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Summer of Crypto

Taking a quick break from the Libra series to provide some trading market updates as we see BTC flirting with some 14-month highs. Today’s edition is brought to you in collaboration with some top global market traders. We have been getting requests from a few folks to mix up our regular programming with more actionable stuff directly related to the markets so we will likely be trying out a couple of different formats over the next few days until something sticks.

BTC/USD has been extremely correlated to offshore Chinese Yuan in the past 3 months. Trade tariff issues and an oncoming capital flight is making locals somewhat nervous. Add to that social issues being imported from Hong Kong (protests on extradition) and China has some issues to deal with. The Yuan cannot afford too much strength either therefore it’s a fine line to keep it weak while not letting it crash. In this global game of who blinks first, looks like the Fed has decided to stop the rate hikes as well. All of this points to a global macro currency issue moving from simmer to bubbling more.

Source: Adamant Capital

BTC is pretty much poised to do well in such an environment. USDC issuance against Yuan in the OTC market is increasing and stablecoins may be the first line of capital flight. Watch carefully for increase in issuance of Tether, USDC and TUSD, the largest stablecoins.

Taking a look at some fundamental factors for BTC, let’s look at the following:

 1. Network Value: NVT is pointing to elevated but absorbing recent gains.

Network Value: NVT
Source: Willywoocharts

 2. Near term volatility hit a local high at 5% a day (nearly an annualized volatility of 100%, rule of thumb is daily move X Square root of time (365), so nearly 100% a year. Volatility retreats usually signify a range bound environment in the near term thereby lending credence to consolidation. 

Near term volatility

 3. Hash rate is at local highs, as are transactions. Avg fee is however still dropping, which is very healthy for near term price support and consolidation.

Source: bitinfocharts.com
Source: bitinfocharts.com
Source: bitinfocharts.com

 4 .Top 100 addresses as a % of total coins hit a low on May16, 2019 and has been solidly trending higher showing the whale accumulation. On a yearly basis this % is still very low. Significant upside exists in this. Nov 2018 was at 19%, current low was at 15.26%, and the present share is 15.7%. The Nov pullback had a big impact as whales seem to have dumped. That number is slowly increasing but the current price highs are higher than Nov 2018. This is a positive as shows broad adoption has increased however if the whales were to return, the upside can be significant.

Source: bitinfocharts.com

 5. Bid/ Ask sums for BTC: The Asks have finally gone higher than the bids for the first time since Dec 2017. Market microstructure is showing a distinct preference for the upside.

Source: data.bitcoinity.org

 6. Futures prices are in steep contango across derivatives exchanges and perp longs are in positive funding territory (i.e. you pay to be long)

All of this convinces us short term pullbacks are to be bought anywhere with 5% of current prices.

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