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 September!

1. Bitcoin Chart/Ethereum Chart

The price of Bitcoin continues its downward trajectory, dropping from $57,600 last week to below $55,000 this week. Bitcoin spot ETFs saw their largest outflow in four months, totaling $288 million. The price decline also reflects increased volatility following the release of U.S. employment data.

While the current downtrend persists, there is potential for a rebound as Bitcoin approaches the lower boundary of its price channel. However, short-term downside risk remains, especially as Bitcoin futures on the Chicago Mercantile Exchange (CME) opened at $54,565, with a gap below $54,000 that could still be filled.

BTCUSDT Chart (Binance)

Spot Bitcoin ETF flows (The block)

Last week, Ethereum’s price declined from $2,440 to $2,300. Ethereum’s supply has steadily increased since April, from 120.31 million last week to 120.32 million this week. Similar to Bitcoin, Ethereum spot ETFs are also experiencing net outflows. Although the overall market outlook for Ethereum is currently unfavorable, its price is nearing the lower end of its downward channel, indicating the potential for a rebound.

ETHUSDT Chart (Binance)

Spot Ethereum ETF flows (The block)

Ethereum Supply(y-chart)

Bitcoin dominance decreased from 57.48% last week to 56.92% this week, and it has not surpassed the 58% resistance level in the short term. This decline in dominance occurred because the drop in altcoin prices was less severe than Bitcoin’s. A strong rally is likely only if Bitcoin dominance rises in conjunction with a Bitcoin price increase.

Bitcoin dominance chart (CoinMarketCap)

2. Major Economic Indicators

• US Bond Yields

Last week, the U.S. 10-year Treasury yield declined from 3.907% to 3.740%, reflecting market sentiment that the likelihood of a significant rate cut (50 basis points) in September has increased due to weak economic indicators. However, according to the CME FedWatch tool, the probability of a 25 basis point cut remains at 70%, while the chance of a 50 basis point cut stands at 30%, showing little change from the previous week.

US10YPrice Government Bond Rate (TradingView)US Dollar Index

The U.S. dollar index fell from 101.675 last week to 101.232 this week. Despite the drop in Treasury yields, the dollar’s decline has been more moderate, and it remains relatively strong amidst concerns about an economic downturn. However, given the anticipated decline in U.S. interest rates, the dollar index may fall below 100 in the near term.

US Dollar Index (TradingView)

• US100 (Nasdaq 100)

The US100 index dropped from about 19,500 to under 18,500, reflecting weak performance in AI-related stocks like Nvidia and diminished expectations for corporate earnings. As the U.S. presidential election approaches, additional volatility across various industries could arise depending on shifts in candidate approval ratings.

US100 (TradingView)

• Gold Futures

Gold futures traded sideways last week, moving from $2,492 to $2,498. While a rate cut is expected to drive gold prices higher, some analysts believe the upside may be limited, given that gold has already risen from $2,000 to $2,500 this year.

Gold Futures (TradingView)

3. Bitcoin Market Data

• MVRV Z-score

The MVRV Z-Score declined further from 1.509 last week to 1.368 this week, signaling a cooling market. For Bitcoin to challenge its all-time high, the score would need to exceed 2, which typically indicates market overheating.

• Indicator explanation: The MVRV Z-score measures the difference between Bitcoin’s market capitalization and its realized value, divided by the standard deviation. It serves as an indicator to assess whether Bitcoin’s market capitalization is overvalued or undervalued. A score below 0 suggests that Bitcoin is significantly undervalued, while a score of 6 or higher, as seen during the all-time high (ATH) in 2021, indicates an overheated market.

Bitcoin: MVRV Z Score (Glassnode)

• aSOPR

The aSOPR indicator rose slightly from 0.989 to 0.998 this week but remains under 1, consistent with a typical bear market pattern. This suggests that overall conditions in the cryptocurrency market remain unfavorable.

• SOPR, or Spent Output Profit Ratio, is calculated by dividing the price at which Bitcoin was previously received by the price at the time of transfer. A SOPR below 1 indicates a bearish market, while a value above 1 indicates a bullish market. The aSOPR is an adjusted version that excludes short-term transactions (within one hour), providing a more accurate representation.

