Trading On-Chain- Volume 2 -All Time Highs Edition

This has been a proud week for myself and it should be for every crypto investor. Bulls paraded through the infamous 2017 top at $20,000. Bitcoin didn’t only break all time highs, we absolutely ripped through them into $23,800.

Talking Points

  • Bitcoins All Time Highs

Bitcoins All Time Highs

Bitcoin destroyed $20,000 resistance and it didn't give anyone a chance to hop on board till we saw a local top at $23,800. This has led to a cascade of short liquidations totaling ~$750 Million dollars across all futures exchanges.Such a high level of short liquidations is one of the reasons we saw a relentless $4400(22%) run through all time highs.

Total Liquidation Data

Once Bitcoin saw a local top around $23800 late longs tried to join and were immediately punished. Within a half an hour Bitcoin dipped 1400$(-6.08%) down to $22,400. This caused a total of ~$350 Million dollars of late longs to be liquidated.

Exchange Reserves

Exchange reserves continue to deplete as we saw another ~60,000 Bitcoin that were bought from exchanges since breaking all time highs. Spot exchange reserves have been steadily depleting since last march.

Exchange Reserves Vs Price

This is a tell-tale sign that demand has outweighed supply and consumers are buying up spot reserves .

Funding

Funding has been extremely high since we broke $20,000 as expected. This shows that the market has a strong long bias. Funding has been a great indicator for us to tell when thing may be getting over heated. as funding grows past 0.05% we have to be extremely cautious with funding. During these conditions pull backs become more likely as smart money will pile into shorts to collect the expensive fees longs are paying out.

BTC Funding Rate vs Price

The key take away here is to wait for funding to reset back to lower levels before entering any fresh longs as the probability of a pullback increases.

Open Interest

The Open interest has broken all time highs with Bitcoin. This shows that this move to $23800 was a healthy move and further continuation is more likely then less.

We can see that the top Exchanges through this move has been Okex, CME and Binance. These are the exchanges to pay attention to over the coming weeks. The rapid growth in open interest from CME is something to take note of. We can speculate that the number of Institutions using futures to trade Bitcoin is growing.

Watching Open Interest on Bitcoin call options is absolutely essential right now. The biggest take away here that a majority of these contracts are set to expire at the end of January. A huge sum of money is on the line here betting that we break above $30,000 in a short period of time.

Market Value to Realized Value(MVRV) Ratio

As we blast through $20,000 we have to raise the question. Is Bitcoin overvalued at these levels?

Price Vs MVRV

We can utilize the MVRV ratio to give us a good sense if we are over valued or not. We get this calculation by dividing Market Capitalization by Realized Capitalization. Realized Cap is is a variation of market cap which values each Bitcoin based on the price it was last moved.

There are levels that historically stick out. Anything below 1 is considered under valued and anything over 3.7 is over valued. This oscillator has been extremely accurate to catching tops and bottoms.

Key Takeaway’s on Bitcoin

  • We are in price discovery and dips are for buying

Ethereum Lagging

Bitcoin broke all time highs but the second largest cryptocurrency by market capitalization is still over 100% away from its all time highs at $1400.

ETH/USD vs BTC/USD

When you look at the ETH/BTC pair you can see that Ethereum has had a hard time keeping up with Bitcoin. Historically, Ethereum moves after Bitcoin starts to stabalize. But when Bitcoin is volatile, we normally see Ethereum and other alts get crushed as people flood to sell their alt-coins into Bitcoin. Generally, the best play is to buy Ethereum and other alts when the chart looks ready to appreciate against Bitcoin.

ETH/BTC

If Bitcoin can consolidate and volatility decreases, its likely that we can see ETH/BTC and other alt-coins make a run for its money. Other than that, its a matter of timing the market. Its a good idea to distribute Bitcoin gains into Ethereum over time. At this point it feel inevitable that Ethereum goes to all time highs. But timing is indeed everything.

Key Takeaway’s on Ethereum

  • ETH/USD has increased in value but is being out performed by bitcoin

Big News

Coinbase made an announcement on twitter that they have filed tehir draft registration for a public offering. This will help Crypto as a whole as we see one of the largest spot exchanges in the world hit the US stock market.

Messarri has valued the company at 28 Billions dollars. Coinbase announcing this after all time highs is not a coincidence. They are trying to build on the momentum that Bitcoin is bringing to the crypo-space.

I am an Under Graduate finance student. I have been studying Crypto Currencies since 2016 and my trading is based off of On-Chain analysis and Order Flow.