Bitcoin bottomed after a textbook 20% selloff, and a new uptrend is likely underway, Fundstrat’s Tom Lee says

Tom Lee

Bitcoin’s recent sell-off looks to have found support and a new uptrend is “likely underway,” Fundstrat’s Tom Lee said in a note on Wednesday.

The most valuable cryptocurrency sold off more than 20% in recent weeks after topping out just below $65,000 amid the Coinbase IPO. Bitcoin broke below $50,000, which represents a key psychological level for investors, but has since recovered and is trading near $55,000 as of Wednesday afternoon.

Now, bitcoin has found support near $47,000, which coincided with a “9” count buy signal generated by the DeMark indicator. This counter-trend indicator, created by Tom DeMark, helps measure price exhaustion in securities.

Traders should look for bitcoin to move above $62,000 to affirm that the sell-off is over, according to Lee.

“If this [$47,000] holds, and is likely, given this was a level prior to the last ‘sell countdown,’ bitcoin going to rally,” Lee said.

A potential target bitcoin could rally too is $69,000, representing potential upside of 25% from current levels, according to technical analyst Katie Stockton of Fairlead Strategies.

Read more: Goldman Sachs names 19 crypto-exposed stocks that have piggybacked on bitcoin’s surge to achieve returns that have nearly quadrupled the S&P 500

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Bitcoin’s free-fall below $50,000 has it testing a new technical threshold that could signal even more weakness ahead

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  • Bitcoin’s decline below $50,000 has the cryptocurrency testing a new technical support level that could signal more weakness ahead.
  • The 100-day moving average at $49,500 will be closely monitored by technical analysts after the 50-day moving average failed to hold as support.
  • Bitcoin could ultimately find support at $42,000, representing a 15% decline from current levels.
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Bitcoin’s weakening momentum has helped contribute to a swift 24% decline from its record high of nearly $65,000 over the past week, and more downside could be ahead if key technical levels fail to hold as support.

The first sign of trouble for bitcoin was a consecutive daily close below its 50-day moving average on Wednesday, which technical analyst Katie Stockton of Fairlead Strategies said was a key line in the sand for the cryptocurrency.

Moving averages are a lagging trend-following indicator that technical analysts use to smooth out price movements and help identify the direction of the trend in place.

Traders often view the the 50-day moving average, which is the average daily closing price of a security over its previous 50 trading sessions, as a short-term moving average that often represents areas of support or resistance.

Now, bitcoin is struggling to hold support at its 100-day moving average, another closely watched moving average that often helps identify areas of support and resistance in the short-term. The weakness was exacerbated on Thursday following reports that the Biden administration is eyeing an increase in the capital gains tax.

The 100-day moving average currently sits at $49,500. Bitcoin briefly fell below that level on Friday to $47,500, but has since recovered and is trading at $49,560. Consecutive daily closes below the 100-day moving average would set bitcoin up for more weakness ahead, and with bitcoin’s RSI still above 30, it has yet to reach levels considered oversold by traders.

According to Stockton, the current weakness could lead to bitcoin finding support at $42,000, which would represent an additional decline of 15% from current levels and a total drawdown of 35% from its record high.

That potential decline would not be out of the ordinary for bitcoin, which has historically experienced significant corrections amid a broader long-term uptrend. And despite the current weakness in bitcoin, Stockton believes bitcoin can ultimately hit $69,000.

“The pullback does not negate the breakout, but it suggests that its targeted level [$69,000] may take longer to achieve,” Stockton said, adding that despite the short-term pullback, bitcoin’s long-term momentum “remains strong.”

Read more: The investing chief of crypto asset manager Arca shares the 3 themes and 10 tokens he’s betting on – and explains how to execute his special-situations investing strategy in digital assets

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Bitcoin’s momentum will slow for months if it’s unable to quickly climb back above the crucial $60,000 level – and 2 main hurdles stand in its way, JPMorgan says

Bitcoin Bubble
  • A decay in momentum could represent a big problem for bitcoin, JPMorgan said in a Tuesday note.
  • A steep liquidation in bitcoin futures contracts has transpired over recent days, suggesting future weakness in the cryptocurrency.
  • “The challenge for bitcoin momentum in the current conjecture is to break above $60,000,” JPMorgan said.
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A decline in momentum could set bitcoin up for weakness going forward, according to a Tuesday note from JPMorgan.

Over the past few days, bitcoin futures contracts have faced a steep liquidation, which in the past has occurred near big round price levels. Certain thresholds like $20,000 in November, $30,000 in mid-January, and $50,000 in mid-February were all met with a brief decay in momentum.

According to the bank, it’s likely that momentum traders are behind the buildup and decline of long bitcoin futures in recent week.

