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 December!

1. Bitcoin Chart/Ethereum Chart

Bitcoin experienced a significant correction, falling below the critical support level of $94,000. This has spread fear in the market, and while the correction is likely temporary, the extent and duration are hard to predict. As a result, the bullish year-end scenario seems challenging for now.

Additionally, fund flows in Bitcoin spot ETFs have turned negative, with record-level outflows in a single session. This situation, coupled with key macroeconomic events such as President Trump’s inauguration and the U.S. interest rate inflection point, increases the likelihood of further market corrections. Investors are advised to adopt cautious strategies to prepare for heightened volatility.

BTCUSDT Chart (Binance)

Spot Bitcoin ETF flows (The block)

Ethereum (ETH) has seen significant volatility, dropping sharply from $3,994 last week to $3,360 this week. The decline and subsequent rebound were both more pronounced compared to Bitcoin. Ethereum spot ETFs have also started experiencing outflows, though the scale is not yet significant. However, given the market conditions, caution is advised.

Ethereum faces staking issues related to spot ETFs, yet its network activity remains positive. From a long-term perspective, it is still considered a promising asset. However, fierce competition among altcoins and Ethereum’s ongoing inflation warrant caution against excessive optimism. In this major correction phase, careful consideration of spot purchases is necessary.

ETHUSDT Chart (Binance)

Spot Ethereum ETF flows (The block)

Bitcoin Dominance increased from 57.20% last week to 58.74%, aligning with expectations. The Federal Reserve’s decision to lower the forecast for next year’s rate cuts due to inflation concerns, coupled with Chair Powell’s negative remarks on Bitcoin reserves, appears to have intensified the decline in the crypto market.

While Bitcoin’s decline was smaller than that of altcoins, its substantial gains earlier this year made corrections inevitable. Amidst a sluggish year-end market, new catalysts are needed for a rebound. If market instability persists, Bitcoin may remain relatively stable compared to altcoins. However, some altcoins that have already experienced significant corrections may also show rebound potential, leading Bitcoin dominance to either stabilize or see slight gains.

Bitcoin dominance chart (CoinMarketCap)

2. Major Economic Indicators

• US Bond Yields

Last week, the U.S. 10-year Treasury yield rose from 4.39% to 4.53%. Despite the Federal Reserve meeting market consensus by cutting the benchmark rate by -0.25%, the dot plot indicating concerns among some members over future rate cuts negatively impacted market sentiment. Additionally, reports of a dissenting vote for a rate freeze fueled the upward movement in bond yields.

This development suggests continued market instability for the time being, with President Trump’s post-inauguration policies likely to be a key factor in market changes. It is a time for cautious positioning.

US10YPrice Government Bond Rate (TradingView)

• US Dollar Index

The U.S. Dollar Index (DXY) rose from 106.871 last week to 107.944. The Federal Reserve’s emphasis on inflation concerns and limited scope for rate cuts next year supported continued dollar strength. The weakening of currencies in non-U.S. markets, combined with President Trump’s America-first policies, is likely to further accelerate this trend. The dollar is expected to maintain its strong stance in tandem with interest rate movements for the foreseeable future.

US Dollar Index (TradingView)

• US100 (Nasdaq 100)

The US100 index fell from 21,784 last week to 21,406 this week, experiencing a correction. Following Chair Powell’s remarks, the index briefly dipped below 21,000 before partially recovering. With year-end approaching, participants may engage in annual performance realizations, requiring attention to potential volatility.

US100 (TradingView)

• Gold Futures

Gold futures prices dropped slightly from $2,644 per ounce last week to $2,631 this week. Rising market interest rates are likely to keep gold prices range-bound or under slight downward pressure in the short term.

Gold Futures (TradingView)

3. Bitcoin Market Data

• MVRV Z-score

The MVRV Z-Score decreased from 3.49 last week to 2.85 this week, falling below 3. This indicates a pause in the short-term bullish trend, resembling the April correction pattern. Historically, the MVRV Z-Score approached 6 during the end of bullish cycles. After excessive risk is mitigated, a potential for recovery may exist.

