The Weekly Update Week 17, 2021
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The Weekly Update
Week 17, 2021
Provided by
Market Update
1 ▪ Bitcoin registered another flat week, while many altcoins
keep climbing higher.
▪ Bitcoin ended April with a decrease of 2%, the first red month
since September last year. Bitcoin dominance falls below 50% for the first time since 2018
$100,000
▪ Altcoins have been ripping over the last few months, leading 100%
the bitcoin dominance to decline from 71% on Jan 1st to 47%
yesterday.
90%
▪ Despite the strong ETH performance lately, the speculators
$10,000 80%
now seem to be more cautious than earlier. Flat
developments in the open interest vs. ETH’s market cap
suggest that the latest moves are largely driven by the spot
70%
markets.
BTC Price (log scale)
Valuation
Bitcoin dominance
60%
2
$1,000
▪ Bitcoin looked strong going into the weekend, but struggled
to climb above $59,000 and is now back below this 50%
resistance level.
40%
▪ Premiums on BTC futures are mostly unchanged from last $100
week. Premium rates climbed throughout the week, but
decreased again as the bitcoin price turned again this 30%
weekend.
20%
$10
10%
Blockchain Activity
3 ▪ On Saturday, the bitcoin difficulty fell by 12.6% due to the 0%
declining hashrate following the Xinjiang incidents, leading
fees to decline back to previous levels. $1
2017 2018 2019 2020 2021
▪ The process for implementing the Taproot upgrade in bitcoin
has begun. Source: Tradingview, Bitstamp
▪ The combined total value locked on Ethereum and the
Binance Smart Chain this week surpassed $100 billion and
currently sits at $124.6 billion.
Bitcoin flat, while altcoins thrive
Bitcoin Correlation:
ETH XRP GOLD S&P500
90-day correlation
Bitcoin registered another flat week, while many altcoins keep climbing
(weekly change included)
▪
higher. Bitcoin’s market dominance is now at the lowest level since August BTC 0.650 -0.093 0.424 0.104 0.079 -0.010 0.154 -0.029
2018, dropping below 50% this week.
Source: CoinMetrics
▪ Ether (ETH) blew through its all-time high last week and has climbed more Top 3 by Market Cap: Percentage Change in Price Over the Last Week
than 30% over the last 7 days. The combination of the upcoming Ethereum
upgrade this summer and the increasing activity on Ethereum has really
gotten the attention of many investors this spring.
▪ Binance Coin (BNB) is also climbing to new highs this week, and the 34.5% $3,435
exchange token has comfortably secured the role as the third-largest
cryptocurrency by market cap, rising more than 1600% this year.
Best Performing Price Last week Last month YTD
Waves 39.746 102.20% 236.20% 510% 13.3% $646.6
Ethereum Classic 53.714 61.93% 280.90% 841%
Dogecoin 0.439 60.57% 674.50% 7589%
Worst Performing Price Last week Last month YTD
1.9% $55,874
Klaytn 2.389 -13.25% -33.39% 388%
LUNA 17.067 -10.12% 3.93% 2499%
BitTorrent 0.007 -9.09% -9.57% 2173%
Last week of top 50 by market capitalization
Source: cryptowat.ch, messari.io Source: NYDIG
May 4, 2021 3 Provided byBitcoin dominance drops below 50%
Percentage of Total Market Capitalization
BTC ETH BCH LTC XRP DASH NEM XMR IOTA NEO
Market
48.15% 17.80% 0.82% 0.89% 3.12% 0.15% 0.14% 0.33% 0.25% 0.33%
Share
Weekly
Change*
-5.70% 5.02% -0.02% 0.02% 0.09% 0.00% -0.03% 0.01% -0.03% -0.05%
* Weekly change in percentage points
Source: Coinpaprika.com
Bitcoin ended April with a decrease of 2%, the first red month since
September last year. The current altseason has seen bitcoin’s market
dominance drop below 50% and we are currently at the lowest level Monthly Performance of Market Capitalization Weighted Indexes
since August 2018.
77%
▪ The Mid Caps Index ended April with a gain of 77%, crushing the other
indexes.
▪ The Small Caps Index bounced strongly during the last week of April,
and managed to close the month with a 30% gain.
