Is Bitcoin at a Crossroads?

Back in December I called for an unbelievable $20k target for the Bitcoin when it traded around $15.6k, and ten days later that target was hit. It was one hell of the roller coaster ride that month as Bitcoin then lost almost half of its worth in a matter of days right ahead of Christmas falling to $11k.

Rinse and repeat! The crypto king started to grow again, and then I posted another map at the end of 2017, which implied a pullback to the $16k-$20k area before another huge drop to the $7500 area. Amazingly, both the upside and downside forecasted areas were hit accurately.

The Bitcoin buzz is coming down with the price staying below $10k. It is like a superstar who has seen his best times already and is on the tour to the countries where he is still warmly welcomed as we are not in the $20k euphoria area now (we can call it a “cocaine” time) although you can still buy some pleasant things selling just one coin for more than $7k these days.

In this post, I would like to share with you a familiar pattern I spotted recently on the Bitcoin chart.

Chart: Bitcoin Weekly > On The Crossroads

After losing 70% of the price from the peak ($20k) to the low of 2018 ($6k), there was another good attempt to start the cooling engine of Bitcoin. Crypto-investors took their chance to buy the coin on the panic selling, and the price doubled as there was follow-through demand as people thought that the $20k is in the cards again, some very optimistic guys called for 100K based on exponential growth. But it appeared to be just a good correction and those who didn’t want to quit the coin below the $10k at the first drop, took their second chance to get rid of it during that temporary strength. Then we saw another rally to the $10k and another drop to the $7k.

The volatility evaporated from this market with the smart money pulling out of it. The range of the fluctuations is getting narrower every other zigzag, and it shapes the familiar Triangle pattern (orange). As we are moving closer to the apex of the pattern we should expect the breakout soon.

I highlighted both upside and downside targets of either case. If we get the upside break, then Bitcoin could hit the $14.6k level to build the hope for a revival. On the other hand, if the cryptocurrency goes below the downside of the pattern, then we could reach the $1250, which would mean the oblivion for the coin.

I added the confirmation levels at the $9950 for the upside move and at the $6400 for another drop to avoid false breaks.

Aibek Burabayev
INO.com Contributor

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No Bitcoin ETF Yet, But There Are Blockchain ETFs

While the Securities and Exchange Commission has yet to approve an actual Bitcoin ETF, it is allowing investors to buy shares of ETF’s which are focused on the technology which makes cryptocurrencies tick, the blockchain.

After the explosion of Bitcoin back in the fall when the price of one coin jumped from around $4,000 to over $19,000, a number of different companies began clamoring to get involved in cryptocurrencies directly or just in the blockchain technology, and that is where these Exchange Traded Funds are focused. The thinking is that while you may not want to invest directly in a cryptocurrency, you may still want exposure to it through the businesses that help it operate.

For example, you could buy Square Inc. (SQ), the payment processing company that a few weeks ago announced it would now allow customers to pay with Bitcoin. Or perhaps it is through a less direct method of buying shares of NVIDIA (NVDA), the semiconductor company, which produces the microprocessors that are needed to make cryptocurrencies a reality. Or lastly, perhaps it just a previous beverage company, Long Island Iced Tea Corp. that now wants to get into blockchain and changes its name out of the blue to Long Blockchain Corp. (LBCC).

The first blockchain ETF to hit the market was Reality Shares NASDAQ NexGen Economy ETF (BLCN) on January 15th, 2018. Then on the 16th, Amplify Transformational Data Sharing ETF (BLOK) began trading. On the 24th, First Trust Index Innovative Transaction & Process ETF (LEGR) began trading, while finally on the 30th, Innovation Shares NextGen Protocol ETF (KOIN) went live.

All four ETF’s share the same language in their fund descriptions which goes something along the lines of a portfolio of equities which have exposure to, are involved in research, development or use, a focus on, or an interest in, blockchain technology.

It would appear all four ETF’s will be competing for the same investors and will likely hold the same stocks, (currently we only know the holdings of the first three, and they are very similar). Furthermore, all four ETF’s have expense ratios within the 0.65% and 0.70% range.

But, while all four ETF’s where rolled out within weeks of each other, BLOK and BLCN have a massive head start regarding capital raised. Currently, BLOK has over $188 million in assets under management, BLCM has over $110 million, while LEGR sits at just around $9 million and KOIN has approximately $3.5 million.

The way the stocks will be picked though may be the only real differential of the four ETF’s. BLOK will be an actively managed portfolio, BLCN will track an index, but with loose freedom for management, LEGR will be straight tracking an index, while KOIN will be using an artificial intelligence machine to pick its investments.

With the funds all being so new, we have limited information on what they hold, and it is hard to make guesses on how they will perform. Furthermore, though it will be interesting to watch them evolve as cryptocurrencies head into what many would consider their second year of life.

