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Weekly Recap

This week from May 9 to May 15, BTC reached highest near 34200, the lowest close to 26600, concussion range reached about 22.19%.

Observe the recent chip distribution map, around 29500 there are intensive chip transactions, there will be some support or pressure.

ž Analysis:

1. 22,600 ~ 29,500 about 989,000 chips

2. 35,690 ~ 40,500 about 2,191,000 chips

• Probability of failure to break 35690–40500 is 61.5%

Macro news：

International situation：

1. NATO allies expect Finland and Sweden to apply to join NATO in the coming days. Russia said that if it applied to join NATO, Russia would have to take ‘military-actions’ measures and would be ‘forced to take countermeasures’.

2. The U.S. Justice Department has passed a bill to sue OPEC for manipulating oil prices.

3. The presidents of Mexico, Bolivia and Brazil said they would not attend the Americas summit because Biden declined to invite Cuba, Venezuela and Nicaragua.

4. The U.S. House of Representatives approved more than $40 billion in aid to Ukraine, which is currently blocked in the Senate.

• **Analysis： **We still believe that the conflict between Russia and Ukraine will continue for some time, and at the same time, this is also a point in time when international relations change. We still maintain the conclusion that energy and agricultural product prices will remain high in the medium term.

US Macroeconomic Indicators:

CPI：

The U.S. CPI rose 8.3% year-on-year in April, down from the 8.5% increase in March, but higher than market expectations of 8.1%;

The CPI increased by 0.3% month-on-month, which was much lower than the 1.2% in March, still higher than the market expectation of 0.2%. The core CPI rose 0.6% month-on-month, an expansion from March’s 0.3% increase and also higher than market expectations of 0.4%.

Fed policy:

In an interview on Thursday, Powell reiterated his desire to stabilize prices and keep inflation down to 2 percent, reiterating that two 50 basis-point rate hikes are likely next. Other Fed members also spoke in agreement to continue raising rates by 50 points at the next meeting.

**Consumer Confidence Index: **The University of Michigan consumer confidence index continued to fall to a 2011 low after recovering last month. The preliminary reading of the University of Michigan’s consumer confidence index in May was 59.1, compared with the expected 64, and the final value in April was 65.2. The preliminary index of expectations was 56.3, erasing most of the gains made in April.

• Analysis:

The overall inflation is likely to have peaked, but the core CPI exceeded expectations (0.6%/0.3% last month), which is the main reason for the slow decline in inflation.

Commodities in the core CPI fell, indicating that the transportation supply chain problems caused by the epidemic have been alleviated. However, it remains to be seen whether it will be affected by the Russian- Ukrainian conflict and the epidemic in China.

The price increase in the service industry is mainly due to the outbreak of retaliatory consumption travel after the recovery after the epidemic, which may fall back after the summer.

The housing sub-item rose slightly, and may continue to rise for several months.

Overall, the growth rate of inflation will continue to fall in the next two to three months, but the rate of decline is likely to be slow. It will not have much impact on the Fed’s plan to raise interest rates and shrink its balance sheet.

In terms of consumption, US consumption could be weaken in the coming period for three reasons:

1: The disappearance of the stock market wealth effect caused by the release of water, and the bottoming out of excess savings will lead to a weakening of personal spending power. Excess savings may run out in 3–4 quarters. 2:Superimposed high inflation, resulting in lower willingness to spend. 3:Rising interest rates will increase the cost of housing and car loans. Mortgage rates have risen above 5.2%, and new home sales have fallen for three consecutive months.

Main market performance:

1: The S&P lost 2.41% this week to close at 4023.89 points. The Dow fell 2.14% this week to close at 32,196.66 points, and the Nasdaq fell 2.8% this week to close at 11,805 points.

2:West Texas Intermediate crude for June delivery gained 0.7% for the week to $110.49.

3:Gold futures for June delivery on COMEX fell 3.8% this week to $1,811.47 an ounce.

4: US dollar index closed at 104.5, up 0.8% for the week.

5:Benchmark 10-year U.S. Treasuries fell 0.18% to end 2.93% For the week, stock market outflows were $6.2 billion and bond market outflows were $11.4 billion.

• **Analysis： **The current PE(TTM) of the S&P 500 is 16.8 times, slightly higher than the average valuation since 1990 of 16.2 times.

