This week the sentiment towards the cryptocurrency markets has slightly improved
but it is still grim. There is fear and blood in the markets. The fear and greed index has
moved up from “9” to “13”.
May ‘21 to Aug ’21 was also a time of extreme fear and BTC was bought off exchanges
(Chart mentioned below). And by the start of September, the prices eventually reacted
to the accumulation.
One can say that we are going through the same phase of extreme fear and
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.
SOPR value had broken below 1 last week and it has been plummeting. This indicates
that Bitcoins are being sold at a loss. This is a classic panic seller behavior and it is
being quietly sold to the accumulators. Eventually, the panic sellers will run out of BTC
to sell or will calm down.
Demand for Cryptocurrency
As mentioned in the prior report, we had assumed that the balance on exchanges had
increased because of the Luna crisis and we were proved right when LUNA came out
and announced the same. As the dust has cleared the decline in balance on
exchanges has begun and it is likely that we continue this pattern of buying.
The overall buying behavior also seems to be strong, as the number of addresses with
at least 1 BTC is still on the uptrend and has hit an all-time high record.
When it comes to new users coming into the crypto space, we will look into the google
trends. The interest is gauged based on the range of 1 to 100
Going by the above chart, it seems like we have a spike in interest in the
cryptocurrency space. This could be attributed to the overall adoption within the
cryptocurrency space. In the prior runups, price was the factor that pulled in new
investors but this time it could be the rise of adoption that would bring in new people.
Is the Smart money buying?
We will consider wallet addresses with more than 1000 Bitcoin as institutional
investors who are closely monitoring the asset class.
We can connect the dots with the prior chart on Bitcoins leaving exchanges with the
above data point and can assume that the Luna’s BTC reserves are responsible for the
downtrend on this number. As the number of BTC addresses with at least 1 BTC has
been climbing higher and higher.
Overall Market Performance
Dow Jones Industrial Average dropped nearly 3% in the last week. The daily chart for
Dow Jones has broken below the descending channel pattern. The next support is
expected at 29,800.
Gold Futures gained marginally over the past week to edge above $1,800. The weekly
trend bounced off from the triangle pattern bottom. The next support for Gold
Futures is expected at $1,675.
Bitcoin continued to consolidate around the $30K levels. The weekly trend for BTC has
broken below the channel pattern. The next resistance for BTC is expected at $40,000
and an immediate support is expected at $24,000. The monthly RSI for Bitcoin is at
46.9, the lowest in over 2 years with a support at 43.
Ethereum against BTC fell by 2.1% over the week. The weekly trend for ETH against
BTC is moving within a channel pattern. The next resistance is expected at 0.077 and
next support is expected at 0.064
What could play out?
The MVRV ratio is equal to the market capital divided by realized capital of Bitcoin.
Realized capital unlike market capital does not use the current market price, but rather
uses the prices of each Bitcoin when they last moved.
So, for example, if the price of most of the Bitcoin when they last moved was $10,000
and the current price is $60,000. Then the MVRV ratio would stand at 6. This means
that the market is extremely heated and profit booking is likely. On the other hand, if
the of most of the Bitcoin when they last moved were near the market price, then the
CMP can be considered as the bottom.
The current MVRV ratio stands at 1.22 and is trending towards to the downside. We
are now too close to the April 2020 low which marked as a starting point to the 2020
Highlights of the week
South Korea calls Do Kwon to the National Embassy by
Yun Chang-Hyun, a representative from the ruling
party. He apparently expressed concerns about the
behavior of exchanges during the crash.
China is the 2nd largest Bitcoin hash rate provider even
though the Chinese govt had banned all crypto
operations in China in mid of 2021. Some of the miners
are still operational which means that the operations
have gone underground
The Schools and Bitcoin Project in Argentina seeks to
educate high school students on the importance of
Bitcoin starting with 4,000 students across 40 odd
Our Pick of the Week
We expect a gain of 10% from the Buy Price of 2.77 USDT and
outperform BTC in the coming week.