• 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 dropped from 1.076 last week to 1.028 this week but remains above 1 on a daily basis, suggesting the potential continuation of a bullish trend. If aSOPR falls below 1, concerns about a bearish reversal may arise.

• 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

Bitcoin perpetual futures open interest decreased from $30.72B last week to $26.72B this week. If it falls to around $23B, entering long positions could be considered. The estimated leverage ratio also dropped slightly from 0.226 to 0.221 but remains at high levels. Overall, the risk remains elevated, warranting caution against significant volatility.

Outstanding Open Interests by Exchanges (Glassnode)

Exchanges’ combined estimated leverage ratio (Glassnode)

4. On-chain data

• Exchange inflows and outflows

Bitcoin’s net outflows from exchanges persist, albeit modestly. This trend is likely to have a positive impact on Bitcoin prices.

Bitcoin: Exchange Net Position Change(Glassnode)

• Number of Whale Wallets

The number of wallets holding over 10k BTC slightly decreased and stabilized, while wallets holding over 1k BTC significantly dropped, driving the recent decline. However, the drop mirrors a prior short-term increase in wallet numbers, suggesting a low likelihood of further sharp declines. If wallets with over 10k BTC act as a leading indicator, Bitcoin may remain in a weak or range-bound phase for the time being.

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

Number of Bitcoin wallets holding 1K or more (Glassnode)

5. Last Week’s Major News

• Powell: “The Fed Cannot Hold Bitcoin… No Plans to Seek Legal Changes”

Jerome Powell, the Chairman of the U.S. Federal Reserve, stated on December 18 (local time) during a press conference after the Federal Open Market Committee (FOMC) meeting that the Fed cannot hold Bitcoin due to legal restrictions. Powell added, “We are not looking for a law change at the Fed.”

• BlackRock Raises Concerns About Bitcoin’s Supply Cap, Triggering Market Uncertainty

A new controversy surrounding Bitcoin’s fixed supply cap of 21 million BTC was sparked by a recent video from BlackRock. On December 19 (local time), reports stated that while BlackRock emphasized the fixed supply as a key factor in maintaining Bitcoin’s value, it also questioned whether this cap would remain in place in the future. This led to significant reactions within the cryptocurrency community, raising concerns about investor confidence.

• Jump Trading to Pay $123 Million Fine Over Terra-Luna Scandal

Jump Trading, a major U.S. market maker, has agreed to pay a $123 million fine after its digital assets division misled investors. Its subsidiary, Tai Mo Shan, had been responsible for providing liquidity to digital assets like Terra and Luna. The U.S. Securities and Exchange Commission (SEC) revealed that Tai Mo Shan exaggerated the stability of the algorithmic stablecoin TerraUSD (UST) and violated securities laws, leading to the fine.

6. Major economic events

Major economic events last week

The Federal Reserve announced a 0.25% rate cut last week, but there were internal conflicts over whether to freeze or lower rates further. A significant number of members expressed concerns about further rate cuts. The possibility of a smaller-than-expected rate cut next year has increased. Additionally, Powell’s negative comments about Bitcoin reserves have caused significant shockwaves in the cryptocurrency market.

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

This week’s major economic events

This week, due to the Christmas holiday, there are no major macroeconomic events. However, attention should be paid to initial jobless claims. If jobless claims decrease more than expected, signaling improvement in the U.S. labor market, it could reduce the justification for rate cuts, potentially negatively impacting the investment market.

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

Summary

• Positive Indicators: aSOPR, Exchange Outflows

• Negative Indicators: Bitcoin Spot ETF Fund Outflows, U.S. Bond Yields, U.S. Dollar Index, Open Interest

Overall Conclusion: The excessive risk-taking of cryptocurrency investors exploded due to the Fed’s message about limiting rate cuts and Powell’s negative comments regarding Bitcoin reserves, leading to a significant drop in both Bitcoin and altcoins. Given the ongoing correction from recent highs, caution is advised before entering new positions until sufficient adjustment occurs. However, there is still potential for a rebound in this cycle, and if further correction happens, it may present an opportunity to buy Bitcoin and key altcoins.