May 13, 2024
What is Quantor?
Quantor is an LLM that gives us an overview of what is happening in the crypto markets.
How does it work?
We have built multiple models to measure the state of the market for BTC, ETH, and an
Altcoin Index. For each model, we get a score and our system gives us an insight based on a decision tree system.
Then, we feed our Quantor LLM with the current and past data and the current and past insights.
Each week Quantor produces a report, and each week we will be sharing that with you.
Below you’ll find this week’s summary.
The Week’s Crypto Ecosystem Highlights
Dear Aqtivators,
In this edition of our newsletter, covering the period from May 6 to May 13, 2024, we dive once more into the cryptocurrency markets. Here are the top highlights from the crypto space this week:
- ETH ETF approval discussion intensifies — Companies have been submitting their S-1 forms with the SEC, allowing them to launch their own ETH ETFs in the US. The likes of BlackRock, Grayscale, and Ark Invest/21 Shares are front runners for applications.
- Bitcoin explores stablecoins — Lightning Labs, the developer behind Bitcoin’s Lightning Network, has tested a protocol that allows stablecoins to be issued on the Bitcoin blockchain.
- FTX Creditors look like they’ll get all their money back — The FTX bankruptcy estate has proposed a reorganization plan that would pay out billions more than needed to cover creditor claims. The plan states that 98% of creditors would receive at least 118% of their claims in cash, while the remaining creditors would receive 100% of their claims plus compensation for the time value of their investments.
Chart of the Week
Bitcoin’s 1-year realized volatility has fallen to 44.88%. When compared to tech stocks collectively called the “magnificent seven” Apple, Microsoft, Google, Amazon, Meta, NVIDIA and Tesla) Bitcoin was now considered less volatile than three of the seven.
This signals BTC’s growth toward becoming a more mature and stable asset class.
Market Overview
The Fear and Greed Index
The Fear and Greed Index has been fluctuating around the neutral zone, indicating a relatively balanced sentiment in the market.
High Time Frame (HTF) Analysis
The higher timeframe (HTF) market state suggests an altcoin bottoming phase.
Low Time Frame (LTF) Analysis
The lower timeframe (LTF) market state also indicates an ETH bottoming phase. The below chart shows us how strong is the trend signal for BTC, ETH, and the Altcoin index.
In this case, we can see that the ETH signal is in a totally over-sold state, reaching the 0 value, which usually marks the bottom of the downtrend phase.
Market Momentum
The momentum for Bitcoin (BTC) has shifted to a neutral phase, while Ethereum (ETH) and Altcoins are displaying bearish momentum. However, the momentum strength is not over-extended, suggesting there’s more room for growth.
Whale vs. Retail Insights
For BTC, whale investors are decreasing their exposure compared to retail investors. However, for ETH and Altcoins, large investors continue to hold higher exposure rates than retail investors, indicating potential smart money interest in these assets.
Funding Rate Insights
The extreme positive funding rate percentage for coins is normal, and the extreme negative funding rate percentage for coins has slightly increased, hinting at a potential market bottom for some assets and a possible short squeeze in different assets.
Overall, the data suggests a potential bottoming phase for altcoins and Ethereum.
The smart money positioning favors ETH and Altcoins over BTC, with large investors being more exposed than retail investors in these assets.
Funding rates have normalized, indicating a reduced risk of extreme market conditions. While momentum remains bearish for ETH and Altcoins, the lack of over-extended momentum suggests the potential for new emerging trends.
BTC Analysis
Bitcoin had mixed fortunes this week. While there weren’t the same steep losses seen in previous weeks, BTC was rejected at $64,300 and continues to sit below the SMA 50 daily.
The world’s largest crypto asset held well against the $60,000 line of support, and the market structure saw higher lows, creating an inverse head and shoulders trading figure. We’re looking for a higher high to see a change in the market structure and bet in a new trend continuation. A higher-high above 67k would confirm it.
As for resistance, the key levels remain the same:
Resistance:
- $64,300 (immediate hurdle)
- $65,700 (50-day SMA)
- $68,600
- $71,200
Support:
- $61,000
- $60,000 (must hold)
Looking at the order books, traders on OKX are playing games. In the last week, we saw a big sell wall form between $64,500 to $65,000. Those same players then filled their bags at $60,000.
Right now, we’re seeing sell pressure from the Binance spot traders at $63,000 and $62,800, while the immediate demand is at $60,000.
In case of a bigger drawdown, OKX has a big wall of demand at $58,500.
Optimized Portfolio Allocation
Based on the latest data and the market status of “Bearish momentum, not extreme, and downward trend”, we have adjusted our portfolio allocation accordingly:
- Momentum: 35% Allocation
- Breakout: 25% Allocation
- Trend Following: 30% Allocation
- Mean Reversion: 10% Allocation
This allocation strategy aims to navigate the current market conditions effectively. With a higher allocation to momentum strategies (35%), we position ourselves to capture potential upside opportunities should the bearish momentum subside.
The 25% allocation to breakout strategies allows us to capitalize on any potential trend reversals or breakouts.
Additionally, the 30% allocation to trend-following strategies acknowledges the prevailing downward trend, enabling us to manage risk and potentially benefit from the continuation of the bearish market.
Finally, the 10% allocation to mean reversion strategies provides a hedge against potential market corrections or reversals to the mean.
This balanced approach ensures that our portfolio remains adaptable and resilient, poised to weather market fluctuations while capitalizing on emerging opportunities across various market phases.
Stay tuned for our future newsletters, where we will continue to provide you with the latest market insights and strategic portfolio allocations.
Trade safe,
The Quantor
AQTIS Investment Management
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That’s all for now. Stay tuned for more exciting updates, and we’ll catch you in the next one!
