In an April 8 Barchart article, I highlighted the recovery of Bitcoin, Ethereum, and many other cryptocurrencies in Q1 2023. I concluded that piece with the following:
In early April 2023, the bullish trend in Bitcoin, Ethereum, and the overall cryptocurrency asset class continued. In all markets, the trend is always your best friend, implying that higher highs are on the horizon in Q2 2023.
Bitcoin settled at $28,391.11 on March 31, 2023, after reaching a high of $29,147.97 in March 2023, the highest price since June 2022. Bitcoin made a higher high in early Q2, reaching $30,970.16 in April. At around the $27,200 level on May 11, Bitcoin has declined a bit since the end of Q1, as the leading cryptocurrency is stuck in neutral.
Technical resistance at the $30,000 level
After falling to a $15,516.53 low in November 2022, Bitcoin recovered.
The chart highlights the one-year 77.5% plunge from $68,906.48. After establishing a bottom in late 2022, Bitcoin recovered, reaching its most recent $30,970.16 high in mid-April 2023. While the leading cryptocurrency nearby doubled from the low, it was half the price as the November 2021 high. Meanwhile, a wall of resistance has developed around the $30,000 level.
The six-month chart illustrates that Bitcoin has primarily traded in a $27,000 to$30,000 range since mid-April, and was at the bottom end of the trading range on May 11.
The factors supporting higher highs
As Bitcoin continues to consolidate at below $30,000 per token, the following factors support an eventual break to the upside:
- Declining faith and credit of fiat currencies are bullish for Bitcoin and other cryptocurrencies.
- Technically, Bitcoin found a significant bottom, and boom and bust price action have been the norm over the past years. The November 2021 through November 2022 bust could give way to a boom if the historical patterns repeat.
- Bitcoin and other cryptos have gained more acceptance over the past years as payment and investment assets.
- A prolonged consolidation near the recent high tends to be a bullish sign for an asset.
It may be a matter of time before Bitcoin lurches higher to a new trading range above the $30,000 per token.
Bitcoin’s roadblocks
While Bitcoin has support, some hurdles could stand in front of price appreciation:
- Governments do not favor independent cryptocurrencies as they threaten the control of the money supply.
- Regulatory bodies have increased supervision and rules contrary to crypto’s ideological thesis.
- Cryptos remain an uber-alternative asset class, and the volatility continues to scare away potential market participants.
- The intrinsic value of crypto tokens is a subject of significant debate.
Value is in the eyes of the beholder, and Bitcoin and cryptos have widespread support and opposition.
Bitcoin will continue to lead an ever-growing asset class
At the $27,200 level on May 11, Bitcoin’s market cap stood at just over $526 billion. The total market cap of the cryptocurrency asset class consisting of over 24,000 tokens was $1.124 trillion. Bitcoin had a 46.9% market share. Meanwhile, the second-leading token, Ethereum, had a $217.4 billion market cap at $1,800 per token. Ethereum’s market cap was less than half of Bitcoin’s, and there are no other cryptos with a total market value of over $83 billion. The eighth-leading crypto, Dogecoin, was worth under $10 billion.
Meanwhile, the number of new tokens coming to market continues to rise. At the end of Q1, there were 23,128 tokens in the asset class, and on May 11, the number had increased to over 24,000. New tokens continue to come to market, even when Bitcoin and other leading crypto prices fall. While the trajectory of token increases has slowed on a percentage basis, the nominal number continues to rise, making cryptos an ever-growing asset class even when the market cap declines.
The odds favor higher, but only risk capital you are willing to lose
The boom-and-bust nature of Bitcoin and cryptos favors the upside after the November 2021 through November 2022 bust period. The 77.5% plunge was less than previous market corrections, leading to new record highs.
Meanwhile, in the April 8 Barchart article, I highlighted two Bitcoin-related assets trading on the stock exchange. The Bitwise Crypto Industry Innovators ETF (BITQ) was at the $5.68 level on April 6.
On May 11, BITQ was 9.9% higher at $6.24 per share. BITQ holds a portfolio of companies that move higher and lower with Bitcoin and crypto prices.
Coinbase Global Inc. (COIN) is a leading cryptocurrency platform that has faced increasing regulatory scrutiny.
On April 6, COIN was at the $61.44 per share level.
The regulatory issues and bank failures have weighed on COIN shares trading at the $60.90 level on May 11, 0.9% lower than the price on April 6.
Bitcoin and cryptos are stuck in neutral in mid-May 2023, with BITQ higher and COIN lower. While the odds favor higher prices, only invest capital you are willing to lose in the burgeoning asset class, as the potential for rewards always comes with commensurate risks.
On the date of publication, Andrew Hecht did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
