There were a couple of exciting things to wake up to this morning, but if I had to name one – crypto market would definitely steal the show.
Continuing a rebound that began about a month ago, coins, both big and small, have advanced further over the weekend, as the market topped $2T valuation and the crown jewel of all, Bitcoin, climbed over $50k again.
If you’ve followed me for a while, you’d know I’d been bullish on crypto stocks given how strong these cryptocurrencies’ rebound has proven… but, all good things must come to an end!
The price action I’m seeing right now gets me nervous about what’s next for some of the biggest crypto names out there.
Let me show you exactly what I mean and how I plan to trade it…
Cryptos Are Breaking Out
What began as a bounce off support a few weeks back has now turned into a full-on rebound at every level of the crypto market.
Here’s the chart of the total market cap of all cryptos:
I’m not going to focus on the obvious – we can all see the value is approaching the all-time highs from earlier this year.
What’s notable to me is that this time around, it took a lot less noise and volume to get to these levels.
Back in winter-early spring, nearly every new breakout took some loud headlines (like Tesla beginning to accept Bitcoin) and was followed by major influxes of greedy buyers – just look at all these high-volume days.
This time, we’re just having a gradual climb higher at relatively low average volume.
Bitcoin is showing a similar trend:
The mother of all cryptos is challenging the $50k area and there’re 2 obvious reasons to pay attention – 1) it’s at an obvious psychological level; 2) It’s a major support turned resistance area.
I’ll be watching the market closely over the next few weeks, and if cryptos hold current levels, I wouldn’t be surprised to see an aggressive breakout higher, into the uncharted territory.
Which makes crypto stocks only more puzzling…
Crypto Names Are Lagging
Now that you’ve seen the crypto charts, let me show you some of the crypto stocks and I’ll let you tell me if you think they look good:
Riot Blockchain – RIOT
Marathon Digital Holdings – MARA
Bit Digital – BTBT
MicroStrategy – MSTR
Now, without a doubt, these have all been great names to own over the past few weeks…
But compare these charts to the Bitcoin and Market Cap charts from above? Are you seeing what I’m seeing?
The relative weakness has been on full display here – while the market as a whole is steadily advancing toward new highs, none of the stocks above are able to take out major resistance areas.
That’s not all: some of them sport high short interest levels – RIOT at nearly 27%; RIOT at nearly 19% – and still, they can barely sustain a push higher.
Look at today, too! As of midday, none of the above can hold any price gains from a gap earlier.
I’m not calling for global panic here, but such weakness is definitely something to keep in mind.
If these names are continuously failing near resistance with cryptos at full swing – can you imagine what will happen to them when the market decides to melt?
Where Do We Go Next?
I’m not bearish yet, at this point I’m just “long-wary” – the action I’m seeing forces me to be cautious.
I see two ways of how this play out:
- The crypto market sells off in the near future and takes all of the above a lot lower.
- The crypto market holds current levels for the next few weeks, the stocks consolidate with it; the market then breaks out higher and so do the said names.
I don’t think it pays to try and bet on either outcome in this situation, I’d rather try to react to what I see.
I’ll be watching the crypto leaders closely over the next few weeks to see how it plays out.
Key Levels To Watch:
Bitcoin – any hold above $50K, or not failures right below $50k is bullish, in my view.
RIOT – above $40, I’d be bullish again; if we continue to fail at $40, I’m not going long.
MARA – current $37-$40 area is key. It needs to hold and clear before the stock can advance higher.
MSTR – I want to see it firm up above $700 – only then I’d consider a long against it and add if we break $800 on momentum.
BTBT – This one has been a hot mess over the past few weeks, but I think we can have a bounce if $12 holds.