- Last week, cryptoassets continued to underperform on account ongoing profit-taking by large long-term holders
- Our in-house "Cryptoasset Sentiment Indicator" has declined sharply and signals bearish sentiment again
- Ongoing profit-taking by large long-term holders such as German government entities or the Mt Gox trustee will likely continue to be a headwind over the coming weeks
Chart of the Week
Bitcoin Long-term Holder (LTH) Realized Profit
Source: Glassnode, ETC Group
Performance
Last week, cryptoassets continued to underperform on account ongoing profit-taking by large
long-term holders. This is also evident in the high readings of long-term holder’s (LTH) realized
profits for Bitcoin (Chart-of-the-Week).
In this context, large long-term holders such as German government entities or the Mt
Gox trustee continue to distribute their long-term holdings that they acquired many years back.
More recently, the Mt Gox trustee has also started distributing bitcoins. The trustee
sold around 2.7k BTC on Friday alone last week. At the time of writing, the Mt Gox trustee still controls
around 139k BTC according to data provided by Glassnode. Another major force of selling was the German
government that sold around 6.4k BTC over the past week. This particular government entity still controls
around 39.8k BTC.
Looking ahead, we still anticipate this amount of selling to continue to be a headwind for the
overall market. In our latest monthly
report we also wrote:
“Continued selling from US and German government entities could likely exert
continued selling pressure on the market over the coming weeks.”
It may take time for the market to fully digest this level of selling as opined by
some influential market observers. This is due to the fact that much of the legacy
supply that was accumulated by government entities (US and Germany), large trusts (GBTC) or legacy exchanges
(Mt Gox) over the past years is currently being distributed again.
That being said, our Cryptoasset Sentiment Index has touched a fresh 2-months low
again and is currently signalling relatively bearish sentiment and positioning again.
Cross Asset Performance (Week-to-Date)
Source: Bloomberg, Coinmarketcap; performances in USD exept Bund Future
Top 10 Cryptoasset Performance (Week-to-Date)
Source: Coinmarketcap
In general, among the top 10 crypto assets, TRON, Toncoin, and Solana were the
relative outperformers.
Overall, altcoin outperformance vis-à-vis Bitcoin has significantly reversed
again compared to the prior week, with only 20% of our tracked altcoins managing to outperform Bitcoin on a
weekly basis. Ethereum also underperformed Bitcoin on a weekly basis.
Sentiment
Our in-house “Cryptoasset Sentiment
Index” has declined sharply and signals a bearish sentiment again.
At the moment, only 5 out of 15 indicators are above their short-term trend.
Last week, there were significant reversals to the downside in the BTC Short-Term
Holder Net Unrealized Profit/Loss ratio (STH-NUPL) and the Crypto Fear & Greed Index.
The Crypto Fear & Greed Index still signals a “Fear” level of
sentiment as of this morning.
Performance dispersion among cryptoassets has reversed to the downside again. This
means that altcoins are increasingly becoming correlated with the performance of Bitcoin again.
Altcoin outperformance vis-à-vis Bitcoin has also significantly reversed
compared to the week prior, with only around 20% of our tracked altcoins outperforming Bitcoin on a weekly
basis, which is consistent with the fact that Ethereum also underperformed Bitcoin last week.
In general, increasing (decreasing) altcoin outperformance tends to be a sign of
increasing (decreasing) risk appetite within cryptoasset markets and the latest altcoin underperformance
could signal declining appetite for risk at the moment.
In contrast, sentiment in traditional financial markets rebounded from its multi-year
lows along with a rebound in market-based global growth expectations, judging by our own measure of Cross
Asset Risk Appetite (CARA).
Fund Flows
Despite the weak price action last week, fund flows into global crypto ETPs continued
to be positive and even started to accelerate again. Global crypto ETPs saw around +695.9 mn USD in net
inflows across all types of cryptoassets which is significantly higher than the +38.2 mn USD in net inflows
recorded the prior week.
Global Bitcoin ETPs saw net inflows of
+632.7 mn USD last week, of which +238.5 mn USD in net inflows were related to US spot Bitcoin ETFs.
Last week also saw significant inflows into Hong Kong Bitcoin ETFs with +247.2 mn USD
which was even slightly higher than US spot Bitcoin ETF net inflows.
