Bitcoin makes new all time highs - where to next?
3 days ago it was announced that Elon Musk through Tesla had taken a position in Bitcoin worth $1.5 billion. Today we had two large institutions stating they were integrating Bitcoin into their business models. According to the WSJ, BNJ said today that it will hold, transfer and issue bitcoin and other cryptocurrencies on behalf of its asset-management clients. Like PayPal last year now Mastercard have jumped on the bandwagon to start supporting crypto payments on its network. Lastly, as if it couldn’t get any better for the digital currency the SEC Commissioner had this to say - " people are already eager to trade a bitcoin ETP, so if we don’t give them the natural way - which I think would be an ETP - they are going to look for other (less optimal) ways to do it." This is a really big shift as ETF products could offer better liquidity compared to Grayscale’s Trust which is used by most institutional investors. Also, redemptions differ between the two with ETFs being able to do it anytime whereas the Grayscale Trust can only do so through the market. There is precedent in other countries for ETPs – Switzerland and Canada have both approved ETP products. Central banks are also looking seriously at digital currencies. This only helps establish Bitcoin as a serious asset class.
One of the major driving factor’s behind Bitcoin remains reckless monetary policy causing a debasement of traditional fiat via significant inflation. The decentralized and hence anonymity that comes with that is also a strong selling point for some. One area where Bitcoin could run into some problems is on the ESG front due to it’s very heavy usage of electricity. CME futures contracts –leveraged funds are very short while asset managers neutral
On the technical front we have a bullish engulfing candle that formed today, with price reaching a new all time high of $48 481. Moving averages are all pointing upwards. The RSI although in overbought territory (73) it isn’t close to its previous correction level of 87 seen back in early January. $50K is looking like where price wants to go next. However, Bitcoin is sensitive to risk-off sentiment and the S&P 500 is looking slightly stretched with a doji candle having formed. If we were to see a pullback then the first support level to monitor would be $42k (previous high) and then lower at $40k and $38K (pink 21-day EMA and white dotted previous resistance horizontal line).