Earnio results for May 2024

Tomáš Hucík

In the last article, I mentioned that bitcoin's price is moving within a channel, and I can basically use the same introduction now. So, let's get started: The price of bitcoin has been moving within the range of $60,000 and $72,000 for quite some time

All attempts to break through these price levels are rejected, and if a breakout does happen, it doesn't last long, and the price returns to the range. 

Because this is quite a wide range, there are movements within it that may look like the market direction but, when viewed from a sufficient distance, are just larger or smaller waves.

Bitcoin has been trading within a channel for several months - Tradingview.com

Bitcoin has been trading within a channel for several months  - Tradingview.com

S&P 500 Index and its growth

Interestingly, the price chart of bitcoin has diverged from the charts of major technology indexes.

NASDAQ and SP500 have been hitting new all-time highs day after day recently, but bitcoin, which is sometimes also considered a "technology" trading tool and its price used to correlate with tech stock prices, is "stuck" in the aforementioned range. 

What this means is hard to estimate, but two interesting explanations are that Bitcoin is becoming a sort of "canary," indicating a larger downturn in global markets, essentially suggesting that the stock market's developments are ahead.

It is also possible that bitcoin is lagging behind the stocks, and we might be looking at a period of price growth where it will try to "catch up." 

Graph of S&P500, the index of the 500 largest American companies reaching new highs - Tradingview.com

Graph of S&P500, the index of the 500 largest American companies reaching new highs - Tradingview.com

Bitcoin ETF flow

The truth is that bitcoin is well-positioned for potential growth. At the beginning of June, bitcoin ETFs recorded their best week ever in terms of new bitcoin inflows.

This shows that there is still interest in bitcoin ETFs, and from the inflow and outflow charts, it looks like the Grayscale Bitcoin Trust is running out of bitcoins to sell. The GBT was originally a closed trust and owned bitcoins even before transforming into an ETF. 

In the chart, you can see that inflows significantly exceeded outflows in the first week of June - Theblock.com

In the chart, you can see that inflows significantly exceeded outflows in the first week of June - Theblock.com

Funding rates

One of the less talked about phenomena is the fact that the current bitcoin market is a battleground for contrasting strategies. ETFs are convinced of bitcoin's long-term value and continually increase their holdings.

Meanwhile, hedge trading funds are utilizing short positions on derivatives. They target funding rates, which are currently positive for short positions. Funding rates work in a way that if you hold an open short position (trade on the price decline), the exchange pays you rewards.

Currently, these funding rates can sometimes reach double-digit annual returns.

These hedge firms can, for example, buy a spot through ETFs and open a short on futures against it; these two positions offset each other, eliminating price fluctuation risk, and they just cash in on the funding rates. 

This battle between spot long positions and short futures positions creates an interesting dynamic, and it will be really interesting to see how it plays out. 

Heat map of funding rates converted to average annual return day by day. For example, if the funding rates remained the same for the whole year as they were on June 9, 2024, holding an open short position would yield an annual return of 10.27% - Coinglass.com

Heat map of funding rates converted to average annual return day by day. For example, if the funding rates remained the same for the whole year as they were on June 9, 2024, holding an open short position would yield an annual return of 10.27% - Coinglass.com

SEC Approves Spot Ethereum ETFs

In the second half of May, the markets were hit by news that very few had actually expected. The US Securities and Exchange Commission approved key documents associated with the approval of spot Ethereum ETFs.

This is a huge milestone for the second-largest cryptocurrency. The approval was surprising and happened very quickly; analysts previously estimated no more than a 25% chance of success. 

When the approval machinery started, the price of Ethereum jumped by 25% to just under $4,000.

Because the actual start of trading is still at least a few weeks or maybe even months away, ETH did not maintain its price and gradually lost all gains. It is still awaiting SEC approval of the S-1 form, which regulates the trading conditions of these ETFs.

Try to guess on a blind chart when the news of the ETF approval appeared - Tradingview.com

Try to guess on a blind chart when the news of the ETF approval appeared - Tradingview.com

Our trading: 

As I mentioned at the beginning of the article about the previous one, I'll do the same at the end.

Since the market situation hasn't changed much, neither has the situation in our portfolio changed significantly from last month

We still have rather pro-trend strategies set up, which trade better in a rising market. However, since the market continues to move sideways, positions that are open are usually closed with a small profit or a small loss. 

Positions on ETH/USDT pair - Bybit.com

In the chart, you can see how the strategy attempts to capitalize on the price increase, partially realizing a profit but also closing part of the position at a loss - Earnio trading, Bybit.com

The advantage of this portfolio composition is that in case of a breakout, if the price breaks the resistance at the top of the channel shown in picture no.1 and continues upwards, we will nicely capitalize on this movement. 

We still see a rather positive sentiment in the market. Crypto is one of the main topics of the US elections, ETFs were approved in Hong Kong, now the Ethereum ETF has been added, the supply of bitcoins on exchanges is declining in the long term ... and much more. 

Additionally, in our portfolio, we have completely migrated our infrastructure and started using new tools that have improved execution itself. This has accelerated the execution of trades to milliseconds, and we no longer experience delays between placing a trade and its execution. 

All these are important steps to capitalize on the potential upcoming price increase. 

Despite the unremarkable market, we managed a nice result of 1.1% this month. Rewards for participants in the Earnio FIX program and affiliate rewards will be fully paid from the project funds. 


Earnio results for April 2024

Earnio results for April 2024

Earnio Results of February 2024

Earnio Results of February 2024

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