.

• 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 fell from 1.037 to 0.971 last week and currently sits at 1.023. Last week, it breached the 1 mark, indicative of an upward trend, before descending, suggesting a potential inability to sustain the bull market. However, it’s encouraging that the aSOPR level has rebounded above 1, necessitating continuous monitoring of its trajectory.

• 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 the 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 decreased from $14.18B to $13.55B over the last two days, now resting at $ 14.42 B. Despite the rise in open interest, the exchange’s combined estimated futures leverage ratio remains at 0.180, unchanged from last week. While there’s a possibility of open interest dropping to $12B if Bitcoin declines, akin to the beginning of the year, the relatively low leverage ratio mitigates the likelihood of a plunge stemming from futures liquidation.

Outstanding Open Interests by Exchanges (Glassnode)

Exchanges’ combined estimated leverage ratio (Glassnode)

4. On-chain data

• Exchange inflows and outflows

Exchange Bitcoin positioning transitioned to favoring inflows over outflows in approximately just three months. This shift appears to be attributed to diminished fund inflows into Bitcoin spot ETFs and a lackluster Bitcoin trend. While inflows of Bitcoin into an exchange aren’t conducive to price increases, their limited magnitude suggests they’re unlikely to prompt significant price shifts.

Bitcoin: Exchange Net Position Change (Glassnode)

• Number of Whale Wallets

The count of whale wallets holding more than 10k Bitcoin saw a slight uptick alongside the rebound in Bitcoin prices. Such an increase in whale wallets at current price levels is a positive sign. A higher whale wallet count coupled with an upward trajectory improves the chances of a rally resurgence.

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

5. Last Week’s Major News

• The ratio of open interest to Bitcoin market cap plummets, suggesting market health.

NewsBTC reported on May 6th that Bitcoin’s open interest to market capitalization ratio reached its lowest point since February, indicating a healthy derivatives sector. In a recent X post, analyst James Van Straten described the derivatives market as “very healthy” during the recent Bitcoin price recovery. It’s worth noting that the ratio of open interest to Bitcoin’s current market capitalization is now less than 2%.

• Lowest Bitcoin mining profits… The mining front is ‘no problem’

Despite Bitcoin mining profits hitting their lowest point, analysis indicates that there are no signs of mining companies facing closures, a concern that had been raised by some. According to Cointelegraph, on May 1st CryptoQuant CEO Joo Ki-young presented a 365-day Fuel chart estimating the selling pressure on miners. Joo stated that miners were showing no signs of giving up even, when faced with adversity. Previously, Joo had expressed concerns about profit reduction due to the halving and BTC price decline, suggesting potential business closures if BTC prices fail to rise.

• Hamas accepts Egypt-Qatar ceasefire plan… “Israel does not agree”

Foreign media outlets, including Reuters, reported on May 6th that the Palestinian armed faction Hamas had agreed to accept Egypt’s ceasefire proposal in the Gaza Strip. However, Israeli officials have asserted that Israel would not accept the ceasefire plan.

6. Major economic events

• Major economic events last week

Last week’s US interest rate announcement and the FOMC press conference held significant importance. As anticipated, US interest rates remained unchanged. During the press conference, Chairman Powell emphasized that lowering interest rates would be a gradual process, hinting at a prolonged period of elevated interest rates. However, he alleviated market concerns by stating that the likelihood of an interest rate hike was deemed unlikely.

The non-farm employment index released following the FOMC meeting fell significantly below expectations, and the unemployment rate surpassed forecasts as well, indicating a weakening labor market in the United States. Consequently, US Treasury yields experienced a sharp decline.

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

This week’s major economic events

Following last week’s FOMC interest rate decision, this week lacks any major events. However, particular attention should be paid to the number of new unemployment claims in the United States. If this figure surpasses predictions, it could signal deteriorating employment conditions in the US, potentially supporting the case for an interest rate cut.

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

Summary

Positive indicators: Bitcoin spot ETF fund inflow, MVRV Z-score

Negative indicators: aSOPR, exchange inflows and outflows

Overall Review: Last week, Bitcoin’s price dipped below $57k, only to rebound beyond $65k. This should be interpreted as a consequence of a significant drop in interest rates rather than a deviation from Bitcoin’s upward trajectory. To confirm entry into a major bull market, Bitcoin must exhibit a robust surge that challenges previous highs. Until this happens, Bitcoin’s fluctuations are likely to be influenced by US bond interest rates, therefore it is advisable to adopt a conservative stance regarding position changes.