(Chart below: S&P 500 dynamic P/E, source: Kevin Strategy Research account)

The current S&P 500 static P/E is 19.8 times. According to the historical matching degree between the current interest rate and the PMI manufacturing index, the corresponding PE should be around 16.5 times.

（Figure below: S&P 500, source: Kevin Strategy Research public account)

The current inflation in the United States is slowing down, but according to the first quarter economic data, manufacturing index and other data, it can be inferred that the current growth has slowed down, and there may be a situation of “stagflation” in the medium term.

(Chart below: Asset classes ahead of inflection points, source: CICC, Bloomber

g)

During periods of stagflation, crude oil, Treasuries, and gold generally outperform the stock market, especially growth stocks. At present, the fundamentals of US stocks are affected by multiple factors such as slowing economic growth, the conflict between Russia and Ukraine, and the Fed raising interest rates and shrinking the balance sheet.

At present, U.S. stocks are still under heavy pressure, and the outflow of funds has not stopped. The market is still relatively fragile, and there is still a large risk of volatility in the follow-up.

Funding news:

1:ARK three funds bought 546,579 Coinbase shares.

2: Justin Sun withdraws $100 million from the AAVE pool and transfers it to Binance.

Other related news:

1:The LUNA and UST storm have drawn the attention of U.S. regulators. Treasury Secretary Yellen said on May 13 that stablecoins will be regulated. 2: The UK is planning to bring stablecoins into the scope of electronic payments regulation.

3: USDT unanchored US dollar more than 10% in a short period of time, but soon completed its return to the anchor. 4: Japanese financial giant Nomura Holdings began offering BTC derivatives trading to Asian clients. 5:Grayscale BTC Ethereum Trust Discount Hits New High. BTC -30.65%, Ethereum -33.71%.

6: FTX US applies for an FTX trust. 7:Venezuela considers 3% tax on foreign currency and cryptocurrencies.

**Long-term Insights: **To see how we’re doing in the long run; Bull/bear/structural change/neutral.

**Mid-term probe: **To analyze where we are now, how long we are in this phase, what will happen.

**Short-term Watch: **used to analyze short-term market conditions; And the likelihood of certain directions and certain events occurring under certain conditions.

Long-term Insights

• Net Transfer Volume from/to Exchange
• Global Price Change
• NVT Price Model
• Realized Capital Price

In last week’s study, the black Swan was deliberately brought up in long-term insights.

Now we still review what happened on chain.

(Figure below: Net transfer volume of exchange)

The daily net inflows hit a four-year high, dealing a blow to an already fragile market.

It is worth noting that from this perspective it is higher than the net transfer as of March 12, 2020.

(Figure below global time zone profit and loss)

The data indirectly reveal the purchasing power of global time zones;

1. Europe and the US are still weak in purchasing power and are even the main sellers.

2. At present, the main buying side is Asian purchasing power.

What is needed is to see an inflection point in purchasing power in the US and European time zones.

Otherwise, the market will remain fragile if only Asia is the main buying force, and the following market may remain difficult due to insufficient institutional capacity.

(The figure below shows network emotional positivity)

Here is the new model debugged earlier:

Mainly used to look at the emotional positivity of the whole network, which is temporary.

In fact, it can also be understood as network utilization and effective inertia.

When this declines, caution is needed and market risk is noted.

From the previous historical back test, a huge decline in the weight of the judgment than the rise of the market impact and weight higher.

Caution is needed.

About the possibility that price have hit the bottom.

(Realized capital price as shown below)

To determine the bottom, there are two dimensions:

1. The space

2. The time

There are several premises at the bottom of this discussion space:

1. extreme pins are excluded

2. Timing has not yet coming

3. Real purchasing power in Europe and the US has also been slow to reverse.

4. The purchasing power of the stabilization currency remains weak

5. No further impact on the overall external disk macro

This model consists of two important data:

1. Realized price; Value different segments of supply at different prices (rather than using the current daily closing price). Specifically, it is calculated by valuing each UTXO based on the price at the time of the last move, divided by the supply

2. Balance price; Is the difference between the realized price and the transfer price. The transfer price is the cumulative sum of the number of days of coins destroyed in dollars, adjusted for the amount of supply and total time bitcoin has been in circulation since its creation. Equilibrium prices attempt to detect major cycle bottoms.

