ID Theory Insights
23rd 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 Weekly SMAs and MACD
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.
BTC spent most of last week and, crucially, finished above the 200w MA - historically an area of key long-term support. The MACD continues to drop further from the signal line signifying continued bearish momentum.
Bitcoin Price Action
2020 is now currently the fourth worst performing year since 2013.
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 increased their long positions and reduced their short positions. Institutions continue to take a predominantly short stance.
Open interest shows the USD value of open contracts offered by various platforms.
Open interest is returning to the futures and options market after a complete unwind during the previous fortnight.
Fundamentals
Google Trends - ‘Bitcoin’
Past 3 months - Worldwide
Searches for ‘Bitcoin’ have reduced from the peak seen in the middle of March.
Google Trends - ‘Bitcoin halving’
Past 3 months - Worldwide
Searches for ‘Bitcoin halving’ continues to show an overall upwards trend over the last 90 days as we approach the halving in May.
WeChat Index - ‘Bitcoin’
There have been 510k searches for ‘Bitcoin’ on WeChat - a 58% drop from the local high on the 13th March.
Localbitcoins and Paxful Volume - Global
USD volume on Localbitcoins is down 24% from the previous week.
USD volume on Paxful is down 35% 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 17% since last week and down 13% YTD.
Mean Transaction Value
The mean transaction value has increased 21% for the week and is up 68% YTD.
Bitcoin Economic Throughput
Current economic throughput is down 31% since last week hovering around $1.91Bn USD but is up 31% YTD on the 7d MA (moving average).
Hashrate
Bitcoin hashrate (7 day moving average) is down 16% for the week. Hashrate is down 3% YTD. It is currently at 94m TH/s on the 7 day moving average.
Daily Active Addresses
The daily active addresses count for Bitcoin is down 8% from the last week. Active address count is still up 11% 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 ~$101.4 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 ~1.05
Lightning Nodes
The number of unique lightning nodes on the Bitcoin network is up 2% for the week. The number of nodes is up 8% YTD.
Lightning Channels
The number of unique channels on the lightning network is flat for the week. The BTC capacity on the Lightning Network is up 2% for the week (total capacity is ~912. BTC).
Wrapped BTC
The total value of Wrapped BTC is up 7% in the past week. There are now 949 WBTC, which represents an increased interest in using BTC within the Ethereum ecosystem (and by extension DeFi).
BTC Days Since All Time High
Spotlight
This week’s spotlight focusses on miner activity using Bytetree’s Miner Rolling Inventory (MRI). MRI measures the changing bitcoin inventory levels held by the miners. An MRI above 100% means miners are selling more than they mine and running down inventory. Conversely, an MRI below 100% means the miners are hoarding bitcoins. As BTC price dropped significantly on the 12th March, the MRI started climbing above 100 signifying that miners, on average, were having to spend more inventory BTC than they were generating.
Tweet of the Week
Our ‘tweet of the week’ comes from the CoinMetrics team who highlight that the next difficulty adjustment is expected to drop 13% based on the hash rate levels seen on the network.
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.