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BTC and Gold
Gold has served as a safe haven asset for 100’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 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.
This week saw the 50d MA crossing above the 90dMA. This is the first time since March 2019 when 13 days afterwards BTC climbed 18% before its rally to $14k thereafter.
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.
Bitcoin’s weekly MACD experienced a bullish crossover. The last time this occurred was March 2019 before the Q2 run up.
Bitcoin Price Action
BTC has experienced the best start to a year since 2013 with the price up 30% since 1st January.
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.
Sentiment has shifted sightly with an increase of institutional buyers moving to long positions.
Open interest shows the USD value of open contracts offered by various platforms (above options charts)
Fundamentals
Google Trends - ‘Halving’
The Bitcoin halving is an event where the number of bitcoins rewarded to miners per block will be halved. This is a feature programmed into the Bitcoin protocol that occurs every 4 years and is essentially a reduction in the supply of bitcoin by half. The next halving will occur in May 2020.
Google searches for ‘Halving’ have been on the rise since June 2019. During the last halving event (July 2016), there was an inevitable short term intense spike in searches, but it seems that the build up to the upcoming 2020 halving is rather different showing that interest has been brewing 300 days before the event.
Localbitcoins Volume - Global
LocalBitcoins and Paxful are both platforms that facilitate over the counter and peer-2-peer trading for bitcoin from local currencies.
Despite positive price action for BTC this week, Localbitcoin volume remained flat ($31m) on a USD dollar basis.
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 has stayed relatively flat in the last week at ~313k transactions yesterday (up 1% for the week). Transactions per day is up 6% YTD.
Mean Transaction Value
This is the average size of each transaction being processed by the Bitcoin network.
The mean transaction value has increased 25% for the week and 104% 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 up 26% hovering around $2.7Bn USD (up 118% YTD).
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 3% for the week. Hashrate is up 14% YTD. Currently at 110m 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 up 30% from the last week. Active address count is still 35% 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 an ATH with it currently standing at ~$104 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 current ratio is currently at ~1.6.
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 with channels on the Bitcoin network has been flat for the week. The number of nodes is up 2% 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.
There are 28.5k unique channels on the lightning network is increased slightly in the previous week. The BTC capacity on the Lightning Network has also decreased slightly by 1% (total capacity is ~871 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 is flat this week (623 BTC).
BTC Days Since All Time High
The previous high in the price of bitcoin was on 17th December 2017 ($19,881).
Spotlight
This week’s spotlight focuses on Bitcoin’s Hodl waves from Glassnode Each colour band shows the percentage of Bitcoin in existence that was last moved within the time period. The number of BTC that are being HODLed continues to increase as we move into 2020. Currently, over 40% of all bitcoins in circulation have not been moved for at least 2 years. This is a sharp increase from only 33% last year, and this level of HODLing behaviour has not been seen since mid-2017, during the major bull market of that year.
Tweet of the Week
Our ‘Tweet of the Week’ comes from Tuur Demeester from Adamant Capital who highlights the growth in the number of entities holding BTC. Entities refers to a classification by Glassnode that uses clustering algorithms to determine the ‘true’ number of users by considering multiple address linked to a single individuals. The number of entities holding BTC has climbed 22% from last year.
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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