Lastly, investors should note that if cryptocurrencies stumble in 2018, these ETF’s could be negatively impacted despite not actually owning the asset. But, most would agree that what is unique about Bitcoin and the others is not what it is, but what makes it work; i.e., the blockchain.

P.S. Those in Canada will not have to wait much longer to get their chance to invest in the blockchain craze as their first ever blockchain ETF will begin trading sometime in February under the ticker HBLK.

Matt Thalman
INO.com Contributor - ETFs

Matt Thalman on How Bitcoin Finished An Astonishing Year

If you look at a chart of Bitcoin during 2017, it really only went higher during the first 11 months. The in the middle of November it was as if the cryptocurrency was strapped to a rocket ship as the price shot higher until mid December.

While early investors made a killing on Bitcoin in 2017, the real excitement all happened in December. Bitcoin started 2017 at $996, began the month of December at $10,500, then peaked on December 17, 2017, at $19,206, but ended the year at just over $14,000. When Bitcoin hit its peak, it was up nearly 100% for just the month of December, but even after falling $5,000 in only 14 days, it still ended the month up more than 30%.

While Bitcoin may have only risen 30% in December, it increased more than 1,350% in 2017, with nearly 400% of that gain coming in December and 800% of its coming after November 1st. So what happened in the last two months of the year that caused the price of Bitcoin to rocket higher, in such as short period?

In one word, Exposure!

In early November the general public, those outside the world of finance, began hearing about Bitcoin and cryptocurrencies for the first time. They were being told Bitcoin and cryptocurrencies where the wave of the future. Blockchain technology was going to change how business transactions were being processed. They were being told that investors were making money hand over fist and this was the time to get in. There would only be 21 million Bitcoin’s ever mined, thus not allowing others to manipulate the price and that no one person, government, or central bank controlled this new digital currency.

They were told, buy a cryptocurrency now, and you will make a killing, Bitcoin only keeps going higher, it’s easy money.

None of the information the average person was being told was a lie. It was all true.

This increased exposure hit a tipping point when Thanksgiving rolled around. With the holiday falling on a Thursday, it is believed that the conversation at many dinner tables across the U.S. touched on cryptocurrencies and Bitcoin at some point, because over the course of the following three days coinbase, the largest and most well known cryptocurrency exchange had over 100,000 new accounts open up.

The price of Bitcoin jumped more than $2,000 from November 24th to the end of the month.

The coming December 2017, which will be known as the month of Bitcoin Futures. The two largest U.S. future’s markets both saw their proposals to offer Bitcoin futures approved, and trading of said futures began during the month. The Commodity Futures Trading Commission approved the bitcoin futures and the CBOE, CME, and the Cantor Exchange all began trading Bitcoin Futures during the month.

The reason Bitcoin Futures where so important is because simply by gaining the ability to have a futures market, Bitcoin’s legitimacy increased in a blink of an eye. Furthermore, now that there where Bitcoin futures trading, the big Wall Street funds and investors could now get in on the cryptocurrency action.

The new money would start flowing into Bitcoin through the trading of its futures. This was huge in terms of making the asset more well known and respectable. But, unfortunately, it only hurt Bitcoins greatest attribute, its limited supply.

See Bitcoin Futures, unlike other futures contracts, are not settled with Bitcoins, they are settled for cash. This means when you buy Bitcoin’s through the use of a futures contract; you don’t end up owning Bitcoin’s, you just get the value of the agreed-upon Bitcoins in cash.

Therefore, when Bitcoins are traded with futures contracts, the actual supply and demand of actual Bitcoin’s is not affected. There was one other thing that happened in December which affected the supply and demand of Bitcoin, Bitcoin Cash.

Bitcoin Cash was created when Bitcoin’s blockchain was forked back at the beginning of August. Those who owned one Bitcoin, now owned one Bitcoin and one Bitcoin Cash when the fork occurred. But, Bitcoin Cash was difficult to trade until Coinbase, began offering an exchange in December. Once it was easy to trade Bitcoin Cash, Bitcoin itself saw its price take a hit.

Furthermore, this event publicized the fact that Bitcoin had been forked in the past and that there were a lot of people planning to fork it again in the future. Each time Bitcoin is forked, and a new cryptocurrency begins, it increases the supply of cryptocurrencies available in the market. It hurts the original idea that there would only be 21 million Bitcoin’s ever mined. It hurts the idea that 1 Bitcoin is worth more than 1 Bitcoin Cash, or 1 Litecoin or 1 Ethereum or any of the other hundreds of cryptocurrencies now available.

Bitcoin futures are still new, how Bitcoin Cash or the other cryptocurrencies will affect Bitcoin, and how different world governments and agencies will handle cryptocurrencies is still very much unknown. But, after a wild end to 2017, the cryptocurrency industry isn’t yet showing signs of slowing in 2018. It should be fun to watch it unfold.

Happy New Year and Happy Investing in 2018,
Matt Thalman
INO Contributor - ETFs

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