Justin Arzadon
5 minutes reading time
The bitcoin price continued to consolidate last week, trading within a tight range of ~US$60-64K.
Ethereum continued its outperformance over bitcoin for the week, setting another all-time high at $4,656. Over the last seven days it has returned 5.63%, outperforming bitcoin which was 1.21% higher.
Bitcoin’s market cap is sitting at $1.17T and market dominance weakened to 42.5%, whilst the value of the entire crypto market inched higher to $2.75T.
| Price | High | Low | Change from previous week | |
| BTC (in US$) | $62,066 | $64,077 | $59,706 | 1.21% |
| ETH (in US$) | $4,250 | $4,656 | $4,160 | 5.63% |
Source: CoinMarketCap. As at 7 November 2021. Past performance is not indicative of future performance. Performance is shown in U.S. dollars and does not take into account any USD/AUD currency movements.
News we are keeping an eye on
In an Australian first, in addition to becoming one of the few banks offering this service around the world, CBA announced it will offer customers the ability to trade Bitcoin and other cryptocurrencies. Ten cryptocurrencies will be made available through their CommBank app in a pilot program. If successful, CBA will open the cryptocurrency market up to its 6.5m users of the app in 2022. CBA CEO, Matt Comyn, stated: “We believe we can play an important role in crypto to address what’s clearly a growing customer need and provide capability, security and confidence in a crypto trading platform.”1
In less positive news – a cautionary tale about an apparent cryptocurrency scam. Off the back of the successful Netflix series Squid Game, a Squid Game token was launched on 26 October for less than $0.01. By Friday of that week the price was over $4 and by 1 November the price rose to $2,862. However, the anonymous creators of the coin sold all their coins, walking away with ~$3.4m and causing the price to crash to under $0.01 within minutes, in an apparent scam known as a ‘rug-pull‘.2
Crypto equities
Last week BetaShares launched the BetaShares Crypto Innovators ETF (ASX: CRYP) on the ASX, shattering the previous record of $8m in net inflows by an ETF for the first day of trading. Within the first 10 minutes, over $10m of units in CRYP had been purchased, and by the close of the trading day, a new record of $39.7m of volume traded was set. The majority of flows came from retail investors, suggesting pent-up demand for crypto-sector exposure in a transparent, cost-effective and regulated structure.3
In company specific news, Bitcoin mining firm Marathon Digital’s (Nasdaq: MARA) stock hit a 6-year high of more than $63 on 3 November. The firm has not sold any of the bitcoin generated from its mining operation over the last year (2,640 BTC), and purchased 4,812 BTC back in January when the price was under $35K. With the current price of bitcoin over $62K, the firm’s 7,453 BTC holdings are worth approx. $462 million. Earlier in the year, MARA announced it plans to achieve 70% carbon neutrality for its operations.4
What are on-chain analytics?
On-chain analysis is an emerging field that leverages information found on a public blockchain to facilitate better decision making. It is a powerful tool that gives us an insight into what’s happening on a blockchain network in real-time, something not available with traditional asset-classes. Its tools and techniques are often applied for trading and investment purposes, but should be used in conjunction with other disciplines.
This week the metric I look at is the Spent Output Profit Ratio (SOPR).
- SOPR is an indicator which reflects the degree of realised profit and loss for all coins moved on-chain for a specified timescale (daily, weekly, monthly, etc.). If SOPR is trending higher, it implies profits are being realised with previously illiquid supply being returned to liquid circulation. If SOPR is trending lower, it implies losses are being realised and/or profitable coins are not being spent.
On-chain metrics
Citing data from on-chain analytics company Glassnode, we look at Adjusted SOPR (14d moving average). The overall market, on average, has been selling at a profit as indicated by the SOPR value trading above 1. A break below 1 would indicate coins are selling at a loss and could be considered macro bearish as reflected between May and July earlier in the year.
Spent Output Profit Ratio (SOPR)
Source: Glassnode.
Altcoin news
Over the last week, Solana (SOL) returned 36.15% and is currently the 4th largest cryptocurrency by market cap. SOL is a cryptocurrency run on the Solana blockchain and a potential long-term competitor to Ethereum. Both offer smart contracts and NFTs on their platforms, however transactions on Solana’s blockchain are extremely cheap, comparatively speaking, and are much faster, allowing for tens of thousands of transactions vs fewer than 100 per second. While investors wait for the Ethereum 2.0 upgrade, Solana has benefited in terms of adoption and price appreciation.5
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Investing in crypto assets or companies servicing-asset markets should be considered very high risk. Exposure to crypto assets involves substantially higher risk when compared to traditional investments due to their speculative nature and the very high volatility of crypto asset markets. Investing in crypto assets or crypto-focused companies is not suitable for all investors and should only be considered by investors who (i) fully understand their features and risks or after consulting a professional financial adviser, and (ii) who have a very high tolerance for risk and the capacity to absorb a rapid loss of some or all of their investment. Any investment in crypto assets or crypto- focused companies should only be considered as a very small component of an investor’s overall portfolio. |
1. https://cointelegraph.com/news/commonwealth-bank-to-enable-crypto-trading-for-6-5m-aussies-other-banks-will-follow
2. https://www.bbc.com/news/business-59129466
3. https://www.financialstandard.com.au/news/crypto-etf-breaks-trading-record-179790414#:~:text=BetaShares’%20Crypto%20Innovators%20ETF%20(CRYP,the%20end%20of%20the%20day.
4. https://cointelegraph.com/news/marathon-digital-stock-reaches-6-year-high-as-company-hodls-460m-bitcoin
5. https://solana.com/
Off the Chain will be published every Tuesday, and provide highlights of key developments in bitcoin and the rest of the crypto market along with analysis, insights and the latest news in the world of crypto.
It provides general information only and is not a recommendation to invest in any crypto asset, crypto-focused company or investment product.