Adjusted SOPR (Glassnode)

• Open Interest

Open interest in Bitcoin perpetual futures saw a minor decrease from $14.47 billion last week to $14.39 billion, showing resilience despite the recent price decline. The estimated leverage ratio for perpetual futures increased from 0.186 to 0.192, indicating that capital is gradually exiting the market.

Outstanding Open Interests by Exchanges (Glassnode)

Exchanges’ combined estimated leverage ratio (Glassnode)

4. On-chain data

• Exchange inflows and outflows

Bitcoin holdings on exchanges continue to experience net outflows, a potentially bullish signal. Notably, a significant amount of Bitcoin is moving off exchanges as key support levels come under pressure. The recent withdrawal of $728 million worth of Bitcoin from exchanges suggests long-term investors are taking advantage of the dip to accumulate.

Bitcoin: Exchange Net Position Change(Glassnode)

• Number of Whale Wallets

Additionally, the number of whale wallets holding more than 10,000 BTC has rebounded from its yearly low. Although still below the annual average, this recovery could be seen as a positive development for market sentiment.

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

5. Last Week’s Major News

• Bank of Japan Signals Willingness to Raise Interest Rates Further, Yen Strengthens While Bitcoin and S&P 500 Futures Decline

On September 3rd, foreign media outlets such as Bloomberg reported that Bank of Japan Governor Kazuo Ueda, in a document submitted to the Japanese government, stated, “The economic environment remains accommodating, and the inflation-adjusted interest rate is still negative even after July’s rate hike.” This marked Japan’s first interest rate increase in decades, which has contributed to the unwinding of the yen carry trade, destabilizing risk assets, including cryptocurrencies. Ueda’s comments sparked a surge in yen purchases, driving the yen’s exchange rate from 147 to 145.85 against the U.S. dollar.

• Arthur Hayes: “Bitcoin Could Reach $50,000”… Aiming for $100,000 by Year-End

Arthur Hayes, Chief Investment Officer (CIO) of Maelstrom Funds, shared his 2024 cryptocurrency market outlook in an interview with KBW on September 4th. He predicted that market liquidity expansion and interest rate cuts would significantly impact the crypto market. Hayes, a co-founder of the cryptocurrency exchange BitMax and a noted expert in both crypto and macroeconomics suggested that Bitcoin could reach $50,000 in the near term, with the potential to hit $100,000 by the end of the year.

• Bitcoin Options Traders Prepare for Further Downside as 7-Day Options Skew Reaches 3-Week Low

As Bitcoin’s price continues dropping amid renewed concerns about a potential U.S. recession, options market traders are positioning for additional downside risk. According to an analysis referenced by CoinDesk on September 4th, using Amber Data charts, Bitcoin’s 7-day options skew has fallen to a 3-week low, indicating a surge in demand for put options as traders seek to hedge against further price declines. Options skew refers to the pricing imbalance between call and put options, driven by shifts in demand for each.

6. Major economic events

Major economic events last week

On the 6th of last week, U.S. non-farm payroll data for August was released, showing weaker-than-expected figures, heightening concerns about a slowing labor market. In response, Bitcoin’s price initially surged toward $57,000, but the gains quickly reversed, and the decline deepened after the U.S. market opened.

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

This week’s major economic events

Key indicators to watch this week include the European Central Bank’s interest rate decision and U.S. initial unemployment claims. With the U.S. economy more focused on mitigating recession risks than controlling inflation, strong employment data could help sustain the positive momentum in asset markets. A senior official from the U.S. Federal Reserve hinted that an interest rate cut is nearing, with a decision expected on September 18.

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

Summary

Positive indicators: U.S. Treasury yields, U.S. dollar index, exchange inflows/outflows, whale wallet activity

Negative indicators: Bitcoin dominance, Bitcoin spot ETF outflows, MVRV Z-score, aSOPR indicator

Overall Review: The virtual asset market continues its downtrend, with ongoing outflows from Bitcoin spot ETFs. However, as Bitcoin outflows from exchanges persist and the asset nears its support levels, there is potential for a short-term rebound. Even if a rebound occurs, it is unlikely to trigger a strong rally, and market participants should remain prepared for volatility.