Overall, if there is still no certainty opportunity for a longer period of time, then the 19,000 to 24,500 area may be a good buying opportunity.

Mid-Term Probe

· Unspent supply for long-term traders

· BTC Age Maturity Band

· Market-wide unrealized profit and loss ratio

· Long-term trader cost basis

· Stablecoin to BTC market cap ratio

· Total Stablecoin Circulation

· Number of addresses above 1BTC

· Proportion of illiquid supply

· Changes in the number of addresses with non-zero balances

· Coin days destroyed

· Miners Net Position

· Diamond Lot Net Position

· Giant Whale Unused Supply

· Futures Clearing Volume

· Realized holding ratio

Firstly the fundamentals of long-term traders.

(Chart below Unspent supply for long-term traders)

Long-term traders/holders have reduced their holdings of 50K BTC in the recent market.

If you stand in the time dimension, the number of coins is not too much.

More impact is reflected in the fact that changes in short-term market conditions further affect the state of long-term investors to a certain extent.

Take a deep look at the rate of change within long-term traders/holders.

1. The growth rate of traders in 6–12 months has increased;

2. 1–2 years trader growth slowed down;

3. 2–3 year old traders have recentlyincreased.

This hand-changing scenario is similar to the end of 2018, the bottom of the bear market; according to the historical scenario review, usually this period:

1–2 years belong to high prisoners

June-December for bear market builders

From this, it can be concluded that the trapped players are accelerating their exit, and the bear market builders are stepping up their pace to buy deeply.

(The following figure shows the unrealized profit and loss ratio of the whole market)

The current market sentiment is mild fear, and it is still lingering in agony.

From a cost perspective, continue to observe long-term traders.

(Chart below Long Term Trader Cost Basis)

Pink is the cost of buying when long-term traders sell;

Blue is the holding cost for long-term traders. (average value)

There has been a recent sell-off by older traders with lower buying costs;

Longer-term traders have lower holding costs, possibly selling by higher-cost traders.

Combining the above, it can be seen that the internal turnover of long-term traders is more violent.

(The following figure shows the market value ratio of stablecoins to BTC)

USDT/BTC: There is an inflection point of rapid decline and bottom-hunting.

USDC/BTC: The decline is not large, but the stock of funds is relatively abundant.

(The figure below shows the total circulation of stablecoins)

The red line is the total circulation of stablecoins: there is currently a slight decline.

It may be that there is an outflow of crypto capital.

But the magnitude is not too large.

Mainly reflected in the USDC circulation of the blue line,

Among the changes in 30 days, they are currently outflow.

Combined with the market value ratio of USDC and BTC: USDC’s stock funds are currently biased to wait and see, and there are outflows.

Look at the number of high-quality addresses.

(The number of addresses above 1BTC in the figure below)

However, the number of addresses above 1BTC has recently increased.

Holders changed the attitude of wait and see before.

(The figure below shows the proportion of illiquid supply)

Looking at illiquid supply from a proportional perspective,

There has been a rapid decrease in the proportion recently. The current proportion has risen again, but it has not reached the previous proportion. It may take time.

(The following figure shows the change in the number of non-zero balance addresses)

Within 30 days, they have a significant trend of increasing near-term bottoms, possibly representing an increase in new users.

(The following figure show that the token burns per day)

The token burn per day volume gives extra weight to traders with a higher number of coins and a higher age of holding coins, indicating that the recent selling pressure has surpassed the peak volume in December last year.

There is still not much pullback, which may affect the recent market.

Look at the basic situation of each group.

(The figure below shows the net position of miners)

Miners are still reducing their holdings, which may be one of the sources of recent market selling pressure.

(The figure below shows the net position of hodlers)

The hodlers, which has always been less underweight, has also reduced its holdings.

From a 30-day period, they are still holding positions.

(Picture below: Unused supply from whales)

Unused supply of whales is currently underweight.

Players with a large number of token may have a slightly pessimistic attitude recently, and their holdings have been reduced significantly.

(Figure below: Futures Clearing Volume)

The volume of futures clearing is at a high point this year, but considering the current state of stock futures, it is determined that the magnitude of this clearing will be larger within half a year.

