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 May!

1. Bitcoin Chart/Ethereum Chart

The price of Bitcoin this week stands at approximately $61,100, marking a decrease from last week’s $63,800. $61k serves as a short-term support level, and for an upward trend to emerge, it must rebound while maintaining its current price range. If further decline occurs, $59k will become the next support line. A strong breakthrough below this support may lead to a fall down to $51,700, a 30% adjustment from the previous high of $73,777.

Crypto asset investors are closely monitoring the release of the US April Consumer Price Index (CPI) this week, anticipating market volatility. If there is no positive change in US interest rates, the ongoing downward trend may persist.

BTCUSDT Chart (Binance)

There is a significant correlation between the inflow and outflow of funds in the Bitcoin spot ETF this year and Bitcoin’s price. Early last week, we witnessed an inflow of funds from ETFs like Ark Invest’s ARKB, but as funds started flowing out of Grayscale’s GBTC after Wednesday, the total inflow of Bitcoin spot ETF funds transitioned from inflow to outflow. Since the inception of the spot ETF this year, BlackRock’s IBIT has been leading in fund inflows, while Grayscale’s GBTC has led in outflows. However, both ETFs have recently experienced a decline in fund movements. Bitcoin’s future price trajectory is anticipated to hinge on the direction of ETF fund flows.

Spot Bitcoin ETF flow (The block)

The price of Ethereum has steadily declined from last week’s $3090 to its current value of $2886. The primary reason for Ethereum’s downturn is attributed to inflation, following a recent network upgrade. According to The Block, the amount of ETH burned on the 6th was 610, a stark decrease from the average daily burn of 3,000 observed over the past four months. Unless Ethereum reverts to deflation with the activation of the network, its trajectory may not surpass Bitcoin’s in the near term.

Furthermore, the SEC’s approval schedule for the Ethereum spot ETF was pushed back to July, dampening expectations of a surge due to ETF-related events in May. Grayscale exacerbated the situation by withdrawing its application for an ETH futures ETF on the 7th, three weeks ahead of the SEC’s approval deadline. In the short term, it seems that time will be required to digest the disappointment stemming from unfavorable news.

ETHUSDT Chart (Binance)

Bitcoin dominance saw a slight increase from 54.83% last week to 55.19% this week. Following the halving, Bitcoin dominance experienced a gradual decline but recently rebounded. As anticipated, we expect Bitcoin dominance to exhibit limited movement between 57% to the upside and 53% to the downside.

Bitcoin dominance chart (CoinMarketCap)

2. Major Economic Indicators

• US Bond Yields

The US 10-year bond interest rate experienced a slight variation, edging from 4.490% last week to 4.492% this week. Despite initial expectations for a decline earlier this year, the 10-year Treasury bond interest rate persists at a higher level due to the delayed U.S. base rate cut, in addition to uncertainty surrounding the future trajectory of government bond interest rates which remain elevated. Instead of hastily predicting interest rate movements, it’s prudent to focus on the upcoming Consumer Price Index (CPI) announcement scheduled for this week.

US10YPrice Government Bond Rate (TradingView)

• US Dollar Index

The US dollar index saw a modest uptick from 105.197 last week to 105.317 this week. Barring any unforeseen events, we anticipate similar fluctuations as seen in U.S. Treasury yields, contingent upon the Federal Reserve’s stance on interest rates.

US Dollar Index (TradingView)

• US100 (Nasdaq 100)

The US100 index appears to be extending its ascent following a successful rebound above 18000 last week. Building upon the momentum from the previous week, semiconductor stocks like Nvidia and Micron Technology spearheaded the climb. As US bond interest rates exhibit mixed trends, the correlation between virtual assets and the US stock market seems to be diminishing. Notably, the Nasdaq 100 index is demonstrating an upward trend fueled by the performance of individual stocks such as AI and semiconductor stocks, suggesting a divergence from the virtual asset market.

US100 (TradingView)

• Gold Futures

Gold futures witnessed a rebound from $2,320 last week to $2,458 this week. The recent decrease in large-scale buying activity from China is notable. If expectations of interest rate cuts resurge in major countries, including the United States, gold prices are likely to once again surpass previous highs.

Gold Futures (TradingView)

3. Bitcoin Market Data

• MVRV Z-score

The MVRV Z-score overheating pattern exhibited further moderation, decreasing from 2.20 last week to 2.076 this week. Aligning with last week’s analysis, it’s anticipated that the MVRV Z-score may continue to decline, albeit with limited magnitude. Looking ahead, there’s a likelihood that the MVRV Z-score still has a significant upward cycle up ahead, from a long-term perspective.

