“Our aim is to help market participants with professional skill and greater focus to better understand the market and make wiser decisions.”

Recap of this week

This week from May 30th to June 5th, BTC was around 32300 at its highest and 29300 at its lowest, with a range of 10.37% or so.

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

Analysis:

1. 26,000–32000 approximately 1.88 million

2. About 1.78million, 36380–40500

- 88.2 % chance of price staying between 26,000 and 40,500

Weekly Important News

Macro news:

1. U.S. President Joe Biden said On June 1 that the administration could not bring down oil prices in the short term, but was exploring buying Russian oil below market prices. Russia said it would not sell anything at a loss.

2. On June 2, OPEC, led by Saudi Arabia, agreed to a “modest increase” of 0.4% of global production in July and August. Mr. Biden’s decision to travel to Riyadh this month to rebuild relations with Saudi Arabia and seek lower domestic gas prices;

3. On June 3, news broke that the Biden administration was considering a proposal to tax windfall oil and gas profits. The UK introduced a 25 per cent windfall tax on oil and gas companies at the end of May to subsidise the public.

4. Russian Presidential press Secretary Dmitry Peskov said on June 3 that Russia has achieved “certain results” in its military operation against Ukraine, and will continue to operate until all objectives are achieved.

5. According to CNN, the US, UK and EU are working on a plan to keep Ukraine neutral and start Russian-Ukrainian talks on the future of Crimea and Donbass, to which Ukraine was not invited. Mr. Biden said there had to be some kind of compromise at some point.

Analysis:

1. This year, Russia’s oil price income is 20% higher than last year, equivalent to about $4 billion more per month, which can support its war demand to a certain extent.

On the other hand, as we predicted before, the Russia-Ukraine war would cause a great financial burden and refugee burden to Europe, and the high inflation caused by it would also do great harm to the European and American economies.

At present, the United States and Europe have the initial intention of reconciling the war. After all, although this war is taking place in Ukraine, it is actually the wrestling between Russia and the West behind it. If America and Europe were to give the go-ahead, the war might enter into substantive negotiations.

2. Biden is trying to adopt policies to improve domestic inflation/livelihood as the US midterm elections approach.

OPEC’s “modest increase in output” on June 2nd does little to resolve energy tensions. There is still no sign that energy prices will improve significantly in the near term.

We can pay attention to the results of Biden’s visit to Saudi Arabia.

Even if energy prices improve, it will take several months for core inflation，which is the the Fed’s main focus, to fall.

U.S. Macroeconomic Indicators:

ISM manufacturing index for May

The ISM manufacturing index rose slightly in May to 56.1 from 55.4.

(Below: US ISM Manufacturing Index, source: MacroMicro)

Household savings

A measure of the household saving rate, which represents the percentage of disposable personal income that can be used as investment.

The household savings rate was 4.4% in April. That means households have less money to invest, the lowest level since 2008.

(Below: Us household saving rate indicator, source: Federal Reserve)

(Below, blue line: consumer loans, red line: personal savings, source: Federal Reserve.)

After the second fiscal stimulus in March 2021, personal loans began to rise while savings began to fall.

Employment in the United States

Non-agricultural data

June 3, US non-farm payrolls increased 390,000 in May vs. 325,000 expected vs. 428,000 previously.

Us unemployment rate stood at 3.6% in May vs. 3.5% exp. 3.6% last.

Market vacancy

The market is shrinking. May’s 11.4 million vacancy, was 450,000 fewer job openings than April’s 11.85 million.

Labor Department layoff data

Layoffs have been rising since February, but slowly.

Job losses by Industry

Layoffs in the tourism, service and retail sectors rose more in April.

Federal Reserve Policy

• Bullard, fed’s most hawkish official: “The Fed could stop

rising the policy rate in 2023 or late 2024 while calling a 3.5% fed funds rate the best threshold for a peak policy rate; Inflation is expected to fall to 2 per cent “soon”.

• Fed Mester: If inflation falls by September, rate hikes could slow; If inflation does not moderate, the pace of interest rates could accelerate.

• Fed Bostick: His suggestion that the Fed “pause” rate hikes in September should not be interpreted as a rescue.

