Bitcoin commentary


Analyzing Bitcoin from different angles to understand emerging factors, navigating related risks and scanning for potential opportunities. Get statistical facts and figures for different timeframes for active or passive traders and hedgers. Andrew Han, Head of Institutional Solutions at Traddictiv, shares his views in this weekly commentary.

Highlights | April 13
  • Price Action Strong. Bitcoin hovered under $60,000 for most of the week, broke that level in weekend trading and reached $61,219. The all-time high at $61,788 remained as overhead resistance with a re-tested prior daily support range between $47,077 and $51,992. Midweek, bitcoin found near term support between $53,966 and $56,630.
  • Trading Volumes Moderate. Bitcoin futures on global regulated exchanges by aggregated daily volume increased to a weekly average of $2.4B, according to skewAnalytics. Wednesday saw an aggregated daily volume of $5.0B set the high for the week.
  • Indirect Exposure to Bitcoin. Coinbase will begin trading 14th April on the Nasdaq exchange under the ticker symbol “COIN” giving investors the opportunity to indirectly gain exposure to bitcoin. Coinbase had earlier reported on Wednesday earnings of $1.8B in the first quarter of 2021, a nine-fold increase from the same period last year. Rival Kraken’s Chief Executive Officer Jesse Powell in a CNBC interview stated that Kraken is looking to go public in 2022. 
  • Large Purchases of Bitcoin. Grayscale Investments (Grayscale) added $1B of bitcoin to its Grayscale Bitcoin Trust (GBTC) having already $38.1B under management as of 5th April.  Meanwhile, MicroStrategy added 253 bitcoins for $15M to its already reported holdings of 91,579 bitcoins as of 5th April worth $5.5B at $60,000 per bitcoin.
  • Bitcoin Miner Asset Acquisitions. Bit Digital, Inc., a bitcoin mining company, announced the completion of the purchase of 4,871 bitcoin miners in the first quarter of 2021 increased its lead as one of the highest operating bitcoin mining computing power (or hash rate) among all listed bitcoin miners. Riot Blockchain, Inc. (Riot) announced a large-scale contract for the purchase of 42,000 S19j Antminers for $138.5M from Bitmain Technologies Limited. This purchase is expected to increase Riot’s bitcoin mining hash rate. Adding to Riot’s acquisition spree for $650M, is Whinstone US, Inc. which is the owner and operator of North America’s largest bitcoin hosting facility, with 300 MW in developed capacity and a long-term power purchase agreement with favorable terms. 
  • Bitcoin Exchange Traded Fund (ETF) Commitments. Canadian digital asset manager 3iQ Corp filed a prospectus for the 3iQ CoinShares Bitcoin ETF with the securities regulatory authorities for listing on the Toronto Stock Exchange (TSX) under the symbol “BTCQ”. In the United States, Kryptoin, an asset manager focused on crypto investment products, re-filed for a bitcoin ETF at the same time as WisdomTree’s ETF is under review by the U.S. Securities and Exchange Commission (SEC). Grayscale Investments further announced last week that it is committed to converting the GBTC to an Exchange Traded Fund in the right regulatory environment. 
  • Correlation Trends Resume. Negative U.S. Dollar correlation to bitcoin remained unchanged while bitcoin correlation moved positively in weekend trading following higher equity markets and Gold which both closed higher on Friday than the previous week.
Weekly Technicals 
Source: ICE Connect, April 11, 2021    

Important information: The information herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation.   
BITCOIN (BTCUSD) Perspective
Daily Trend: UP

Price retraced to the Fibonacci 61.8% level ($50,204) within the buy UFO range ($47,077 - $51,992) from the all-time high set at $61,788 and held above the $50,000 level along the uptrend line.  Bitcoin created a pivot low at $50,333 on 25th March and closed the month strong at $58,950. Early April had seen movement towards $60,000 and rolled over last weekend towards a 4-hour support range between $53,966 and $56,630. Price moved from 4-hour support, cleared $60,000 and reached $61,219 in weekend trading.    

Source: ICE Connect
Weekly Trend: UP

The 1st week of March saw a rebound in price. Follow through in buying pressure saw a new high in weekend trading for the 2nd week of March. A spinning top pattern is seen at the close of the 3rd week of March which could have represented indecision about the immediate direction of bitcoin. Price continued to weaken through the week in volatile price action and ended the 4th week strong and recovered some of the initial weakness. The final week of March ended on a Wednesday with price headed towards $60,000. Friday’s close on 2nd April saw bitcoin trade weakly higher after the release of the U.S. Non-Farm Payroll’s report which sent equities convincingly higher. The recent weekend saw the lagged return of positive price correlation to equity markets.    

