ID Theory Insights
16th March 2020
ID Theory is a London-based cryptoasset investment firm. Our weekly Insights report provides the latest key macro as well as on-chain data for Bitcoin. If you would like to receive insights directly to your inbox, you can subscribe here.
Correlations
Historically bitcoin has clearly demonstrated that it is uncorrelated to any other asset. However, given the adoption and evolving use cases of bitcoin, it can be useful to look at particular groups of assets for emerging correlation:
BTC and Gold
Gold has served as a safe haven asset for 1000’s of years.
BTC and Inverted US 2 Year Treasury Yield
In a risk-off environment Treasury yields drop (and hence inverted yields rise).
BTC and USD/CNY
Weakening CNY may lead to a greater demand for capital flight from China.
BTC and CHF/EUR
The Swiss Franc (CHF) is a safe haven currency.
BTC and VIX
Volatility (represented by the VIX) generally increases in times of economic uncertainty.
BTC and SMAs
Simple moving averages (SMA’s) smooth price histories by averaging daily prices over a given period of time. Crossing moving averages represent a shift in momentum.
Bitcoin closed narrowly below the 200 week moving average. An area of key long term support.
BTC and MACD
The MACD continues to drop further from the signal line signifying continued bearish momentum.
Bitcoin Price Action
Bitcoin’s price movement last week has meant it’s YTD has dipped below every year since 2013 apart from 2018.
Bitcoin Derivative Market
The Commitment of Traders (COT) is a weekly report issued by the CFTC enumerating the holdings of participants in the Futures market. Dealer/Intermediary represents the sell side, Asset Manager/Institutional represents the buy-side.
Dealer/intermediaries have reduced their short position while Asset Managers have increased their short positions.
Open interest shows the USD value of open contracts offered by various platforms.
Fundamentals
Google Trends - ‘Bitcoin’
Past 3 months - Worldwide
Google trends show that searches for ‘bitcoin’ have increased significantly in the last week in comparison to the last 3 months.
Google Trends - ‘Bitcoin halving’
Past 3 months - Worldwide
Searches for ‘bitcoin halving’ continues to show an upwards trend over the last 3 months with searches last week being the highest seen during the period.
WeChat Index - ‘Bitcoin’
Searches for ‘bitcoin’ on WeChat have spiked significantly last week with searches reaching 1.2m on 13th March which represented a 52% increase from the previous day.
Localbitcoins and Paxful Volume - Global
LocalBitcoins and Paxful are both platforms that facilitate over the counter and peer-2-peer trading for bitcoin from local currencies.
USD volume on localbitcoins is up 22% from the previous week.
USD volume on Paxful is down 7% from the previous week.
Localbitcoins has gained market share against Paxful as volume Localbitcoins now represents 60% of the combined USD volume.
Confirmed Transactions Per Day
Confirmed transactions are down 8% since last week and up 6% YTD.
Mean Transaction Value
The mean transaction value has decreased 5% for the week and is up 38% YTD.
Bitcoin Economic Throughput
Current economic throughput is up 23% since last week hovering around $2.76Bn USD but is up 89% YTD on the 7d MA (moving average).
Hashrate
Bitcoin hashrate (7 day moving average) is down 10% for the week. Hashrate is up 15% YTD. It is currently at 114m TH/s on the 7 day moving average.
Daily Active Addresses
The daily active addresses count for Bitcoin is down 4% from the last week. Active address count is still up 20% YTD.
Bitcoin Days Destroyed
During the last week there has not been any significant BDD activity observed.
Realised Cap
Realised Cap is currently standing at ~$102.1 Bn.
MVRV
Historically, two important thresholds can be observed - MVRV above 3.7 could signal potential overvaluation and MVRV below 1 could signal undervaluation. The ratio ratio is currently at ~0.96.
Lightning Nodes
The number of unique lightning nodes on the Bitcoin network is flat for the week. The number of nodes is up 6% YTD.
Lightning Channels
The number of unique channels on the lightning network is also flat for the week. The BTC capacity on the Lightning Network is up 1% for the week (total capacity is ~900. BTC).
Wrapped BTC
The total value of Wrapped BTC is up 1% in the past week. There are now 889 WBTC.
BTC Days Since All Time High
Spotlight
This week’s spotlight is on Bitcoin Hodler Net Change (Adamant Capital, 2018). This metric uses liveliness (Blumer, 2018) as its foundation which indicates how many meaningful transactions are occurring on the network, thus accounting for lost coins. When liveliness is used alongside the current circulating supply, we can determine the changes in long term holders every month. Interestingly, despite a sharp retrace in BTC price last week, there has only been a small net negative change so far in march signifying that long term holders are not selling their positions.
Tweet of the Week
Our ‘tweet of the week’ comes from crypto derivatives analytics firm Skew who highlight their key findings of how the derivative markets have behaved in the last week during the market sell-off.
About the Author
Lewis Harland is an analyst at ID Theory and is a full-time researcher of decentralised networks and cryptoassets.
ID Theory Ltd. is an Investment Advisor for cryptoasset investment fund, IDT Crypto Asset Fund Ltd.
Interested in partnering with ID Theory or building something special? Get in touch through our website or at info@idtheory.io.