- BlackRock’s ETF application put a complete stop to bitcoin’s decline in price.
- Bitcoin has entered into overbought territory, which historically has been good for BTC prices
Bitcon is ringing several bullish technical indicators, as the “BlackRock Pivot” extends into day seven. The question facing investors is whether the improvement represents a long-term change, or a brief correction before turning down again.
Bitcoin recently rose more than 7% on Wednesday, breaching the psychologically important $30,000 price level, last reached in April. Bitcoin also breached the upper range of its Bollinger Bands, for the second consecutive day, a bullish signal.
Trading volume in BTC was above its 20-day moving average for the third consecutive day, while Bitcoin as a percentage of overall crypto market capitalization reached 51.6%.
The upswing follows what will likely rank as two of the most significant events in crypto this year – the Securities and Exchange Commission’s (SEC) lawsuits versus Binance and Coinbase on June 5 and 6, and financial services giant BlackRock’s filing for a spot Bitcoin ETF last week.
Event one led to a 5% decline in BTC’s price over two days, completing a 16% drop that began in April. Event 2 led to an about-face, with prices rising 1.3% on the announcement and an additional 17% since.
What happens next will be intriguing to watch. Blackrock’s ETF application may serve as a significant pivot event in 2023 crypto, and possibly beyond. Three areas stand out.
- Reputational risk for bitcoin improves with BlackRock entering the fray. Writing off BTC’s merits when the world's largest asset manager is expanding its crypto presence becomes more challenging.
- An approval of a BlackRock ETF adds a large buyer to the market, as the ETF will need to acquire BTC in order to provide investment exposure.
- A successful approval outlines a framework for similar projects by large asset managers, creating the potential for repeated successful filings. While not ETF related, the announcement of Fidelity and Schwab’s crypto exchange intentions, and Deutsche Bank’s plan’s for crypto custodianship, over additional evidence of TradFi’s a creeping flow into crypto.
Bitcoin’s price spike has led to its Relative Strength Index (RSI) surpassing 70, traditionally s a signal that the asset is “overbought.” This has not been the case for bitcoin historically however.
Since 2015, bitcoin’s RSI has surpassed 70, 416 times. In the 30 days ensuing, BTC’s price has risen 13.5%. On the 65 occasions since 2015 when the RSI has ranged between 72-74, the price has climbed 12.9%.
By comparison, ETH's average 30-day gain following a 70+ RSI reading is just 3.3%. The data indicates that bitcoin has a tendency for prolonged moves higher, even when technically overbought.
Bearish investors who do not expect history to repeat itself may be eyeing $27,000 as a target price, as it coincides with BTC’s 20-day moving average.
The weight of BlackRock’s announcement, increased trading volumes’ and BTC’s penchant to trend when overbought may prove challenging for bearish investors however.
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