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The Good

Bitcoin has the blues, with the world’s largest crypto spending its 8th consecutive week aimlessly wandering. As of early Monday morning, BTC was hanging on for dear life, trading hands at around $30,860, down 8% over the past 7 days. A big move seems to be on the horizon, the direction of which remains to be seen. Dipping below $30,000 and then surging back seemed to send mixed signals to a market still gripped by fear, uncertainty, doubt.

Despite a rough end to the week on-chain, BTC’s supply shock seems to remain in play, at least according to a few well-tracked metrics. Bitcoin’s illiquid supply change has bullishly consolidated over the past month, hinting towards a strong state of accumulation. As of June 18th, roughly 120,000 more BTC were “locked-up” than a month prior indicating the vast majority HODLers simply aren’t in the business of selling. 

Likewise, the % of Bitcoin’s total supply held by long-term holders (LTHs) is quickly approaching 75%. If current maturation patterns persist, LTHs could hold upwards of 80% of BTC’s supply within the next two months. The last time LTHs controlled that much BTC (in percentage terms) was 2020; a bullish squeeze ensued.

Although single-day exchange flows reached a two-month high on Saturday 7/17, associated metrics continue to signal a period of accumulation. For the week ending July 18th, exchange wallets held (on average) -24,022 BTC less than a month prior, a bullish development considering May’s heavy inflows. Continued exchange outflows bode well for BTC’s long-term health, as they suggest coins are being HODLed rather than sold. 

In addition to Bitcoin’s brewing supply shock, a collection of key indicators would seem to suggest the world’s largest crypto remains oversold at near-historic levels. Willy Woo’s popular NVT signal has continued its bullish consolidation over that past week, clocking in at 20.19 as of 7/18, up 1.8%. The last time NVTS called this range home was in March 2020. In that case, BTC’s price rallied 50% over the next 3 months. Stock-to-Flow Deflection is hinting towards a deep value play as well have settled in at a 2 year low of 0.28 as of Sunday evening. However, the drastic divergence between BTC’s spot price and S2F has led many to question the model’s credibility, including its own founder PlanB who stated the next 6 months will “make or break” S2F as a predictive tool.       

The Bad

Saturday, July 17th marked a dreary day on chain with Coin Days Destroyed skyrocketing to a YTD-high of roughly 79 million coin days. The move was a concerning one given CDD has continually indicated a period of re-accumulation over the past month. However, it’s important to keep in mind single-day measures aren’t necessarily indicative of larger trends. Considering net realized profits hit a 2 month high of $1.4 B and the total number of exchange transfers remained relatively flat, it is likely that a small number of profitable entities sold on the 17th. Maybe they were weary of potential bullish momentum stemming from GBTC’s unlocking event which took place the following day.      

For much of the past month, BTC’s technical indicators have painted a dark picture that doesn’t seem to be lightening up anytime soon. Per Coinbase, a move back below $30K looks likely given a loss of upside momentum and strong resistance on the charts. If said sub-$30K breakdown ensues, BTC’s next area of support will occur somewhere around $27K, representing a 57% decrease in price from April’s ATH of nearly $65,000. 

Similarly, Bitcoin’s 8th consecutive week of range-bound trading has drawn comparisons to the summer/fall of 2018, a period of tight consolidation which preceded sustained downside momentum.    

In other developments, BTC’s position as an inflation hedge seems to be in jeopardy. While core CPI, a key inflation measure, has gradually risen to a 30 year high of 4.45%, BTC has spent the last 2 months in a sideways rut leading many to ask if BTC was a protectionary asset in the first place. Based on recent developments, those questions appear to have merit. 

Binance’s regulatory troubles could spell bad news for BTC. The world’s largest crypto exchange by volume has been outright banned in the UK and Singapore (among others) due to problems arising from the issuance of “stock tokens” tracking the likes of Tesla and Apple. A continued global crackdown would not bode well for the world’s largest crypto, which regularly experiences daily trading volumes of $2 billion on Binance alone.   

