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The Good 

While many traders view BTC as fickle and generally in a rut, on-chain analysts were singing a more positive tune. 

A number of metrics continue to suggest that the largest crypto remains oversold at near-historic levels. Willy Woo’s popular NVT Signal (NVTS) continues to flash bullishly, having declined roughly 12% from year-to-date lows over the past week. The same goes for PlanB’s stock-to-flow model which reached an all-time low of 29.9 amidst Friday’s downward price pressure.

“Strong hands” (long-term holders, also called “Hodlers”) have continued to snap up undervalued BTC over the past week adding a net 120,739 to their positions, leading many, including The Pomp Letter’s Will Clemete, to suggest that Bitcoin is in a period of heavy reaccumulation. BTC’s on-chain supply metrics are seemingly in support of the analyst’s assertion, with a record 95,800 BTC having left the asset’s liquid, ready-to-be-sold supply over the past month. 

The ever-bullish Stablecoin Supply Ratio continues to indicate impending upside momentum. SSR’s well-tracked oscillator has risen over 25% since the 1st of June, suggesting some of that “dry powder” is making its way back into the markets.  

The Bad 

BTC dipped below $30,000 Tuesday morning, retracing all 2021 gains and sparking fear of the next “crypto winter.” Institutional interest remains slow per data from Glassnode, with Canada’s QBTC ETF having experienced a net outflow of nearly 10,500 BTC over the past month. Demand for Grayscale’s popular Bitcoin Trust is also waning. The fund’s assets decreased nearly 50% from April’s all-time high of $41.4 billion and currently sit at about $21 billion. 

Transaction volume on the BTC network continues to hang around levels uncharted since the Fall of 2018, signaling dwindling on-chain demand. This decline in demand, coupled with BTC’s free-falling hash rate has seen block production time increase to 23 min, its highest level in 11 years. 

The Ugly

Adjusted Spent Output Ratio (aSOPR) hovered close to dangerous territory this week having reached a year-to-date low of 0.87 as of Friday afternoon (6/25). The metric serves as a key proxy for market profitability. It averaged 0.96 for the week ending 6/27, suggesting that those who sold during the downturn did so at an extreme loss – $3.4 billion in the aggregate. However, aSOPR is not all doom and gloom: analyst Clemente noted a “bullish divergence” forming amidst recent downside volatility. 

Selected indicators as of 7:00 p.m. (EST) Sunday, June 27th.

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 5.86 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, levels such as these point out that in the event of a major positive news event, plenty of buyers will be able to propel upward momentum. Across the financial market spectrum, excess liquidity is sloshing around in just about every major corner; as of now, BTC is no exception to this larger scale trend. 

>>Adjusted Spent Output Price Ratio, 7-day SMA (aSOPR): examines levels of profitability/loss experienced by coins moved on-chain over a given time interval. Ignores UTXOs with a lifespan of less than 1 hr. A ratio above 1 means that coins (on aggregate) are being sold for profit, vice versa for ratios below 1. aSOPR once again faced downward pressure for much of the past week, culminating in the metric’s single day average hitting a YTD low of 0.87 on 6/25. aSOPR averaged 0.96 for the week ending 6/27, down -3% WoW, a bearish case suggesting those who sold amid recent price volatility did so 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 largely spent the week in a downtrend and settled around 0.3 by Sunday. Looking back, S2FD hit an all-time low this past Friday. In general, this downward momentum has primarily been influenced by BTC’s negative price reversal. In the coming months, it will be interesting to see whether fears surrounding reduced mining capacity will prove true, likely translating into a higher deflection ratio–all else equal. 

>> 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 198,330 transactions per day on average for the week ending 6/27, a bearish reading considering the metric is still approaching levels unseen since the spring of 2018. Year-to-date, transaction volume has steadily moved downward, hinting that regulatory headwinds, mining disruptions, and emerging competitors in the Defi space are starting to inflict wounds on BTC’s blockchain processing activity.

Technicals

>200 Day Simple Moving Average: Equally weighted average of daily pricing data from last 200 trading days. Often serves as a key area of support/resistance and a good assessment of underlying momentum. The current level of $43, 572 continues to reflect poor prospects, as the gap between the 200-day SMA and the price of BTC continued to grow from last week. Looking back historically, 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 of going away. 

>>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. This week’s MACD reading is demonstrative of recent downside momentum, with the metric having crossed below its signal line for the first time in nearly a month amidst Monday’s price volatility. MACD measured in at -1565.47 as of Sunday night, down 24.7% WoW, a bearish case.  

>>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 46.56 as of 6/27, up 12% WoW.        

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 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 $11.12 B, down about 12.6% compared to the week before. Considering that the past 7 days saw relatively muted levels of futures inflows coinciding with a negligible fall in BTC’s price, futures positions reflected a largely neutral outlook. 

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 , daily average net flows came in at -1270 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. In fact, the standard deviation of net flows for the month of May was around 10,208 BTC, just over twice the variability of exchange net flows seen so far this 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 continues to present an extremely bullish case having declined roughly 12% from last week’s YTD lows. The metric is currently sitting at 18.27 as of 6/27, suggesting an already oversold market is continuing to dish out deals.