Outflows from the ETC
Group Physical Bitcoin ETP (BTCE) continued last week with net outflows equivalent
to -42.0 mn USD while the ETC
Group Core Bitcoin ETP (BTC1) saw neither in- nor outflows last
week.
The Grayscale Bitcoin Trust (GBTC) continued to see net outflows, with around -87.9
mn USD last week.
Meanwhile, global Ethereum ETPs saw a
reversal in flows last week compared to the week prior with positive net inflows totalling +7.7 mn USD.
Interestingly, Hong Kong Ethereum ETFs neither recorded in- nor outflows last week (+/- 0 mn USD).
The ETC
Group Physical Ethereum ETP (ZETH) saw minor net outflows of around -1.7 mn USD
and the ETC
Group Ethereum Staking ETP (ET32) showed sticky AuM last week (+/- 0 mn
USD in flows).
In contrast, altcoin ETPs ex Ethereum continued to attract
an even higher amount of capital of around +20.1 mn USD last
week.
The same is true for Thematic & basket crypto
ETPs which also continued to see positive net inflows of +35.4 mn USD, based on our
calculations. The ETC
Group MSCI Digital Assets Select 20 ETP (DA20) saw neither in- nor
outflows last week.
Meanwhile, global crypto hedge funds have continued to increase their market exposure even
further into the most recent correction. The 20-days rolling beta of global crypto hedge funds’
performance increased to around 0.66 (up from 0.57) per yesterday’s close.
On-Chain Data
Bitcoin on-chain data currently show a significant level of “pain” among
short-term holders which renders a short-term bottom very likely.
For instance, the short-term holder net unrealized profit-loss ratio (STH-NUPL) is
currently at -14.6% meaning that the average short-term holder has around -14.6% in unrealized losses. This
metric is already at the lowest level since November 2022 – when FTX collapsed!
Furthermore, the short-term holder spent output profit ratio (STH-SOPR) has declined
to 0.957 last Friday – the lowest level since end of 2022 as well.
Short-term holders are investors with a holding period of less than 155 days.
At the time of writing, the average cost basis of short-term holders lies at around
64k USD per bitcoin according to data provided by Glassnode which means that short-term holders are
significantly “under water” with their holdings. It is no surprise that short-term holders have
continued to realize large amounts of losses into the most recent correction.
This seems to have exacerbated the most recent downside price correction.
That being said, profit-taking by long-term holders is currently the dominant force
that is exerting selling pressure on the market.
This is also evident in the high levels of long-term holders' (LTH) realised gains for
bitcoin (Chart-of-the-Week).
In this context, large long-term holders such as the German government or the Mt Gox
trustee continue to distribute their long-term holdings acquired many years ago.
Recently, the Mt. Gox trustee has also started to distribute bitcoins. On Friday of
last week alone, the trustee sold around 2.7k BTC. At the time of writing, the Mt. Gox trustee still
controls around 139k BTC, according to Glassnode. Another major selling force was the German government,
which sold around 6.4k BTC last week. This particular government entity still controls around 39.8k BTC.
Looking ahead, we still anticipate this amount of selling to continue to be a headwind for the
overall market as opined in our latest monthly
report.
Besides, the hash ribbon signal also implies that BTC miners still remain under
economic pressure which signals a heightened risk of continued distributions from these entities as well.
Moreover, the market lacks new catalysts that would lead to a significant influx of new
short-term investors as shown by the Short- to Long-Term Realized Value (SLRV) Ribbon signal.
Despite the fact that we saw a positive reversal of global net inflows into Bitcoin
ETPs over the past 2 weeks, net buying volumes on BTC spot exchanges continue to be negative, highlighting
the high selling pressure from other types of investors.
On a positive note, this high degree of selling implies that sellers could become
exhausted relatively soon which would lead to a stabilization in prices.
Futures, Options & Perpetuals
Last week, both BTC futures and perpetual open interest declined amid an increase in
forced long liquidations.
Nonetheless, perpetual funding rates mostly remained positive throughout last week.
When the funding rate is positive (negative), long (short) positions periodically pay short (long)
positions. A positive funding rate tends to be a sign of bullish sentiment in perpetual futures markets.
The 3-months annualized BTC futures basis rate declined significantly to only around
8.0% p.a.
