Crypto News

Ethereum Gains Favour Over Bitcoin Among Institutional Investors

In a recent report by Bybit Research, it was revealed that institutional investors are now favouring Bitcoin over Ethereum, with an 80% allocation to these two prominent assets. Ethereum, the second-largest digital asset globally, has surpassed Bitcoin in institutional holdings, while Solana has seen a decline in popularity among institutions. The report, which covers data up to January 31st, 2024, indicates a decrease in the allocation of altcoins in institutional portfolios, with only a 1% allocation to Solana.

Ethereum has shown remarkable performance, outpacing Bitcoin by 4% since the beginning of the year and rallying 33% year-to-date against the U.S. dollar. This surge in Ethereum's value is attributed to several factors, notably the impending Ethereum Dencun upgrade scheduled for March 13th, 2024. The Dencun upgrade promises significant enhancements to Ethereum's scalability and network efficiency.

Despite the institutional preference for Ethereum, retail investors remain more bullish on Bitcoin. This shift in institutional sentiment towards Ethereum can be attributed to its deflationary supply, limited Ether token availability on exchanges, and the increased staking activity resulting from Ethereum's transition to a proof-of-stake consensus mechanism, known as 'the merge,' in September 2022.

Additionally, Ethereum's growing decentralised finance (DeFi) ecosystem and the roll-out of Layer-2 networks contribute to its increasing appeal among investors. Overall, these factors have propelled Ethereum to the forefront of institutional investment strategies, marking significant milestones in its development and adoption within the digital asset landscape.

Miners Offload Substantial Sum Of Bitcoin, But Holdings Stand Firm

Last month saw miners steadfastly holding approximately $40 billion worth of Bitcoin, despite selling off a similar amount, maintaining a reserve of 1.82 million BTC throughout February, just slightly lower than January's 1.827 million. As the Bitcoin halving looms on April 19th, 2024, with miners' block rewards set to be halved from 6.25 to 3.125, there's a concerted effort to maximise profits before this quadrennial event.

The most substantial volume of Bitcoin sold by miners occurred on February 26th, surpassing 40,000 BTC. This surge in sales notably propelled Bitcoin's price to a then-high of $54,910 on the Binance exchange. In recent months, CleanSpark, a Bitcoin mining company publicly traded on the U.S. stock exchange, has implemented trading desks to optimise the management of their Bitcoin holdings, aimed at reducing operational costs. Similarly, other entities in the Bitcoin mining industry, like Terawulf, are strategically positioned to mitigate the impact of diminishing mining rewards.

The halving approach intensifies the focus on capitalising on profits in the lead-up to the event, characterised by a meticulous balance of selling off assets and holding reserves. With the halving's regular recurrence every four years, stakeholders in the Bitcoin ecosystem are keenly aware of the significance of maximising returns in the pre-halving period, ensuring a resilient stance amidst the evolving dynamics of the cryptocurrency landscape.

Robinhood Teams Up with Arbitrum to Revolutionise Swap Experience for Lightning-Fast Transactions

Robinhood Markets, renowned for its online financial investment and trading services, made headlines on Thursday by announcing its partnership with Arbitrum, the layer-2 scaling solution for Ethereum. This collaboration aims to enable users of the Robinhood app to access swaps through its Robinhood wallet. The partnership, unveiled last week, seeks to leverage the speed and efficiency of the Arbitrum network for mainstream adoption.

Robinhood is widely recognized for its user-friendly interface, particularly beneficial for novice investors who may find complex features daunting. Currently, the platform supports trading for approximately 15 cryptocurrency assets. Despite its user-friendly design, Robinhood offers limited functionality compared to specialised cryptocurrency wallets or decentralised exchange (DEX) platforms. However, the partnership with Arbitrum presents an opportunity for Robinhood to enhance its offerings. While its primary focus remains on facilitating the buying, selling, and swapping of supported crypto assets, Robinhood's well-known commission-free model remains a cornerstone of its business strategy.

Should Robinhood choose to expand its roster of supported cryptocurrencies in the future, this move could attract even more users to the mainstream crypto space, leveraging Arbitrum's layer-2 capabilities for faster transaction execution. Notably, Arbitrum's native token experienced an 11% surge following the announcement.

Crypto Analysis

Bitcoin (BTC)

Bitcoin recently emerged from 11 days of sideways movement, breaking through a notable green horizontal zone depicted on the chart below. This breakout led to a surge in value, propelling Bitcoin to reach its current price of $65,555 at the current time of writing on early Monday morning, marking price levels unseen in the past 28 months. The last time Bitcoin reached such heights was back on November 15, 2021.