• Fed Waller dismissed market talk of a September pause, saying he was leaning toward voting for a 50 basis point hike “at the next few meetings.”

• Fed’s Daley: Rates should be raised until inflation approaches 2% target.

• The Fed began tapering its balance sheet on June 1:

In total, the fed reduced its holdings by $47.5 billion this month, taking the total assets of the Fed to about $894.58 trillion and reducing the balance sheet by 0.00531% this month.

Analysis:

1. The manufacturing industry in the United States rebounded after a continuous decline in May, but we still need to pay attention to whether it continues to decline due to the epidemic in China, supply chain interruption and the decline in consumer demand in the second half of the year.

2. The assets of American consumers are under considerable pressure due to inflation.

The rise in US consumer debt has been driven by two factors,

1. Some previously pent-up spending was released after the blockade.

2. Cash-strapped people rely on credit cards for basic needs. Both are happening at the same time.

George Soros, CEO of Soros Fund Management, thinks the timing of a U.S. recession could be mid-23.

On the consumption side, recessions go through several processes.The current decline in deposits;

· Meanwhile, credit card borrowing rose;

· Credit card default is the next step;

· Finally, bad credit cards.

3. Non-farm conditions remained strong in May, with fewer job openings and higher layoffs, indicating that companies began to cut back on hiring in response to the Federal Reserve’s interest rate hike and shrinking balance sheet.

Job cuts in industries such as travel services also suggest that businesses are already preparing for an economic squeeze.

4. Most of the fed officials’ speeches this week are more hawkish, and the 50 basis points of interest rate hikes in June and July and the contraction of the balance sheet are basically certain.

Main Market Performance:

1. The S&P closed the week down 1.2% to 4108.54. The Dow ended the week down 0.94% at 32899.70 points, while the Nasdaq ended the week down 0.98% at 12012.73 points.

2. WTI Crude futures for July delivery ended the week up 1.71 percent at $118.87 a barrel.

3. COMEX gold futures for August delivery ended the week down 0.3% at $1,850.200 an ounce.

4. The dollar index closed around 102.10, up nearly 0.4% for the week.

5. The benchmark 10-year Treasury rose nearly 20 basis points to close at 2.94%

Analysis:

Powell has said before that there are too many job openings.

The Fed has an intention to reduce employment.

The biggest losers would be small companies.

Let’s look at junk bond interest.

This measure represents the cost of financing for small companies. It used to be a leading indicator for U.S. stocks.

(Chart below: Relationship between rising junk bond spreads and falling stock markets, source: Wind, Monetta Research)

Previous economic crises, such as the dotcom bubble in 2000, the financial crisis in 2008 and the start of the commodity bear market in 2015, saw yields rise significantly.

(Chart below: Current trend in junk bond rates, source: Bloomberg)

Junk bond interest have come down recently and are now at 2019 averages.

Due to:

1. The Fed’s interest rate hike and shrinking of its balance sheet will lead to financial contraction. The panic of liquidity withdrawal in the market will lead to the selling of junk bonds, and the yield will rise further.

1. Funding costs depend on the health of small and medium size companies, which will be worse in the second half of the year.

So we think short — and medium-term junk bond spreads have a lot of room to rise, and the likelihood of sustained current low levels is very low.

From the perspective of its correlation with the stock market, it is highly likely that the stock market will break new lows if the interest of junk bonds rises.

Capital News:

1. Canonical Crypto launches $20 million Crypto fund

2. Cryptoasset products saw net inflows of $87 million last week.

3. French venture capital Alven raised €350 million for its new fund and launched Operation3, a Web3 initiative.

4. Binance completes $500 million fund raising and will develop technologies such as blockchain and Web3.

5. The Purpose Bitcoin ETF, a Canadian Bitcoin fund, hit a record high of 43,700 bitcoins under management, with inflows of about 13,000 bitcoins in the last six weeks.

Other news

1. Japanese prime minister says WEB3 is an opportunity for Japan to start growing again. Japan has passed the Stablecoin bill and will introduce regulations governing stablecoin issuers in the coming months.