The Ugly

In the past week, the U.S. Securities and Exchange Commission announced that it would seek a public comment period related to Wisdom Tree’s recent Bitcoin ETF proposal i.e. they kicked the can further down the road; pushing back the timeline for the release of exchange-traded crypto products by a number of high profile asset managers. Given that the SEC can’t currently monitor crypto exchange activity to the same extent as the can equity markets, regulators seem convinced for now that ETFs tracking the crypto markets could spell trouble. In the eyes of SEC chairman Gary Gensler, crypto exchanges will have to yield to more stringent oversight before any ETFs could be launched on public exchanges. 

Another government-led regulatory effort in the crypto space looks to ratchet up this week as officials from the Fed, Treasury Department, the SEC, and the CFTC meet to discuss the merits and potential risks associated with stablecoins. Policymakers will look to develop regulatory standards focused on the management of stablecoin reserves. While the three largest stablecoin issuers – Binance, Circle Internet Financial, and Tether– remain optimistic about the meeting, the results of this scrutiny could generate headwinds for crypto markets going forward.

Selected indicators as of 7:00 p.m. (EST) Sunday, July 18th.

On Chain 

>Stable Coin Supply Ratio, 7-day SMA (SSR): Measures the supply of BTC relative to the supply of all stablecoins–denominated in BTC. In most cases, a ratio less than 10 suggests a lot of “dry powder” waiting on the sidelines ready to spur a rally. On the other hand, a measure greater than 20 usually points to a low supply of stablecoins able to accommodate additional BTC purchases; a condition that usually precipitates a decline for the latter. The ratio’s 7 days SMA moved slightly downwards from levels seen last week, coming in at 5.64. Sideways movement in the SSR has been the overarching theme over the past month, hinting that positioning in stablecoins has remained pretty steady as the uncertainty surrounding BTC’s outlook persists. Stablecoins as a group has been the recipient of major inflows throughout the year, so much so that regulators are beginning to hold high-level discussions on their merits and drawbacks. With crypto exchanges becoming more integral players in global capital markets, their needs with regard to liquidity and risk management may result in greater stablecoin positioning in the foreseeable future. In fact, the market value of the three largest stablecoins alone–USDC, USDT, and BUSD–has increased nearly ten-fold since last year.

>>Adjusted Spent Output Price Ratio, 7-day SMA (aSOPR): Examines levels of profitability/loss experienced by coins moved on-chain over a 24-hour interval. SOPR calculates an aggregate level of daily spent outputs: the price at which a coin is sold divided by its respective cost basis. The adjusted metric ignores UTXOs with a lifespan of less than 1 hr; as a result, it provides a better window into spending activity that actually results in economically significant profits/losses. A ratio above 1 indicates that coins–in the aggregate–are being sold for profit, vice versa for ratios below 1. The metric exhibited choppy movement for much of the past week, averaging 1.01 for the week ending 7/18. Despite spending most of the week in negative territory, the metric experienced relatively parabolic movement over the weekend; as evidence, aSOPR rose as high as 1.19 on Saturday before quickly falling back down to 0.98 the following day. This situation hints that a few large entities saw this weekend as an opportune time to capture profits on their long-term holdings.

>>Stock to Flow Deflection Ratio (S2FD): Bitcoin’s status as a relatively scarce commodity enables the Stock to Flow (S2F) model to gauge the current amount of BTC available–the stock–in relation to the amount of BTC mined annually–the flow–to project an appropriate price for the asset. The deflection ratio simply divides the current spot price of BTC by the projected price calculated by the S2F. Any reading above 1 suggests BTC is overvalued according to the model; anything less is regarded as a signal that BTC is undervalued. For the week, movement was largely toward the downside, with the metric settling around 0.287 by Sunday. According to proponents of scarcity-derived value theory, the model continues to show a deep value play. However, it’s undeniable that the present divergence between the spot price and the S2F’s projected price–one that has persisted since mid-March of this year–has put a slight dent in the model’s credibility. In the eyes of its creator–an independent analyst known as Plan B–the next six months will “make or break” the S2F as a tool for predictive analysis. Overall, the question of whether the S2F model projects actionable insights remains hotly contested among market participants.