In the previous week's analysis, the focus was on Ethereum potentially surpassing Bitcoin in terms of performance based on technical indicators. However, it's crucial in technical analysis to remain open to all possibilities. While the upward movement of Bitcoin was acknowledged as a possibility, it's imperative not to be blinkered, and trade what you see, as overlooking other scenarios can lead to significant losses.

The breakout was accompanied by strong volume, indicating robust market participation. Currently, there are few short-term resistance levels visible on the daily chart. The Visible Range Volume Profile (VRVP) indicator is a trading analysis tool that evaluates trading volume across various price levels within a designated visible range on a chart. This range is usually within a specific time frame or price area chosen by the trader. It offers valuable perspectives on market sentiment and probable directional changes and we can see that there is no significant volume at present on this particular chart compared to the previous price below.

A closer examination of the 4-hour chart revealed an intriguing development: the formation of a triangle pattern alongside a hidden bullish divergence in the Relative Strength Index (RSI). This pattern often signals potential market bottoms or lows, where the momentum indicator trends downward while the price trends upward. It's important to note, though, that this pattern could have led to a breakout in either direction but shifted to the upside on Sunday morning.

A glance at the monthly chart reveals that Bitcoin is at extremely overbought levels, not seen since April 2021, and hitting the notable horizontal green-shaded zone, indicating a significant area of long-term resistance. The current price is approaching this zone, extending up to the all-time high of $69,000. While short-term resistance may be encountered at this level, the sheer size of last month's candle body stands out, surpassing the magnitude of any previous candles over the past 27 months and this in itself shows very strong current price action. 

Examining the Visible-Range Volume Profile (VRVP) on this chart, it's evident that there is an exceptionally small reading, with nothing notable on the upside up to November 2021's all-time high at $69,000. Consequently, there appears to be very little standing in the way of reaching that significant milestone.

This week suggests a compelling narrative: despite the inherent uncertainty in cryptocurrency markets, coupled with the strong fundamentals of Bitcoin, it appears increasingly probable that the world's largest digital asset will reach new all-time highs. The question seems to be not if, but rather when, this milestone will be achieved.

I eagerly anticipate revisiting Bitcoin's trajectory in the coming week.

TOTAL3 (altcoins excluding Ethereum) & BTC.D (excluding major stablecoins)

This week, I've included the TOTAL3 and the BTC.D charts to track Bitcoin's remarkable strength. It's essential to analyse whether altcoins have mirrored Bitcoin's strong performance. Let's start with the Total3 chart. At the beginning of the week, we witnessed a confirmation of the break above old resistance, which transitioned into new support, as indicated by the blue horizontal line at around $532B. The momentum accelerated throughout the week and into the weekend. This support demonstrated classic characteristics, persisting for the better part of the week, bouncing numerous times before a significant surge. Notably, it found support on the 10-EMA and progressively distanced itself from the moving average as the week unfolded.

Presently, we find ourselves in overbought territory, with the RSI momentum indicator reaching an extreme area, although this can persist for a considerable time. On the weekly chart, we've surpassed the 0.382 Fibonacci level from the November 2021 all-time high of $1.131T down to the significant monthly low of $286.90B, which aligns with $708.95B. While this isn't a Fibonacci number, it's crucial to consider as it marks the halfway point between a significant high and low, evident by the confluence of support illustrated by the two green arrows to the left of the chart.

The subsequent area of significance is the 0.618 Fib level, resting at $808.55B. Amidst the current bull market phase, we must question whether there's a possibility of a price reversal. However, given that we've confirmed a major double bottom as marked on the weekly chart, it's highly improbable, but not totally out of the question that we will revisit that level in the future. This assessment is bolstered by an examination of other major cryptocurrency charts, with Bitcoin poised on the brink of a new all-time high. If the price can then break above the 0.618 Fibonacci level and close above it, then it is highly likely that altcoins will also attempt to reach the old all-time high of $1.31T.

A glance at the price action of the Bitcoin Dominance chart, excluding major stablecoins, reveals that the price failed to capitalise on Bitcoin's move above the parallel trendline depicted on the left side of the chart. This lack of momentum aligns with Bitcoin's early week surge followed by a surge in altcoins during the latter part of the week and now is moving up on today’s daily candle on early Monday morning.

On the weekly chart displayed on the right, a notable Head & Shoulders pattern is taking shape, presenting a tidy formation. A break and close below the neckline of this pattern would provide a measured objective of around 51%.

Although it is extremely hard to deny that we are indeed experiencing some kind of an altcoin season at present, the question we have to ask is whether altcoins can indeed outperform Bitcoin over the near to medium term, and it appears more plausible now than it did at the beginning of the week, when Bitcoin experienced its remarkable surge. However, the fake out that commenced on Thursday, leading to a drop back below the upper channel trendline, could serve as a critical turning point. If Dominance can decline further and retest the lower trendline, the likelihood of a huge altcoin season that eclipses Bitcoin significantly increases.

