By Matrixport Research

Summary

BTC Price Trend: Based on the 5 key BTC price indicators and data as of 28 February, BTC price has a higher probability of retracing in the short term. Market Trends: Cryptocurrencies continues to gain mainstream traction as more institutional investors continue to endorse and invest in bitcoin. The latest wave of investors includes fund titan Blackrock and popular investment advisory firm Motley Fool. In addition to increase fund inflow from institutes, numerous institutional giants such Rakuten and Google have adopted parts of cryptocurrencies into their ecosystem. Endorsement from high-profile institutions should spur the development and wide-spread adoption of the cryptocurrencies industry. Abnormal Activity Tracker: No abnormal activity.

BTC Price Trend

Based on the 5 key BTC price indicators and data as of 28 February, BTC price has a higher probability of retracing in the short term. Overall:

  • NVTS is a short-medium term bull/bear indicator. Current NVTS value is 94.4, on the higher end of the scale, indicating that the chances of BTC prices increasing is lower;

  • MVRV is a short-medium term bull/bear indicator. Current MVRV value is 3.01, at the slightly higher end of the scale, suggesting that BTC could nearing a short term peak；

  • Mayer Multiple is currently 2.03 and has been fluctuating up and down, therefore there is no clear signals. However, it is still above 1, suggesting that BTC is still in the bull market；

  • Bitcoin Difficulty Ribbon is a short-term buying indicator and has remained unchanged. Therefore, no price signal could be derived；

  • Funding rate was high across the entire month of February, particularly during mid-Feb where BTC prices experienced a spike. However, it did not hit abnormal levels of 0.25%. No short-term price signals are provided.

As discussed per our previous report “Price Indicators Deep Dive and Bitcoin Price Analysis”, there are limitations to the aforementioned indicators, and these indicators should only serve as suggestions and not investment advice.

Market Trend

According to its latest SEC filings, Miller Value Funds, run by veteran hedge fund manager, Bill Miller, who is also a bitcoin bull, may invest in the Grayscale Bitcoin Trust through its flagship fund, the Miller Opportunity Trust. The new filing will enable the fund to invest up to 15% of its assets in Bitcoin, making a potential maximum investment of $337m.

Rick Rieder, chief investment officer at BlackRock Financial Management, hinted that the firm has already invested a percentage of its portfolio into crypto. In an interview with CNBC’s Squawk Box on Wednesday, Rieder said BlackRock has started to invest in crypto. In his opinion, blockchain technology and related regulations have evolved to the point where a number of people should have some Bitcoin holdings as part of their portfolio for diversification and return.

Motley Fool, a popular investment advisory service firm is buying $5m worth of Bitcoin from its own balance sheet for its 10X portfolio, a portfolio that recommends subscribers and invests their own money in assets that the firm believes will grow tenfold in the next few years. Motley Fool will be buying Bitcoin directly and not through any ETFs or trusts. The firm has recommended the digital asset as a core holding to all its 10X portfolio subscribers and has provided time for them to purchase BTC before The Motley Fool initiates its own purchase. It added that the company will also be separately buying $5 million in Bitcoin onto its own balance sheet in a few weeks’ time.

MicroStrategy continues to increase its Bitcoin holding. The business intelligence firm announced bitcoin purchases worth over a billion dollars in February. To date, MicroStrategy holds over 90,000 BTC in its corporate treasury account.

Commentary: Unlike previous instances, where many institutions only express positive sentiments, they have gotten off the sidelines and invested their capital into bitcoin. Compared to the earlier wave of institutional investors, the latest wave of investors comes with deeper pockets and willingness to hold the novel asset class for a longer duration. Some of the earlier investors such as MicroStrategy are also doubling down on the space. Increased institutional participation will help diversify the cryptocurrency market and aid its development as a globally recognized asset class.

Japanese e-commerce giant Rakuten has allowed users to spend Bitcoin and other cryptocurrencies at merchants throughout Japan. According to a recent announcement, users of Rakuten’s cryptocurrency wallet can now exchange BTC, ETH and BCH for the firm’s e-money, Rakuten Cash, and deposit into the Pay app and Point credit card. The move means customers can pay with crypto at thousands of merchants across Japan that accept Rakuten Pay and Rakuten Point Card. Rakuten also announced that it will be integrating its crypto wallet into the Pay app.

Google Finance has started a dedicated “crypto” tab on its website. Right at the top of the page, where users can “compare markets,” cryptocurrencies are listed among the five default markets, which also include U.S., Europe, Asia and Currencies. At the moment, Google Finance only tracks a limited number of cryptocurrencies such as BTC, ETH, LTC, and BCH.

Commentary: In the past, many doubters believe that cryptocurrency was just a bubble and will never have any real-world utility. However, as the industry continues its unabated growth, there have been more examples of real-world adoption and acceptance of cryptocurrencies. Rakuten’s adoption of crypto as a form of payment is one of the latest examples of payment providers accepting crypto as currencies. Google’s dedicated crypto tab helps to bring more attention and legitimacy to the industry. As such developments continue, the industry should continue to grow and gain acceptance.