“Each previous episode presented a challenge for bitcoin momentum to break out above the certain price thresholds,” JPMorgan said.

Now, that price threshold is the $60,000 level. If bitcoin fails to break out above the $60,000 level, momentum signals “will naturally decay from here for several months, given their still elevated level,” JPMorgan said.

Bitcoin currently trades near $55,500 after topping out around $64,000 last week amid the Coinbase direct listing frenzy.

The recent decline in bitcoin has investors watching key technical levels, including the 50-day moving average, which would signal further downside to $42,000 if that level doesn’t hold as support, according to one technical analyst.

Read more: A 29-year-old self-made billionaire breaks down how he achieved daily returns of 10% on million-dollar crypto trades, and shares how to find the best opportunities

JPMorgan is doubtful that bitcoin will be able to break above the key $60,000 level amid a decline in momentum for two reasons.

“First, the decay in our bitcoin momentum signals seems more advanced, reminiscent of the second half of 2019, and thus more difficult to reverse than in the previous three episodes. Second, the flow into bitcoin funds appears weak, raising concerns about the strength of the overall bitcoin flow picture at the moment,” JPMorgan concluded.

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Bitcoin is not overbought and could reach $75,000 before the current bull market ends, research from Kraken says

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Citi said bitcoin is at a “tipping point.”

  • Bitcoin is not yet in “overbought” territory and could reach $75,000 before the current bull cycle ends, Kraken says. 
  • According to historical price movements of bitcoin, the first quarter of 2021 could be met with massive gains for the token. 
  • Bitcoin is up 62% year-to-date as of Friday as it hovers just below $48,000.
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Bitcoin could gain much higher before the current bull market ends based on historical price movements, says a Kraken Intelligence market report published Friday.

Although bitcoin is quickly approaching resistance, it remains several tens of thousands of dollars away from entering into “overbought” territory, Kraken said. If bitcoin were to surpass $75,000 in the next few months, historical price action suggests bitcoin would then be close to the top of the cycle. 

The cryptocurrency has pulled back from its all-time high above $58,000 on February 21, but it still finished the month 37% higher. The coin is up 62% year-to-date as of Friday as it hovers just below $48,000.

According to Kraken, bitcoin is now trending in a manner most similar to the first quarter of 2013, bitcoin’s best first quarter on record. If the trend continues, the first quarter of 2021 “could be a historic quarter with a relatively outsized return.”

“By plotting a logarithmic growth curve that connects BTC’s prior market cycle tops (resistance) and bottoms (support) and by making assumptions about how severe BTC will correct upon hitting a cycle high, one will find that BTC likely has plenty of upside before entering a bear market,” the report says. 

The report comes as some investors voice concerns that bitcoin’s rapid acceleration is a clear sign the cryptocurrency is in a bubble waiting to burst. Michael Burry said the coin is a “speculative bubble that poses more risk than opportunity” in a tweet Monday that has now been deleted. 

On Wednesday Kraken CEO Jesse Powell told Bloomberg a $1 million as a price target within the next 10 years is “very reasonable.” 

 

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Americans are becoming increasingly bullish on cryptocurrency as bitcoin soars to new records

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Bitcoin miners are seeing gold despite the cryptocurrency’s recent fall.

  •  A new study of 30,000 Americans reveals 50% view cryptocurrencies as safe investments.
  • The survey also revealed 57% of investors think companies should accept crypto as payment.
  • Though crypto enthusiasts have mixed opinions on whether bitcoin will ultimately serve as a medium of exchange or simply a store of value.
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Bitcoin’s record-breaking rally to a $1 trillion market capitalization on Friday has increased the buzz around cryptocurrencies. Debates on whether these are worthy investments have flourished among investors, analysts, and the public. 

Despite critics arguing against the legitimacy of these assets, a new study reveals that cryptocurrencies are viewed as safe investments by 50% of Americans. Additionally, 41% of those surveyed said investing in the stock market and cryptocurrencies are equally risky investments. 

Conducted by Piplsay, a global consumer research platform, the study surveyed over 30,000 people in February on their views on digital currencies.

“The crypto bull run has seized the attention of millions of people who previously had never considered digital currencies like Bitcoin to be an alternative asset,” said Pavel Matveev, CEO of Wirex, a digital payments platform. “Bitcoin and other currencies are intended to have several uses, not least ease of exchange, purchase, and liquidity.” 

The survey also revealed that 57% of Americans think major companies should start accepting cryptocurrencies as payments. In a separate survey of 1,050 Americans conducted by DealAid, 50% of investors said they would be willing to pay for products using bitcoin. 

