Bitcoin’s Recent Performance
In May, Bitcoin reached an all-time high, but subsequently experienced a roughly 10% decline over the next nine days. Recently, it has once again approached those peak levels. At Inside Edge, we currently incorporate the iShares Bitcoin ETF (IBIT) in two of our growth-oriented portfolios. Given the strong underlying fundamental, macroeconomic, and technical factors, I believe it is an opportune time to expand our positions for our investors.
Reasons for Bitcoin’s Rally
Here are three primary reasons behind Bitcoin’s resurgence towards its all-time highs:
- Institutional Demand: The IBIT ETF has seen unprecedented adoption, achieving $70 billion in assets within just 341 days—more than five times faster than the previous record set by the SPDR Gold ETF (GLD). Additionally, MicroStrategy, led by Michael Saylor, has accumulated over 500,000 bitcoins and continues to add to its holdings.
- Macro Environment: Despite concerns about inflation linked to tariffs, U.S. bond yields remain stable. This favorable environment is beneficial for risk-associated assets like Bitcoin, which is likely to experience upward movement as Federal Reserve actions are anticipated to lower fed funds rates, supporting growth trades. A “capped” U.S. rates market and worries about recession are also exerting downward pressure on the dollar, which is advantageous for growth assets.
- Improving Regulatory Environment: Upcoming U.S. legislation regarding stablecoins is expected, which would enhance the acceptance of cryptocurrencies and stable value coins. There is also increasing corporate interest in Bitcoin as a Treasury asset.
Technical Analysis
Analyzing Bitcoin’s futures on a weekly chart reveals a distinct upward trend that began in late 2022. An intriguing aspect of this trend is the behavior of the Average Percent True Range (APTR), a volatility indicator that measures the market’s high-to-low range in percentage terms. Currently, the 10-week APTR shows a low reading of 8.5%, coinciding with a testing point at the $110,000 resistance level.
Low Volatility Insights
In contrast to typical stock market trends, where the VIX tends to rise during corrections and fall when markets stabilize, low volatility readings in Bitcoin may indicate upcoming price increases. The daily chart also reflects low APTR readings in the 4%-3% range as Bitcoin approaches the significant triple-resistance level of $110,000.
Future Projections
I project a target of $135,000 based on Fibonacci analysis. I currently hold IBIT with a 3% allocation in our Tactical Alpha Growth Portfolio and a 3.5% allocation in our Active Opportunities Portfolio, with plans to increase both to over 5% as the breakout level for IBIT is around $64. I will, however, consider a risk-reduction strategy should the price fall below $58.
Active Portfolio Management
Our firm offers active portfolio management and updates for subscribers, including insights like those discussed here. It’s essential to consider that I personally hold IBIT and my wealth management firm, Inside Edge Capital, is similarly invested.
Disclaimer
All opinions presented are solely those of the contributors and do not reflect the views of CNBC or its affiliates. The content provided is for informational purposes only and does not serve as financial, investment, tax, or legal advice. Individual circumstances may vary, and consulting a financial advisor is strongly recommended prior to making any financial decisions.
