The crypto market has been hot. But in a market of tokens and stocks of all sizes and types, Bitcoin (CCC:BTC-USD) has not. But how do things shape up for BTC investors going forward? Let’s to Bitcoin price chart are elsewhere for answers, and offer a risk-adjusted determination aligned with those findings.
Bitcoin or BTC. It’s the largest and most known digital asset on the planet. But over the past couple months a rotation has occurred at the hands and in the minds of investors. BTC is still the largest crypto by size with a valuation just north of $1 trillion. But forever number two in line, Ethereum (CCC:ETH-USD), has been busy catching up as it’s market cap nears $500 billion.
Over the past month BTC has lost 7.72%. For a volatile coin, that’s unlikely to set off alarm bells. But the lethargy is also embedded within a gain of just 16.91% in the past three months. Where’s the wild volatility that cryptos are famous for? I’m glad you asked. At the same time, ETH has used the sometimes-unruly price behavior to its advantage. ETH is up about 95% in the past thirty days and more than 470% since the first day of the year.
So, what gives? BTC investors could chalk up the weakness to the fact risk assets, even the biggest, go through corrections. Think Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN) or what’s happening in most tech stocks right now. But there is another possible reason that could account for Bitcoin’s relative pressure. They’re non-fungible tokens (NFTs).
NFTs offer investors the chance to own unique, digital properties comprised of video, audio and other files. Think along the lines of digital art. Moreover, the asset’s popularity is exploding. The NBA is already hawking trading cards. The NYSE is offering NFTs of its most-prized moment. And some NFTs having already fetched millions of those old-fashioned Benjamins most of still rely on. But what’s that have to do with BTC’s performance of late? Maybe everything and nothing.
As with any market or asset, there will be corrections in NFTs. But not today. More importantly, and regardless of a bull or bear cycle, NFTs are stored on digital-ledger Ethereum technology. Yeah, ETH. And it’s reasonable to assume that today’s pressure in BTC and narrowing valuation spread is related to NFTs.
Some pros believe there’s more to BTC’s current weakness as the crypto market continues to grow.
To be fair, Bitcoin isn’t at a loss for staunch supporters. Top fund manager Ark Invest owns more than 7.25 million shares of Grayscale Bitcoin ETF (OTCMKTS:GBTC). Islamic crypto zealots are chanting for $111,000 per BTC token this year. And the CEO of Kraken cryptocurrency trading platform sees the sky as the limit or at least $1 million per coin for BTC longer-term.
As well and not to be ignored with mainstream acceptance of cryptos at stake, ahead of the curve growth businesses Tesla (NASDAQ:TSLA) and Square (NYSE:SQ), as well as more conservative outfits such as MassMutual also have their hands in the Bitcoin cookie jar. Some are taking a different approach and view however.
Well-followed influencer and outspoken billionaire and Mavericks owner Mark Cuban argues ETH’s blockchain technology has the strongest functionality among digital assets. Most of today’s decentralized finance or (DeFi) projects are built on Ethereum’s blockchain which makes its utilization value much greater. In his estimation Ethereum is the closest thing to a true currency, while BTC is an alternative store of value to gold due to its algorithmic scarcity. Mark also smartly, in our view, owns both BTC and ETH.
Bitcoin Weekly Price Chart
Source: Charts by TradingView
It’s a tug-o-war in BTC with bulls and bears making decent cases for owning and avoiding or shorting the coin. But is a day of reckoning here today for Bitcoin? For that and given what is still a young and evolving crypto market, I’d rely on the price chart for buying or selling decisions without getting too far ahead of ourselves.
Right now and reviewing BTC’s listed proxy GBTC, Bitcoin bulls have the technical advantage in conjunction with disciplined money management. This past week shares reaffirmed a hammer candlestick formed in April and completing a well-supported double bottom pattern. Along with a properly aligned and oversold stochastics set up, purchasing the coin today has some obvious merit.
For those investors wanting exposure to BTC, pattern risk stands at roughly 13% if purchasing GBTC near $44 and placing a stop-loss slightly beneath zone and pattern support at $38 a share. Making that risk a worthwhile proposition, if Bitcoin can make good on the bullish formation, an eventual breakout could reasonably find shares near $70 based on a conservative measured out of the base during the second half of 2021.
Stocks Owned: On the date of publication, Chris Tyler holds, directly or indirectly, positions Grayscale Bitcoin and Ethereum Trusts (GBTC and ETHE), Ark Invest Funds (ARKK, ARKG) and their derivatives, but no other securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.