Polkadot (DOT)

Our final chart of the week features Polkadot, currently ranked at number 13 in market cap, with an undiluted valuation of $10.5 billion. It boasts a daily trading volume of $557 million, representing a healthy 5.57% of its market cap. Generally, a volume between 5 to 10% of market cap is considered robust for any asset.

Polkadot has recently surpassed the $10 mark, marking a significant milestone. At the time of writing, early Monday morning UK time, it broke through daily resistance and closed above it at approximately $9.59, as indicated by the green horizontal shaded area on the chart and the accompanying blue arrow.

This price level hasn't been seen since June 2022, additionally, both the 100-day and 50-day moving averages are trending upwards, with the price comfortably above the 10-day exponential moving average, indicating a strong upward trend.

However, it's worth noting that the RSI momentum indicator suggests Polkadot is currently extremely overbought, potentially signaling an imminent pullback. Despite this, the fact that the price has breached weekly resistance on strong price action suggests that the rally may persist in the short term.

On the weekly chart, a significant breakthrough of resistance is evident, highlighted by the two blue arrows on either side of the chart and the green-shaded horizontal area. This breakthrough signifies a major shift in price action to the upside.

The monthly chart presents an intriguing picture, as illustrated below. We're nearing the first horizontal resistance line at $10.37, which dates back to July 2021, as indicated by the blue arrow on the left side of the chart. However, it's not until we reach the 0.236 Fibonacci level, calculated from Polkadot’s November 2021 all-time high of $55.09 down to the major monthly low of $3.56 in October 2023, that we encounter significant monthly resistance, marked by the red arrow.

It's noteworthy to observe, as indicated by the green arrows on the chart, that the 0.382 Fibonacci level at $23.24 also presents a substantial confluence of resistance. Monitoring this area will be crucial if and when we approach it.

Although Polkdot has broken large barriers over the last week, we are hitting some weekly resistance. There is the possibility that the price could find a local top shortly due to overbought indicators and then continue in the medium term towards the important monthly Fibonacci levels we just mentioned. I look forward to revisiting the Polkadot chart on any further developments.

In Summary

The continued uptrend of Bitcoin, inching closer to its all-time high, coupled with altcoins pushing forward, signals a robust bull market. However, the fact that altcoins still have a significant gap to bridge to reach their all-time highs can be viewed in both positive and negative light.

On the positive side, if Bitcoin not only surpasses its all-time highs but continues to surge, it's plausible that altcoins, while they may not reach their all-time highs in the near term, could still experience substantial upside. Despite approaching extreme overbought levels, the cryptocurrency space appears to be in a largely favourable position, both technically and fundamentally.

Macro News

Bank of Japan Ready to Raise Rates?

Last Friday 29th February, Bank of Japan (BOJ) board member Hajime Takata indicated they are nearing the end of negative interest rates. The BOJ has been the only major central bank to buck the rate hiking trend of the last two years, as the Japanese economy has struggled with disinflation and deflation since the 1980s.

“There are uncertainties for Japan’s economy but my view is that the price target is finally coming into sight,” Takata said in a speech on Thursday to business leaders. Takata said Japan is “at a juncture for a shift in the entrenched belief that wages and inflation won’t rise”.

Takata said at a press conference that afternoon that “It’s fine to shift the gear one notch lower” and confirmed prior messaging from BOJ officials that ending negative rates would keep policy accommodative. Takata said “we wouldn’t just keep hiking over and over”.

The Japanese yen strengthened following the news but quickly pared its gains vs the US dollar. There are concerns around significant leveraged positioning in the Japanese yen carry trade, where investors borrow yen to fund trades in higher yielding currencies, could be affected by the BOJ’s change in policy stance. The Bank is fully aware of the consequences of surprising markets however, and are taking a very slow approach to transitioning policy to positive rate territory.

Rates Look Set to Remain Higher for Longer

Last week the Royal Bank of New Zealand (RBNZ) held rates at 5.5%, citing “[o]ngoing restrictive monetary policy settings are necessary to guard against the risk of a rise in inflation expectations” and that “[r]ecent drops in core inflation and business inflation expectations are encouraging, but they remain above the 2 percent mid-point of the committee’s target band.”

Whilst inflation has widely fallen across the global economy, rate setters remain cautious on cutting too soon as wage growth remains strong and official inflation measures remain above their 2% target.

T Rowe Price economist Tomasz Wieladek said in a note the “ECB [European Central Bank] is concerned about persistence in domestically generated inflation” and that “[f]orward-looking indicators suggest that services inflation may stay at these highly elevated levels for a long time”.