BTC options’ open interest increased significantly last week after the large
expiries at the end of June. This increase in open interest was largely driven by an increase in relative
put open interest consistent with the recent price correction as BTC option traders increased their downside
bets/hedges. However, the aggregate put-call open interest ratio still remains significantly lower than
during the highs observed in March.
That being said, both the spike in put-call volume ratios as well as 1-month 25-delta
option skew signalled a significant increase in demand for downside protection.
BTC option implied volatilities have also increased slightly during the latest leg
down. Implied volatilities of 1-month ATM Bitcoin options are currently at around 50.5% p.a. The term
structure of volatility is also inverted now with short-dated options trading at significantly higher
implied volatilities than longer-dated options. This tends to be a sign of overextended bearishness in the
options market.
Bottom Line
- Last week, cryptoassets continued to underperform on account ongoing profit-taking by large long-term
holders
- Our in-house "Cryptoasset Sentiment Indicator" has declined sharply and signals bearish sentiment again
- Ongoing profit-taking by large long-term holders such as German government entities or the Mt Gox trustee
will likely continue to be a headwind over the coming weeks
Appendix
Bitcoin Price vs Cryptoasset Sentiment Index
Source: Bloomberg, Coinmarketcap, Glassnode, NilssonHedge, alternative.me, ETC Group
Cryptoasset Sentiment Index
Source: Bloomberg, Coinmarketcap, Glassnode, NilssonHedge, alternative.me, ETC Group; *multiplied by (-1)
Cryptoasset Sentiment Index
Source: Bloomberg, Coinmarketcap, Glassnode, NilssonHedge, alternative.me, ETC Group
TradFi Sentiment Indicators
Source: Bloomberg, NilssonHedge, ETC Group
Crypto Sentiment Indicators
Source: Coinmarketcap, alternative.me, ETC Group
Crypto Options' Sentiment Indicators
Source: Glassnode, ETC Group
Crypto Futures & Perpetuals' Sentiment Indicators
Source: Glassnode, ETC Group; *Cumulative daily absolute change in BTC OI multiplied by sign of BTC price change
Crypto On-Chain Indicators
Source: Glassnode, ETC Group
Bitcoin vs Crypto Fear & Greed Index
Source: alternative.me, Coinmarketcap, ETC Group
Bitcoin vs Global Crypto ETP Fund Flows
Source: Bloomberg, ETC Group; Only ETPs & Grayscale Trusts
Global Crypto ETP Fund Flows
Source: Bloomberg, ETC Group; Only ETPs & Grayscale Trusts
US Spot Bitcoin ETF Fund Flows
Source: Bloomberg, ETC Group; data subject to change
US Spot Bitcoin ETFs: Flows since launch
Source: Bloomberg, Fund flows since traiding launch on 11/01/24; data subject to change
US Spot Bitcoin ETFs: 5-days flow
Source: Bloomber; data subject to change
US Bitcoin ETFs: Net Fund Flows since 11th Jan mn USD
Source: Bloomberg, ETC Group; data as of 05-07-2024
Bitcoin vs Crypto Hedge Fund Beta
Source: Coinmarketcap, Bloomberg, NilssonHedge, ETC Group
Altseason Index
Source: Coinmarketcap, ETC Group
Bitcoin vs Crypto Dispersion Index
Source: Coinmarketcap, ETC Group; Dispersion = (1 - Average Altcoin Correlation with Bitcoin)
BTC Net Exchange Volume by Size
Source: Glassnode, ETC Group
Important information:
This article does not constitute investment advice, nor does it constitute an offer or solicitation to buy financial products. This article is for general informational purposes only, and there is no explicit or implicit assurance or guarantee regarding the fairness, accuracy, completeness, or correctness of this article or the opinions contained therein. It is advised not to rely on the fairness, accuracy, completeness, or correctness of this article or the opinions contained therein. Please note that this article is neither investment advice nor an offer or solicitation to acquire financial products or cryptocurrencies.
Before investing in crypto ETPs, potentional investors should consider the following:
Potential investors should seek independent advice and consider relevant information contained in the base prospectus and the final terms for the ETPs, especially the risk factors mentioned therein. The invested capital is at risk, and losses up to the amount invested are possible. The product is subject to inherent counterparty risk with respect to the issuer of the ETPs and may incur losses up to a total loss if the issuer fails to fulfill its contractual obligations. The legal structure of ETPs is equivalent to that of a debt security. ETPs are treated like other securities.