2. Brazil has officially launched the Brazilian blockchain network, while imposing an individual income tax on crypto investors.

3. Fidelity Investments plans to hire 110 technicians to set up a crypto exchange.

4. Block Inc. and Apple are teaming up to offer iPhone Tap to Pay.

5. “Tesla will grow in headcount [over the next 12 months], and the number of people on fixed salaries will be relatively flat,” Musk said, reversing his earlier remarks this week that he wanted the company to cut about 10% of its workforce.

**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 Watch

• No. of Addresses with Balance >=10k
• No. of Addresses with Balance >=$100
• ETH Transaction Type Breakdown

(Figure below: The number of addresses with a balance above 10K)

The address number of the balance showed a high slope increase in the past month.

The same momentum also emerged in early 2019.

Preliminary indications are that more trading addresses are converging into the giant address center.

(Figure below: number of addresses with more than $1 million)

In order to test this idea, the above data was deliberately sought, and the basis of this data was gradually enlarged.

Prove that more and more $1 million + addresses are gradually decreasing.

The following two conclusions can be drawn:

1. More and more large split addresses gradually move closer to the center of the huge address.

2. Larger addresses are gradually losing or even leaving.

According to the number of addresses with balances above 10K, the first thing is more likely to happen.

The market is still changing hands.

This week, take a look inside the ecology:

(Figure below: Ethereum transaction share by category)

The relative number (share) of transactions in the Ethereum network by category.

Trades and accounts fall into the following categories:

Vanilla: 30.356%

Pure ETH transfers between externally owned accounts (EOAS) without invoking any contracts.

ERC20:6.922%

All transactions that invoke the ERC20 contract.

Contracts in the stablecoin category are not included here.

Stablecurrency: 6.357%

A fungible token whose value is linked by the issuer or an algorithm to the assets below the chain.

More than 150 stablecoins are included in this category, of which USDT, USDC, UST, BUSD and DAI are the most prominent.

DeFi: 4.937%

On-chain financial instruments and protocols implemented as smart contracts, including decentralized exchanges (DEX).

Contains more than 90 DeFi protocols in this category,

Examples are Uniswap, Etherdelta, 1Inch, Sushiswap, Aave, and 0X.

Bridge: 1.407%

A contract that allows tokens to be transferred between different blockchains.

More than 50 Bridges are included in this category, such as Ronin, Polygon, Optimism and Arbitrum.

NFT: 36.602%

Transactions that interact with irreplaceable tokens.

This category includes token contract standards (ERC721, ERC1155) and NFT markets (OpenSea, LooksRare, Rarible, SuperRare) for trading these.

MEV robot: 0.552%

Miner Extractable Value (MEV) robots perform trades for profit by reordering, inserting, and reviewing trades within blocks.

Others: 12.866%

This category includes all other transactions in the Ethereum network that are not included in the above category.

NFT’s share of transactions in Ethereum grew by more than 600% in a year.

It continues to gain momentum and may become one of the growth engines of Ethereum in the future.

Mid-term Probe

• Activeness
• Unspent Supply in 1 month
• Supply Last Active Held by Short-term Holders
• Supply Last Active Held by Long-term Holders
• Realized HODL Ratio
• Stablecoin and Addresses with Balance>=1
• Addresses with Non-Zero Balance
• Accumulation Trend Score
• Supply hold by Entities with 0.01–100BTC
• NUPL
• Illiquid Supply Shock
• Long-term Holder Net Position Change
• Hodler NetPosition Change
• Miner Net Position Change
• Whales’ unspent Supply

(Below: activeness)

In terms of Activeness,

The number of active addresses is hovering at low, and the market still lack activity.

The number of new addresses is falling, and there is a shortage of new entrants.

Take a deep look at the situation of the new force (short-term trader within a month).

(Figure 1: Unmoved supply within one month)

The blue line is the unmoved supply within one month

The yellow line is the number of BTC that has grown to more than one month

As discussed in the last two weeks’ weekly papers.

The recent bottom took place within a month of short-term traders to participate in the fierce grab the phenomenon,

We’re just talking about the amount of supply they’re occupying, which is 407,000 BTC.

