Bitcoin has retreated from its all-time high of $108,000 and is hovering just above the $90,000 level —that is nearly a 15% fall. That is taking a toll on several crypto ETFs. So are crypto ETFs a sell now?
On Friday, a strong jobs report sparked fears that the Fed’s rate cut plans may be put on hold. Economists at Goldman Sachs are betting that the next rate cut won’t be until June. They expect two cuts in 2025 and one cut in 2026. But analysts at Bank of America worry that the risk of a rate hike is on the increase.
“Our base case has the Fed on an extended hold. But we think the risks for the next move are skewed toward a hike,” Bank of America said in a note to clients.
Meanwhile, outflows from bitcoin exchange traded funds hit $582 million on Wednesday, according to CoinDesk.
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Three Major Trends Set To Benefit Crypto And Bitcoin In 2024
Post-Election Tailwinds For Crypto ETFs Fade
President-elect Donald Trump’s favorable attitude toward cryptocurrencies powered a rally among crypto ETFs in November and December. But that is changing in January.
On Dec. 17, hints that Trump may follow through on plans to create a bitcoin strategic reserve lifted bitcoin to an all-time high of $108,239.
Further, crypto-friendly lawyer Paul Atkins was nominated to lead the Securities and Exchange Commission by Trump.
Crypto plays also rallied amid reports that bitcoin miner Hut8 (HUT) has plans to build a $12 billion artificial intelligence data center in Louisiana, possibly in partnership with Meta Platforms (META). Facebook-parent Meta announced its plans to build its largest AI data center on Dec. 4.
Digital coins can be very volatile and so can crypto exchange traded funds. These ETFs provide some advantages for investors, however.
Crypto ETFs offer a way of holding several digital currencies and stocks related to those currencies such as Coinbase (COIN), Mara Holdings (MARA), MicroStrategy (MSTR) and Riot Platforms (RIOT).
Crypto ETFs are different from ETFs that hold just stocks since they are affected by the prices of the underlying coins. Digital currencies also have to get some regulatory approvals, and those decisions can affect the ETFs that hold them.
But these ETFs are good ways to get around some risks that crypto assets have. They can be bought and sold like other ETFs and stocks and do not need a digital wallet or a crypto exchange. ETFs are also highly liquid, while some coins have limited supply.
IBD MarketSurge pattern recognition makes it possible to see if the ETF has formed a proper base or has broken out of a base into a buy zone.
Spot Bases And Buy Points With Pattern Recognition
The ETF would be a buy if it climbs into a buy zone. But several crypto ETFs are triggering sell signals.
Spending a little time reading charts can improve tremendously the odds of making successful buys and selling at the right time.
Underlying Price Is Key
The price of the underlying coin is a factor that can affect the performance of these ETFs.
Bitcoin’s limited supply could also be a strong tailwind for ETFs exposed to bitcoin or bitcoin futures. However, there are some risk factors such as technology upgrades that affect the price of coins and that can affect crypto ETFs as well.
Coins also have several uses that can affect their pricing. Bitcoin is seen as a store of value, whereas ethereum is known for its staking feature.
As in the case of stocks, the market is an important factor. Understanding the market direction is vital to assessing how much to invest now.
How Invested In The Stock Market Should You Be Right Now?
Even a stock with strong earnings and forecasts can underperform when the market direction slopes down. On the other hand, a stock that has been trading above chart support levels may break out to new highs due to the momentum of an upward-trending market.
Regardless of the recommended exposure to markets, investors should be cautious because cryptocurrencies are volatile assets and continue to have high risks.
Bitcoin ETF Undercuts Key Level
The ProShares Bitcoin ETF (BITO) broke out of a cup-with-handle base with a buy point of 26.86 in December but shares have undercut the 50-day moving average and are slipping below the 200-day moving average as well. The ETF tracks the performance of bitcoin futures.
ProShares Bitcoin ETF was the first U.S. bitcoin-linked ETF.
Its Relative Strength Rating has improved to 86 from 23 in just three months. But investors should wait for the fund to retake the 26.86 buy point before buying it.
The VanEck Digital Transformation ETF (DAPP) holds shares of Hut8, MicroStrategy, Coinbase and Block (SQ). The ETF has fallen below a buy point of 15.14 after a 37% gain and triggered a round-trip sell signal. It is best to wait for the stock to form a new base or retake the 50-day moving average.
The Amplify Transformational Data Sharing ETF (BLOK) invests in blockchain companies. Its top holdings include Coinbase, Core Scientific (CORZ), MicroStrategy and CleanSpark (CLSK).
The ETF also has a diversified portfolio across several sectors. Software is its biggest holding though it also holds several stocks in capital markets, information technology and financial services.
Shares have given up much of their gains after breaking out of a cup-with-handle buy point of 37.15. The ETF is also under its 50-day line now. It is best to wait and watch for a new base for this ETF.
Bitwise Crypto ETF Near Highs
Bitwise Crypto Industry Innovators ETF (BITQ) broke out on Oct. 29 but shares sold off before rebounding in November. That landed the stock above the 25% profit zone from a buy point of 16.58, according to IBD MarketSurge. But the stock has fallen below the 50-day line as well.
The fund invests in MicroStrategy, Coinbase, Mara Digital Holdings, Riot Platforms and other prominent players in crypto assets.
The Valkyrie Bitcoin Miners ETF (WGMI) reversed lower after soaring as much as 28% from a buy point of 24.83. The ETF has erased the entire gain and is below the buy point. Shares have undercut the 50-day line also.
The fund holds several companies with connections to bitcoin mining, such as CleanSpark, Bitfarms (BITF) and Hive Blockchain (HIVE). The ETF also holds a position in Nvidia (NVDA).
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