Cryptocurrency exchange Coinbase, which is preparing to trade publicly in the next few months, is being valued at $77 billion, based on trading of the company’s privately held shares on a secondary market. Coinbase is running an anonymous order book on a private stock market ahead of the company’s direct public listing, the date for which is still unknown. The sale allows current and former employees, as well as investors in Coinbase, to take some cash off the table.

Commentary: Coinbase listing on the US market is one of the latest breakthroughs within the cryptocurrency industry. Following the listing of mining hardware manufacturer and crypto asset management firm, Coinbase is largest crypto-related firm to be listed. This listing is expected to open the gates for future listing of crypto-related firms. Should Coinbase valuation continue to soar after listing, this will help to boost the prices of many exchange-linked tokens such as BNB and UNI as investors look to pile into the space.

Grayscale Bitcoin premium flips negative as BTC stays below $50,000. The gap between the GBTC share price and the implied price of the underlying bitcoin has collapsed to a 4% discount from a 35% premium late last year. Analysts speculated the shrinking premium might be due to reduced demand for bitcoin, or due to increasing competition among providers of bitcoin-focused exchange-traded products. One day after GBTC’s flip to discount, Grayscale’s Ethereum Trust (ETHE) also traded at a discount. The trust closed 5.21% below the price of ETH after trading at a premium to the spot price of ether since 2017. Earlier in the month, it traded at a premium that was nearly 20% above the spot price.

Commentary: After trading in premium for much of the bull market, the sudden drop in Grayscale’s trust prices versus their net assets is quite surprising. This could signify a few things: (1) Institutional investors’ interest might be waning as GBTC and ETHE were the main tools for institutional investors to invest in the asset class, a drop in premium may signify they are no longer as bullish, (2) Increased competition within the trust space, more competitors are offering cheaper and better alternatives resulting in investors switching over, (3) Such trusts are not a perfect proxy/alternative to the real underlying assets, investors who bought at a premium probably suffered a larger loss when the trust flipped to a discount compared to an investor who holds the underlying asset.

DeFi’s top three lending protocols have reached record levels of collateral lockup above $20B. A Messari research report into valuing these platforms suggests they’re on track to generate in excess of half a billion in interest annually. Maker, Compound Finance, and Aave have all seen record levels of lending deposits as crypto yield farmers seek exponentially better returns than traditional banks can offer.

DeFi aggregator growth set to dwarf 2020’s volume as DeFi users are increasingly turning to aggregators to get the most cost-effective trades. According to Dune Analytics data, the number of new users, daily transactions, and volumes have surged since the beginning of the year. As gas fees and DEX trading commissions continue to increase, more users are turning to DeFi aggregators such as 1inch and Paraswap, setting DeFi aggregators for a strong 2021.

Asset manager CoinShares is coming to market with a DeFi index token for institutional investors. According to Danny Masters, CoinShares’ Chairman, the index token will bring legitimacy and ease of access for investors to novel asset classes such as DeFi tokens. The index token itself is structured so as to take advantage of the infamous volatility of crypto markets. The impending launch has attracted a substantial level of interest from investors.

Bitwise launched a DeFi index fund as it hopes to capture deep-pocketed investors’ bets on the emerging decentralized finance market within the digital asset ecosystem. At launch, the fund’s top holdings include AAVE, UNI, MKR, SNX and other promising ETH-based DeFi tokens. The fund will be guided by Bitwise’s public methodology, as well as a five-member advisory council representing a broad swath of venture funds active in DeFi.

Commentary: After DeFi summer boom in 2020, the sector cooled off slightly in the fourth quarter of 2020. However, it looks to be picking up steam again in early 2021 as multiple projects look to introduce new products and services. User and trading volumes have been trending up and new funds are looking to invest into the space. This bodes well for promising DeFi tokens, and it is likely successful project will see a new surge in interest and prices.

Abnormal Activity Tracker

BTC: No abnormal activity although fees per transaction (USD) continues to raise as BTC price continue to increase in February.

ETH: The Ethereum network daily transactions rate remains stable while average gas price continues to rise. On average, February’s the gas price remains one of the highest on record, however, there are no sudden spikes in fees.

Disclaimer

Matrixport provides this analysis as general information only. Matrixport accepts no responsibility for the accuracy or completeness of any information herein contained and Matrixport shall not be responsible for any loss arising from any investment based on any forecast or other information herein contained. The contents of this materials should not be construed as an express or implied promise, guarantee or implication by Matrixport that the forecast information will eventuate. The cryptocurrency market is highly volatile. Buying, selling, holding, or investing in cryptocurrencies or related product carries various risks and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before participating in the cryptocurrency market. Matrixport is not acting as a financial adviser, consultant or fiduciary to you with respect to any information provided. Any information available here is “general” in nature and for informational purposes only.