At the same time, they may have reached stock limits.

The dimension of continuance time discusses the state of long and short term groups.

(Chart below: short term traders unspent supply)

Short term traders hover lower and look slightly underweight for now.

(Chart below long term traders unspent supply)

Long-term trader overall direction is relatively clear, there is a high patience and slow increase, may be affected by the market position changes, at present slightly increase, and then continue to wander.

(The chart below shows the weighted ratio of short and long term traders)

There has been a certain amount of uplift, which may represent a certain amount of uplift in speculators’ sentiment.

Partly it reflects the eager bullishness of short-term traders right now.

(The figure below shows the change of stablecoin stock and high-quality address)

Observe the conversion of stable currency stock into high-quality addresses within the exchange;

Stable currency stock is still decreasing and tends to outflow;

High quality addresses maintain high growth.

It could be that current stock spending is in relatively good shape.

Changes in the number of stablecoin wallets from the number of non-zero balance addresses.

(The figure below shows the number of addresses with non-zero balance of stable currency)

The number of non-zero balance addresses for USDT and USDC is currently showing slight signs of increasing.

Could represent an increase in the number of wallets for new users in the market.

Combined with the stable currency exchange balance, it shows the growth under the condition of stock.

Let’s look at the accumulation trend along the chain.

(Accumulation trend points in the figure below)

At present, the color becomes black, and the accumulation trend score is close to 1, reflecting a certain accumulation trend.

Look in depth at the group to which the accumulation trend belongs.

(Figure Below: 0.01–100BTC entity supply)

According to the data,

The addresses from 0.01 to 100BTC all showed significant increase.

Maybe they’re part of the bottom accumulation.

Looking at illiquid supply, look at very illiquid buyers.

(Below:illiquid supply)

The vast majority of coins in the market are not included in the liquidity, and the supply of illiquidity has been greatly increased, accounting for 76.2% at present, and the medium and long term fundamentals have been largely repaired.

It also indirectly reflects that they are squeezing the seller’s space.

It’s stalled a little bit.

Due to the large volume, from the perspective of quantity, they may be the main body of the the recent bottom.

Look rationally at market sentiment.

(The following figure shows NUPL)

Now the market is in a mood of hope -anxiety,

Both hope the market will improve, but also anxious about whether it will improve; Slightly anxious overall.

Keep looking at the data and add more perspectives.

So if you look at the population changes,

(Chart below long-term trader net position)

（Figure Below: Hodler Net Position Change）

（Figure Below: Miner Net Position Change）

（Whales’ Unspent Supply）

Taken together,

There is a phenomenon of reduction among long-term traders, the current volume is not large, it may be the phenomenon of slight selling after the market rebound, but not a large number of selling, which also indicates that some long-term traders have a little lack of confidence in the recent market prices.

Hodlers after slightly reduced, but still active in the state of holding.

Some miners retracted the amount of selling, reducing the recent selling pressure.

The whales are still hovering at low, lacking clear direction.

Short-term Observation

• Options Open Interest Put/Call Ratio
• Leverage
• Option and Futures Volume
• Long liquidation Dominance
• Contracts Map
• Supply Hold by Long-term Holders
• Supply Shock
• Spent Volume Lifespan 5y-7y
• Hodler Net Position Change
• 168h BTC Exchange Net Position
• Illiquid Supply
• NVT Price Model
• No. of New Addresses
• Stablecoins on Exchanges
• Stablecoin Net Position
• U.S. EU and Asia Month-over Month Price Change
• URPD

Derivatives Market：

(The figure below shows the proportion of put and call options)

The proportion of put and call options holdings reached a new high in a year, and the trend of mature traders to increase bearish protection to hedge the future risk remains unchanged.

Traders can set a risk management strategy, in order to hedge the advent of risk.

(The futures projected leverage ratio below)

Futures projected leverage reached a new high.

The figure is the ratio of open futures contracts to BTC exchanges.

There are two reasons for the current rise:

1. Futures open interest rose and exchange balances fell

2. Futures open interest rose, and exchange balances rose

3. Futures open interest decreased, and exchange balances decreased.

The current market belongs to the first situation, which reflects that the influence of futures outstanding contract quantity on the market is more dominant than that of spot.

