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The Good

This week saw a relatively new and noteworthy proclamation spread throughout the twitter-sphere, Bitcoin is currently oversold at near-historic levels. Based on analysis by well-known analyst Willy Woo’s popular NVT Signal (NVTS) is flashing bullish, currently hovering around levels unseen since the crash (and subsequent recovery) of March 2020. 

According to Woo, Long-Term Hodlr’s have largely played the role of the bargain-hunter over the past week, adding a net 127,423 BTC to their positions.  

Stablecoin Supply Ratio continues to present a strong bullish case, having consolidated over the past week. SSR is currently sitting at 6.86, only 40 basis points off historic lows achieved earlier this month. A counterintuitive metric, SSR measures BTC’s market cap relative to that of its fiat tracking counterparts, often serving as a proxy for capital rotations into/out of BTC. Low ratios are taken as a bullish sign, suggesting large numbers of liquid, on-chain funds are waiting on the sidelines ready to be deployed into the market. 

The Bad 

A slight week-over-week increase in open futures interest coincided with a drop in Bitcoin’s price, presenting a bearish outlook. Despite its WoW increase, futures interest is still down 50%+ from April 2021 highs, suggesting dwindling enthusiasm amongst institutional players, a sentiment echoed by Will Clemente in the latest rendition of his weekly newsletter. 

Adjusted Spent Output Ratio’s (aSOPR) 7 day SMA crossed below its key threshold of 1.0 late on 6/20. The metric is currently holding tight at 0.999, suggesting those who sold their BTC this week did so (on average) in the red. 

Bitcoin’s average daily transaction volume consolidated this week and is currently sitting at levels unseen since the fall of 2018. The network experienced an average of 221,613 transactions/day for the week ending 6/20, down 1.3% WoW, and nearly -40% from highs reached in January 2021. 

The Ugly 

June 19th marked exactly one month since BTC has traded above its 200-day SMA. If BTC is to pass through its 200-day SMA (currently standing at $43,092) it will need a 31% move to the upside in order to do so.

On Chain 

>Stable Coin Supply Ratio, 7-day SMA (SSR): Measures the value of BTC’s market cap relative to the market cap of all stablecoins. Low ratio suggests a lot of “dry powder” waiting on the sidelines ready to spur a rally, vice versa for high ratio. The ratio’s 7 day SMA was largely unchanged from a week before, settling at 6.86 by the end of the week. The metric continues to hang around 12-month lows, suggesting that volatile swings in BTC have been pushing traders towards stablecoins during the past few months. Nonetheless, these levels point to a noticeable swell of liquidity currently sitting on the outskirts that when fully deployed could serve as rocket fuel for the bulls.

>>Adjusted Spent Output Price Ratio, 7-day SMA (aSOPR): Offers insights on profitability/losses experienced by coins moved on-chain over a given time interval. Ignores UTXOs with a lifespan less than 1 hr. Ratio above 1 means that coins (on aggregate) are being sold for profit, vice versa for ratio below 1. aSOPR faced downward pressure for much of the past week, culminating in the metric’s 7 day SMA crossing below 1 on 6/20. Current level of 0.999 indicates that throughout the past 7 days, HODLers were selling at a loss. 

>>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 (stock) in relation to the amount of BTC mined annually (flow) to project a price for the asset. The deflection ratio simply compares the current market price of BTC in relation to 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. The deflection measure ended the week at 0.34, reaching a low point not seen since the summer of 2017. 

>> Number of Transactions, 7-day SMA: Weekly moving average for the daily number of transactions on the Bitcoin network. Decrease in transaction volume often coincides with bearish momentum, while increasing transaction volume generally reads bullish. BTC’s ledger verified 221,613 transactions per day on average for the week ending 6/20, a bearish reading considering the metric is still approaching levels unseen since September of 2018. Year-to-date, transaction volume has steadily moved downward, hinting that regulatory crackdowns and emerging competitors in the Defi space are starting to take a toll on blockchain processing activity.

Technicals

>200 Day Simple Moving Average: Equally weighted average of daily pricing data from last 200 trading periods. Often serves a key area of support/resistance. The current level of $43, 092 is increasingly bearish, as the gap between the 200-day SMA and the price of BTC continued to grow from last week. Although in absolute terms the gap may look foreboding, it’s still not nearly as bad in relative terms when comparing it to the divergence witnessed during the coronavirus-induced market uproar in March 2020.

>>Moving Average Convergence Divergence (MACD): 12-day EMA minus 26-day EMA. Paired with a trend line, representing 9-day EMA of MACD; cross above signal line taken as bullish, cross below taken as bearish; -1255.17 is seen as bullish, with MACD having experienced positive momentum in the past week up 24%.   

>>Relative Strength Index (RSI): Momentum indicator measuring both the speed and rate of change of recent price movements. Helpful in determining overbought/oversold conditions in the price of BTC. Values above 70 indicate overbought market conditions and bearish momentum, while values below 30 signal an oversold environment with bullish momentum to the upside. Reading of 41.81 taken as neutral, but fast approaching oversold territory, down 17% WoW.    

Fundamental 

Open Futures Interest, 7-day SMA (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 gauging the general level of strength/weakness that underlies the price movement of BTC. For the past week, the daily average open interest in futures contracts was $12.76 billion, up about 7.5% compared to the week before. Considering that the past 7 days saw relatively strong levels of futures inflows coinciding with a fall in the price of BTC, futures positions reflected slightly bearish sentiment.

Exchange Net Flows, 7-Day SMA: Weekly moving average tracking the difference between # of BTC flowing into exchanges vs out of exchanges. Counterintuitive measure, Net inflows (positive value) normally taken as bearish sentiment, vice versa for outflows. For the week (6/14 – 6/20), daily average net flows came in at -268.44 BTC, presenting a slightly positive outlook. It should also be noted that net flows have been noticeably less volatile in recent weeks compared to levels seen last month.

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 has rebounded slightly from historic lows, currently sitting at 20.68, a strong bullish sign indicating the market is highly oversold.