Bitcoin and Ethereum are trending higher, and every other day it seems like another crypto Exchange Traded Fund (ETF) is getting regulatory approval.
This is my attempt at a dispassionate crypto market analysis.
Let’s dig in.
Cboe Global Markets is looking to list and trade shares of what could be the first Bitcoin exchange-traded fund in the United States.
The filing with the US Securities and Exchange Commission sought the green light for the VanEck Bitcoin Trust. In December 2020, VanEck Associates filed for the ETF for the third time since 2018, once again seeking approval for the financial product.
Just last month, Canadian securities regulators cleared the launch of the Purpose Bitcoin ETF, putting Canada ahead of the US in terms of bitcoin regulatory approval in North America.
As of today, the Purpose ETF holds 11,141 bitcoin ($576 million) in cold storage.
Cboe Global Head of Listings Laura Morrison spoke well of the ETF’s prospects in an interview, saying that “this time around we’re much more optimistic than we have been in the past. The market has really changed. There’s a tremendous amount of information relative to the depth and breadth.”
“We’re really excited about being the first filing in this wave,” Morrison said.
An ETF would be less expensive than other products like Grayscale’s GBTC, which has taken the lion’s share of fully regulated bitcoin trading for years. These new products also explain the GBTC discounted pricing.
This could all change very quickly.
Market Dynamics Reset As BTC hovers above $50,000
Bitcoin’s perpetual futures funding rate reset close to zero. Historically, decreasing funding rates and unwinding open interest indicates a flush out of speculative over-leveraged trading. This increases the possibility for spot market dynamics to take the driver seat again should bull market conditions be defended.
Bitcoin trades above the 20-daily EMA
Bitcoin’s parabola remains intact as USD pairing manages to move back above the 20-daily exponential moving average. Throughout its price-history, the 20-daily EMA has acted as a strong indication of market trends.
If taken at face value, bitcoin is poised to grind higher, according to this indicator. This could swing bitcoin up to the 1.618 Fib level at about $73,000 (our second target) by the end of March/early April — just in time for the quarterly close.
On-Chain aSOPR resets
In addition to the technical indicators, on-chain data has also cooled off.
The Adjusted Spent Outputs Profit Ratio (aSOPR) has reset below 1.0 for the first time this bull market, hitting a value of 0.988. The aSOPR metric looks at all coins spent that day and calculate the degree of profit or loss they were in compared to when they were last moved.
When the aSOPR is less than 1.0, it means on aggregate, coins exchanged hands at a loss. Low aSOPR values, especially when reset below 1.0, also means fewer old and profitable coins got transacted. This suggests confidence and HODLing behaviour remains strong.
Is it different this time?
The short answer to this question is yes — otherwise bitcoin would not be holding above $50,000. Concerns about inflation and central bankers’ approach to world economies have forced investors out of Euro-Dollars and into stocks, bitcoin, and crypto — where returns are good. Signs that bitcoin is becoming widely accepted are everywhere, and readers of my blog will be familiar with these industry-defining events.
On Monday, both the S&P 500 and the BTC/USD pair bounced and have since offered a strong start to the week. At the same time, gold has continued to underperformed massively as it keeps sliding lower — not something you’d normally expect in a market that’s pricing in inflationary pressures.
One narrative that could explain this is that investors are dropping gold for bitcoin, realising that bitcoin fulfills gold’s scarce purpose and to an infinitely higher degree. The fact that bitcoin is new tech could be why bitcoin seemingly moves in tandem with traditional stocks as well.
In truth, bitcoin still hasn’t truly found its identity (being programmable) and only explored the trillion-dollar mark for a brief moment. As such, the reality probably lies somewhere in the middle, whereby investors buy bitcoin for whichever narrative makes sense to them (hedge, technology, payments). This is all the more reason to have it in one’s portfolio as it offers multiple confluence touch points.
If bitcoin retains this momentum above $50,000, there’s reason to expect it to accelerate upwards in what could be the later stages of this bull market.
Whether that cyclical number ends up being $100,000 or $300,000 is anyone’s guess. Generally, the slower the move up, the more sustainable it is.
Ethereum heads North
Ethereum has bounced against the US Dollar, following bitcoin. It remains above support against bitcoin, exchanging hands at ₿0.031.
Various tailwinds have surfaced this week that will likely have a lasting effect on the second biggest cryptocurrency. One such tailwind (which didn’t get much attention) is Amazon’s endorsement of the Ethereum blockchain and DeFi. At the same time, Evolve Funds just filed for an ETH ETF just weeks after getting approval for its bitcoin product. CI Financial and Galaxy share this enthusiasm for Ethereum, having also put an ETF filing of their own.
This wave of positive news comes at a time when Ethereum is about to solve scalability, at least until the market tests the newer upper limits again. This is perhaps the most important piece of news that could see ETH outperform bitcoin as a recognised leader for developing Web 3.0.
The technical picture is also acceptable for bulls. ETH re-tested the $1400 breakout and came out alive.
However, should ETH plunge below its all time high again, it could very well be the start of a major bear trend — though there doesn’t seem to be a good reason to expect this given recent events.
On the flip side, ETH could be on the precipice of a spectacular breakout, the likes of which we’ve never seen.
I’m betting on the latter.