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 May!

1. Bitcoin Chart/Ethereum Chart

Risk assets, including Bitcoin and altcoins, showed an upward trend following the release of the U.S. Consumer Price Index (CPI) for April. Bitcoin’s price successfully rebounded from $61,100 last week to over $66,100 this week, maintaining the short-term support level of $61,000.

BTCUSDT Chart (Binance)

In the U.S., Bitcoin spot ETFs have recorded inflows of $1.3 billion over the past two weeks, fully recovering from April’s net outflows. As a result, the traded Bitcoin ETF achieved its highest net purchase of $12.3 billion since its launch. Recent purchases include Ark Investment’s ARKB and Fidelity’s FBTC. Additional buying power from GBTC, managed by BlackRock IBIT and Grayscale, which hold the largest assets under management (AUM), is likely to impact Bitcoin’s price movement positively in the future.

Spot Bitcoin ETF flow (The block)

Spot Bitcoin ETF AUM (The block)

The price of Ethereum rose from $2,886 last week to $3,064 this week, but its rate of increase is lower than that of Bitcoin. Many investors believe the SEC is unlikely to approve an Ethereum spot ETF soon. Additionally, the supply of Ethereum, which was deflationary from late last year to March of this year, shifted to inflation in mid-April, contributing to its relative weakness compared to Bitcoin. Consequently, Ethereum may show a lower growth rate compared to Bitcoin in the short term until these issues are addressed. However, in a full-fledged bull market, Ethereum’s price tends to average above 0.05 BTC. Currently, with Ethereum at 0.047 BTC, it can be considered undervalued.

ETHUSDT Chart (Binance)

Bitcoin dominance increased to 56.03% from 55.19% last week. Consistent with previous predictions, Bitcoin’s dominance over market capitalization is expected to show limited movement, ranging between 53–and 57%.

Bitcoin dominance chart (CoinMarketCap)

2. Major Economic Indicators

• US Bond Yields

U.S. 10-year bond yields fell to 4.416% this week after the U.S. CPI report showed a greater-than-expected slowdown. This has alleviated investors’ concerns about the possibility of no interest rate cuts this year, strengthening the prospects for two cuts in September and December. While changes in market interest rates could occur depending on the contents of the upcoming U.S. Federal Reserve meeting minutes, BlackRock CIO Ryder is bolstering the interest rate cut theory, arguing that the Fed must cut rates to reduce inflation.

US10YPrice Government Bond Rate (TradingView)

• US Dollar Index

The dollar index, which measures the dollar’s value against six major currencies, hit a five-week low, dropping from 105.317 last week to 104.486 this week. This is the first time since April 9 that the dollar index fell below the 105 mark based on the closing price. The dollar index is likely to weaken in the near term as U.S. bond yields are expected to fall.

US Dollar Index (TradingView)

• US100 (Nasdaq 100)

The US100 index is at 18,576, setting a new high after successfully rebounding last week. Last year, the correlation between the Nasdaq and Bitcoin decreased, but over the last 90 days, the 90-day correlation index between Bitcoin and the Nasdaq Technology Stock 100 Index reached 0.46, the highest since last August. This suggests that Bitcoin is increasingly recognized as a growth asset similar to technology stocks, which is positive for the flow of virtual assets.

US100 (TradingView)

• Gold Futures

Gold futures prices have hit historical highs, rising from last week’s $2,358 to $2,432 this week. This increase reflects a growing preference for safe assets due to international political instability, such as the conflict in the Middle East, the war between Russia and Ukraine, and the increasing likelihood of U.S. interest rate cuts within the year. However, the most significant factor has been the Chinese central bank’s gold purchases. The People’s Bank of China bought 225 tons, accounting for one-quarter of the total gold purchased by central banks globally last year. This is the highest amount since 1977, when the Chinese government began releasing statistics, and China’s gold reserves surged from 1,948 tons at the end of October 2022 to 2,262 tons in March this year. Some suggest that China is intentionally purchasing gold to counter dollar hegemony. If a U.S. interest rate cut becomes likely, the price of gold futures is expected to break previous highs and continue its upward rally.