▪ The Large Caps Index ended April at 7%, dragged down by bitcoin. 30%
Several large caps like ETH and BNB had a great month, but BTC’s 2%
decline held the Large Cap Index down throughout the month.
7%
-2%
Source: NYDIG, Bletchleyindexes.com
May 4, 2021 4 Provided byMarket sentiment climbing higher again
The market sentiment is climbing higher again and is once again approaching the “Extreme Greed” area. The Fear and Greed Index dropped to 27 last week, the lowest seen in a year.
However, we are now back at 68 already, with a rapid climb over the past week. While a market sentiment in the “Extreme Greed” area hasn’t been a top signal in this current bull run, it
is always important to be more cautious when approaching an extremely greedy market.
Extreme Greed Fear & Greed Index
68
68
Now Last week Last month
Extreme Fear Greed (68) Greed (50) Greed (74)
Source: Alternative.me, NYDIG
May 4, 2021 5 Provided byBitcoin volume dropping
Sunday marked the third-lowest daily volume of 2021
The past week has been relatively quiet for bitcoin, and the trading activity has declined. The 7-day real bitcoin volume* dropped sharply, down more than 40% over the past
week. Sunday marked the third-lowest daily volume of 2021, with only $4.5 billion changing hands on the leading spot exchanges. We are now close to the lows from April again,
but we expect the activity to pick up again as soon when bitcoin makes its next move.
16
Real BTC Daily Volume (7-day average)
14
12
Trading Volume ($ bn)
10
8
6
4
2
0
Apr 20 May 20 Jun 20 Jul 20 Aug 20 Sep 20 Oct 20 Nov 20 Dec 20 Jan 21 Feb 21 Mar 21 Apr 21 May 21
Source: Messari, Skew *as defined by Arcane Research. Read more here.
May 4, 2021 6 Provided byVolatility stays high
The 7-day volatility spiked last week and has stayed above 4.5% since. The 30-day volatility is also slowly trending upwards again, a sign that bitcoin is currently
seeing more significant movements again, with the latest being Friday’s 8% increase.
15%
BTC-USD Volatility
Daily Return 30-Day Volatility 7-Day Volatility
10%
5%
4.56%
3.55%
0%
-5%
-10%
May 20 Jun 20 Jul 20 Aug 20 Sep 20 Oct 20 Nov 20 Dec 20 Jan 21 Feb 21 Mar 21 Apr 21
Source: cryptowat.ch, Coinbase
May 4, 2021 7 Provided byIt’s definitely altseason
The bitcoin dominance falls below 50% for the first time since 2018
Altcoins have been ripping over the last few months, leading the bitcoin
dominance to decline from 71% on Jan 1st to 47% yesterday.
Bitcoin
Bitcoin dominance
dominance falls falls
below below
50% 50% forfirst
for the the first
time time
sincesince
20182018
▪ It’s been an incredibly strong year for the many altcoins. On January 1st, the $100,000 100%
combined market cap of all altcoins sat at $222 billion. Now, the combined
market cap of all altcoins sits at $1.16 trillion, a YTD growth of 420%.
90%
▪ The altcoins have, in other words, significantly outpaced bitcoin’s growth this
year. $10,000 80%
▪ Many factors have been pulling in the direction of altcoins lately. Thriving 70%
developments in DeFi have led Ethereum and the DeFi tokens to grow
BTC Price (log scale)
Bitcoin dominance
significantly. Likewise have the so-called ETH-killers (most notably Solana and
BNB). $1,000 60%
▪ In addition, the market has also definitely been frothy lately. Dogecoin has seen 50%
YTD returns of more than 7500%, and TikTok influencers have jumped into the
space promoting investments in highly questionable projects.
$100 40%
▪ The driving forces seem to be a mix of the anti-establishment uproar seen from 30%
the WallStreetBets community following the infamous GME squeeze, in
addition to a very high risk tolerance with the hopes of financial independence
looming. 20%
$10
▪ Bitcoin has been consolidating (albeit with substantial volatility) more or less 10%
since the end of February, setting the perfect stage for altcoins to skyrocket. In
the 2017 bull run, prolonged consolidation periods were very strong periods for
altcoins with capital rotating into the sector. $1 0%
2017 2018 2019 2020 2021
▪ While some altcoin projects are highly interesting, such as those within the
disruptive DeFi sector, others are not. We urge investors to be cautious Source: Tradingview, Bitstamp
onwards in the more questionable altcoins.
