ID Theory Insights
11th May 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
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 S&P 500
The S&P 500 generally rises as risk appetite increases.
BTC Daily SMAs
On the 10th May, BTC wicked down to $8100 with the 100d and 200d MA acting as lines of support.
BTC Weekly SMAs and MACD
The weekly MACD continued to rise above the signal line providing stronger indication of bullish momentum.
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.
Dealers have shifted to a predominantly short stance while asset managers continue to take a predominantly long stance.
Open interest shows the USD value of open contracts offered by various platforms.
CME open interest in Bitcoin futures has risen sharply to $415m as institutions return to market.
Fundamentals
Google Trends - ‘Bitcoin’
Past 3 months - Worldwide
Searches for ‘bitcoin’ has risen sharply in the last week.
Google Trends - ‘Bitcoin halving’
Past 3 months - Worldwide
Searches for ‘bitcoin halving’ continued to climb indicating increased interest as we head towards the halving event this week.
WeChat Index - ‘Bitcoin’
In China, there are also signs of growing interest in bitcoin with searches for the cryptocurrency keeping above 600k per day in the last few days.
Localbitcoins and Paxful Volume - Global
USD volume on Localbitcoins is up 16% from the previous week.
USD volume on Paxful is down 9% from the previous week.
Localbitcoins volume represents ~60% of the combined USD volume of Localbitcoins and Paxful.
Confirmed Transactions Per Day
Confirmed transactions are up 4% since last week and up 9% YTD.
Mean Transaction Value
The mean transaction value has increased 12% for the week and is up 61% YTD.
Bitcoin Economic Throughput
Current economic throughput is up 13% since last week hovering around $2.4Bn USD and is up 65% YTD on the 7d MA (moving average).
Hashrate
Bitcoin hashrate (7 day moving average) is up 6% for the week. Hashrate is up 24% YTD. It is currently at 120m 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. Daily active address count is up 66% YTD.
Bitcoin Days Destroyed
During the last week there has not been any significant BDD activity observed.
Realised Cap
Realised Cap (Coinmetrics, 2018) is currently standing at ~$104 Bn.
MVRV
MVRV (Mahmudov & Puell, 2018) historically provides two important thresholds - MVRV above 3.7 could signal potential overvaluation and MVRV below 1 could signal undervaluation. The ratio ratio is currently at ~1.53.
Lightning Nodes
The number of unique lightning nodes on the Bitcoin network is flat for the week. The number of nodes is up 14% YTD.
Sidechain Channels and Capacity
The number of unique channels on the lightning network is down 1% from last week (28,632 total). The BTC capacity on the Lightning Network is down 3% for the week (total capacity is ~926. BTC). Liquid, Blockstream’s Bitcoin sidechain, has stayed flat too with a capacity of ~2055 BTC which represents 2.2x the capacity seen on lightning.
Wrapped BTC
The total value of WBTC has increased 15% in the past week. There are 1297 WBTC in circulation, which represents an increased interest in using BTC within the Ethereum ecosystem (and by extension DeFi).
BTC Days Since All Time High
Spotlight
Our spotlight focusses on Plan B’s halving analysis that shows, historically, Bitcoin’s difficulty adjustment does not adjust downwards post-halving but instead carries adjusts upwards. This perhaps challenges the argument that inefficient and unprofitable miners leaving the network will lead to a sustained decrease in difficulty in the short to mid-term.
Tweet of the Week
Our ‘tweet of the week’ is from Bloomberg who reported that notable macro investor Paul Tudor Jones is investing investing Bitcoin as a hedge against future inflation by central banks. Jones wrote in his May 2020 BVI Letter - Macro Outlook:
"This brilliant feature of Bitcoin was designed by the anonymous creator of Bitcoin to protect its integrity by making it increasingly near and dear, a concept alien to the current thinking of central banks and governments."
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.
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