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PraxisVeritas.io

@praxisveritas

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@praxisveritas
When does ETH/BTC bottom? One of the most striking divergences between ETH and BTC are the centralized exchange net on-chain flows. While BTC has been seeing persistent net outflows for the past few months on a rolling 14 and 30-day sum basis, ETH continues to see net inflows. The sell pressure this creates for ETH continues weighing on its price vs. BTC. If anyone has an idea about which entities are responsible for this please reply. It's a solid hypothesis that ETH/BTC bottoms when this divergence normalizes.
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The Praxis Veritas prediction engine has been flagging the positive shift in the ETH price regime since September. The likelihood remains very high that we continue in the current rising price regime through mid-December.
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Major stablecoin (USDT, USDC & DAI) issuance continues pushing to new highs on a daily basis over the past few weeks. One indicator we can use to assess the broader crypto rally is to look at how major stablecoin volumes are changing relative to the aggregate market cap. The second chart below plots the 1 month change in the major stablecoin share of the aggregate crypto market capitalization in grey. Periods of persistent declines in the stablecoin share coincide with broad price increases in the window since these data have been available. Currently we are seeing the stablecoin share decline by ~1% point over the past month.
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The probability of ETH being in a rising price regime continues increasing through Oct. The shift in price regime probability started in mid-Sep.
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Regarding BTC dominance, it's possible that the reason we have seen continue to push to cycle highs in 2024 has to do with market conditions that dominated in 2023. The chart below shows the Goldman Sachs financial conditions index as a 9 month leading indicator of BTC dominance. The real easing in financial conditions, which took place in 2024, has yet to show up in crypto market structure.
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Uptober looking more and more likely as the probability of ETH being in a rising price regime continues climbing. Check the link in the bio for more on how the probability estimate is generated.
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ETHUSD Risks Start Improving in mid September The Praxis Veritas ETHUSD forward-looking rising price regime probability starts to improve to around 10% beginning in mid-September. This is the most persistent improvement after a sharp decline through July and August. As a reminder, price regime predictions incorporate macro and cross-asset factors as well as numerous inputs idiosyncratic to the asset under analysis - in this case ETH. On the cyclical data side, we have seen a marginal improvement in global data surprise indices in recent weeks. The signs of a true inflection point are not yet there, but at the margin the rate of economic data deterioration could be moderating. Ethereum's utilisation at the L1 level is stabilising in terms of daily active addresses while L2 activity remains in an uptrend. Volatility risk premia have reached a local inflection point and continue rising.
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Rarely have we seen a 3 month period where the ETH daily return distribution has been as negatively skewed as over the past 3 months. Last time was in the immediate aftermath of FTX. Putting aside pessimism on CT, this is an empirical reflection that price action has also been unusual.
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BTC and ETH: when will the lashings stop? [continued] How can we improve our confidence about an important inflection point in BTC and ETH after the brutal recent price action? First two indicators mentioned were volatility risk premia. Continuing with net flows into centralised exchange addresses: this should be relatively straightforward to interpret - BTC or ETH net inflows into CEXs are more likely to coincide with selling pressures dominating markets and vice versa. Currently we are seeing both BTC and ETH net inflows on a rolling 14 and 30-day basis. No sign yet of inflection points here.
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BTC and ETH: when will the lashings stop? One place to look is the volatility-risk-premium, which compares implied with realised volatility. For BTC and ETH, the implied values are the Deribit DVOL indices, while the realised vol data are Rogers-Satchell 30 day vol estimators, which incorporate intraday price action. Although data are only available since 2021, inflection points after negative price action have occurred around low percentile readings of the VRP. For BTC, current values are on par with the start of mid-July's price recovery, but still higher than January and May's inflections.
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First recording of a human voice is from 1860 and only recently recreated from an imprint of the sound wave found in a Paris archive. https://www.bbc.com/reel/video/p0j7x5f7/listen-to-the-oldest-known-recording-of-a-human-voice
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Putting the US gov't aside, one of the more interesting developments on the supply side is about the Mt. Gox coins. One safe assumption is that as this process unfolds the willingness by creditors to sell BCH would be much higher than BTC. If it therefore surprising to see BCHBTC bouncing in recent days. Some evidence that the Mt. Gox impact on price is over.
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One of the lessons we learned recently from the German govt sale of Bitcoin is that price need not linearly respond to amount of assets sold. Most of the BTC price decline around this event occurred as relatively small amounts of the 50K were transferred out. We can apply this logic to analyzing ETHE, which is currently undergoing a sizable drawdown in assets after spot ETH ETFs started trading. From 2.92 Mln ETH on the eve of ETF conversion to 2.28 Mln as of Friday, the drawdown represents ~22% of assets in ETH terms. So far ETH prices have fallen ~10% as this drawdown unfolds, in both USD terms and even more against BTC. While we can't know whether the bulk of the price decline is behind us, it's likely that we see a rapid decline in sensitivity between ETHE asset declines and price changes going forward. This should be true particularly as other spot ETH ETFs are seeing relatively strong inflows since launch.
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The horse race continues and it remains close. Over the past two weeks, BTC+ETH have taken a slight lead over COIN equity, but it remains close.
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As Mt. GOX disbursements start, the best signs to watch of maximum market impact remain BCHBTC spot and BCH funding rates. BCH will also be distributed to creditors' exchange addresses and it's much more likely that BCH will be sold compared to BTC. Thus, a downtrend in BCHBTC coupled with negative funding rates would be consistent with Mt. GOX sellers remaining active in the market.
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The intensifying US growth deceleration is starting to drag on overall global growth momentum. Markets have so far been dealing with these headwinds incredibly well, evidenced in part by the persistence of historically low implied and realized volatility regimes. We do have positive policy factors to look forward to, which may go some ways at solving this discrepancy. The start of a rate easing cycle likely takes place at latest in the fall and policies under a new US administration could continue to drive markets. Nonetheless, in the near term the data flow against these drivers.
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New all-time highs in supply of major stablecoin supply. This is liquidity in a crypto context and should co-vary with risk appetite in the space.
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Ahead of a formal launch of spot ETH ETFs, the rolling 50D correlation between BTC and ETH log-returns are approaching 0.9 From a portfolio diversification perspective, most straightforward approach is an equally-weighted basket of the two as correlations are high on an absolute basis and volatilities comparable.
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After a steady decline from mid-March through May, we are seeing Bitcoin's daily active addresses trend up once again since June. For both BTC and ETH, daily active addresses in a general uptrend has been a useful cross-reference to purely price-based metrics about the state of the cycle.
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BTC implied and realised volatility have started rising once again when compared to a cross-asset aggregate measure. The pattern of previous upswings is that BTC relative volatility goes up, as upside exposure drives the aggregate volatility surface. Particularly when examining realised relative volatility, we are at tame levels on a historical basis.
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