• 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 experienced a slight decrease from 1.023 last week to 1.018 this week, yet it consistently remains above 1, demonstrating positive indications for sustaining the bull market. However, recent observations where hundreds of Bitcoins were transferred from wallets that had been dormant for the past decade suggest a risk that the aSOPR could drop below 1 once again, potentially leading to profit-taking activities.

• 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

The total perpetual futures open interest for Bitcoin on exchanges saw a marginal decline from $14.42B last week to $14.25B this week. Nevertheless, the combined estimated futures leverage ratio on exchanges slightly increased from 0.180 to 0.182, suggesting a modest outflow of funds from the perpetual futures market. Given that both the open interest size and leverage ratio are not significantly elevated, the likelihood of a Bitcoin crash triggered by liquidation remains low.

Outstanding Open Interests by Exchanges (Glassnode)

Exchanges’ combined estimated leverage ratio (Glassnode)

4. On-chain data

• Exchange inflows and outflows

Bitcoin positions on exchanges have maintained an inflow advantage since last week. With the simultaneous rise in Bitcoin inflows to exchanges and outflows from Bitcoin spot ETFs, there exists a strong correlation between Bitcoin exchange inflows and outflows and Bitcoin spot ETFs.

Bitcoin: Exchange Net Position Change (Glassnode)

• Number of Whale Wallets

The number of whale wallets holding more than 10k Bitcoin remains slightly elevated in tandem with the rebound in Bitcoin prices. Should the count of whale wallets above 10k continue to rise within the current price range, it could potentially positively impact Bitcoin’s price trajectory in the future.

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

5. Last Week’s Major News

• Hong Kong Bitcoin Spot ETF records first net outflow

Among the three Bitcoin spot ETFs listed on the Hong Kong stock exchange on the 30th of April, Huaxia Fund’s BTC spot ETF experienced its first net outflow on the 7th. According to The Block, Huaxia Fund’s BTC spot ETF saw an outflow of 75.36 BTC the day before, while the remaining ETFs recorded zero inflows.

• FTX creditor compensation expected to inject at least $3 billion to $5 billion in liquidity into cryptocurrency markets

The cash compensation for customers and creditors of bankrupt cryptocurrency exchange FTX is expected to inject billions of dollars in liquidity into the cryptocurrency market. Most FTX customers and digital asset loan creditors will receive approximately 118% of the asset value tied up in FTX in cash within the next 60 days. FTX estimates the value of its cash-distributable assets to range between $14.5 billion and $16.3 billion. A portion of FTX’s compensation will likely be reinvested into cryptocurrency assets.

• SEC postpones decision to approve Invesco-Galaxy ETH spot ETF to July

The U.S. Securities and Exchange Commission (SEC) has deferred its decision on approving Invesco and Galaxy’s Ethereum (ETH) spot exchange-traded fund (ETF). According to Cointelegraph, the SEC extended the review period for Invesco and Galaxy’s applications by an additional 60 days. The new deadline for the final approval decision is July 5 of this year.

6. Major economic events

• Major economic events last week

Last week saw minimal major macroeconomic events, aside from the weekly U.S. crude oil inventories and new unemployment claims. Crude oil inventories declined less than anticipated, while new unemployment claims surpassed expectations, indicating potential deterioration in the U.S. economy.

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

This week’s major economic events

This week, several significant events are on the horizon, ranging from major U.S. price indicators to a speech by U.S. Federal Reserve Chairman Powell. Of particular note is the impending release of the Consumer Price Index (CPI) on Wednesday, which holds paramount importance for many market participants. A notably lower-than-expected CPI figure could signal an impending interest rate cut, likely prompting market reactions.

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

Summary Positive indicators: aSOPR, open interest

Negative indicators: Bitcoin spot ETF fund flow, exchange inflows and outflows

Overall Review: Bitcoin seems to have lost its short-term upward momentum, influenced by mixed U.S. interest rates and outflows from Bitcoin spot ETFs. The impending release of the US CPI is expected to heighten Bitcoin’s volatility. A lower CPI could spark a rebound in virtual assets following recent declines, while a persistently high CPI might further weaken Bitcoin’s price, potentially breaching support levels. Caution is advised in either scenario.