The tide is turning in bitcoin's favor fast as the digital asset rises above $108,000 for the first time. So are crypto ETFs a buy now?
On Monday, hints that President-elect Donald Trump may follow through on plans to create a bitcoin strategic reserve lifted bitcoin to an all-time high of 108,239. A top bitcoin ETF broke out.
But not everyone has an appetite for digital coins because they can be very volatile. Crypto exchange traded funds provide some advantages for these investors.
Trump's favorable attitude toward cryptocurrencies is also powering a rally among these crypto ETFs.
Further, crypto-friendly lawyer Paul Atkins was nominated to lead the Securities and Exchange Commission by the Trump administration.
Last week, some crypto plays rallied amid reports that bitcoin miner Hut8 has plans to build a $12 billion AI data center in Louisiana, possibly in partnership with Meta Platforms. The Facebook parent announced its plans to build its largest AI data center on Dec. 4.
Both stocks fell sharply Wednesday amid a broad stock market decline.
ETF Advantage Extended To Crypto ETFs
Rather than hold volatile crypto plays, crypto ETFs offer a way of holding several digital currencies and stocks related to those currencies such as Coinbase, Mara Holdings, MicroStrategy and Riot Platforms.
Crypto ETFs are different from ETFs that hold just stocks since they are affected by the prices of the underlying coins. Digital currencies also have to get some regulatory approvals, and those decisions can affect the ETFs that hold them.
But these ETFs are good ways to get around some risks that crypto assets have. They can be bought and sold like other ETFs and stocks and do not need a digital wallet or a crypto exchange.
On IBD MarketSurge, it is possible to see if the ETF has formed a proper base or has broken out of a base into a buy zone.
Spot Bases And Buy Points With Pattern Recognition
In both cases, the ETF would be a buy. ETFs are also highly liquid, while some coins have limited supply.
Spending a little time reading charts can improve tremendously the odds of making successful buys and selling at the right time.
Underlying Price Is Key
The price of the underlying coin is a factor that can affect the performance of these ETFs.
Bitcoin's limited supply could also be a strong tailwind for ETFs exposed to bitcoin or bitcoin futures. However, there are some risk factors such as technology upgrades that affect the price of coins and that can affect crypto ETFs as well.
Coins also have several uses that can affect their pricing. Bitcoin is seen as a store of value, whereas ethereum is known for its staking feature.
As in the case of stocks, the market is an important factor. Understanding the market direction is vital to assessing how much to invest now.
How Invested In The Stock Market Should You Be Right Now?
Even a stock with strong earnings and forecasts can underperform when the market direction slopes down. On the other hand, a stock that has been trading above chart support levels may break out to new highs due to the momentum of an upward-trending market.
Regardless of the recommended exposure to markets, investors should be cautious because cryptocurrencies are volatile assets and continue to have high risks.
Best Crypto ETFs To Watch: Bitcoin ETF Breaks Out
The ProShares Bitcoin ETF broke out of a cup-with-handle base with a buy point of 26.86. Shares closed below the buy point Wednesday. The ETF tracks the performance of bitcoin and invests in bitcoin futures.
ProShares Bitcoin ETF was the first U.S. bitcoin-linked ETF.
But its chart has some weak features. The 200-day moving average is above the 50-day moving average. In a truly bullish set up, the 50-day line is above the 200-day.
Its Relative Strength Rating has improved to 91 from 19 in just three months. The best-possible score is 99.
The VanEck Digital Transformation ETF holds shares of Hut8, MicroStrategy, Coinbase and Block. The ETF is above a profit zone from a buy point of 15.14. It is best to wait for the stock to form a new base or to pull back to a key moving average.
The Amplify Transformational Data Sharing ETF invests in blockchain companies. Its top holdings include Coinbase, Core Scientific, MicroStrategy and CleanSpark.
The ETF also has a diversified portfolio across several sectors. Software is its biggest holding though it also holds several stocks in capital markets, information technology and financial services.
It is way past a profit zone from a cup-with-handle buy point of 37.15.
It is best to wait and watch for a new base for this ETF.
Bitwise Crypto ETF Near Highs
Bitwise Crypto Industry Innovators ETF broke out on Oct. 29 but shares sold off before rebounding in November. That landed the stock above the 25% profit zone from a buy point of 16.58, according to IBD MarketSurge. But the stock has fallen below that zone.
The fund invests in MicroStrategy, Coinbase, Mara Digital Holdings, Riot Platforms and other prominent players in crypto assets.
The Valkyrie Bitcoin Miners ETF reversed lower after soaring as much as 28% from a buy point of 24.83. The ETF has erased a gain of more than 25% as it sinks back toward the buy point.
The fund holds several companies with connections to bitcoin mining, such as CleanSpark, Bitfarms, and Hive Blockchain. The ETF also holds a position in Nvidia.
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