Bitcoin Hits $42K: Let's Dive Under The Hood
The orange coin remains the market monster. This is where I think it makes sense to avoid getting overly exuberant.
What a start to the week for Bitcoin ($BTC-USD). After crossing over $40k late Sunday, it didn’t take long for BTC to rip up to $42k on Monday. That level does appear to be the point of potential exhaustion (at least for now) as we’re seeing yet another overbought RSI and a bearish divergence in that same indicator:
Of course, this is just a daily chart. But even looking at the longer term weekly chart we can observe a high RSI. It’s here we can also see $42k being a potentially important pivot point for bears.
We’ve also seen beast-mode runs in the bitcoin miners over the last few weeks with many of them up between 50-60% in just the last three or four sessions.
I think we’re sort of seeing a “blow off top” in some of these equities pertaining to this current Bitcoin bounce. In my view, some level of consolidation can be reasonably expected in both BTC and the mining equities between now and the end of the year, at minimum. However, even though I think we’re due for a pullback, there are some things to be excited about fundamentally speaking.
There is no question the market’s expectation for a soon-to-be approved spot ETF is a big reason for this move in BTC. CoinShares data shows 9 consecutive weeks of investment inflows into crypto - with 93% of that inflow going to Bitcoin year to date.
Ethereum ($ETH-USD), which has been a bit of “tute” darling in the past because of its DeFi and yield earning protocols has actually seen outflows year to date - though that has started to reverse more recently with some of the same fund managers who have applied for spot BTC ETFs now also gunning for spot ETH ETFs as well.
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