>> Number of Transactions, 7-day SMA: Weekly moving average for the daily number of transactions on the Bitcoin ledger. On-chain transaction volume is a helpful proxy for gauging underlying network effects and mainstream adoption. As P2P exchanges grow, the thesis behind BTC’s use case is buttressed, thereby reinforcing bullish market cycles. BTC’s ledger verified 211,182 transactions per day on average for the week ending 7/18, down nearly 40% from yearly highs seen back in January. As expected, the 1st crypto’s mean transaction volume has failed to take off despite four consecutive mining difficulty downgrades, the latest coming this past Sunday. Transaction activity could see a spurt upwards in the coming weeks as payment fees have dropped by around 90% in the wake of the mining adjustment seen in late June; in fact, the median fee imposed on P2P transactions fell from a monthly high of $5.28 seen on July 2nd to about $0.32 as of July 18th.

>>Coin Days Destroyed (CDD): CDD is used to gauge extended market cycles by placing heavier weighting on the trading actions of investors that hold BTC for the long term. For each day that one BTC remains unspent, its UTXO address accumulates a coin day: the balance of BTC within the address multiplied by the number of days dormant. When that idle coin is eventually spent, the accumulated level of coin days on the UTXO is recorded by the CDD measurement; this process then proceeds to automatically destroy the accumulated coin days within the UTXO by resetting its coin days level to zero. To measure the aggregate level of days destroyed, CDD takes the respective lifespan of each UTXO spent on the date in question, multiplies it by the volume of coins spent on each respective UTXO on the same date, and then sums all the individual products together. Historically, CDD values less than 5 million days signal an approaching lower bound floor for the price of BTC; conversely, values greater than 20 million days indicate an approaching ceiling as long-term investors start to take profits on their existing holdings. During the past week, CDD experienced quite the whirlwind, spiking as high as 79 million coin days on 7/17–a level not seen in almost 2 years. The speed and magnitude of this upward shock in the CDD is simply something we have not seen during this year, as the metric’s 7-day moving average ended the week at 15.9 million. Corroborated by the upward surge in aSOPR and exchange inflow volume, CDD seems to suggest that a temporary window of profit-taking during this past weekend resulted in a sizable amount of dormant coins being spent. 

Technicals

>200 Day Simple Moving Average: Equally weighted average tracking daily pricing data from the last 200 trading days. Often represents a key area of support/resistance and provides a solid assessment of underlying momentum by largely ignoring volatile day-to-day price swings. The current level of $44,621 continues to reflect poor prospects, as the divergence between the 200-day SMA and the price of BTC grew incrementally from last week. From a historical view, this same kind of rift between the spot price and a higher 200 day SMA also emerged in the spring 2018 crash. In that case, the gap ultimately took a little over a year to close. With this in mind, the divergence we’re seeing today may show little signs abating, especially with prevailing market sentiment fixated on an anticipated consolidation phase. 

>>Relative Strength Index (RSI): Momentum indicator measuring both the speed and rate of change of recent price movements. Helpful in determining overbought/oversold market conditions. Values above 70 indicate an overbought market and bearish momentum, while values below 30 signal an oversold environment with bullish momentum to the upside. Despite a number of on-chain metrics signaling bullish, oversold market conditions, RSI has continued to hold its neutral rating, settling in at 37.02 as of 7/11, down 18%. Per CoinDesk, RSI’s continued neutral rating gives power to the bears as HODLers await further (lower) levels of support. 

Fundamental 

>Open Futures Interest, 7-day average (All Exchanges): Calculates the total amount of funds ($USD) currently allocated towards BTC futures contracts (across all exchanges) that have neither been exercised nor expired. Provides insight into the actions of institutional traders, while also evaluating the general level of strength/weakness that underlies price fluctuations of BTC. For the past week, daily average open interest in futures contracts came in at $11.7 B, up marginally compared to levels seen during the prior week. With futures inflows having moderated during the past month, the current positioning projects a largely neutral outlook. At the moment, it’s hard to use this data to extract any kind of trend confirmation for BTC’s price, as open interest has remained locked within a pretty tight range ($11-12 B) since the start of July.

>Exchange Net Flows, 7-Day SMA: Weekly moving average tracking the difference between # of BTC flowing into exchanges vs out of exchanges. The numbers projected by the metric are quite counterintuitive; positive net inflows are normally taken as bearish signatures, and vice versa for outflows. For the week (7/11 – 7/18), daily net flows registered an average of 3306 BTC, a bearish reversal considering the metric’s recent consolidation. The downside move was largely inspired by Saturday’s on-chain madness which saw single-day exchange flows rise to their highest level in nearly 2 months. By pure net flow standards, Bitcoin’s brewing supply shock has taken a painful, but non-lethal, blow.   