It is suggested that investors pay attention to leverage risk and prudently use high leverage to participate in the market.

(Chart of daily trading volume of derivatives)

Daily trading volume in derivatives fell to low levels and sentiment in derivatives trading temporarily slowed.

When sentiment returns to derivatives trading, leverage will amplify the impact if markets move in one direction.

Be aware of high volatility in the short term if you are involved in derivatives trading.

(Chart: Long Clearing Dominance)

Long liquidation turing to short liquidation at the moment.

(Chart Below: Contract Map)

Short-term market long sentiment is obvious, if there are derivatives traders involved, pay attention to the relevant point burst risk.

Come to Spot Market：

Selling Pressure：

（Figure Below: Long-term Traders）

Long term traders have switched back from underweight to overweight in the near term, a relative slowdown in selling pressure in the market.

But what’s going on with long-term traders?

(Figure below long-term holder cost output ratio)

Long-term traders are selling at a profit.

Long term traders in the last 3 months, the market continued to decline in the process of profit selling margin gradually reduced.

It is worth noting that in the recent rebound process to change the attitude of the past, profit selling state increased significantly.

And over the course of three months, the obvious behavior was to increase the margin of profit selling when market is strong.

Mature traders in the short term, we still do not see a clear sign of better confidence.

Short-term traders should pay attention to risk control and make rational decisions.

(Supply Shock Below)

Profit selling in the broader market followed the same pattern.

During the recent rally, the magnitude of profit selling in the overall market has increased again, unlike in the previous downturn.

(Chart below for 5–7 year holders)

The most obvious of these profit-selling groups is that 5–7 year trades rebounded to sell 1666 BTC in the short term.

(Chart below:Illiquid Supply)

Illiquid supply groups continue to increase their holdings in the recent past, and the attitude of important groups in the market is temporarily changing.

The above two important mature groups have temporarily eased the selling pressure, and there continues to be a slight undertaking strength, which needs to be paid attention to later.

(Figure below:Hodlers)

The market’s most firmly hodlers, also changed the previous state, the increase rate slowed, but there is still purchasing power.

(Figure 168h BTC exchange net position)

168h BTC net position slightly increased, short-term potential selling pressure slightly increased, but relative to the previous huge up and down, volatility is significantly smaller.

Taken together,

Mature traders move into overweight mode, with more of the action being to sell on rallies.

But previously the most determined hodlers, are slowing down purchasing.

Potential selling pressure changes in the short — term are small.

Trading Mood and Purchasing Power：

(Figure below: NVT)

The graph below shows positive trading sentiment on the Internet.

The market trading mood is rising.

(Number of new addresses in figure below)

There is a slight increase in the number of new addresses in the market, and there is a slight potential incremental capital in a short period of time, but the change is not obvious, and the previous short-term incremental capital is more turned into stock.

(Stablecoin exchange balance below)

The stable currency exchange balance is still biased towards stock funds and has not floated in the short term.

Most of the funds in wait-and-see wandering, the market lack of incremental funds.

(Stablecoin net position below)

Blue: USDT net trading position

Yellow: USDC exchange net position

The net position of stablecoin exchange has shown signs of narrowing slightly recently, indicating a narrowing of outflows.

(The figure below shows 30-day cumulative price changes in the US, Europe and Asia)

Recently, the U.S. traders selling pressure slowed, Asia purchasing power decline.

There has been a shift in purchasing power attitudes across the market, but the common denominator is that the market lacks sufficient purchasing power.

(The chip figure below)

Recent purchasing power is reflected in the market chips change signs, mainly reflected in the 28,800–29,500 position.

Other price chips in the short term and no obvious increase, and in the lower chips and higher chips, and even slightly reduced.

Taken together,

The trading sentiment in the market has improved slightly in the short term,

The market has a little new address in the short term, bringing a little incremental capital, but the overall capital is more inclined to stock capital.

Asia purchasing power began to reduce holdings, Europe and the United States time zone purchasing power, began to slow down the pace of selling.

