Monthly Commentary (Sep 2021)

Looking at the graph from about historical Bitcoin monthly returns over the past 9 years, September has been a rocky month for cryptomarkets. From China FUD to regulatory crackdowns where China's top regulators ban crypto trading and mining, we're facing much uncertainty within the sector.

Following two consecutive months of double-digit percentage gains in July and August, Bitcoin and the overall markets gave some back in September (BTC -7.2%, ETH -12.6%). The Smart Beta Index (SBLI) tracks the overall markets in similar fashion; returned -9.8% in September. Despite the negative performing month, SBLI remains to outperform the overall market in the medium to long run:

Statistical Performances:

By looking at data from a longer timeframe, our smart-beta rebalancing strategy is playing out. The smart-beta factors are designed to add alpha to the index portfolio in the long run and it is being displayed here.

While Bitcoin's market cap dominance has been flat over September, going into mid October, the strong pick up in both Bitcoin's price and market cap dominance MTD is very noticeable. SBLI rebalanced its composition to fully in Bitcoin as our smart beta rebalancing model suggests the index to stay 100% exposed in the "big brother" for the coming month.

It has been a remarkable year, and this is an interesting start of Q4. So far MTD, the SBLI is roughly +20%. Let's hope the markets can close out the last quarter of 2021 strong!

Macro Update

Total Marketcap trend

The amazing recovery in the crypto market during the late summer months came to a halt in early September as D3 confirmed a bearish divergence against RSI, sending the Total Market Cap from as high as 2.44T all the way to 1.8T in a matter of 20 days. The dump was very violent as it appeared to be liquidating leveraged longs as it tried to retest ATH, and amazingly the market found support near the upper white box area shown in the chart below, before forming an engulfing weekly candle in early October.

There's this a huge resistance right at the orange horizontal line (2.40T) as the market have wicked a few times to test the barrier. There's also another potential bear divergence forming against RSI - spot will need to break up much higher for invalidation. given there may possibly be a BTC ETF being approved in the US coming the 3rd week of October, it looks like the market is trying to at least retest All time high at 2.58T, which is really not that far away.

BTC Dominance

From last month's commentary the bullish divergence on BTC dominance is playing out as it formed a double bottom at around 40.5% and rebounded to as high as 45%. Looking at the weekly chart it is facing some structural resistance between 45-46% which should give some room for Alts for a possible short term run. If we break above the upper rectangular box then possible to see the next stop to be at 50% (with no real resistance until 60%).

While this is a bit too far away to predict for now, what's more interesting is if you invert the chart you will see a different perspective on where the dominance will go:

BTC, ETH exchange netflows

What started as a net outflow for both BTC and ETH from exchanges during the start of September to outflows towards the month end. In hindsight it appears to be another capitulation bait on retail flows as we see prices quickly reversed at the start of October. All in all a rather quiet lackluster month though.

Spot vs Derivatives

Apart from the nasty September 7 nuke that had a massive liquidation (roughly half a billion USD, worst liquidation since the May flash crash), spot and derivatives CVD seems to be much in line throughout the month. Its worth noting derivative prices led the early October charge versus spot. The last time this happened was during the July-August 2021 mini-bear market where derivatives CVD kept rising when spot CVD wasn't really moving; what ensued was a major comeback in late August. Will we see something similar happen this time for October?

Uneventful September; but October seeing derivatives CVD leading.

Looking back you can see how a divergence on Spot vs Derivatives CVD was forming in a bearish July (with Derivatives CVD leading higher), and the market popped higher in August.

On the derivatives funding market you can see that we had a rather flat-ish funding month as crypto prices were all in the red throughout the last 3 weeks of September. It was worth noting funding was still rather flat when BTC made its move back to 50k - which we believe added more fuel to the rally.

Fear and Greed

After a huge drop in the Fear and Greed Index in September, we are back near the August euphoric levels as BTC is trying to retest ATH again. As witnessed in the past, euphoric or fear levels could last for a while and we may just be getting started.

Option Skew

Short dated option skews have not changed much, favoring downside throughout all of October expiries. Worth pointing out that October option open interests are not as high as the December 31st expiry hence we would prefer to look at the skew on the expiry with the highest OI. In this case the December 31st smile is still slightly skewed to the upside.


We can see that DeFi markets is recovering quite nicely as total TVl across most popular L1/L2 chains are at all time highs. Around 70% of it still resides in Ethereum and we're seeing Solana and Terra are the biggest gainers in TVL since September. Its interesting to note that Binance Smart Chain (BSC) still sits in #2 spot, but its incumbents are catching up quite quickly.

We're seeing some L2 chains like Fantom are getting alot of traction as we're seeing TVL growing quite quickly over the past 2 months as its sitting in the #5 spot. We see its price is going parabolic, but we believe there's more room to grow given its marketcap / TVL ratio is relatively low compared to its peers.

Bitcoin - Technicals

After a 25% pullback in September, we saw BTC skyrocketed in early October to liquidate late shorters and now we're sitting in a very interesting setup shown below. On higher timeframes like D3 and W1 we see BTC broke through an important diagonal resistance - coupled with a highly likely tk ichimoku cross, we could be in for another leg up this Q4. Bearish Divergences are forming on the lower timeframes so watch out for potential false breakouts along the way. Once this diagonal is broken, we could see resistances at 50k would turn into support - if we do have another 10% dip from here this could be a strong support level there.