Crypto Market Compass | Week 50, 2023 | Bitwise

André Dragosch, PhD Director, Head of Research — Europe

Aperçu

Chart of the Week
Performance
Sentiment
Flows
On-Chain
Derivatives
Bottom Line
Appendix

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Cryptoassets outperformed last week, supported by a significant repricing in monetary policy expectations and short futures liquidations
Our in-house “Cryptoasset Sentiment Index” still remains relatively elevated
However, cryptoassets have recently pulled back as bitcoin investors are increasingly taking profits

Chart of the Week

Performance

Last week, cryptoassets managed to outperform traditional assets like equities, again supported by a significant repricing in monetary policy expectations and short futures liquidations at the beginning of last week.

However, this outperformance appears to have reached some limits in the short term, as stronger than expected US jobs data last week on Thursday had already started to put a lid on the recent rallye.

More specifically, US non-farm payrolls growth and the unemployment rate were stronger than consensus estimates which led to a reversal in US Treasury yields albeit from low levels. This coincided with a decrease in overall risk appetite across traditional financial markets as well.

In addition, bitcoin on-chain data suggest that investors are increasingly taking profits amid still elevated cryptoasset market sentiment as evidenced by an increasing amount of coins in profit being sent to exchanges (Chart-of-the-week).

Nonetheless, as bitcoin's rallye took a pause, there was a significant increase in altcoin outperformance with Avalance and Cardano returning over 50% last week, respectively.

In general, among the top 10 crypto assets, Avalanche, Cardano, and Polkadot were the relative outperformers.

Altcoin outperformance vis-à-vis Bitcoin picked up significantly compared to the week prior, with 50% of our tracked altcoins managing to outperform Bitcoin on a weekly basis.

Sentiment

Our in-house Cryptoasset Sentiment Index has remained relatively elevated compared to last week and is still in positive territory. At the moment, 10 out of 15 indicators are still above their short-term trend.

Compared to last week, we saw major reversals to the downside in the Crypto Dispersion Index and the BTC 25-delta 1-month option skew.

The Crypto Fear & Greed Index also still remains in "Greed" territory as of this morning.

Meanwhile, our own measure of Cross Asset Risk Appetite (CARA) has recently declined somewhat, signalling a decrease in risk appetite in traditional financial markets. However, the indicator still remains in positive territory overall.

Performance dispersion among cryptoassets has declined somewhat compared to last week but continues to be relatively high. In general, high-performance dispersion among cryptoassets implies that correlations among cryptoassets have decreased, which means that cryptoassets are trading more on coin-specific factors and that diversification among cryptoassets is high.

At the same time, altcoin outperformance has picked up significantly compared to the week prior, with 50% of altcoins outperforming Bitcoin on a weekly basis. In general, high altcoin outperformance tends to be a sign of high risk appetite within cryptoasset markets.

Flows

Last week, we saw the first week of net outflows from cryptoasset ETPs since early October.

In aggregate, we saw net fund outflows in the amount of +18.2 mn USD (week ending Friday).

Most of these outflows focused on Bitcoin ETPs (-13.1 mn USD) and thematic & basket ETPs (-18.4 mn USD) while both Ethereum ETPs and altcoin ex ETH ETPs managed to attract net inflows of +5.8 mn USD and +7.5 mn USD, respectively.

Meanwhile, the NAV discount of the biggest Bitcoin fund in the world - Grayscale Bitcoin Trust (GBTC) – has declined somewhat last week to around -10.7%. In other words, investors are assigning a probability of around 89% that the Trust will ultimately be converted into a Spot Bitcoin ETF.

Besides, the beta of global crypto hedge funds to Bitcoin over the last 20 trading remains low at approximately 0.8, implying that global crypto hedge funds still remain under-exposed to Bitcoin market risks.

On-Chain

The market remains overall in a strong profit environment which means that some investors might already be inclined to take profits on their positions. At the time of writing, 88.3% of BTC addresses are in profit while 77.6% of ETH addresses are in profit according to data provided by Glassnode. These percentages are close to the highest readings year-to-date.

In fact, profit-taking activity by bitcoin investors has picked up as we approached the recent highs in bitcoin of 45k USD, especially among short-term holders (i.e. those with a holding period of less than 155 days). Short-term holders' transfers of BTC in profit to exchanges has reached the highest level since July this year, recorded last week on Monday. This has certainly held back the current rallye a bit due to increasing selling pressure. Short-term holder Spent Output Profit Ratio (STH-SOPR) has also increased significantly, indicating an increased level of spending (in profit) by short-term holders.

Although profit-taking remains dominated by short-term holders, long-term holders (holding period > 155 days) have also increased their transfers of profitable coins to exchanges. We are currently observing a structural increase in long-term holders' exchange transfers and spending which could be a hindrance to further price increases in the short-term.

However, on a positive note, we are not observing an increase of older coins being spent which would be a clear indication of a larger price correction. For instance, coin days destroyed (CDD) for BTC remains near year-to-date lows which implies that it's mostly profit-taking of younger coins that is taking place at the moment.

BTC whale deposits to exchanges have also not picked up meaningfully either. Whales are defined as network entities (cluster of addresses) that hold at least 1,000 BTC.

Although there was evidence for a larger whale transfer of ETH to Kraken last week, overall, ETH net exchange inflows remained fairly muted.

However, overall exchange balances for bitcoin have clearly picked up, implying a net inflow of coins to exchanges over the past week. More specifically, around +14k BTC have flown into exchanges on a net basis according to data provided by Glassnode. This will likely exert some downside pressure on prices in the short term.

