Bitcoin is struggling to shake its weekend handover and technicians (traders who study charts to divine future prices) are suggesting that more weakness may be in store for Bitcoin hodlers.
In a note sent to investors on Wednesday, Tallbacken Capital Advisor’s CEO Michael Purves noted that Bitcoin’s recent highs weren’t confirmed by its relative strength index and that its upward momentum was fading.
According to Purves,
“From purely a technical perspective, the bullish case looks highly challenged here in the near term.”
More significantly though, Purves, who has never weighed in on Bitcoin prior to Wednesday’s note, indicates that cryptocurrencies have now become too big for Wall Street to ignore.
As more firms allows their (high net worth) customers to dabble in digital assets and more institutional money is tied to its performance, previously reluctant chartists are now lending their expertise to a growing crop of cryptocurrency analysis.
Crucial to more upside for Bitcoin is the need to break back over US$60,000 and soon.
JPMorgan Chase (+0.85%) strategists noted that the last few times they witnessed such negative price action in Bitcoin, buyers returned in time to prevent deeper slumps, but current flows into Bitcoin funds this time appear to be weak and momentum decay seems to be more advanced.
While Bitcoin is still up almost 90% year-to-date, the listing of U.S. cryptocurrency exchange Coinbase Global (-2.97%) has not had the intended effect of rallying Bitcoin higher.
If nothing else, Coinbase Global has struggled off the blocks and Bitcoin’s recent price weakness is feeding into the downward trend for the stock as well.
Coinbase Global is well off its listing price of US$380, and even below its last pre-listing trade price of US$350, closing at US$308.95 on Wednesday.
And there are concerns that Coinbase Global may also be overvalued, with its market capitalization implying that it is worth more than Nasdaq (-0.23%) and the Intercontinental Exchange (-0.19%), owner of the New York Stock Exchange.
But betting against Bitcoin, is a tricky business that even Purves concedes is akin to reading tea leaves,
“While upside momentum is clearly looking challenged here, it is inconclusive how much downside risk remains. It is entirely possible that Bitcoin could simply consolidate in a range for some time.”
And overall appetite for cryptocurrencies still remains robust, even if Bitcoin’s fortunes may have waned, with the world’s second largest cryptocurrency Ether, demonstrating remarkable resilience in the face of Bitcoin’s slide and a host of other cryptocurrencies retaining their value.
What we may be witnessing is a rotation out of Bitcoin and more speculative exploration into crypto’s “next big thing.”