Market expectations in January were for the Fed to cut 7 times this year but that’s changed now to 4 cuts, following strong economic data and messaging from Fed speakers. Below is a chart from Jim Bianco at Bianco Research, showing the difference between what the Fed says they will do and what the market had priced in January vs where pricing is today:

Switzerland economic data also suggests the market has mis-priced Swiss National Bank cuts, with CPI prints at or above expectations:

The Royal Bank of Canada is set to announce its policy rate decision on Wednesday, followed by the ECB on Thursday. The US Federal Reserve, Bank of England and central banks of Japan, Australia and Switzerland all announce rate decisions later in March.

Bitcoin ETFs

The spot bitcoin ETFs have made bitcoin far more accessible and have been breaking ETF records and most expectations, for both volume and flow statistics. Bloomberg ETF analyst Eric Balchunas who, along with James Seyffart, says ETF flows tend to be sticky as investors tend to be loyal (and forgetful).

But Jim Bianco, who has been a bitcoin investor for 7 years and custodies his own crypto, has words of caution. His view is that ETF volume and flows have largely been speculative, tweeting “Degens gone wild” and comparing bitcoin ETF trade volume to that of Gamestop (GME).

Eric Balchunas however, with his 20 years’ experience as an ETF analyst, has been doing a great job of countering Bianco’s sceptical perspective with well reasoned arguments on why this is organic growth.

Joseph Wang reports bitcoin is all over US media and as more asset managers and institutional investors allocate just a very small amount to these ETFs, that would make a big difference to the market cap of bitcoin. With the halving less than two months away and current ETF demand already well in excess of daily mined bitcoin, prices could rise considerably.

Fidelity Investments Canada add 1-3% bitcoin allocation to their All-In-One funds. Canada tend to lead the US and this is a strong signal that other funds will follow Fidelity’s lead.

JP Morgan have changed their perspective on bitcoin and cryptoassets and are also talking about the halving. Coindesk reported JP Morgan wrote in a note to clients they “think this bitcoin appreciation is contributing to better spot bitcoin ETF flows, which is in turn driving bitcoin prices higher, and pulling other tokens higher as well”.

JP Morgan upgraded Coinbase (COIN) from underweight to neutral, following the rapid post-ETF price appreciation of bitcoin and anticipated rise in Coinbase earnings. However they remain cautious as they see spot bitcoin ETFs as competition to COIN’s share price.

Bill Miller of Miller Value Partners discussed their position in bitcoin and MicroStrategy (MSTR) on CNBC’s Closing Bell on Friday. Miller says MicroStrategy “still has a massive runway ahead of it” and "[i]t's our position that we are in the very early innings today of a massive capital repricing event."

To keep a balanced perspective, JP Morgan are cautioning bitcoin’s price could fall towards $42,000 after the halving, as reduced block rewards from 6.25 to 3.125 will reduce miners’ profit margins. This could already be being priced into publicly traded bitcoin mining stocks as they have lagged the rapid appreciation in the underlying bitcoin price of the last couple of weeks.

Do we see a plateau, or even a sizeable correction post-halving? As Ash reported above, Bybit’s survey suggests institutional preference has swung to ethereum over bitcoin although there are plenty of signs that Wall St and the ETF target market are only beginning to wake up to what bitcoin is and flows from this market demographic should sustain and increase steadily over time as more brokers and fund managers add bitcoin into their offerings.

This Week’s Economic Events

Monday

• ECB Governing Council member Robert Holzmann speaks

• Fed’s Patrick Harker speaks

Tuesday

• Japan’s Tokyo CPI

• BOJ Governor Kazuo Ueda speaks

• China Caixin services PMI

• China’s 14th National People’s Congress begins

• UK BRC retail sales monitor, S&P Global Services PMI

• Eurozone S&P Global Services PMI, PPI

• US factory orders, ISM services, S&P Global Services PMI

• More than a dozen US states hold Republican and Democratic primaries

Wednesday

• Australia GDP

• UK Chancellor Jeremy Hunt unveils annual budget

• UK S&P Global construction PMI

• Eurozone retail sales

• Bank of Canada rate decision, Canada Ivey PMI

• Fed Chair Jerome Powell testifies before House committee

• Fed issues Beige Book survey of regional economic conditions

• Fed’s Neel Kashkari, Mary Daly speak

Thursday

• China trade, forex reserves

• BOJ board member Junko Nakagawa speaks

• UK Halifax house price index

• ECB rate decision

• US initial jobless claims, trade

• Fed Chair Jerome Powell testifies before Senate committee

• Fed’s Loretta Mester speaks

• US President Joe Biden delivers the State of the Union address

Friday

• Eurozone GDP

• Canada unemployment rate, employment change, participation rate

• US nonfarm payrolls, unemployment

• Fed’s John Williams speaks

Earnings Calendar