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MARKET UPDATE

  • Positive week ends with brutal price drop
  • Bullish signal: Fundamental volume change in 2020
  • Record number of bitcoin ATMS – surpassing 7,000 worldwide
  • “Risk off” from institutional investors or liquidity squeeze?
  • XRP consistently dominates Bitcoin Cash in terms of market cap

VALUATION

  • Bitcoin price crashes down – Is the local bottom in?
  • Premium rates in opposite directions
  • CME premiums once again ahead of retail platforms

BLOCKCHAIN ACTIVITY

  • Investor confidence suggests attractive risk/reward ratio
  • On-chain activity for bitcoin increases: Active addresses and transaction count is up by 5-7%.

 

POSITIVE WEEK ENDS WITH BRUTAL WEEKEND DUMP

 

ALL GAINS WIPED OUT DURING THE WEEKEND

February ended relatively flat in terms of price gains. With March kicking off, the Small Caps Index gained momentum. However, a brutal price dump during the weekend wiped out all gains for February.

  • Small Caps is still performing best and is “only” down 0.5% so far in February.
  • Large Caps, Mid Caps and bitcoin also started the month green. With the price action over the last couple of days, all indexes are now in the red.
  • The market cap changes are a bit mixed this week, with bitcoin decreasing marginally.

 

EXTREME FEAR IN THE CRYPTO MARKET

The Fear & Greed Index crashed down with the price, and is now down to 17 – Extreme Fear. We haven’t seen these levels since mid December last year.

 

BULLISH SIGNAL: FUNDAMENTAL VOLUME CHANGE IN 2020

The 7-day average real trading volume* looks fundamentally different this year. After pushing upwards at the beginning of January, the volume has not dipped down to the lows from 2019 again. Even with the “bearish” price action over the last weeks, the volume holds an average level far above the lows seen in the end of 2019. As seen below, the average volume in 2020 is outperforming most months in 2019, except for the summer months.

 

BITCOIN VOLATILITY SPIKES WITH THE PRICE DROP

The 30-day volatility moved sideways last week, but spiked with the drop in the bitcoin price this weekend. Bitcoin was “stuck” in the upper $8,000 area since the price drop below $9,000 two weeks ago. That tight trading range resulted in a large move this weekend, with bitcoin dropping over 10%.

 

NUMBER OF BITCOIN ATMS SURPASS 7,000: A 60% GROWTH IN A YEAR
ON ROUTE TO 30,000 ATMS IN 2023

  • The number of bitcoin ATMs in the world just surpassed 7,000, across 75 countries.
  • This is a yearly growth of approx. 60%, as the number was around 4,300 in March 2019.
  • If this ATM growth continues, we will have almost 30,000 bitcoin ATMs installed worldwide by 2023.
  • These machines let you trade bitcoin for cash, and vice versa.
  • The first bitcoin ATM was installed in 2013 at a Vancouver coffee shop, seeing $10,000 in BTC transacted on its launch day.
  • Today, Genesis Coin is the largest manufacturer. Accounting for over 2,300 of the ATMs – or 33.5%.
  • The growth over the last couple of years show that the public demand for bitcoin availability is growing and that the global presence is increasing steadily.

 

“RISK OFF” OR LIQUIDITY SQUEEZE FROM INSTITUTIONAL TRADERS?
TRADING VOLUME DRIES UP

  • Last week, we reported on the lowest CME bitcoin volume in 2020, that recovered sharply.
  • However, the daily volume continued to trend downwards again this past week. On Wednesday and Friday, less than $90 million got traded. The lowest daily volume in three months.
  • The open interest has also been decreasing and is now down to levels around $200 million. Just two weeks ago, the open interest was almost at £350 million.
  • It looks like institutional traders are taking a break from bitcoin, in this unstable period with growing fear related to the coronavirus.
  • While de-risking is a potential motivation, it’s likely that the sudden drop in the stock market had an effect through margin calls leading to a short-term liquidity squeeze.
  • This is consistent with the initial co-movement of stocks and BTC, and the successive disconnection; with stocks continuing down while BTC turned up.

 

XRP CONSISTENTLY DOMINATES BITCOIN CASH IN TERMS OF MARKET CAP

  • At the day of the Bitcoin/Bitcoin Cash fork in 2017, both XRP and BCH had a market cap of $6 billion.
  • The first months after the fork, Bitcoin Cash got a lot attention, and its market cap dominated the market cap of XRP.
  • However, since the boom of early 2018, XRP has consistently been valued higher than BCH and held a firm grip of its position as the third largest crypto currency.

 

THE TRUE COST OF A PRESIDENTIAL CAMPAIGN

  • Michael Bloomberg recently pulled out of the presidential election, after having spent more than $500 million on the primary rounds.
  • This is almost as much as Donald Trump spent during the entire election campaign of 2016. Trump spent almost 617 million on his campaign to become president in the United States.
  • If Trump spent his money of the presidential election in 2016 on Bitcoin, he would’ve turned the 616.5 million dollars spent on the election to $21.8 billion today (calculated from June 2015).
  • Such an investment would’ve secured Trump 2.5 million Bitcoins in 2015.
  • While this is an interesting thought experiment, it does not seem to be shared by Donald Trump himself. It turns out that Trump is not the greatest Bitcoin advocate out there, based on his tweet from July 2019.

 

BITCOIN PRICE CRASHES DOWN – IS THE BOTTOM IN?

  • While it looked like the bitcoin price was going to recover nicely last week, the weekend changes this.
  • A brutal drop from the lower $9,000 area to the upper $7,000 changed the sentiment drastically.
  • Breaking down below both the 200DMA and the 100DMA, the bitcoin price is now trading around $8,000 – a level which has seen a lot of trading activity historically.
  • This could act as a strong support level, and a local bottom for the bitcoin price.
  • However, a continuation to the downside is still possible, where the levels around $7,200 look like a possible support level.

 

PREMIUM RATES IN OPPOSITE DIRECTIONS

  • After a period with decreasing premiums and a bearish sentiment among futures traders, things turned for some platforms last week.
  • The premiums of the March contracts fell drastically during the weekend, but the June contracts are looking better.
  • CME is back in front of the retail platforms, with a premium of 3.45% for June BTC contracts.

 

 

CME’S BITCOIN FUTURES ARE AHEAD OF RETAIL AGAIN

  • The BTC futures premium rates for March have seen a major pullback over the last couple of days.
  • The annualized premium rates for March is now down to around 4% on most platforms.
  • The recent price drop has really hit the premium rates, but the premium rate for CME’s bitcoin futures are once again higher than other platforms.

 

INVESTOR CONFIDENCE SUGGESTS ATTRACTIVE RISK/REWARD RATIO

  • Data show that the current price level of bitcoin could offer an attractive risk/reward ratio for investors.
  • The Reserve Risk metric indicates how confident long-term holders of bitcoin are relatively to the current price, defined as BTC price divided by ‘HODL Bank’. This metric considers how long investors have been holding bitcoin.
  • The Reserve Risk is currently at low levels, which historically has indicated an attractive risk/reward ratio for investing in bitcoin.
  • When confidence is high and price is low, there is an attractive risk/reward to invest (green zone).
  • When confidence is low and price is high then risk/reward is unattractive at that time (Reserve Risk is high, red zone)
  • As always with these on-chain metrics, we must take into consideration that they loose out on a lot of activity, i.e. from exchanges and other off-chain activity

 

 

 

 

 

 

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