>Network Value to Transactions Ratio Signal, 7-day SMA (NVTS): Slight variation of Willy Woo’s NVT ratio. Measures BTC’s market cap relative to the 90 day SMA of daily transaction volume on the Bitcoin network. Provides insight on overbought/oversold market conditions, serving as a leading indicator of market peaks/troughs. NVTS continues to present a bullish case as it hovers around levels not seen since last year’s coronavirus-induced market uproar. The metric is currently sitting at 20.19 as of 7/18 (up 1.8% WoW), suggesting an already oversold market continues to dish out deals. This trend will continue until serious positive price momentum can be sustained.   

>Market value/Realized value Ratio (MVRV): Takes the current market cap of BTC and divides it by the realized capitalization. The latter attempts to gauge the true economic weight locked up in BTC by multiplying the number of UTXO’s by the price at which the coins in those UTXO’s were last moved–not at the current market price. Since realized cap presents a cumulative cost basis for the market and removes the influence of dormant coins, it provides a noteworthy assessment of Bitcoin’s long-term fair valuation. Periods in which the ratio falls below 1 signal the possibility of an impending accumulation phase; in this case, such a reading can point to the formation of a newfound fair value threshold. On the other hand, historical evidence suggests that a ratio above 3.7 flashes overvalued conditions, showing that speculators are primarily dominating buying activity. The ratio ended the week at 1.64, hovering around a low point not seen since last October. Overall, MVRV currently suggests a somewhat balanced relationship between BTC’s current price and its fair value as implied by the realized capitalization. Mirroring the recent sideways movement in BTC’s spot price, realized price has flatlined around $19k since early June. 

Hash Rate (estimated), 7 -day SMA: Bitcoin’s decentralized nature incentivizes a global matrix of computer operators to verify network transactions through an ultra-fast competition of brute computational power, known as “mining”. Miners work to verify transactions by producing a series of unique 64-digit alphanumeric codes, collectively referred to as “hashes”. Hash rate is an estimation of the total numbers of hashes produced each second by miners on the Bitcoin network, serving as a key proxy of the total computational resources underpinning the world’s largest crypto. Bitcoin’s hash rate fell off a cliff in mid-June, declining more than 50% from May’s sustained peak; it’s yet to fully recover. The nose-dive can be almost entirely attributed to an intense Chinese mining crackdown which has effectively shuttered half of Bitcoin’s processing power. Miners are flocking out of China at record paces in an event deemed the “Great Migration” by many in the on-chain community. A quick hash rate recovery will signal bullish momentum, indicating miners (on aggregate) have successfully relocated (or liquidated) their operations. On the other hand, a slow and prolonged recovery will flash bearish, signaling displaced miners are having trouble finding a new home. Hash rate averaged 100 EH/s for the week ending 7/18, up roughly 3%. Although it’s still far below levels seen earlier this year, a positive outlook can be extracted from this metric when considering that it has started to rebound from the yearly lows seen during the end of June. Per Coinbase, there is mounting evidence that a number of mining operations have successfully relocated to the US and Kazakhstan, a move that will bode well for the health of the network. 

The Good

Bitcoin has the blues, with the world’s largest crypto spending its 8th consecutive week aimlessly wandering. As of early Monday morning, BTC was hanging on for dear life, trading hands at around $30,860, down 8% over the past 7 days. A big move seems to be on the horizon, the direction of which remains to be seen. Dipping below $30,000 and then surging back seemed to send mixed signals to a market still gripped by fear, uncertainty, doubt.

Despite a rough end to the week on-chain, BTC’s supply shock seems to remain in play, at least according to a few well-tracked metrics. Bitcoin’s illiquid supply change has bullishly consolidated over the past month, hinting towards a strong state of accumulation. As of June 18th, roughly 120,000 more BTC was “locked-up” than a month prior indicating the vast majority HODLers simply aren’t in the business of selling. 

