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BTC and Gold
Gold has served as a safe haven asset for 1000’s of years. Any positive correlation may indicate BTC beginning to earn safe haven status.
BTC and Inverted US 2 Year Treasury Yield
In a risk-off environment Treasury yields drop. Positive correlation here points to BTC being considered a risk-off asset.
BTC and USD/CNY
Weakening CNY may lead to a greater demand for capital flight from China. Positive correlation here may indicate BTC is being used as a mechanism for this flow.
BTC and CHF/EUR
The Swiss Franc (CHF) is a safe haven currency. If there is correlation between CHF strengthening against EUR, this may indicate BTC being utilised as a risk-off asset.
BTC and VIX
Volatility (represented by the VIX) generally increases in times of economic uncertainty. Strong correlation between the VIX and BTC may indicate it be utilised as a risk-off asset.
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.
There is a bullish convergence occurring of the 50d MA and the 200d MA (known as a golden cross). The last time this occurred was in April 2019.
April 2019
BTC and MACD
MACD (moving average convergence/divergence) is a momentum indicator showing the relationship between two moving averages of a price. It is designed to reveal changes in the strength, direction, momentum and duration of a trend.
The weekly MACD continues to generate a bullish signal after the crossover on the 20th January.
Bitcoin Price Action
2020 is still the best performing year for BTC since 2013 with price up 39% YTD.
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.
Institutional sentiment has once again shifted this week as Asset Managers have reduced their short positions and increased their long positions.
Open interest shows the USD value of open contracts offered by various platforms.
Fundamentals
Google Trends - ‘Bitcoin Halving’
12 Months
Worldwide searches for ‘Bitcoin Halving’ over the last 12 months peaked in the last week in relation to the rest of the period.
30 Days
If we look at the past 30 days, search interest peaked on the 9th and 11th February but has since lowered in recent days to levels seen at the start of February.
WeChat Index - ‘Bitcoin’
WeChat searches for ‘Bitcoin’ hit 373k on the 16th February. Despite recent searches being lower than the local peak on the 9th February, recent searches are still 97% higher than the local low on the 25th January.
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.
Localbitcoins saw a 3% increase in global USD volume in the last week.
Conversely, global Paxful volume (USD) dropped 17% in the last week.
Localbitcoins continues to retain ~60% of the USD denominated volume market share over Paxful.
Confirmed Transactions Per Day
Represents the number of transactions completed on the Bitcoin network within a 24 hour period. The higher the number the more the network is being utilised.
Confirmed transactions are up 2% since last week and up 12% YTD.
Mean Transaction Value
This is the average size of each transaction being processed by the Bitcoin network.
The mean transaction value has increased 18% for the week and is up 106% YTD.
Bitcoin Economic Throughput
Economic throughput is the transactions per day multiplied by the mean transaction value. It is a measure of the financial bandwidth of the Bitcoin network per unit of time and represents the value flowing through the system.
Current economic throughput is down 6% since last week hovering around $2.8Bn USD but is up 93% YTD on the 7d MA (moving average)
Hashrate
The Hashrate is a measure of the processing power contributed by miners to secure the network. A higher hashrate means more equipment and electricity (i.e. CapEx) being dedicated to mining bitcoin.
Bitcoin hashrate (7 day moving average) is down 1% for the week. Hashrate is up 12% YTD. Currently at 108m TH/s on the 7 day moving average.
Daily Active Addresses
The number of addresses sending or receiving bitcoin. It is a proxy for the number of people using the Bitcoin network.
The daily active addresses count for Bitcoin is down 6% from the last week. Active address count is still up 25% YTD.
Bitcoin Days Destroyed
Bitcoin Days Destroyed (BDD) is an alternative metric for transaction volume on the Bitcoin network. It is calculated by taking the number of Bitcoins in a transaction and multiplying it by the number of days it has been since those coins were last spent.
During the last week there has not been any significant BDD activity observed.
Realised Cap
This metric approximates the value paid for all coins in existence by summing the market value of coins at the time they last moved on the blockchain. It was developed by the Coinmetrics team in response to the flaws inherent with looking at traditional Market Capitalisation (MCap).
Realised Cap is at ATH with it currently standing at ~$105.6 Bn.
MVRV
Market Value/ Realised Value (MVRV) is simply the ratio comparing market cap and realised cap. When the MVRV is high then it might be an indication that the traded price might be above BTC’s ‘fair value’.
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 ~1.71.
Lightning Nodes
The Lightning Network is a "Layer 2" payment protocol that operates on top of Bitcoin). It enables fast transactions among participating nodes and has been touted as a solution to the Bitcoin scalability problem. An increasing number of nodes represents the growth and decentralisation of this network.
The number of unique lightning nodes on the Bitcoin network is up 1% for the week. The number of nodes is up 4% YTD.
Lightning Channels
Lighting channels enable users on the lighting network to send and receive money to and from other users. Once established they allow payments to stream seamlessly between two peers.
The number of unique channels on the lightning network has stayed flat in the last week. The BTC capacity on the Lightning Network has increased by 1% (total capacity is ~877 BTC).
Wrapped BTC
Wrapped BTC represents bitcoin that has been locked in a smart contract to be deployed on Ethereum as an ERC20 token. This allows bitcoin holders to utilise the value of their bitcoin within the Ethereum ecosystem.
The total value of Wrapped BTC has climbed 10% in the past week. There are now 766 WBTC.
BTC Days Since All Time High
Spotlight
This week’s ‘spotlight’ is from Matt D’Souza who argues that analysis of CME futures activity points to institutions and whales accumulating BTC at times when there have been moments of sell offs from weaker hands. Matt states:
“Analyzing the volume flows in the CME (Institutional Exchange) vs Coinbase/Bitfinex (Retail Exchange) we can distinctively see that the CME led the accumulation of Bitcoin in early 2019 and once again, the CME was more active during late Q4 2019 and January, 2020. All 3 periods were the lows in Bitcoin Price…”
Tweet of the Week
Our ‘Tweet of the Week’ comes from Bitcoin quantitative analyst, PlanB. He highlighted this week that February performance for BTC has been so strong that there have only been two other months that have closed higher - the two months being December of 2017 and June 2019. It remains to be seen how the current February month will place in relation to these months.
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.