Bitcoin: Guess Who's Back

Thesis Summary

Bitcoin (BTC-USD) has moved over 12% in the last five days. The world's premier cryptocurrency has even broken back above $30,000.

We could argue that a lot of this recent volatility has been due to the news surrounding the SEC, BlackRock (BLK) and now this new "Wall Street Exchange". On the other hand, we bounced exactly at a key support level and reversed in quite a predictable manner in terms of TA.

BTC continues to dominate the crypto space, and it makes me wonder if this outperformance is here to stay.

And while BTC is up 12%, Grayscale Bitcoin Trust (OTC:GBTC) is up over 30% in the last five days. What's up with that, and should you buy it?

An Emotional Rollercoaster

Bitcoin has been on a news and price rollercoaster while I have been on an emotional one. On June 6th, the SEC sued Coinbase (COIN) for operating unregistered securities. A day prior, the SEC served Binance (BNB-USD) with 13 charges.

This triggered a sell-off in Bitcoin, and especially altcoins, which were specifically named in the SEC lawsuit. While the SEC's interpretation of what securities are surrounding crypto has always been less than transparent, its actions sent a very clear message.

And then, swooping in with what now seems like impeccable timing, BlackRock sent in an application to launch its own crypto ETF. This happened last Thursday, June 16th.

BlackRock has a good record when it comes to getting ETFs approved, 575-1. However, the SEC also has a great record at rejecting BTC ETFs, 33-0. A real battle of the Titans.

In terms of the timeline for the ETF, K33 research has drawn a timeline of when this could be approved.

Looks like both ARK and BlackRock could possibly have an ETF out just ahead of the Bitcoin halving. Very good timing indeed.

The BlackRock ETF application seems to have triggered a green light for institutional investors, and we now know that Wall Street "Insiders", like Charles Schwab (SCHW) and Citadel Securities, amongst others, are joining forces to launch an institutional crypto exchange called EDX markets.

Just to sum up, let's have a look at how these events look against the BTC price chart.

Bitcoin Outlook

Looking at the chart above, one could say that sentiment has shifted. Indeed, it would appear that the BlackRock ETF changed the tides of Bitcoin, and the fact that this happened only 10 days after the SEC went after the two largest crypto exchanges in the world, is very interesting.

In just over a week, sentiment went from complete desperation to hope and euphoria, and though this may seem strange, it is very much in line with the dynamics of Elliott Wave Theory. A wave 2 often reflects maximum fear and desperation, while wave 3s, to the upside, are the result of euphoria and high expectations.

Let's review the Bitcoin chart I have been sharing with readers and subscribers over the past month:

As per my Elliott Wave count, the recent sell-off was a wave 2 inside a larger circle wave 3. So far, this has played out exactly as one would expect from a TA perspective.

BTC found a bottom exactly at the 50% retracement of wave 1, which was the rally from $19.5K to $31K. This level also happens to be the neckline of our larger inverse head and shoulders we have been forming. I talked about this in my last Bitcoin article. And this is also the bottom of the downward channel we have been forming in Bitcoin (blue lines).

Unsurprisingly, once we broke out of the channel, BTC broke loose, and only now that we approach the previous high are we seeing some red.

So what can we expect now? The chart above lays out the path I'd expect to see as we approach the next halving, which is around March 2024. This time around, I believe we could complete most of the Bitcoin gains before the halving, even reaching new all-time highs.

Bitcoin Dominance

With the latest rally in Bitcoin and the shift in institutional sentiment, there are also a couple more issues to address.

First up, Bitcoin Dominance:

The chart above shows the percentage of the crypto market dominated by Bitcoin. As we can see, with the latest rally, we have broken out of a 2-year range and also broken out of an ascending channel shown in blue. From a TA perspective, this looks like it wants to head much higher, back into the 60% range.

From a fundamental perspective, this could make sense. The new institutional interest seems to be so far limited to Bitcoin and some other major coins. BlackRock issued a Bitcoin ETF; not a crypto ETF, and the new Wall Street exchange EDX appears to be limited to Bitcoin (BTC), Ethereum (ETH), Litecoin, (LTC) and Bitcoin Cash (BCH).

Altcoins did suffer the most during the recent sell-off. Is it possible that, moving forward, this underperformance will continue?

While this is no longer the COVID era of free money where every coin was pumping, I still think there's room for more than 1, 2 or even 3 cryptos to succeed. Blockchain technology has many uses, and there are plenty of altcoins out there which puts this technology to use. My own crypto portfolio has BTC, ETH and over 10 other high conviction coins.

Is GBTC a good buy?

Lastly, let's talk about GBTC. While BTC has rallied nearly 15% since its low, GBTC is up by twice that amount. What's going on?

In short, we are closing the gap.

GBTC owns physical Bitcoin, but since it is not an ETF, and it can't arbitrage its own share price, it does not trade at fair value. The value of GBTC is below the value of the BTC it holds. In other words, it trades at a discount.

What we have seen happen in the last week is a reduction of this discount, which has gone from near 45% to just under 35%. With the BlackRock ETF application, there are renewed hopes that GBTC could convert into an ETF. This would ensure that the discount is closed, meaning returns even above what BTC offers.

But even if the BlackRock ETF doesn't go through GBTC is still deeply discounted, and we have seen this discount turn into a premium during the height of Bitcoin bull markets.

Ultimately, I think GBTC is a good way to own some Bitcoin.

Final Thoughts

The recent Bitcoin rally has caught many off guard, but to those with keen understanding of sentiment and technical analysis maybe not so much. Moving forward, I expect BTC to reach all-time highs in the next year. How we get there, though, will depend on many factors. For now, I am looking at the $36K area as our next target.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

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