May 4, 2021 8 Provided byEther (ETH) Futures:
Open interest data suggest that this rally is driven by spot buyers, not leverage
ETH Futures: Open Interest
$10bn 3.8%
Despite the strong ether (ETH) performance lately, the speculators now
$9bn 3.6%
seem to be more cautious than earlier. Flat developments in the open
interest vs. ether’s market cap suggest that the latest moves are largely
driven by the spot market. $8bn
3.4%
▪ The recent strength in ETH has been accompanied by remarkably soft growth $7bn
Total Open Interest (OI)
in open interest. 3.2%
OI vs. Market Cap
$6bn
▪ Previous rallies in ether have been accompanied by a spiking open interest, this 3.0%
time it’s different. $5bn
2.8%
▪ Now, the open interest relative to the market cap has remained flat at around $4bn
2.6% since the liquidation flush of April 18th, meaning that the OI currently
follows the price action in ETH tightly. 2.6%
$3bn
▪ The OI to market cap ratio of ETH is still substantially higher than in Bitcoin, 2.4%
though, where the OI sits at 1.8% of the BTC market cap at the time of writing. $2bn
$1bn 2.2%
▪ This suggests that the ETH market is more leveraged than BTC’s, but the current
ether rally seems more sustainable than previous rallies. However, this is purely
based on data from the futures market and do not account for leverage $0bn 2.0%
through lending.
Oct 20 Nov 20 Dec 20 Jan 21 Feb 21 Mar 21 Apr 21 May 21
Total OI vs Market Cap
Source: Skew, TradingView
May 4, 2021 9 Provided byFlat month for the bitcoin funds
It’s been a relatively slow month in terms of growth in the bitcoin
investment vehicles, with the aggregated fund size remaining flat
for a month. Bitcoin Funds: BTC Under Management
₿ 820,000
▪ The bitcoin investment vehicles have seen a year-to-date growth of
107,000 BTC, but flows and outflows netted each other out in April, with the
₿ 800,416 ₿ 801,844
combined bitcoin holdings of all investment vehicles growing by 1400 BTC.
₿ 800,000
▪ The Grayscale bitcoin trust has not been closed for private placements in
the last months, with the shares of the trust trading at large discounts in the ₿ 780,000
secondary market.
₿ 760,000 ₿ 756,724
▪ Meanwhile, the Canadian ETFs have continued to prosper. In the last month,
the Purpose ETF’s Bitcoins under management grew by 18%, while Evolve’s
AUM grew by 33%. ₿ 740,000 ₿ 735,507
▪ There seems to be a trend of capital rotating into ETFs, with most other
₿ 720,000
investment vehicles seeing declining AUM.
▪ The market awaits an answer from the SEC on the 10 US ETF applications. ₿ 700,000 ₿ 694,636
This could dramatically shake up the market and lead to further growth of
bitcoins under management by bitcoin investment vehicles.
₿ 680,000
▪ The SEC was due to make a first comment on VanEck’s Bitcoin ETF
application last Thursday but postponed it to June. We’ll likely have to wait ₿ 660,000
until at least the end of June for the SEC to make any statements on the
ongoing applications.
₿ 640,000
▪ Currently, 801,444 BTC is managed by bitcoin investment vehicles, equaling Dec 30th Jan 29th Feb 28th Mar 26th Apr 30th
4.3% of the circulating bitcoin supply.
Source: NYDIG, Purpose, CoinShares, Grayscale, 3iQ,
Wisdomtree, Ninepoints, 21Shares
May 4, 2021 10 Provided byValuation
Provided byBitcoin struggling with resistance?
Bitcoin / U. S. Dollar, 6H, Coinbase
Bitcoin looked strong going into the
weekend, but struggled to climb above
$59,000 and is now back below this
resistance level. Resistance Resistance
▪ With an impressive recovery last week,
bitcoin managed to climb 26% from the
lows at $47k.