Likewise, the % of Bitcoin’s total supply held by long-term holders (LTHs) is quickly approaching 75%. If current maturation patterns persist, LTHs could hold upwards of 80% of BTC’s supply within the next two months. The last time LTHs controlled that much BTC (in percentage terms) was 2020; a bullish squeeze ensued.

Although single-day exchange flows reached a two-month high on Saturday 7/17, associated metrics continue to signal a period of accumulation. For the week ending July 18th, exchange wallets held (on average) -24,022 BTC less than a month prior, a bullish development considering May’s heavy inflows. Continued exchange outflows bode well for BTC’s long-term health, as they suggest coins are being HODLed rather than sold. 

In addition to Bitcoin’s brewing supply shock, a collection of key indicators would seem to suggest the world’s largest crypto remains oversold at near-historic levels. Willy Woo’s popular NVT signal has continued its bullish consolidation over that past week, clocking in at 20.19 as of 7/18, up 1.8%. The last time NVTS called this range home was in March 2020. In that case, BTC’s price rallied 50% over the next 3 months. Stock-to-Flow Deflection is hinting towards a deep value play as well have settled in at a 2 year low of 0.28 as of Sunday evening. However, the drastic divergence between BTC’s spot price and S2F has led many to question the model’s credibility, including its own founder PlanB who stated the next 6 months will “make or break” S2F as a predictive tool.       

The Bad

Saturday, July 17th marked a dreary day on chain with Coin Days Destroyed skyrocketing to a YTD-high of roughly 79 million coin days. The move was a concerning one given CDD has continually indicated a period of re-accumulation over the past month. However, it’s important to keep in mind single-day measures aren’t necessarily indicative of larger trends. Considering net realized profits hit a 2 month high of $1.4 B and the total number of exchange transfers remained relatively flat, it is likely that a small number of profitable entities sold on the 17th. Maybe they were weary of potential bullish momentum stemming from GBTC’s unlocking event which took place the following day.      

For much of the past month, BTC’s technical indicators have painted a dark picture that doesn’t seem to be lightening up anytime soon. Per Coinbase, a move back below $30K looks likely given a loss of upside momentum and strong resistance on the charts. If said sub-$30K breakdown ensues, BTC’s next area of support will occur somewhere around $27K, representing a 57% decrease in price from April’s ATH of nearly $65,000. 

Similarly, Bitcoin’s 8th consecutive week of range-bound trading has drawn comparisons to the summer/fall of 2018, a period of tight consolidation which preceded sustained downside momentum.    

In other developments, BTC’s position as an inflation hedge seems to be in jeopardy. While core CPI, a key inflation measure, has gradually risen to a 30 year high of 4.45%, BTC has spent the last 2 months in a sideways rut leading many to ask if BTC was a protectionary asset in the first place. Based on recent developments, those questions appear to have merit. 

Binance’s regulatory troubles could spell bad news for BTC. The world’s largest crypto exchange by volume has been outright banned in the UK and Singapore (among others) due to problems arising from the issuance of “stock tokens” tracking the likes of Tesla and Apple. A continued global crackdown would not bode well for the world’s largest crypto, which regularly experiences daily trading volumes of $2 billion on Binance alone.   

The Ugly

In the past week, the U.S. Securities and Exchange Commission announced that it would seek a public comment period related to Wisdom Tree’s recent Bitcoin ETF proposal i.e. they kicked the can further down the road; pushing back the timeline for the release of exchange-traded crypto products by a number of high profile asset managers. Given that the SEC can’t currently monitor crypto exchange activity to the same extent as the can equity markets, regulators seem convinced for now that ETFs tracking the crypto markets could spell trouble. In the eyes of SEC chairman Gary Gensler, crypto exchanges will have to yield to more stringent oversight before any ETFs could be launched on public exchanges. 

Another government-led regulatory effort in the crypto space looks to ratchet up this week as officials from the Fed, Treasury Department, the SEC, and the CFTC meet to discuss the merits and potential risks associated with stablecoins. Policymakers will look to develop regulatory standards focused on the management of stablecoin reserves. While the three largest stablecoin issuers – Binance, Circle Internet Financial, and Tether– remain optimistic about the meeting, the results of this scrutiny could generate headwinds for crypto markets going forward.