Weekend Update 5/10

Choppy Weekend of Trading

Dear readers,

Hope you all had a great weekend. This is the first of many newsletters to be released from this channel. Moving forward, Friday’s weekly recap will be sent out on Pomp’s channel, while Monday’s weekend recap and Wednesday's mid-week update (if needed) will be sent out on this channel. I sincerely appreciate the overwhelming support and hope you gain some value from these. Now let’s get into it.

This weekend was choppy, with prices ranging from above $59,000 on Saturday, to a low of $56,265 on Sunday. Let’s take a look at some on-chain developments that are worth noting.

There was a sharp spike in supply held by addresses with 100-1,000 BTC. This can mean several things. Firstly, several new whales stepped in and bought in the same cohort simultaneously. This would be very coincidental and unlikely in my opinion. The second theory is that whales on the border of this threshold and the 1,000-10,000 BTC threshold sold down, crossing over. For example: if a whale had 1,001 coins and sold 2, they’d move down from the higher cohort into the 100-1k cohort. This is possible, but once again would be coincidental that many whales all did this at once. The third theory is that whales took advantage of low transaction fees to spread out their holdings amongst multiple wallets. In my opinion, this theory makes the most sense, but ultimately is likely a combination of all three.

To support the third theory, I’d like to present twofold. Firstly, inverse to the spike in supply held by addresses with 100-1k BTC, there was a drop off in supply held by addresses with 1k-10k BTC at the same time. To me, this suggests that some of these whales sold off, moving into the 100-1k cohort, but also rebalanced their holdings. For example, a whale has 10K BTC in one address, takes advantage of low transaction fees, and moves those BTC into 10 wallets each with 1K BTC to diversify risk.

Second, there was an hourly spike in transaction fees at the same time these moves of supply between cohorts. This is more evidence to me of reshuffling. However, once again there was some selling of whales on the border of the cohorts playing into this as well.

Funding rates still remain low despite price grinding up over $10,000 since the $47,000 bottom on April 25th. This means that traders are still likely scared to go long after the carnage that incurred during the massive liquidation events of late April. It also means that traders are in disbelief at this rally. This, along with massive stable coin prints, leads me to believe that this price rally is being driven by spot buying, not speculation. In other words, this price rally since the $47k low is very healthy and sustainable.

Futures open interest is still overall pretty flat, although it has added about $1.5B since the low during last month’s price correction.

Hash rate also has made another leg up. This really shows the resiliency of the Bitcoin network and is great to see. Looking ready for new all-time highs this week.  

Lastly, realized price has crossed 2017 market price all-time highs, reaching $20,000 for the first time. Realized price is derived from realized cap. Realized cap is the total value of coins based on when they were last moved. This cap is then divided by supply to get realized price. This leg up in realized price shows strong validation of these price levels from the market, very similar to the on-chain volume discussed in Friday’s newsletter sent out on Pomp’s substack. This also shows we are relatively early in the bull run. Realized price crossed previous market price ATH in 2017 at $3,250. Not saying you should base any price projections based off that, but just shows we still have a ways to go. Healthy bull market.

In conclusion, not much has changed. Weekends are often choppy and have lower volume due to decreased participation from institutions.

Looking forward to touching base later this week, have a great Monday guys. Cheers!