▪ As noted in last week’s report, the $58k
level would be an important area to
surpass for further upside. This level got
rejected over the weekend, and we still
need a confident move above $59k to
look for more upside.
▪ It looks like the $55k level is holding for
now, and we could likely see a retest of
the $58k level soon,
▪ A retrace to the lower $50k area would
also not be surprising (or bearish), as
bitcoin consolidation continues, and we
haven’t seen any clear signs of a trend
reversal.
Source: Tradingview, Coinbase
May 4, 2021 12 Provided byFutures premiums mostly unchanged
BTC Futures Annualized Rolling 3-Month Basis
60%
50%
Premiums on BTC futures are mostly unchanged from last
week. Premium rates climbed throughout the week, but 40%
decreased again as the bitcoin price turned again this
weekend.
30%
▪ The annualized 3-month basis is still around 20% on
average among the retail-focused platforms.
20%
▪ The annualized 3-month basis on CME is also declining a
bit this week, and touched the lower 5% area this
morning. 10%
▪ With no clear direction for these futures premiums at
the moment, the market seems more undecided on the 0%
next move for bitcoin.
-10%
-20%
28 Feb 6 Mar 12 Mar 19 Mar 25 Mar 31 Mar 6 Apr 13 Apr 19 Apr 25 Apr 2 May
FTX BitMEX Deribit Binance CME*
Source: Skew.com *Closed Saturday - Sunday
May 4, 2021 13 Provided byFunding rates still neutral
BTC Price vs Funding Rates
A quiet week in the bitcoin perpetuals. The funding remains
neutral.
▪ The funding rates have now been in the neutral territory for 16
days as short-term traders seem undecided on bitcoin’s
direction.
▪ This is the longest period of neutral funding rates we’ve seen
since bitcoin broke its 2017 ATH in December.
▪ One of the key explanations behind the declining funding
rates could be the ongoing altseason, attracting the risk
seekers to move onto other coins in the spot market.
▪ We believe the low funding rates and the low open interest in
bitcoin as of now is a healthy sign. With less leverage, fewer
positions will risk becoming liquidated, setting the stage for
less dramatic price movements.
Source: NYDIG Data
May 4, 2021 14 Provided byBlockchain Activity
Provided byBitcoin on-chain summary: Difficulty adjustment normalizes fees
On Saturday, the bitcoin difficulty fell by 12.6% due to the
declining hashrate following the Xinjiang incidents, leading
fees to decline again.
▪ The percentage contribution from fees to the miner revenue has
quickly fallen back to its normal state as it declined to 11.82% over
the last week, in contrast to last week’s 21.98%.
▪ This has made it cheaper to conduct transactions on the bitcoin
blockchain. The average transaction fees now sit at around $25
dollars, after having spiked at $62 in the aftermath of the hashrate
fall.
▪ Bitcoin’s difficulty adjustments elegantly absorb various shocks in
the market and then normalize the state leading the block creation
rate to reach the desired state of 6 blocks per hour.
▪ Now, blocks are created at a higher rate than 6 blocks per hour
following the difficulty adjustment, meaning that miners are
earning more from block subsidies at the current rate. This has
helped to increase the miner revenue, despite a large decline in
fees.
Source: Bytetree
May 4, 2021 16 Provided byTaproot upgrade upcoming: Status on signaling from the miners
The process for implementing the Taproot upgrade in Bitcoin has
begun.
▪ Taproot is a soft fork to the Bitcoin network that will improve Bitcoin’s scripting
capabilities and privacy. It may help with making smart contracts more
efficient and private by only revealing the relevant parts of the contract when
spending.
▪ It can also improve privacy of the Lightning Network by making channels look
like regular bitcoin transactions.
▪ To activate the soft fork, BIP9 and Speedy Trial has been the chosen
deployment method. Here, miners and mining pools help coordinate the
deployment by signaling for deployment in their mined blocks.
▪ 90% of all blocks within a 2016 block period (the period between bitcoin’s
difficulty readjustments) must signal for Taproot in order for the soft fork to
take place, meaning that 1815 of the 2016 blocks within a period must signal for
taproot. The Taproot soft fork signaling process lasts until August.
▪ Within the next 12 weeks, 90% of all mined blocks within a 2016 block period
must be signaling for Taproot for the activation to take place.
