Issue #4 Monday Feb 12, 2024
What a difference a week makes. After the tumble in prices following the ETF approvals, to the holding pattern of the last two weeks, things are looking decidedly rosy for BTC. Last week, Bitcoin broke out of its range to surge above $48,000.
As a result, the asset is poised for its seventh consecutive day of gains, which would mean that Bitcoin is on a hot streak not seen since January 2023. This has been thanks in part to the ebbing of outflows from Grayscale in favor of inflows to the likes of BlackRock’s iShares Bitcoin Trust and Fidelity’s Wise Origin Bitcoin Fund.
These two have emerged as the two front-runners of the new ETFs approved, capturing the majority of the $8 billion since they started trading in early January.
It’s also been good news for miners on the network. As the halving approaches, mining revenue is set to be slashed, but thanks to the boom in Ordinals inscriptions, miners have earned more than $200 million in fees in the last three months.
This combination of institutional money and a robust mining community has many analysts talking up 2024 as a defining moment for the world’s largest cryptocurrency. While Bitcoin’s dominance over asset prices has ticked up, the rest of the market has seen gains too. Ethereum finished the past week up 7%, with every coin in the top 20 by market cap, sharing the spoils of renewed interest in digital assets.
All this positive news takes the total crypto market to $1.8 trillion in value, a number not seen since the halcyon days of April 2022.
Chart of the week
Bitcoin is on course for its longest continuous price appreciation since January of 2023.
Source: Bloomberg
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BTC Analysis
Crypto is a momentum market. And last week, we saw precisely what that means. After two weeks of consolidation in the tight range, we saw an expansion. The move was quick and BTC hit the next level of supply at 48K, which we identified as a key line in our analysis a few weeks ago.
This week, however, prices are cooling and we’re seeing several bearish signals based on our order book and liquidity systems, suggesting we’re entering a new phase.
Orderbook & signals
We are getting bearish mean reversion signals based on our order books system in the $48,000 area. That’s because we can see big ask orders in the $50,000, $49,200, and $49,000 range, meaning the current price has moved past the recent average price and we are expecting a consolidation sometime soon.
We don’t see enough demand on order books to keep prices going up, which suggests the 12% surge in the last week is giving away to an accumulation/distribution phase. To remain bullish, BTC needs to hold on to $47,000.
Retail vs whales — a tale of two investors
Using metrics based on long/short ratios, we can tease out the differences between what retail investors are doing, versus whales.
Using the chart below, we can see multiple green vertical lines, where whales are taking profits and looking for short positions. Retail investors, however, are taking longer positions and are creating a top that needs another round of accumulation to break into the next price phase.
Where is the liquidity?
The current liquidity pools are concentrating below $47,000, around the $46,500 level. On the other side, we can see new shorts opening, with a liquidation point above the current pivot high.
Over the next few days, we’ll be watching to see if there’s a liquidity grab that can help recapture the $47,000, which could be a healthy sign for a continuation in price appreciation.
Coin of the week
It’s Bitcoin’s turn to shine again this week. The asset beat out all others in the top 20 when it comes to gains, adding 11% over seven days. Open Interest has also started to tick up in the coin, as investors eye up the potential of the halving due in April.
Solana meanwhile, our star two weeks ago, spent some time consolidating after its last breakout, but also has seen double-digit gains in the last seven days. It’s pulled back below the $107 line which we established in our last analysis, but the coin is behaving as we predicted.
Looking Ahead
In the US, January’s Consumer Price Index report is due out this week. This serves as an indicator of how effective the Fed’s hike in interest rates has been in curbing inflation — and therefore borrowing rates. When the CPI moves, there is typically an impact on crypto prices.
While markets have accepted that a rate cut is unlikely this week, concerns that inflation is stalling around 3% could cause jitters. Over in Asia, Chinese New Year is typically an auspicious time for crypto. The event typically causes a bump in prices, with some predicting more gains this week.
Xīnnián hǎo!
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That’s all for now. Stay tuned for more exciting updates, and we’ll catch you in the next one!