The recent market purchasing power is mainly reflected in 28800–29500 near.

Weekly Summary

Macro Summary：

Long-term:

The Central African Republic plans to tokenize its natural resources. Brazil launches blockchain network. You can pay attention to the blockchain application in these two countries.

Currently, most encryption applications are gimmicks and marketing tools. In the coming year, we need to focus on whether there are encryption projects and applications that can generate real value.

Cryptocurrencies will go through the bubble-industrialization phase, which needs to be supported by more practical applications.

The actual adoption will be important to the long-term value of cryptocurrencies.

In addition, economies of scale on the demand side can better stimulate network effects, and the critical point of quality can better increase the effect of new users.

These two factors may be the opportunity to trigger the future WEB3 bull market boom.

After industrialization, there will be many DAO projects in WEB3 in the future because of these two points. Later the scale will snowball.

At the same time, it will further stimulate the gradual shift of capital from financial capital to industrial capital, at a time when the new world is just beginning to emerge.

Medium term:

Given the combination of junk bond interest, market sentiment and valuations discussed in our previous weekly reports, stocks will continue to dip within the next six months.

Given consumption and the overall economy situation, the U.S. is likely to have a recession sometime next year, when stocks and financial markets could dip again due to insufficient liquidity.

There may be some chance of a choppy bounce in between, and it may be safer to enter then than it is now.

Short term:

Watch next week:

June 10 U.S consumer price index CPI.

On-chain Long-term Watch： 1. The number of addresses with balances over 10K is increasing rapidly, similar to the end of 2018 and the beginning of 2019. 2. The number of addresses with more than $1 million is increasing, and the number of super accounts sliting may decrease. 3. NFT’s share of ethereum transactions has increased by 600% over the past year. 4. Still growing to 36.602% of the total, it may be one of the future growth engines of Ethereum.

• Market setting:

Confusion goes hand in hand with change. The surge has left most participants confused, but some groups continue to switch hands strongly. This process may take some time.

On-chain mid-term probe:

1. The active address is hovering at a low level, while the newly added address is declining, which may represent the problem of insufficient new strength in the market.

2. Short-term traders may reach the upper limit of stock within 1 month; Short-term traders hover in a zone; Long — term traders slightly sell, choose to increase the wandering.

3. The weighted ratio between short and long term indicates that there is a certain amount of speculators involved.

4. The number of high-quality addresses is on the rise, and the current expenditure of stable currency stock is good; Stabecoin wallet addresses increased slightly.

5. Small and medium size players of 0.01–100BTC are accumulating, while users of big level whale level are still watching and cautious.

6. Illiquid supply rebounded to 76.2% and could be a near-term bottom protector.

7. Market sentiment is currently hovering between hope and anxiety, with a hint of confusion.

8. Slight underweight among long-term traders; hodlers slightly reduced holdings, may be due to risk aversion; Miners cut back on selling.

- Market setting:

Between accumulation and repair; The market is biased towards the recent bottom accumulation, confidence is still repairing, and the big tier users are slightly cautious.

On-chain short-term observation:

1. The ratio of put and bullish positions is still relatively high.

2. The leverage rate of the market has reached a new high and is currently in a certain space shock.

3. Long-clearing advantage briefly shifted to short-clearing.

4. Daily trading volume of derivatives is rising again, and sentiment of derivatives is rising again.

5. Long term traders are turning overweight and profit selling has increased during the recent rally.

6. Illiquidity unsupplied turned into sustained slight overweight.

7. The increase rate of hodlers slows down, but they still have purchasing power and their mood drops temporarily.

8. Trading sentiment rises briefly.

9. For a short time, there are some new addresses and slightly potential new funds, but the overall capital is more inclined to the stock.

10. Asian purchasing power began to reduce holdings, and European and American time zones began to slow down the pace of selling.

11. The recent market purchasing power is mainly reflected in the vicinity of 28800–29500.

12. There is an 88.2% chance that the price will stay between 26,000 and 40,500

Market Tone Set：

The overall market has been from a wait-and-see to a slight increase attitude, but did not see too much trace of incremental force.

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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