Some companies this year have already taken steps towards accepting cryptocurrency as a means of payment. PayPal in October 2020 said it will start allowing people to use cryptocurrencies starting this year, while Tesla announced in January it plans to start accepting bitcoin as payment. Investment banks JP Morgan and Morgan Stanley have both also expressed interest in considering cryptocurrency as payment.

Critics however are quick to argue that the volatility of cryptocurrencies makes them poor medium of exchange.

“If you bought a $50,000 Tesla with four bitcoins on October 1st, that purchase now has an opportunity cost of $212,000, because bitcoin’s dollar price has risen from $10,000 to $53,000 in those four and a half months,” said Robert Minter, Director of Investment Strategy, Aberdeen Standard Investments. “That type of volatility is unsuitable for transacting in an economy.” 

Bitcoin has skyrocketed in recent days, surging 60% this month alone. Ethereum, the second-largest cryptocurrency by market value, also soared to record highs Thursday. Even dogecoin, a cryptocurrency that began as a joke, has been gaining traction in recent weeks

“Bitcoin’s market cap hitting $1 trillion demonstrates the mainstreaming of cryptocurrency as a store of value,” said Adam Liposky, Ecosystem Operations Lead at Pocket Network, a blockchain data ecosystem for Web3 applications. “We expect that Bitcoin is only the first of many $1TR market caps that we’ll see in the blockchain economy.”

Enthusiasts argue bitcoin may exist solely as a form of value akin to “digital gold,” while other forms of digital currencies will emerge as forms of payment. 

Mike Venuto told Insider he doubts “we will ever buy coffee with bitcoin.” 

“This excitement obscures the reality of the original bitcoin thesis of decentralization, replacing the trusted third party and banking the unbanked,” Venuto, who manages an approximately $1 billion ETF, said. “The focus now seems to be the store of value argument from the limited supply.”

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Billionaire ‘Bond King’ Jeff Gundlach says bitcoin appears to be in ‘bubble territory’

FILE PHOTO: Jeffrey Gundlach, Chief Executive Officer, DoubleLine Capital LP., speaks at the Sohn Investment Conference in New York City, U.S. May 4, 2016.  REUTERS/Brendan McDermid
FILE PHOTO: Jeffrey Gundlach, Chief Executive Officer, DoubleLine Capital, speaks at the Sohn Investment Conference in New York

  • “Bond King” Jeffrey Gundlach told CNBC on Monday bitcoin hit “bubble territory” once it passed $23,000, and he doesn’t feel comfortable with the coin’s current levels. 
  • “I don’t like bitcoin here, I don’t like things that are up on a stilt like that,” the DoubleLine Capital founder said of the coin that rallied nearly 300% in 2020. He added that he’s “neutral” on bitcoin.
  • Bitcoin fell as much as 13% on Monday to $30,558. It’s lost over $10,000 in value since hitting a record above $41,000 last week, but the coin is still up nearly 89% in the last month.
  • Watch bitcoin trade live here.

“Bond King” Jeffrey Gundlach told CNBC on Monday bitcoin hit “bubble territory” once it passed $23,000, and he doesn’t feel comfortable with the coin’s current levels.

“I don’t like bitcoin here, I don’t like things that are up on a stilt like that,” the DoubleLine Capital founder said of the coin that rallied nearly 300% in 2020.

Bitcoin fell as much as 20% on Monday, to $30,324. While the coin has lost roughly $10,000 in value since hitting a record above $41,000 last week,it’s still up nearly 89% over the past month. Gundlach suggested bitcoin’s run-up has happened all too fast.

“People seem to be so much on one side of the boat that I just really don’t really believe the boat can sail that well, and I think that’s where bitcoin is on the bullish side right now,” he said. 

Read more: The CIO of a $500 million crypto asset manager breaks down 5 ways of valuing bitcoin and deciding whether to own it after the digital asset breached $40,000 for the first time

The investor added that bitcoin has a “terrific supply and demand dynamic” if institutions get involved. The total number of bitcoins that can ever be mined is 21 million, which means that the supply stays scarce even if demand grows. He’s insisted that he’s not a “bitcoin hater” and told CNBC he went neutral on bitcoin after it hit $23,000.

In a DoubleLine webcast in December, he said: “I’m not a bitcoin pro or con person. I’m not in the cult, and I’m not in the anti-bitcoin cult. I just look at it as a fascinating representation of animal spirits and speculation.”

Earlier, in a RealVision interview from Oct 1, Gundlach said he “didn’t believe in bitcoin.”

“I think that it’s a lie,” he said. “I think that it’s very tracked, traceable. I don’t think it’s anonymous.” Gundlach later added that he was “not at all a bitcoin hater.”

Read more: Goldman Sachs says to buy these 29 stocks poised to deliver the strongest sales growth through year-end

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