Bitcoin soared on Friday ahead of inauguration day Monday and cleared $105,000 for the first time in the new year, which begs the question: are crypto ETFs a buy now?
On Friday, reports said President-elect Donald Trump may make cryptocurrencies a “national priority.” That lifted several crypto exchange traded funds that had been rallying since Wednesday’s softer inflation report.
The rally in crypto-related ETFs follows a sharp sell-off after a strong jobs report last Friday sparked fears that the Fed’s rate cut plans may be put on hold.
Meanwhile, outflows from bitcoin exchange traded funds hit $582 million last week, 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.
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) gapped up above the 50-day moving average amid a four-day winning streak. 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 42 in just three months.
The VanEck Digital Transformation ETF (DAPP) holds shares of Hut8, MicroStrategy, Coinbase and Block (SQ). The ETF fell below a buy point of 15.14 after a 37% gain and triggered a round-trip sell signal.
But the ETF is retaking the 50-day moving average on Friday. That could be seen as an early entry.
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.
The ETF is has also retaken its 50-day line now.
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 ETF fell below the 50-day line as the year wrapped up.
But that is changing this week as shares gapped above the 50-day line on Friday.
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 before erasing the entire gain. Shares also have retaken the 50-day line.
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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