Market Update 01/19

MARKET OVERVIEW

The post TradFi cryptocurrency epoch is here, and the crypto markets disappointed - The Securities and Exchange Commission has approved (11) Bitcoin exchange traded funds, from major financial players such as Grayscale Bitcoin Trust $GBTC, BlackRock iShares Bitcoin Trust $IBIT, ARK 21Shares Bitcoin ETF $ARKB, Bitwise Bitcoin ETF $BITB, Invesco Galaxy Bitcoin ETF $BTCO, WisdomTree Bitcoin Fund $BTCW, VanEck Bitcoin Trust $HODL, Franklin Bitcoin ETF $EZBC, Fidelity Wise Origin Bitcoin Trust $FBTC, Valkyrie Bitcoin Fund $BRRR) and Hashdex Bitcoin ETF $DEFI. Interestingly enough, Vanguard ETF provider decided not to offer crypto related product, quoting that "Vanguard does not see Bitcoin aligned with their investment principles", Bitcoin is a digital commodity similar to gold, and they do not offer Gold ETF either.

Since the launch of Bitcoin ETFs, $BTC has retreated from the 30 / 60 / 90 highs to $41,379, falling some 10% since the announcement. Also, the ETFs fund flows (assets under management) were relatively lukewarm - we will use BlackRock $IBIT as the benchmark has accumulated less than $1 billion of AUM ( $ 698,142,357 ) which carries expense ratio (fees charged for management) of~ 50 basis points or 0.47%. Bitwise $BITB is another notable product with less than $500 million of AUM ( $354,524,321 ) and cheaper fees of 20 basis points.

Notability, Coinbase $COIN has under performed over the past 14 days, falling to $125.48 per share, from a period peak of $186.36 at month end December 2023 - some 29.5% percent. We would see that a fragmented crypto market in the United States is due to increased competition, as institutional investors will likely opt-in to passive investing, instead of owning spot cryptocurrencies directly with Coinbase Prime accounts. This might lead to less interest in altcoins - as they are mostly bought / sold through Bitcoin instrument and perhaps other stablecoins. With the passive investing, the institutional investors mainly have exposure to a benchmark index, and not Bitcoin directly.

Also the crypto mining stocks have fallen to a 30 day low including Hive Technologies $HIVE, Hut 8 Mining $HUT (Canada) and Riot Blockchain $RIOT, Marathon Digital $MARA, Cipher Mining $CIFR, and Clean Spark $CLSK. Canaan Inc. ADR also has fallen to $1.87 per share from $3.19 December 2023 high, they are the largest manufacturer of Asic PoW equipment in the world.

Crypto Quant has published a report, that you can reference here., suggesting that South Korea is leading the world in altcoins trading, surpassing Coinbase in total volume $ 32.5 billion versus ~ $ 30 billion on $COIN. It appears there is more appetite for altcoins, layer 1 / 2 start-up in Asia comparing to the North America.

Ethereum (re) staking, post the Shanghai Update is leading a new wave of node operations and investing, with the leading Cosmos projects and token airdrops across 5 different protocols on the Eigen Layer including EtherFi (eETH), Renzo, Frax Ether (sfrxETH), Mantle Staked Ether (mETH) and Liquid Collective Staked Ether (LsETH).

The NFT market update, Pudgy Penguins collection floor price FP has rallied from 10 to ~ 20 recently, equating to 17.95 ETH.

For the week ending on January 19th - Bitcoin retraced to $41,379. Ethereum token also retraced to 7 day resistance level high of $2,468, experiencing high price cuts since the ETF launch. Bitcoin daily volume on the day is $ 21.9 billion (2.67% of MC) and Ethereum daily volume $ 10.8 billion (3.64% of MC), a significant decrease in the trading volume as the market re calibrated to a pre rally levels.

BTC and ETH total market capitalizations equal $ 812.2 billion ( $95 billion decrease) and $ 296.3 billion ( 29.3 billion decrease), as BTC/ETH 2.7411x ratio, decrease from 2.8883x ratio on 01/12. Ethereum outperformed against Bitcoin for the past 7 days by ~ 5.30% percent, adding 18% since January 10th. However on the 6 months basis, Ethereum is down versus Bitcoin 5%. The total market capitalization of the cryptocurrency market is $ 1.68 T, and BTC dominance at 49.69%.

BITCOIN DERIVATIVES

The Futures Markets on CME had a closing price of $ 41,465 and trading volume of of 6,742 contracts (Ticker: BTCF4), with traders increasing their positions in the wake of Bitcoin ETF trading. The aggregate CME Open Interest are currently at 22,821 with a net change from yesterday of 450. The weekly CME Option Markets for the past 7 days had the same amount of Bitcoin Options with (22) Calls and (41) total Puts concentrating at $37,000 level and total volume of total (63) Options.

The futures curve for ME January ($42,750), February 2024 (+ 345) and March 2024 (+ $725) and April 2024 (+ $945). Bitcoin futures, volume for the week ending on January 19th, 2024, is lower than comparing to the previous week at 9,262 contracts.

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c1 Bitcoin (trailing) 30 days

c2 BTC/ETH (trailing) 7 days

TECHNICAL ANALYSIS

The volume adjusted indicators for BTC cryptocurrency, including Accumulation Distribution Line and the Sharpe Ratio, including BTC/ETH ratio are reported on chart 1 and chart 2 for week the ending on January 19th, 2024.

#Bitcoin
○ A/D Ratio - Accumulation Distribution Indicator or ADL (Accumulation Distribution Line) is a volume based indicator that aims to measure the underlying buying / selling pressure by combining money index multiplier with traded volume. For the period of trailing 30 days - Bitcoin ADL of $47,275 is higher than the market price $ 41,259 that suggests that Bitcoin traders were wrong about the sustainability / strength of the price rally.

The ADL is a volume based indicator which was essentially designed to measure underlying supply and demand. It accomplishes this by trying to determine whether traders are actually accumulating (buying) or distributing (selling), so ADL can reveal divergence between volume flow and the actual price.

○ Money Index Flow (31 day)- or The Money Flow Multiplier is determined by the relationship between a period’s closing price and the period’s high/low range, adjusted for 31 days, trailing. For this week, we're not reporting MIF.

○ Sharpe Ratio (31 Day) - The Bitcoin SR is the performance adjusted return for the risk free rate (5%) / divided by the standard deviation of return for the period. The week ending in January 5th has SR of -2.47 for the past 30 days, down from 0.49 in the previous week. Please note that Sharpe Ratio take into account volatility in the denominator, even as we see spike in BTC price, so does a level of risk.

#Ethereum
○ $BTC / $ETH (inverse quotation) for the past 14 days Ethereum has outperformed BTC by 5.95% and on lower trading volumes, ending at 0.0595 per coin, increase from 0.0561 from the 7 days ago. For the past 7 days ETH has surprisingly outperformed BTC, perhaps performance lagging.