I saw Mark Yusko of Morgan Creek Capital on Twitter earlier this week mentioning the importance of cryptocurrencies to investment managers. Since my Chapel Hill High School bus made a stop every morning on Morgan Creek Road near Mark’s house, I’m always pausing to read whatever he has to say and think about it. Since it comes from the old home town.
In response to a post by Cole Kennelly about the importance of digital currencies and tokenized securities to institutional investors, Yusko said, it’s “the most important asset allocation decision decision institutional investors can make.”
Maybe this is why buyers keep showing up when Bitcoin drops down near that 6000 support level.
Bitcoin dropped all the way down that level in February after peaking up near the 20,000 level a few months earlier. It’s been a couple of months since then, though, and a truly significant rally has failed to emerge. Buyers show up from time to time but then sellers show up to meet them.
Frankly, it’s become boring — especially after all the excitement of the quick move from next to nothing up to that 20,000 mark. Nothing like a 70% drop in value to throw cold water on investor enthusiasm. Meantime, we’ve seen 6 or 7 months of ups and downs in what you would have to call a narrow range with 6000 holding up as some kind of significant bottom.
Here’s the monthly logarithmic price chart for a sense of perspective on the unusually large moves:
From the standpoint of basic technical analysis, the downtrend line and the uptrend line are headed for a showdown. Which trend line gets crossed first may provide some guidance in the future direction of the cryptocurrency. The moving average convergence/divergence indicator (below the price chart) has a sell signal indicated, for what it’s worth.
Here’s a logarithmic chart view of the weekly Bitcoin price:
You can see clearly that the basic uptrend remains intact despite the sudden, dramatic sell-off from late 2017 into early 2018. On the moving average convergence/divergence indicator (below the price chart) it looks as if a buy signal is begging to emerge. In the meantime, price remains below the Ichimoku cloud for the 5th straight month — not a typically bullish type of formation, but, as we know, things can change quickly.
And here’s the daily price chart for Bitcoin:
It’s another case of a showdown looming just ahead between the downtrend line connecting the peaks and the uptrend line connecting the lows. A couple of closing prices on the other side of either line might be indicative of price direction to come.
A close below that June low of just below 6000 would definitely be concerning, from a classic technical analysis perspective. And since competing Ethereum has already taken out its June price low, caution may in order.
I do not hold positions in these investments. No recommendations are made one way or the other. If you’re an investor, you’d want to look much deeper into each of these situations. You can lose money trading or investing in stocks and other instruments. Always do your own independent research, due diligence and seek professional advice from a licensed investment advisor.