Source: ICE Connect
Monthly Trend: UP

Buying interest at the end of the month of February paused while March ended strong for bitcoin. The start of April held near the highs and looked to challenge the all-time high.     

Source: ICE Connect

6-Month Performance NYSE ® BITCOIN INDEX vs U.S. DOLLAR INDEX ® and GOLD INDEX
U.S. DOLLAR INDEX® (DXY) (-1.7%)    

NYSE® Bitcoin Index (NYXBT or Bitcoin) continued to outperform DXY and rose as DXY fell indicating an inverse correlation relationship where bitcoin high pivots closely mirrored low pivots in DXY. Bitcoin moved lower towards the end of the 3rd week of March as DXY gained some ground having broken out higher from a range. Bitcoin had since recovered close to the all-time high while DXY moved lower since peaking on 31st March.
GOLD INDEX (XAU) (-0.5%)    

Gold retreated from all-time highs as bitcoin continued to make new highs. Over the period November 2020 to January 2021 there was a positive correlation which diverged with bitcoin having accelerated higher. The positive correlation resumed in the last week of February where both fell in tandem. The first week of March had seen both Gold and bitcoin trade in a range. The second week of March continued the positive correlation to Gold with both moving higher against the U.S. Dollar. The third week of March saw Gold move towards $1,760 and closed that Friday within the prior days’ range. The fourth week of March had seen range bound price action between $1,715 and $1,750. The last three days of March saw Gold sell off towards $1,678 and rebound to $1,730 on April 1 forming a double bottom pattern and this week reached $1,758.  
Source: ICE Connect. Price Comparison from Oct 1, 2020 (~6 Months)
Source: ICE Connect. Range ending April 11, 2021    

6-Month Performance NYSE ® BITCOIN INDEX vs Major Asia Pacific Equity Indices
STRAITS TIMES INDEX (STI) (27.3%)

HANG SENG INDEX (HSI) (20.8%)

KOSPI COMPOSITE INDEX (KOSPI) (32.8%)

THAILAND SET INDEX (SET) (25.6%)

SHANGHAI COMPOSITE INDEX (SSE) (5.5%)

SP500  INDEX (SPX) (22.1%)

Source: ICE Connect. Price Comparison from Oct 1, 2020 (~6 Months)

Equivalence    

The table provides equivalent values between Bitcon (XBT) and the Bakkt ® Bitcoin (USD) Cash Settled Monthly Futures (BMC) contract for common technical calculations used to identify key price values for a market. Fibonacci for retracement levels, simple moving averages for trend analysis, support and resistance lines and sell/buy UFOs for potential locations may indicate where sellers/buyers could enter/exit the market.
Source: ICE Connect
Weekly Educational Bite 

Terminology and concepts of the digital asset marketplace. 

What is the Notional Value of a Futures Contract?   
Notional value of a futures contract is how much total value the contract theoretically controls.

Contract Size * Underlying Price = Notional Value

Bakkt ® Bitcoin (USD) Cash Settled Monthly Futures (BMC) for example has a contract size of 1 bitcoin and assuming the BMC price is $60,000.00, the notional value of the futures contract is $60,000.00.

What is the difference between Margin and Leverage?    
Margin is the amount of money deposited with the broker to control a futures contract. It is determined by the futures exchange and may be adjusted by the broker to manage risk to their clients.

Leverage is the ability to use less money to theoretically control 1 futures contract compared with buying the product underlying the contract outright which amounts to the notional value of the futures contract.

To calculate how much leverage a futures contract gives, divide the notional value of the contract by the margin. 

The BMC example above had a notional value of $60,000.00 and with a margin requirement of $18,000.00, is equal to approximately three times leverage on our money ($60,000.00 / $18,000.00 = 3.33).

What is a Point and a Tick?
Point is the smallest price increment that can occur on the left side of the decimal point. (Example. 90.000)

Tick is the price movement that occurs on the right side of the decimal when looking at the price of a futures contract and is the smallest possible price change measured by markets. A Point is composed of Ticks. (Example. 90.000)

Mini US Dollar Index® Futures (SDX) has a minimum price fluctuation of $0.005 representing one tick and would move from 90.000 to 90.005.  It takes 200 ticks to make one point or a move from 90.000 to 91.000. 

Limitations
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To retail investors: Futures contracts based on bitcoin may pose specific risks. Such risks may arise from greater volatility in prices resulting from a range of factors. Those risks could in turn affect financial outcomes associated with maintaining required margins or any losses at final contract settlement.
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