The Weekly Recap: Carving a New Fortune

KEY TAKEAWAYS

  • Bitcoin is retesting its former all-time high with strong on-chain support 
  • Surging funding rates point to greater optimism among traders 
  • Grayscale’s discount may herald a shift to Bitcoin ETFs 

Bitcoin

A promising start of the week for Bitcoin, which touched $54k on Monday for the first time in more than two weeks, has turned into massive bullish momentum. As of the time of writing, the price of Bitcoin has established strong support above $56k, after a few close attempts to test its previous all-time high near $58k. Despite weakness in both equities and precious metal markets, Bitcoin appears to have quickly shaken off the impact of rising Treasury yields, and its price action remained remarkably resilient, while gold fell to a 39-week low, and stock indices traded down as much as 10% intra-day. 

With the current momentum, the largest cryptocurrency is seen regaining its dominance vis-à-vis altcoins. Tracking the change in dominance may help to identify the start of a new cycle. Historically, Bitcoin’s dominance tends to sidestep for a while after bottoming out. It will then trend up with greater momentum and performance that outshines altcoins. 

The market dominance breakdown of major cryptocurrencies is listed below.

BTCETHBCHLTCXRPLINK
Market share62.07%12.07%0.60%0.82%1.21%0.71%
Weekly Change +0.16%+0.09%-0.03%+0.01%-0.15%-0.05%

Ether 

Ether has been rapidly approaching its highs until Wednesday when the uptrend started to weaken as the impact of CME’s ETH futures launch gradually subsided. The price of ETH has since returned to range trading between $1,750 and $1,850. Its momentum can be partly attributed to the scheduled EIP 1559 upgrade, which has certainly garnered investors’ attention. 

The EIP 1559 proposal, packaged with the London hard fork this July, met with considerable resistance from the mining community. EIP 1559 attempts to tackle multiple issues with user experience on the Ethereum network by using a hybrid system of base fee and tips to evenly incentivize miners in periods of network congestion. In a lucrative business such as Ethereum mining, gas fee contributes to at least half of the total mining revenue, which has surpassed a record high of $1.3 billion in February. The implementation of EIP 1559 will probably become a pivoting moment for the future price movement of ETH. 

On-Chain Activities 

Strong on-chain support may be the reason why Bitcoin stayed largely unaffected by the drawback in tech stocks and the surge in the U.S. dollar index this week.

The balance of Bitcoin on exchanges continues its uninterrupted downward movement, reaching the lowest level since August 2018 — which is often a bullish sign. On top of that, selling pressure from miners seems to have cooled, with the rate of miner sales declining significantly and the Miner Position Index (MPI) returning to net neutral.  

On the other hand, the UTXO realized price distribution chart indicates that the price levels between $46k and $48k have seen the largest on-chain accumulation since Bitcoin shattered its psychological resistance at $20k. The significant accumulation interest at this level reflects a crucial entry point viewed by many investors. Should the price tumble, this price level would become a strong line of defence against further depreciation. 

Stablecoin supply continues to surge, suggesting a huge inflow of buying power ready to move into assets. With increased stablecoin balance on exchanges, liquidity in the markets improves, and there are more stablecoins available to absorb selloffs, providing a safety net for Bitcoin as it charges towards new highs. 

Market sentiment has recovered from the sharp decline at the beginning of March, and is crawling further into the “Extreme Greed” territory. The growing optimism since the reset of the futures market last week is likely to turn out as a healthy development. 

Derivatives 

The funding rates across all exchanges are picking up again after staying neutral for almost two weeks. The current market condition mirrors the climb towards $58k since mid-February, although the rates are not nearly as crazy as they were in the last week of February.  

The bullish sentiment is also reflected in the future basis levels, which reflect a gradual yet firm structural bullishness. 

Industry News

When MicroStrategy started its first Bitcoin purchase in August 2020, it might not have imagined that the Bitcoin treasury would become a global phenomenon. The wave has recently reached Asia and the farthest corner of Europe as Meitu, a Hong Kong-listed software company, and Aker, a Norwegian energy firm, added a total of more than 1,500 bitcoins to their balance sheet. 

The Grayscale Bitcoin Trust, which has been traded continuously at a premium since its inception, is now trading at a discount for almost two weeks. Amid the abnormal discount, Grayscale is seeking to hire nine ETF specialists, leaving some investors wondering if this heralds a shift towards Bitcoin ETFs and other products. Meanwhile, ETF giant WisdomTree has filed its application to launch a Bitcoin ETF, hopping on the bandwagon along with many firms in their application with the SEC.