Finally, look at the long-term and short-term trader movements of the recent market.

(The figure below shows the realized holding ratio)

When the indicator rises, it shows that there are more short-term traders entering the market.

There are more chips at the bottom that are judged to be short-term traders (holding the currency for less than 155 days).

Since they have not held coins for a long time, their recent behavior is not clear.

Short-Term Watch

· Long liquidation advantage

· Options and Futures Daily Trading Volume

· Contract liquidation chart

· Average cost of holding for short-term traders, average cost of selling for short-term traders

· Profitable status of short-term traders

· long term holder

· Traders holding 1 week — 6 months

· BTC net position

· Loss-shifting volume, profit-shifting volume

· Stablecoin exchange balance

· USDT net position

· USDC exchange net position

· Net unrealized profit-to-loss ratio for short-term traders

Derivatives Market:

(Figure below: Long liquidation advantage)

Long liquidation advantage, the current trend of long liquidation is going down, pay attention to possible changes in derivatives market risks.

(The chart below shows the daily trading volume of options and futures)

The daily trading volume of options and futures has dropped rapidly, and the sentiment of derivatives trading has temporarily declined in the short term, but it is worth noting that when the trading volume of derivatives rises again, leverage will likely amplify the impact on the market.

(The following figure shows the contract(x) liquidation chart)

Blue: Partial long funds

Red: Partially short funds

There are many high-leverage longs and a certain amount of shorts near the current price, and the short-term derivatives market risks are still high, and it is necessary to be alert to the derivatives risks in the short-term market.

If the current price is approaching, and the participants who close their positions at intensive relevant points should pay attention to the risks.

Spot Market:

(The figure below shows the average holding cost of short-term traders and the average selling cost of short-term traders)

The average cost of short-term traders is around 43,500, and the average selling cost is around 30,000, which also means that most short-term traders in the current market are in a state of loss.

(The figure below shows the profit status of short-term traders)

Specifically presented in the data on the chain, the profit status of short-term traders has increased slightly, but the overall profit status is still relatively weak, and the sentiment of short-term traders is relatively weak.

(Figure below for long-term holders)

In the short term, the market fluctuates greatly, and the sentiment is transmitted to the long-term holders. During this continuous decline, the long-term traders showed signs of reducing their holdings.

At present, there are signs of a slight increase in holdings, and the confidence of long-term traders has been affected to a certain extent in the short term, which is worthy of attention.

(The figure below is for traders who hold 1 week to 6 months)

Traders who hold it for less than 1 week to 6 months have also shown a state of continuous selling in the near future, and it may take some time for the recovery of short-term traders’ sentiment.

(The chart below shows the net BTC position)

Purple: 24-hour net position

Blue: 168-hour net position

BTC net position changes, 24-hour net positions currently have no outflow and inflow changes.

The 168-hour net position change has declined, and it is necessary to observe whether there are signs of turning outflow.

(The figure below shows the amount of loss transfer and profit transfer)

Purple: Profit shifting volume

blue: loss transfer volume

In the short term, the amount of market profit transfer fluctuates within a certain space,

The amount of loss transfer has declined, but the amount of loss transfer in the overall market is still high. Short-term market sentiment recovery requires attention to whether the loss-selling range can continue to decline and narrow.

Purchasing power of funds:

(The following figure shows the balance of the stablecoin in CEX)

Green: USDT CEX balance

Blue: USDC CEX balance

In the short term, the balance of stablecoin exchanges has increased by a large amount, and a certain amount of incremental funds have entered the market. There are signs of initial acceptance in the market, but the current situation may take time to repair.

(The figure below shows the net USDT position)

USDT has a relatively large inflow.

(The following figure shows the net position of USDC exchange)

USDC also has a certain amount of inflow, but it is showing signs of turning its head down slightly.

From the perspective of market acceptance, the acceptance has not been completely completed, but from the traces of acceptance, the signs of falling fluctuations will be less than half of last week.

However, it is still necessary to pay attention to the recovery of short-term sentiment and the possibility of external disk risk spillover.

(Graph below: Net unrealized profit/loss ratio for short-term traders)

The positions held by short-term traders have lost about 49%, and the sentiment of short-term traders who are reflected in the data on the chain is still relatively sluggish.