Derivatives

Aggregate open interest across both BTC futures and perpetuals continued to hover sideways last week, although there were some significant futures short liquidations recorded on Monday and Tuesday of last week totalling more than 100 mn USD according to Glassnode data.

In contrast, BTC option open interest increased significantly by around +23k BTC tied in option contracts across all exchanges according to data provided by Glassnode. In this context, there was a significant increase in relative put-buying judging by the increase in put-call open interest ratio that increased from 0.45 to 0.50. So, option traders increased their downside protection over the past week.

This observation is also supported by the fact that 25-delta BTC option skews increased as the spread between delta-equivalent calls and puts narrowed significantly. More specifically, the average 1-month 25-delta BTC option skew on Deribit increased from -8.6% p.a. at the beginning of last week to only -1.7% p.a. recorded yesterday. This implies increased relative demand for puts vis-à-vis calls as well. However, overall ATM implied volatilities did not change significantly compared to the week prior.

At the time of writing, the large majority of BTC call option open interest for contracts expiring at the end of December sits at 40k USD. The “max pain theory” would suggest that we converge to this price in the short term.

Meanwhile, the 3-months annualized rolling basis in BTC futures has remained fairly flat throughout the week and is currently at around 8.0% p.a. according to data provided by Glassnode. Bitcoin perpetual funding rates also still remain positive across various exchanges, even despite the most recent pull-back as of this morning. So, this implies that the current pull-back is probably not exhausted in terms of selling, yet.

Bottom Line

Cryptoassets outperformed last week, supported by a significant repricing in monetary policy expectations and short futures liquidations
Our in-house “Cryptoasset Sentiment Index” still remains relatively elevated
However, cryptoassets have recently pulled back as bitcoin investors are increasingly taking profits

Appendix

Informations importantes

Communication à caractère promotionnel. Les informations contenues dans le présent Document sont fournies à des fins d’information et de pédagogie. Elles ne constituent ni un conseil en investissement, ni une recommandation personnalisée, ni une sollicitation en vue d’acheter ou de vendre un instrument financier.

Le présent Document (qui peut prendre la forme d’une présentation, d’un communiqué de presse, d’une publication sur les réseaux sociaux, d’un article de blog, d’une communication audiovisuelle ou d’un support similaire – ci-après le « Document ») est émis par Bitwise Europe GmbH (« BEU » ou l’« Émetteur »).

Bitwise Europe GmbH est constituée selon le droit allemand et agit en qualité d’émetteur des produits négociés en bourse (« Exchange Traded Products » ou « ETP ») mentionnés dans le présent Document. Les ETP sont émis sur la base d’un prospectus de base et de conditions définitives, susceptibles d’être complétés. Un prospectus a été publié ou, le cas échéant, sera publié conformément au Règlement (UE) 2017/1129. Les investisseurs peuvent obtenir gratuitement le prospectus de base, les conditions définitives applicables ainsi que tout supplément éventuel sur le site www.bitwiseinvestments.eu/fr

L’approbation d’un prospectus par l’autorité compétente ne constitue ni une approbation ni une recommandation des instruments financiers concernés.

Capital à risque. Les crypto-actifs sont des actifs hautement volatils et présentent un risque élevé. La valeur des investissements dans des crypto-actifs ou dans des ETP liés aux crypto-actifs peut fluctuer fortement à la hausse comme à la baisse et les investisseurs peuvent perdre tout ou partie de leur capital investi.

Les ETP liés aux crypto-actifs sont des instruments financiers complexes et peuvent ne pas convenir à tous les investisseurs. Ils peuvent exposer les investisseurs à des risques spécifiques, notamment un risque de crédit de l’émetteur, un risque de liquidité, des risques opérationnels ainsi que des risques liés au fonctionnement, à la réglementation et à la valorisation des marchés des crypto-actifs sous-jacents.

Aucun mécanisme de garantie du capital ne s’applique. Selon la juridiction et le mode de détention, les investisseurs peuvent ne bénéficier d’aucun mécanisme public d’indemnisation ou de protection des investisseurs.

Les performances passées ne constituent pas un indicateur fiable des performances futures. Toute déclaration prospective reflète des hypothèses et des anticipations et ne constitue pas une garantie de résultats futurs.

Avant toute décision d’investissement, les investisseurs doivent lire attentivement le prospectus de base, les conditions définitives applicables et notamment la section intitulée « Avertissements ». Une décision d’investissement doit tenir compte de la situation personnelle de l’investisseur, de ses objectifs, de son horizon d’investissement et de sa capacité à supporter des pertes potentielles. Le cas échéant, il convient de solliciter un conseil indépendant en matière financière, fiscale et juridique.

Un avertissement détaillé sur les risques applicables aux ETP liés aux crypto-actifs est disponible à l’adresse suivante : www.bitwiseinvestments.eu/fr/risk-warning

À propos de Bitwise

Bitwise est l’un des principaux gestionnaires d’actifs spécialisés dans les cryptoactifs au niveau mondial. Depuis 2017, Bitwise accompagne des milliers de conseillers financiers, de family offices et d’investisseurs institutionnels à travers le monde afin de faciliter la compréhension et l’accès aux opportunités liées aux cryptoactifs. Bitwise dispose d’une solide expérience dans la gestion d’une large gamme de solutions delta-one, indicielle et active, incluant des ETP, des ETF, des mandats de gestion dédiée, des fonds privés et des stratégies de hedge funds, aux États-Unis et en Europe.