In 2011, Tom Dyson – a titan of the financial newsletter industry – offered me a birthday gift worth $200.

It was 100 bitcoins on a thumb drive. Tom handed those to me after a long debate in which we pondered Bitcoin’s true nature. Was it an asset… or a currency?

Tom firmly believed it was a currency, saying “Brad, take this thumb drive… and witness how it’s indeed a digital currency.”

Bitcoin’s spectacular journey from those early days has been nothing short of extraordinary.

Today, as Bitcoin approaches $41,400, those 100 bitcoins would be worth a staggering $4,140,000.

Bitcoin has clearly transcended the initial debates, firmly establishing itself as a major trading and investment asset.

So… what now? As Bitcoin continues gaining legitimacy, we can apply all manner of technical analysis to it.

Let’s do that today…

Technical Analysis: RSI and BITO

In previous issues, we used the Relative Strength Index (RSI) to assess market conditions, such as identifying overbought sectors.

The ProShares Bitcoin Strategy ETF (BITO) has an interesting scenario: over the last 10 days, its RSI has increased to over 70.

This could indicate an overbought state… but with Bitcoin, it might also signal a potential breakout.

Breakouts and Resistance: A Technical Perspective

Identifying true breakouts means understanding resistance levels. On BITO’s chart, a resistance line has formed at around $19.50, marking the recent highs. When the price decisively crosses this threshold, it often signals a breakout and an upward trend.


Bollinger Bands: Deciphering Market Movements

Bollinger Bands are instrumental in this analysis. These bands include a middle Simple Moving Average (SMA) line flanked by upper and lower bands, representing resistance and support levels, respectively. When BITO’s price surpasses the upper band, as it has recently, it implies a strong trend continuation – a key indicator of a breakout.


Adding MACD to the Analysis

The Moving Average Convergence Divergence (MACD) is also valuable. Recently, BITO’s MACD indicated a shift from downward to upward momentum, shown by the fast line (12-day MA) crossing over the slow line (26-day MA). This crossover suggests strengthening upward momentum for BITO.

It’s a very strong confirmation of a breakout.


Qualitative Support: What’s Driving Bitcoin’s Rise?

Bitcoin’s recent surge is due to several factors. A few legal cases were recently resolved in cryptocurrency’s favor. The growing possibility of purchasing Bitcoin through traditional stock exchange funds rather than less-regulated crypto platforms has sparked considerable interest.

The listing of a BlackRock exchange-traded fund for Bitcoin, given BlackRock’s stature as the world’s largest ETF provider, is giving cryptocurrency more legitimacy.

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Early Belief in Bitcoin: A Rewarding Insight

Looking back at Tom Dyson’s gift of 100 bitcoins, Bitcoin’s journey from a novel digital currency to a significant financial asset is remarkable. Those early beliefs have been vindicated many times over for those who embraced Bitcoin from its inception.

The Path Ahead for Bitcoin

Bitcoin’s path remains inherently volatile. The cryptocurrency’s future will be shaped by technological advancements, regulatory changes, and evolving market sentiments.

From a shared debate to witnessing its latest market breakout, my journey with Bitcoin has been a testament to its captivating evolution.

Using technical tools like RSI, Bollinger Bands, and MACD to analyze BITO has given us a structured method to understand Bitcoin’s market movements.

As we continue to observe Bitcoin’s growth, staying informed and adaptable is crucial in navigating its trajectory.

Leveraging data for you,

Brad Hoppman
Analyst, Market Minute