Weekly Summary ：

News Summary：

Long-term:

Luna event could trigger tighter government oversight of stablecoin. That’s a good thing for cryptocurrencies.

This is just proof that projects with questionable design will be targeted for shorting.

The free market environment has produced automatic mine clearance mechanisms, and the market needs to grow in the process of further clearance.

When the market mood is good, we often cannot discover the real problem.

Only when the market is bad can we see problems more easily, distinguish the false from the true, and better determine the direction of the future.

It also allows you to screen out more projects create real value.

The macro volatility of the environment will also make the encryption market to usher in the test and shuffle.

In the storm, only the truly valuable projects will be left behind.

We believe that market fluctuations can increase the risk control and evaluation of projects, so as to improve the overall level of the market. This black swan is also a test for the market. The market will be healthier in the future.

Medium term:

Based on last week’s analysis, the U.S. stock market remains under triple pressure of inflation, policy and economic growth in the medium term. There is no significant upside in the medium term.

Short term:

Watch for retail sales data that will be released on May 17 next week.

Short — term U.S. stock market sentiment remains fragile, please continue to watch out for external volatility caused by risk spillover.

On-chain Long-term Insight：

1. The black Swan event last week led to a four-year high in net turnover.

2. Purchasing power in European and American time zones remains weak.

3. Internet emotional positivity is still poor and needs to be cautious.

4. If there is still no certainty in the medium and long term in the future, it will be a good buying price if it reaches 19000–24000.

- Market tone setting

Weak; still needs to pay attention to the external influences , as well as emotional panic abreact.

On-chain Mid-chain probe:

1. Illiquid supply rapidly increased after reducing holdings, and the decisive role is again reflected.

2. From the perspective of time, the reduction of long-term traders’ holdings is not large, but the reduction of 5W BTC is one of the main factors for the occurrence of black swans in the short-term market in terms of quantity.

3. Internal changes in long term traders: The hold-ins accelerated their exit, the builders added to the buying pace, the market structure looks similar to the end of 2018.

4. The carrying cost of long-term traders is still falling, while long-term traders with higher costs are still selling; Meanwhile, long-term investors with lower holding costs are also selling.

5. The total amount of futures clearing shows that the current magnitude is relatively high, and the existing futures players have suffered great losses recently.

6. Stablecoin situation: “USDT/BTC” has a reversal point of rapid decline and bottom-fishing. The proportion of decline of “USDC/BTC” is small, and the total supply of stablecoin declines slowly.

7. The realized holding ratio shows that there are many short-term traders hunting for the bottom recently. Due to the short holding time and limited patience, there is a certain probability that it will be a potential risk in the current market.

8. Affected by the recent market, the mood of all market participants has decreased to mild fear, and there is a lack of confidence problem, but it is lingering and suffering at present.

• Market setting:

Mild fear; In terms of time, some groups need time to repair in the medium and long term. In the short term, pay attention to speculators.

On-chain short-term observations:

1. Long liquidation dominance shows the current trend of clearing long has declined.

2. In the short term, the daily trading volume of derivatives has fallen, and the sentiment of derivatives trading has declined temporarily.

3. At the current price, there is a large amount of long leverage capital and a certain amount of short capital, and there is a certain liquidation risk, pay attention to derivatives risk.

4. The average cost of short-term traders is about 43,500; Current short — term traders total position loss of about 49%.

5. Long-term holders reduced their holdings in the short term, and now slightly increase their holdings again. Traders who held for 1 week to 6 months reduced their holdings.

6. There was no outflow inflow change in the 24-hour BTC net position.

7. The profit transfer of the overall market is wandering in a certain space, and the loss selling of the market has dropped slightly, but it is still high.

8. A large amount of incremental funds came into the market in the short term, and there are traces of slight undertaking at present.

9. Sentiment among short-term traders remains subdued.

10. The probability of failure to break 35690–40500 is 61.5%

• Market setting:

The market is still fragile, there is a preliminary trace to undertake, but with the current situation, may still need some time to repair.

Disclaimer:

All the above are market discussion and exploration, and does not contain directional investment guidance; Please be cautious and guard against the market black swan risk.

This report is provided by the “WatchToweR” Research：

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