Bloomberg
Wall Street is starting to see weakness popping up on Bitcoin charts
(Bloomberg) – Bitcoin has yet to recover from its inexplicable weekend nonsense, and now the investing public is tense about the notoriously volatile token’s next step. Enter the chart watchers. Tallbacken Capital Advisors’ Michael Purves, who weighed in on crypto for the first time, sent a note on Wednesday with a technical analysis of the coin’s trading patterns. Bitcoin’s recent highs were not confirmed by its relative strength index, among other things, and its upward momentum is waning, he said. Purves, CEO of the company, wrote. Purves’ decision to comment is the latest sign that Bitcoin has become too big for Wall Street to ignore. As more companies allow clients to float in the assets and more institutional money is tied to its performance, chart watchers are now capitulating and lending their expertise to the growing batch of analytics. Previously, JPMorgan Chase & Co. led by Nikolaos Panigirtzoglou noted that the last few times they witnessed such a negative price action in Bitcoin, buyers returned in time to avoid deeper slumps. This time, they are concerned: If the largest cryptocurrency cannot break back above $ 60,000 soon, momentum signals will collapse, the strategists wrote in a note on Tuesday. It’s likely that traders, including Commodity Trading Advisers (CTAs) and crypto funds, were at least partially behind the build-up of long Bitcoin futures in recent weeks, as well as relaxing in recent days, they said. a steep liquidation in the same way as in mid-February, mid-January or late November, ”the strategists said. “Momentum signals will of course decay from here for several months, given their still elevated level.” In those three previous cases, the overall current momentum was strong enough to allow Bitcoin to quickly break above key thresholds, further building in position from momentum traders, JPMorgan noted. “Whether we see a repeat of those previous episodes in the current business cycle remains to be seen,” said the strategists. The likelihood of it happening again seems less because the momentum decay seems more advanced and thus harder to reverse, she added. Money flows to Bitcoin funds also seem weak, they said. Bitcoin rose to $ 64,870 around the time of Coinbase Global Inc.’s Nasdaq listing, but has pulled back to $ 55,000. The cryptocurrency is still up about 90% so far and the coin, which has fallen five of the last six sessions, is struggling to catch up to the 50-day moving average of around $ 56,810. For many chartists, that’s a bearish indicator as it tends to determine price momentum trends. Should Bitcoin fail to break its short-term trendline, it could go lower and test the USD 50,000 level, about a 10% drop from where it is currently trading. The next area of support would be its 100-day moving average around $ 49,208. That would represent an 11% pullback from Wednesday’s trading levels.Tallbacken’s Purves, which says the coin’s breakout in 2017 and its subsequent decline is a useful case study, also points to Bitcoin’s daily MACD signal – or the moving average convergence divergence meter – which has turned bearish over the medium term. And the performance is still correlated with Cathie Wood’s very popular ARK Innovation ETF. “Trading Bitcoin on the bullish side doesn’t seem to have a favorable risk reward right now and if you’ve made a profit, it seems like a good time to go to the sidelines for now,” Purves wrote. To conclude how much further it could decline. Institutional buyers will be key. “While the upward momentum here seems clearly challenged, it is inconclusive how much downside risk remains,” he wrote. could consolidate in a range for some time. ”Bitcoin fell 3.2% to $ 54,996 on Wednesday. Smaller and alternative coins that had emerged in recent days also suffered declines, with Dogecoin – the poster child for crypto risk-taking – fell about 15% to trade about 31 cents. That’s down from 42 cents the day before, according to CoinMarketCap.com. Visit us for more articles like this at bloomberg.com Subscribe now to check out to keep up with the most trusted business news source. © 2021 Bloomberg LP