What is the general sentiment for Crypto?
The sentiment towards the cryptocurrency market has moved to the extreme fear zone from fear zone. Compared to last week’s, the Fear & Greed Index has changed from “40” to “24”.
Another data to evaluate the sentiment of the general public would be to look at Spent Output Profit Ratio (SOPR). What is SOPR? In laymen terms, it indicates if people have sold at a profit or if they sold at a loss. An SOPR value above 1 indicates that profit booking dominated loss booking and below 1 indicates that loss booking dominated profit booking. A value of 1 indicates that the coins were sold at their purchase price. Adjusted SOPR filters out transactions that are younger than 1 hour, thus, clearing out noise from the metric.
aSOPR for this week has fallen sharply from 0.99 to 0.93. The metric is currently moving in the range as was seen in June. Generally, we see that the metric value of 1 acts as resistance during bear market. For strong confirmation of trend reversal the metric should stay and oscillate above 1.
Will The Market Fall More?
Whenever a coin is moved on-chain, unspent output or a UTXO is created which holds the volume of BTC. From the time UTXOs are created up until the time they are spent , UTXOs accumulate lifespan known as age. Spent Output Age Bands helps in analysing the lifespan accumulated by each of the spent outputs on any particular day.
From the graph, we see that more than 3,500 UTXOs with the lifespan of more than 10 years were spent on-chain. Since 2020 ,we have not seen more than 2,400 UTXOs with age more than 10 years being spent on-chain on any particular day. Thus, it is important to monitor the prices as this might lead to further volatility in prices.
Exchange reserve is one of the important metrics to determine the potential number of coins with a high probability of getting spent in the market.
Exchange reserve increases: Liquid supply increases, selling pressure increases
Exchange reserve decreases: Illiquid supply increases, selling pressure decreases
In the last one week, exchange reserve has dropped by 13%. This might be due to investors transferring their coins from exchange (FTX) to wallets.
Coin Days Destroyed (CDD) is calculated as the sum value of the number of days between created and spent multiplied by the UTxO amount.
When the metric value increases this indicates that long-term coins are moving in great amounts which might lead to huge volatility in prices or signal trend reveral. On the contrary, when the metric value decreases this indicates long-term holders are moving their coins in less amount.
The metric has increased by 10M in the last one week which indicates that the amount of coin age that is being spent in the system is significant and further increase in the metric might lead to more price volatility.
Puell Multiple captures the aggregate profitability of Bitcoin mining industry. It is calculated by dividing miner’s current income (USD) to the annual average income.
• Puell Multiple > 4: Profitability is high which increases miner’s incentive to sell
• Puell Multiple < 0.5: High income stress which can lead to capitulation
Currently, the metric stands at a value of 0.54. The important metric to observe in the present scenario is hash rate. If hash rate increases operational cost of miners also increases. Since, miners are already at high income stress , increase in operational cost will lead to sell off by miners and further drop in price.
Overall Market Performance
Dow Jones Industrial Average gained over 4% in the last week. The weekly trend for Dow Jones broke out of the megaphone down pattern. The next resistance is expected at 34,300 and next support is expected at 28,700 levels.
Gold Futures also jumped up by 5% during the past week. The weekly trend for Gold is made a breakout from the descending channel pattern. The next resistance is expected at $1,820
Bitcoin made a massive downward slide during the past week due to the ongoing FTX fiasco. The daily trend for BTC is broke below the triangle pattern. The next support for Bitcoin is expected at $14,700
Ethereum remained fairly neutral against Bitcoin, in the week gone by. The hourly trend for ETH-BTC has broken out of the triangle pattern. The next resistance is expected at 0.085 and next support is expected at 0.065.
Highlights of the week:
Crypto investment firm Digital Currency Group is giving an equity infusion of $140 million to Genesis Global Trading. This additional capital will bolster the position of Genesis Global trading as a global leader in crypto capital markets.
Giottus, an Indian cryptocurrency exchange among the top 10 in the country, announced it will provide customers with proof of reserves, which will boost their confidence of the customers.
Wealth funds are investing in crypto, and a large number of funds already reside in Dubai. Dubai’s Virtual Assets Regulatory Authority (VARA), a dedicated regulator for the industry, has assured local companies that a framework will come by the end of this year.
Our Pick of the week: