Sebastian Sinclair


<p>Bitcoin (<a href="https://blockworks.co/price/btc" target="_blank" rel="noreferrer noopener">BTC</a>) continues to flirt with valuations not seen in nearly two months, as price momentum nosedives.</p>



<p>The asset, which is down 2.5% on the day to $26,300, lost its footing above a support threshold along $27,000 sending it to its lowest point since March 14.</p>



<p>Bitcoin&#8217;s return to $25,000 looks like a very “real prospect” in the coming days, FxPro senior market analyst Alex Kuptsikevich told Blockworks in an email.</p>



<p>“The bears will have their work cut out for them here, as some oversold conditions will have built up by then,” he said, highlighting the distorted equilibrium between buyers and sellers.</p>



<p>For a time, volatility was muted as prices remained relatively locked between $27,000 and $30,000. That was <a href="https://blockworks.co/news/bitcoin-price-less-volatile">expected to persist</a> throughout May, as declining interest across crypto derivatives effectively sapped long and short sellers.</p>



<p>It’s worth noting that as of May 8, bitcoin volatility was hovering at its lowest point since the beginning of January at 29% — down significantly from March 13’s peak of 63%, data from <a href="https://app.intotheblock.com/coin/BTC/deep-dive?group=financials&amp;chart=volatility" target="_blank" rel="noreferrer noopener">IntoTheBlock</a> shows.</p>



<p>However, volatility has been spiking on the daily time frame since May 8 and that uptick is poised to feed into medium-term price action.</p>



<p>Still, the fact that the price has not yet breached $25,000 is significant when viewing this year’s performance, Kuptsikevich added.</p>



<p>“Now it has every chance of becoming an equally reliable support,” he said.</p>



<p>But first, bitcoin would need to sort out its <a href="https://blockworks.co/news/bitcoin-mempool-surges-new-life-for-blockchain">congestion issues</a>, Rich Rosenblum CEO of market maker GSR told Blockworks.</p>



<p>Data reveals a significant increase in unconfirmed Bitcoin transactions, which currently stand at 284,369. This is a 440% rise compared to the figure of 52,600 observed nearly two months ago on March 17.</p>



<p>The current weight of the mempool, which refers to the total data size within it, is about 871 MB. This exceeds the default maximum mempool limit of 300MB set by Bitcoin Core, <a href="https://mempool.space/" target="_blank" rel="noreferrer noopener">data shows</a>.</p>



<p>It&#8217;s important to note that not every node operator sticks to the default 300MB limit. Some opt for higher thresholds to prevent discarding transactions with lower fees.&nbsp;</p>



<p>When this occurs, transactions continue to be processed, they just might come with a higher cost, likely the result of a newly popular use case for the world’s oldest crypto.</p>



<p>Over the past week, there has been a substantial increase in the number of Ordinals inscriptions on the Bitcoin network, which has almost doubled from <a href="https://dune.com/dgtl_assets/bitcoin-ordinals-analysis" target="_blank" rel="noreferrer noopener">2.5 million to 4.78 million</a>. This surge is largely attributed to the growing interest in the <a href="https://blockworks.co/news/defi-on-bitcoin">BRC-20 token</a>.</p>



<p>“Organic congestion due to excitement over BRC-20? Well, that’s probably bullish that we’re finally seeing enough adoption that it’s slowing the network,” Rosenblum said.</p>



<p>If, on the other hand, the network is deliberately flooded with a continuous cycle of small transactions in an attempt to profit from a bitcoin short position. “That’s bearish and hard to police in a decentralized world,” he added.</p>



<hr class="wp-block-separator has-alpha-channel-opacity"/>



<p><strong>Get the news in your inbox. Explore Blockworks newsletters:</strong></p>



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown"><strong>The Breakdown</strong></a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch"><strong>0xResearch</strong></a>: Alpha in your inbox. Think like an analyst. </li>
</ul>


Bitcoin

Bitcoin Price Analysts Eyeing $25K as Support Following Momentum Shift

Sam Martin

<div id="highlights-block_60c9fc7f1690b" class="highlights">
        <ul>
                <li>Bitcoin fundamentals show we are in the early stages of the next leg higher</li>
                <li>Ethereum looks undervalued based on earnings and being a hotspot for innovation</li>
            </ul>
    
</div>



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



<p>There is some evidence of long term bitcoin holders beginning to take some profits. </p>



<p>A futures-backed bitcoin ETF could mislead investors. </p>



<p>Bitcoin dominance has been on the rise over the last 30 days.</p>



<p>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 <a href="https://watchtheburn.com/" target="_blank" rel="noreferrer noopener">that you can watch</a> in real-time. </p>



<p><strong>Latest in Macro:</strong></p>



<ul class="wp-block-list"><li>S&amp;P 500: 4,486, +.34%</li><li>NASDAQ: 15,021, +.84%</li><li>Gold: $1,764, -.18%</li><li>WTI Crude Oil: $82.31, +.04%</li><li>10-Year Treasury: 1.591%, +.015%</li></ul>



<p><strong>Latest in Crypto:</strong></p>



<ul class="wp-block-list"><li>BTC: $61,329, +2.99%</li><li>ETH: $3,746, +1.35%</li><li>ETH/BTC: .0611, -2.44%</li><li>BTC.D: 46.95%, +.24%</li></ul>



<h3 class="wp-block-heading">Bitcoin</h3>



<p>Historically when the <a href="https://www.investopedia.com/terms/r/rsi.asp" target="_blank" rel="noreferrer noopener">relative strength index</a> (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. </p>



<div class="wp-block-image"><figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="970" height="677" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/BTCUSD_2021-10-18_14-47-39.png" alt="" class="wp-image-9525" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/BTCUSD_2021-10-18_14-47-39.png?w=970 970w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/BTCUSD_2021-10-18_14-47-39.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/BTCUSD_2021-10-18_14-47-39.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/BTCUSD_2021-10-18_14-47-39.png?w=368 368w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/BTCUSD_2021-10-18_14-47-39.png?w=374 374w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/BTCUSD_2021-10-18_14-47-39.png?w=314 314w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/BTCUSD_2021-10-18_14-47-39.png?w=80 80w" sizes="auto, (max-width: 970px) 100vw, 970px" /><figcaption>Source: Trading View</figcaption></figure></div>



<p>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&#8217;t being as aggressive with their long positions as they were during the last trip to $60,000. </p>



<div class="wp-block-image"><figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="360" height="394" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-3.23.49-PM.jpg" alt="" class="wp-image-9529" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-3.23.49-PM.jpg?w=360 360w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-3.23.49-PM.jpg?w=274 274w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-3.23.49-PM.jpg?w=235 235w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-3.23.49-PM.jpg?w=238 238w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-3.23.49-PM.jpg?w=200 200w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-3.23.49-PM.jpg?w=73 73w" sizes="auto, (max-width: 360px) 100vw, 360px" /><figcaption>Source: <a href="https://app.krowntrading.net/cryptos/markets" target="_blank" rel="noreferrer noopener">app.krowntrading.net</a></figcaption></figure></div>



<p>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&#8217;t been moved for extended periods of time, is beginning to rise. During bull markets, the &#8216;smart money&#8217; takes profit on the way up and accumulates throughout price corrections. This is likely the beginning of &#8216;smart money&#8217; selling their coins to traders and new market participants chasing the hype. </p>



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="590" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/CDD-1024x590.png" alt="" class="wp-image-9531" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/CDD-1024x590.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/CDD-1024x590.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/CDD-1024x590.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/CDD-1024x590.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/CDD-1024x590.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/CDD-1024x590.png?w=453 453w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/CDD-1024x590.png?w=380 380w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/CDD-1024x590.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/CDD-1024x590.png?w=1600 1600w" sizes="auto, (max-width: 1024px) 100vw, 1024px" /><figcaption>Source: Glassnode</figcaption></figure></div>



<h3 class="wp-block-heading">Futures-Backed ETF</h3>



<p>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. </p>



<p>The spread between further out futures months and BTC spot price widens even more when the price is rising drastically during a bull run. &#8220;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.&#8221; Jodie Gunzberg, managing director of CoinDesk indexes, wrote to Blockworks in an email. </p>



<p>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.   </p>



<div class="wp-block-image"><figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="524" height="347" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-3.38.54-PM.png" alt="" class="wp-image-9534" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-3.38.54-PM.png?w=524 524w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-3.38.54-PM.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-3.38.54-PM.png?w=388 388w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-3.38.54-PM.png?w=394 394w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-3.38.54-PM.png?w=331 331w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-3.38.54-PM.png?w=80 80w" sizes="auto, (max-width: 524px) 100vw, 524px" /><figcaption>Source: Y Charts &amp; @LynAldenContact</figcaption></figure></div>



<h3 class="wp-block-heading">The trillion dollar rest</h3>



<p>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. </p>



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="970" height="677" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/BTC.D_2021-10-18_15-57-56.png" alt="" class="wp-image-9536" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/BTC.D_2021-10-18_15-57-56.png?w=970 970w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/BTC.D_2021-10-18_15-57-56.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/BTC.D_2021-10-18_15-57-56.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/BTC.D_2021-10-18_15-57-56.png?w=368 368w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/BTC.D_2021-10-18_15-57-56.png?w=374 374w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/BTC.D_2021-10-18_15-57-56.png?w=314 314w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/BTC.D_2021-10-18_15-57-56.png?w=80 80w" sizes="auto, (max-width: 970px) 100vw, 970px" /><figcaption>Source: Trading View</figcaption></figure>



<h3 class="wp-block-heading">Non-Fungible Tokens (NFTs)</h3>



<p>Solana NFTs had a rough weekend, with floor prices down across the board. Trading data from <a href="https://opensea.io/rankings" target="_blank" rel="noreferrer noopener">OpenSea</a> and <a href="https://solanalysis.com" target="_blank" rel="noreferrer noopener">Solanalysis</a> of some of the top Solana and Ethereum projects can be found in the photos below:</p>



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="351" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-4.02.20-PM-1024x351.png" alt="" class="wp-image-9537" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-4.02.20-PM-1024x351.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-4.02.20-PM-1024x351.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-4.02.20-PM-1024x351.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-4.02.20-PM-1024x351.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-4.02.20-PM-1024x351.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-4.02.20-PM-1024x351.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-4.02.20-PM-1024x351.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-4.02.20-PM-1024x351.png?w=1240 1240w" sizes="auto, (max-width: 1024px) 100vw, 1024px" /><figcaption>Top Ethereum Projects</figcaption></figure></div>



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="288" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-4.02.10-PM-1024x288.png" alt="" class="wp-image-9538" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-4.02.10-PM-1024x288.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-4.02.10-PM-1024x288.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-4.02.10-PM-1024x288.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-4.02.10-PM-1024x288.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-4.02.10-PM-1024x288.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-4.02.10-PM-1024x288.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-4.02.10-PM-1024x288.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-4.02.10-PM-1024x288.png?w=1231 1231w" sizes="auto, (max-width: 1024px) 100vw, 1024px" /><figcaption>Top Solana Projects </figcaption></figure></div>



<h3 class="wp-block-heading">Ethereum</h3>



<ul class="wp-block-list"><li>Ethereum has generated over $1 billion of revenue through transaction fees over the last 30 days. </li><li>Ethereum has burned over $825 million of that revenue, thus minimizing inflation from ether issuance. <ul><li>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. </li></ul></li><li>As more activity occurs on top of Ethereum&#8217;s base layer, revenue from transaction fees will continue to rise. </li><li>Ether currently trades at a price-to-earnings ratio of 46, according to <a href="https://www.tokenterminal.com/terminal/projects/ethereum" target="_blank" rel="noreferrer noopener">token terminal</a>. </li></ul>



<div class="wp-block-image"><figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="791" height="573" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-4.58.14-PM.png" alt="" class="wp-image-9548" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-4.58.14-PM.png?w=791 791w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-4.58.14-PM.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-4.58.14-PM.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-4.58.14-PM.png?w=355 355w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-4.58.14-PM.png?w=360 360w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-4.58.14-PM.png?w=302 302w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-18-at-4.58.14-PM.png?w=80 80w" sizes="auto, (max-width: 791px) 100vw, 791px" /><figcaption>Source: Token Terminal</figcaption></figure></div>



<h3 class="wp-block-heading">Other Notable News</h3>



<ul class="wp-block-list"><li>Famous investor, <a href="https://markets.businessinsider.com/news/currencies/carl-icahn-market-crisis-bitcoin-potential-if-inflation-spirals-2021-10" target="_blank" rel="noreferrer noopener">Carl Icahn</a>, claims the US has an inflation problem and recognizes bitcoin&#8217;s potential. </li><li>Memecoin, Shiba Inu (SHIB), has seen its number of unique holders <a href="https://twitter.com/intotheblock/status/1450152893420605443?s=20" target="_blank" rel="noreferrer noopener">increase more than 9%</a> in the last two weeks.</li><li>Interactive Brokers <a href="https://www.businesswire.com/news/home/20211018005264/en/Interactive-Brokers-Group-Introduces-Cryptocurrency-Trading-for-Financial-Advisors-in-the-U.S." target="_blank" rel="noreferrer noopener">announced</a> support for RIAs to begin trading cryptocurrencies through their services. </li><li>Grayscales&#8217; Director of Communications took to <a href="https://twitter.com/jenn_rosenthal/status/1450085085940617219?s=20" target="_blank" rel="noreferrer noopener">twitter</a> to announce the firm will file with the SEC in an attempt to convert their bitcoin trust, GBTC, into an ETF. </li></ul>



<p>That is all for today, folks. Looking forward to catching tomorrow! </p>



<hr class="wp-block-separator"/>



<p><strong>Are you a UK or EU reader that can&#8217;t get enough investor-focused content on digital assets? <a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Join us</a>&nbsp;in London on November 15th and 16th for the Digital Asset Summit (DAS) London. Use code ARTICLE for £75 off your ticket.&nbsp;<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Buy it now</a>.</strong></p>



<hr class="wp-block-separator"/>


RSI

Newsletter

Blockworks Research