• Bitcoin fundamentals show we are in the early stages of the next leg higher
  • Ethereum looks undervalued based on earnings and being a hotspot for innovation

The relative strength index and global funding rates for bitcoin do not look overly extreme.

There is some evidence of long term bitcoin holders beginning to take some profits.

A futures-backed bitcoin ETF could mislead investors.

Bitcoin dominance has been on the rise over the last 30 days.

Ethereum has generated more than $1 billion in revenue over the last 30 days, with a vast majority being paid out to token holders via a burning mechanism that you can watch in real-time.

Latest in Macro:

  • S&P 500: 4,486, +.34%
  • NASDAQ: 15,021, +.84%
  • Gold: $1,764, -.18%
  • WTI Crude Oil: $82.31, +.04%
  • 10-Year Treasury: 1.591%, +.015%

Latest in Crypto:

  • BTC: $61,329, +2.99%
  • ETH: $3,746, +1.35%
  • ETH/BTC: .0611, -2.44%
  • BTC.D: 46.95%, +.24%

Bitcoin

Historically when the relative strength index (RSI) on BTC reaches 90 or higher, a correction has occurred over the near-to-medium term. While the RSI can remain above 90 for extended periods of time during a bull market, it is a metric worth monitoring for froth in the market. The following monthly chart shows that in December of 2017 BTC was extremely overbought, with the RSI reaching 96 before the big crash. The same thing occurred before the crash in May of this year. The current RSI reading (purple line) sits near 72, indicating the next leg higher could just be starting.

Source: Trading View

Global funding rates are on the rise which has a lot of analysts calling for a correction. However, when looking at a broader time horizon, traders aren’t being as aggressive with their long positions as they were during the last trip to $60,000.

The binary coin-days destroyed (CDD) metric, which tracks the 7-day moving average of the number of coins that are moving (being sold) that haven’t been moved for extended periods of time, is beginning to rise. During bull markets, the ‘smart money’ takes profit on the way up and accumulates throughout price corrections. This is likely the beginning of ‘smart money’ selling their coins to traders and new market participants chasing the hype.

Source: Glassnode

Futures-Backed ETF

There is a lot of debate over whether a futures-backed ETF is advantageous for investors and BTC price action. When the futures market is in contango, or when the spot price trades below further out futures contracts, futures-backed ETFs are forced to roll their positions for a small loss. However, over time this can prove to be very costly for investors as seen in the below chart of United States Oil (USO) versus spot WTI Crude Oil prices.

The spread between further out futures months and BTC spot price widens even more when the price is rising drastically during a bull run. “So, that means that when investors expect the biggest gains, the contango should be at its worst, making losses from rolling the futures contracts the greatest. It’s going to surprise unsuspecting ETF buyers in a terrible way.” Jodie Gunzberg, managing director of CoinDesk indexes, wrote to Blockworks in an email.

Due to the ease of buying a bitcoin ETF in a brokerage account, ill-informed retail investors may find themselves paying the cost of contango without even being aware.

Source: Y Charts & @LynAldenContact

The trillion dollar rest

Ether and other altcoins have drastically underperformed BTC over the past month, with bitcoin dominance rising nearly 12% during that time frame. As seen in the following chart, BTC currently composes nearly 47% of the entire digital asset market cap. It is worth noting that BTC dominance was at 72% at the turn of the year. Many traders rotated money out of BTC and into altcoins in search for higher returns, but now find themselves scrambling to rotate back into BTC.

Source: Trading View

Non-Fungible Tokens (NFTs)

Solana NFTs had a rough weekend, with floor prices down across the board. Trading data from OpenSea and Solanalysis of some of the top Solana and Ethereum projects can be found in the photos below:

Top Ethereum Projects
Top Solana Projects

Ethereum

  • Ethereum has generated over $1 billion of revenue through transaction fees over the last 30 days.
  • Ethereum has burned over $825 million of that revenue, thus minimizing inflation from ether issuance.
    • The burning mechanism is similar to a share repurchasing program that public companies often create in order to return capital back to shareholders via a tax efficient method.
  • As more activity occurs on top of Ethereum’s base layer, revenue from transaction fees will continue to rise.
  • Ether currently trades at a price-to-earnings ratio of 46, according to token terminal.
Source: Token Terminal

Other Notable News

  • Famous investor, Carl Icahn, claims the US has an inflation problem and recognizes bitcoin’s potential.
  • Memecoin, Shiba Inu (SHIB), has seen its number of unique holders increase more than 9% in the last two weeks.
  • Interactive Brokers announced support for RIAs to begin trading cryptocurrencies through their services.
  • Grayscales’ Director of Communications took to twitter to announce the firm will file with the SEC in an attempt to convert their bitcoin trust, GBTC, into an ETF.

That is all for today, folks. Looking forward to catching tomorrow!


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  • Blockworks
    Reporter
    Sam Martin is a Columbus-based reporter covering the convergence of traditional financial markets and digital assets. He previously worked in the agricultural industry on a hedge desk. He graduated from the University of South Carolina with a double-major in International Business and Supply Chain Management as well as a minor in Japanese.