Gold Futures (TradingView)

3. Bitcoin Market Data

• MVRV Z-score

The MVRV Z-score increased from 2.07 last week to 2.35 this week. After falling under 2 and showing signs of cooling off, the score’s subsequent rise indicates a positive trend and the potential for a full-fledged upward movement.

• 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 remained virtually unchanged, moving slightly from 1.018 last week to 1.017 this week. The consistent values above 1 suggest that the bull market is ongoing.

• aSOPR is short for Adjusted SpentOutfit 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 exchange-aggregated perpetual futures open interest increased from $14.25 billion last week to $15.50 billion this week. The estimated leverage ratio also rose slightly from 0.182 to 0.185, indicating an increase in risks. Although this is lower than the $18 billion open interest level seen when the decline began last March, the significantly higher open interest now warrants caution regarding a potential short-term decline. However, since the leverage ratio is not excessively high, the likelihood of a large decline is low.

Outstanding Open Interests by Exchanges (Glassnode)

Exchanges’ combined estimated leverage ratio (Glassnode)

4. On-chain data

• Exchange inflows and outflows

Bitcoin holdings on exchanges, which showed an inflow advantage over the last two weeks, have shifted to an outflow advantage. This suggests that more funds are being stored directly outside of exchanges by institutions or custodians, coinciding with the inflow of institutional funds into Bitcoin spot ETFs.

Bitcoin: Exchange Net Position Change (Glassnode)

• Number of Whale Wallets

The number of whale wallets holding more than 10,000 Bitcoin remains largely unchanged despite the rebound in Bitcoin prices. Current figures are neutral. If the number of Bitcoin whale wallets increases within the current price range, it could be interpreted positively for future price increases.

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

5. Last Week’s Major News

• Tether issues $1 billion… “Providing additional upward momentum for Bitcoin”

Tether has issued $1 billion worth of its USDT stablecoin, pushing Tether’s market capitalization over $110 billion. According to Cointelegraph on the 17th, this increase in Tether issuance could drive the price of Bitcoin higher.

• Joe Burnett “$4 trillion passive fund is eating up Bitcoin” — Effects of MSCI inclusion in MicroStrategy

Joe Burnett of IIICapital, managing $5 billion, predicts that passive funds will flow into Bitcoin via MicroStrategy. MSCI recently announced that MicroStrategy stocks would be included in the MSCI ACWI global stock index at the end of this month. Burnett forecasts that MicroStrategy will represent 0.02% to 0.03% of the MSCI index when the market closes on May 31, leading to automatic purchases of MicroStrategy shares worth $1 billion.

• Deadline for U.S. Ethereum ETF approval approaching… “It will likely be rejected” outlook spreads

As the deadline for the U.S. Securities and Exchange Commission (SEC) decision on the first Ethereum spot exchange-traded fund (ETF) approval nears, speculation grows that the SEC will reject it. The decision is due on the 23rd. Citing anonymous sources, Bloomberg News reported that private discussions between Ethereum ETF applicants and the SEC have been minimal compared to previous Bitcoin ETF approvals. Consequently, applying companies are bracing for a likely rejection.

6. Major economic events

• Major economic events last week

Last week, the consumer price index (CPI) was reported to be similar to or lower than forecasts. Specifically, the monthly CPI for April increased by 0.3%, below the forecast of 0.4%, and retail sales (MoM) were flat at 0.0%, significantly lower than the forecast of 0.4%. These figures indicate a slowdown in the U.S. economy. Consequently, U.S. bond interest rates fell, positively impacting the overall asset market.

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

Summary

Positive indicators: US bond interest rate, Bitcoin spot ETF fund flow, US100, gold futures, exchange inflows and outflows, MVRV Z-score

Negative indicators: Open Interest

Overall Review: Last week, the slowdown in the U.S. CPI led to a decrease in interest rates, positively affecting the overall asset market. As a result, virtual assets, which have been recently weakening, also rose. On-chain data related to Bitcoin is favorable for a continued rise. Increasing the proportion of Bitcoin in portfolios might be prudent, anticipating further gains within the current range. However, the significant increase in open interest is a risk factor and could lead to a short-term decline.