Cryptos Below Record Levels

On March 14, 2024, Bitcoin reached its latest record high of $73,662.76 per token. The move to an all-time peak came after the SEC approved spot Bitcoin ETF products, expanding the leading cryptocurrency’s addressable market. Over the past few years, a critical issue facing potential investors has been the storage of Bitcoin in computer wallets or unregulated exchanges. The Mount Gox in 2014 and the late 2022 FTX bankruptcy scared away many investors and traders. Regulated ETF products allow market participants the security of Bitcoin exposure without worrying about storage issues, which causes a flood of new buying, and pushes the price to a record peak.

The SEC’s approval of spot Bitcoin ETFs was another in a series of events that caused the price to rise to an all-time high. In late 2017, the CME listed Bitcoin futures, which had the same impact at the time. Over the following years, high-profile buying or endorsements from Elon Musk and Jack Dorsey prompted buying.

After the latest rally, Bitcoin and other crypto prices have corrected, but the market now awaits the next significant event to cause another rally to new highs.

Technical support/resistance levels for Bitcoin

• After rising to $73,662.76 on March 14, Bitcoin corrected 23% to a $56,668.48 low on May 1, now the critical support level.
• At $70,450 per token on May 27, Bitcoin was above the midpoint of the trading range since the mid-March 2024 high.
• Bitcoin was in a short-term bullish pattern in late May, increasing the odds of a challenge of the all-time peak.

Technical support/resistance levels for Ethereum

• After rising to $4,090.306 on March 12, Ethereum corrected 30.4% to a $2,846.412 low on May 1, now the critical support level.
• At $3,965 per token on May 27, Ethereum was above the midpoint of the trading range since the mid-March 2024 high.
• Ethereum is in bullish pattern of higher lows and higher highs in late May.

The event that could ignite a rally

• The SEC’s approval of spot Bitcoin ETF products pushed Bitcoin to a new record high in 2024.
• A spot Ethereum ETF may have similar impact on the second-leading cryptocurrency.
• Over the past years, new products that have expanded the addressable market or high-profile purchases have pushed the prices higher, while scandals, exchange bankruptcies, and hacks have caused prices to plunge.
• The SEC approved exchange applications to list spot Ether ETF products on May 23.

The higher prices go, the more risks increase

• The cryptocurrency asset class’s market cap was at the $2.63 trillion level on May 27.
• The crypto asset class remains smaller than gold, Microsoft (MSFT), Apple (AAPL), and is around the same level as NVIDIA (NVDA).
• A rise above the $3 trillion level could cause increasing concerns by regulators and legislators.
• Therefore, the higher prices move, the more risk of government intervention to curb the ascent.
• Governments control the money supply, and cryptos pose a direct risk to that control if the value increases to levels that could challenge the traditional fiat foreign currency markets.

Only invest capital you are willing to lose

• The boom-and-bust nature of the cryptocurrency asset class attracts significant speculative activity.
• The potential for substantial rewards involves significant and commensurate risks.
• Government intervention or bans could cause another plunge in the blink of an eye.
• Only invest funds you are willing to lose in the volatile asset class.

Over the past years, new highs and significant corrections in cryptos have been event based. While the approval of spot Ethereum ETFs could ignite another rally, there are more than a few treacherous risks in the asset class at the current price levels. Volatility creates a paradise of opportunities, but the potential for oversized rewards comes alongside substantial risk.

Thanks for reading, and stay tuned for the next edition of the Tradier Rundown!