▪ If 1815 (90%) of the blocks signal for readiness within a period, then full nodes
that have upgraded to Bitcoin Core or any other compatible implementation
will consider the signaling a success and activate the Taproot soft fork in
November.
▪ We will not see the Taproot activation take place within this first period, given
that there are already 365 non-signaling blocks. But, according to
taprootactivation.com most major miners seem to be open to signal for
Taproot in the upcoming months. Source: Screenshot from taproot.watch
May 4, 2021 17 Provided byThe combined total value locked in DeFi and BSC surpasses $100 billion
The combined total value locked on Ethereum and the Binance Smart Chain this
week surpassed $100 billion and currently sits at $124.6 billion.
May 4th
Total value locked: Ethereum DeFi + Binance Smart Chain
▪ With the blistering ETH rally, the DeFi sector has seen massive developments in its TVL over Combined TVL
$124.6bn
the last weeks. The last week has seen the TVL on Ethereum grow by $16.5 billion, a 1-week
growth of 27%.
$120bn
▪ At the current growth rate, the total value locked on Ethereum’s DeFi alone will surpass $100
billion within the next week. BSC
$100bn $47.3bn
▪ The total value locked in Ethereum DeFi has seen a one-year growth of 8318% - highlighting
the enormous growth of the sector. $80bn
ETH DeFi
$77.3bn
▪ The growth of Ethereum’s DeFi sector has not been without hurdles and problems. The
major hurdle to overcome being the scalability issues, leading to very high fees in periods. $60bn
▪ This has led to more centralized chains entering the space (The root behind the
contradictory term “CeDeFi” – centralized decentralized finance), most notably with the $40bn
Binance Smart Chain. Throughout 2021 the Binance Smart Chain ecosystem has experienced
enormous growth. The total value locked in Binance Smart Chain projects currently sits at
$47.3 billion. $20bn
▪ Combined, the total value locked on Ethereum and BSC sits at $124.6 billion as of May 4th.
$0bn
31 Jan 14 Feb 28 Feb 14 Mar 28 Mar 11 Apr 25 Apr
▪ Other chains have also attracted new DeFi-like projects with growing success. Solana has
attracted the attention of many. Sam Bankman Fried of FTX has been a huge proponent of
DeFi Ethereum TVL Binance Smart Chain TVL
Solana utilizing the network to create Project Serum, a decentralized exchange with on-
chain orderbooks.
Source: Defipulse, Defistation
May 4, 2021 18 Provided byDisclaimer
• The Weekly Update (the “Report”) by Arcane Research is a report focusing on cryptocurrencies, open blockchains and fintech. Information published in the Report aims to spread knowledge and summarise
developments in the cryptocurrency market.
• The information contained in this Report, and any information linked through the items contained herein, is for informational purposes only and is not intended to provide sufficient information to form the basis for an
investment decision nor the formation of an investment strategy.
• This Report shall not constitute and should not be construed as financial advice, a recommendation for entering into financial transactions/investments, or investment advice, or as a recommendation to engage in
investment transactions. You should seek additional information regarding the merits and risks of investing in any cryptocurrency or digital asset before deciding to purchase or sell any such instruments.
• Cryptocurrencies and digital assets are speculative and highly volatile, can become illiquid at any time, and are for investors with a high risk tolerance. Investors in digital assets could lose the entire value of their
investment.
• Information contained within the Report is based on sources considered to be reliable, but is not guaranteed to be accurate or complete. Any opinions or estimates expressed herein reflect a judgment made as of the
date of publication and are subject to change without notice.
• The information contained in this Report may include or incorporate by reference forward-looking statements, which would include any statements that are not statements of historical fact. No representations or
warranties are made as to the accuracy of these forward-looking statements. Any data, charts or analysis herein should not be taken as an indication or guarantee of any future performance.
• Neither Arcane Research nor Arcane Crypto AS provides tax, legal, investment, or accounting advice and this report should not be considered as such. This Report is not intended to provide, and should not be relied on
for, tax, legal, investment or accounting advice. Tax laws and regulations are complex and subject to change. To understand the risks you are exposed to, we recommend that you perform your own analysis and seek
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19 Provided byProvided by
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