Bitcoin Rallies to Upper Channel - What Next?

Even we were concerned with Bitcoin briefly traded below $6k in late June. Yet, the recent upside price move was incredibly quick and the price of Bitcoin ran right up to our upper price channel. We believe this will become a new price peak over the next few days/weeks where the price of Bitcoin should continue to drop from these levels near $7500. We know there are many Bitcoin investors that want to hear us state that it should continue to push higher, but there are other factors at play here that may limit this movement.

The price channels that are currently constraining the price of Bitcoin originate back in February and March of 2018. The low and high price rotation within these months start the points of interest for our research team. From these points, we have continued to identify key price levels that appear to contain breakouts.

You can see from the chart below, the upper BLUE channel line is our downward sloping price channel that is acting like an upper ceiling for the price. Additionally, you can see our “drawn Red and Green arrows” showing what we believed Bitcoin would potentially do over the next few months. We believed that Bitcoin, as it traded lower, towards $6k, may find support and rally (based on our time/price cycles) towards a peak near July 16 (showing as the end of the Green Arrow). From this point, we believe the price of Bitcoin will trail off, heading lower, with the intent to retest channel support near $5700 if the price cannot break through and hold above the blue upper channel.

This longer term daily Bitcoin chart shows a larger picture of our analysis work. You can clearly see the channels that are constraining price at the moment – the BLUE support channel and the RED resistance channel. The most recent lows established a new lower price point for the Blue channel – which indicated a downward sloping pennant formation is in place.

There are two things we want to caution Bitcoin investors and traders about. First, the rotation that we are expecting to complete this pennant formation could happen very quickly within a fairly tight range ($7400 to $5700). For traders, this is an excellent range for some quick profits. For investors, this could create some stress as price rotates.

Second, by our estimates, at least one more low price rotation is required before any real breakout will be attempted. If our analysis is correct, this current price peak will end with prices falling back below $6k, forming another “lower bottom” and rallying again to near the upper price channel (near $6700 or so) before trailing off for the last time – nearing the apex of the pennant formation. We believe the current outcome of this price setup will be a low price breakout, forming a potential wave 5 that should end near or below $5500. After that bottom is reached, we should be looking for a new bottom formation setting up a new advancement leg higher.

Could our analysis change, of course, it could depending on what price action shows us. Right now, this pennant formation and the wave counts are driving our analysis. The Time/price cycle analysis helps us to determine when and where price target/peaks/troughs may happen, but they are not set in stone. If you are a trader and are long Bitcoin, this may be the highest price you will see over the next few months.

 If you are an investor and think this is the start of a bigger move higher – we don’t agree with you. We believe we are very close to the final leg lower that should form the new price bottom – at least for a while. Once this bottom forms, we’ll be able to provide a better understanding of what we believe will happen in the future. For right now, our target low for the bottom is $4400 on or near August 20, 2018. We’ll see how it plays out.

We keep a close eye using our proprietary ADL Fibonacci and ADL Cycle forecasting systems using the Bitcoin investment trust which trades like a stock/ETF, the symbol is: GBTC.

If you want to learn how we can help you stay ahead of these global market moves and help you plan for and execute greater trades, please visit The Technical Traders site to learn how we assist you. We offer comprehensive research, analysis, daily video, trading signals and much more to our valued subscribers. We also offer access to our specialized proprietary price modeling systems that have proven to be timely and accurate.

Chris Vermeulen 
Technical Traders Ltd.

How Bitcoin Helped ARK Win 'Top ETF' in 2017

ETF.com’s “ETF of The Year” award went to the ARK Innovation ETF (ARKK) for 2017. The award was given to ARKK for a number of reasons, but the top two were due to its exposure to disruptive technology in 2017 and its strong performance. Both of those key metrics for winning the award were partly due to the fund's exposure to Bitcoin.

ARKK owned Bitcoin through buying shares of the Bitcoin Investment Trust (GBTC). ARKK had anywhere between 6% and 10% of its assets in GBTC during 2017 while the cryptocurrency rose higher during the end of last year. During that time Bitcoin was often ARKK’s top holding. This helped the fund produce an 85% return for investors in 2017. Just for comparison, GBTC was up roughly 1,550% in 2017.

What’s more interesting though is that while GBTC is now down more than 65% year to date in 2018, ARKK is up more than 21% this year. The main reason for this reversal is because sometime in January of 2018 ARKK’s management team started selling their position in GBTC. As of today, ARKK still has a small position in GBTC, but it represents just 0.26% of the fund's assets.

ARK, the issuer of the ARKK ETF recently told ETF.com that it was a “complicated decision” to cut its Bitcoin investments, but that it was driven largely by regulatory and tax concerns, more so than the true “merits” of Bitcoin.

It should also be noted that in 2017 the only other ETF investors could buy to gain substantial exposure to Bitcoin was another ARK issued and managed ETF, the ARK Web X.0 ETF (ARKW). ARKW was also up more than 80% in 2017, has risen more than 20% thus far in 2018, and currently has just 0.33% of its assets in GBTC.

The performance of both ARKK and ARKW in 2017 and 2018 highlight how a smart and at times slightly lucky management team can provide value for investors when it comes to ETF’s. Anyone who owned either fund in 2017, or up to this point in 2018 is more than happen to pay the 0.75% expense ratio both funds carry.

More so, with the S&P 500 up a mere 2.4% in 2018 and both ARKK and ARKW up more than 20%, it is hard to say that ARK’s investment team was just a one hit wonder with Bitcoin and bought and sold at the perfect times.

Having said that, both funds hold shares of Twitter (TWTR) and Square (SQ) in their top ten holdings. These are two stocks that have performed exceptionally well year to date, up 83% and 76% respectively. Both of these stocks again show ARK’s management teams value. But, at the same time, both funds have Tesla (TSLA) represent their top holding at 8.16% of assets and 6.20%. While I am a fan of Tesla and a shareholder, this does highlight the fact that while ARK’s management team has made some profitable picks in the past, they do tend to lean say on the dangerous side.

A year ago, Bitcoin was trading around $1,000 per coin, and its future was very much so in question. Around the same time, investors were questioning whether Jack Dorsey was capable of running both Twitter and Square because Twitter was in the weeds and early investors had been burned by a weak share price. Square has for the most part always had a strong life as a public company, but its jump over the last year and a half can largely be contributed to the fact that Wall Street wasn’t sure if the payment processing company could compete with PayPal (PLPY), Visa (V), and the others in a very competitive and crowded space. Lastly, where should we start with Tesla, it’s one of the companies with the highest short interest, the CEO Elon Musk constantly makes promises and then misses his set goals, the company is struggling to become profitable, and most analysts believe there is no way possible that the company will not have to raise a massive amount of debt soon, despite Musk adamantly disagreeing.

My point for the history lesson is that ARK’s investment team may be really, really good, or they could just be on a nice run over the last 12 months. Investors need to be cautious when buying into a “Top Performing” ETF and take a look at how and why the fund achieved that title before buying shares. If the Tesla trade goes bad and I mean really, really, bad, which it certainly could, ARK’s investment team may not look so smart, while their funds and the investors get to pay the price of their risk taking.

Matt Thalman
INO.com Contributor - ETFs