Bitcoin is setting up for another big move.
The “King of Cryptocurrencies” has been stuck for the past several weeks inside a tight trading range between $45,000 and $50,000 per coin.
It closed Friday near $47,500 – just about in the middle of its range.
And, it looks ready to break that range, in one direction or the other, soon…
Take a look at this chart…
Notice how all of the various moving averages are now coiled together. This tells us there’s a lot of energy built up in this chart. And, that energy will fuel the next big move.
Also, notice how this chart displayed a similar setup twice before in 2021 – in May and in July.
We pointed out the potential for a big move in May. And, we suggested that move would be to the downside.
The bitcoin stocks like Riot Blockchain (RIOT), MicroStrategy (MSTR), and Tesla (TSLA), were behaving poorly. We figured the stocks were discounting future weakness in bitcoin.
Two months later, the price of bitcoin had been cut in half.
In July, we once again pointed out the potential for a big move. This time, though, the crypto stocks were acting well. They had been rallying even as the price of bitcoin was falling. That seemed like a bullish sign. So, we figured bitcoin was gearing up for a rally.
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Since then, the price of bitcoin gained nearly 70% between its bottom in July and its recent peak.
As we noted, though, the price has been stuck in a tight range for the past few weeks. The moving averages are now coiled and pointing to a big move. The only question is…
Which direction will it break?
The “crypto bulls” aren’t going to want to hear this. But, the bitcoin stocks are suggesting the next move is lower.
Just take a look at this RIOT chart…
RIOT is a bitcoin mining company. While bitcoin is trading about 5% below its recent high, shares of RIOT are down more than 20% over the past month.
And, how about this chart of MicroStrategy (MSTR) – the enterprise software company that raised money by issuing bonds, and then plowed all of that money into bitcoin…
MSTR is also down about 20% from last month’s peak.
If the stocks do indeed lead the price of bitcoin, then the recent action in RIOT and MSTR suggests bitcoin’s next big move will be lower.
The action in Tesla (TSLA), though, is suggesting something different.
Take a look…
TSLA – the electric vehicle manufacturer that made more money in one quarter by owning bitcoin than it did in its entire lifetime by selling cars – is about 5% higher today than where it was trading last month.
So, unlike in May and July when we had a unanimous consensus – the bitcoin stocks are in disagreement here. Two out of three are suggesting the next big move will be lower… one suggests it will be higher.
We can’t have quite as much confidence in this prediction as we had the two previous times this year. But, it seems to me the odds favor a move to the downside.
We should know for sure within a few weeks.
Best regards and good trading,
Jeff Clark
Reader Mailbag
Do you follow the crypto market? If so, do you think this kind of setup will move bitcoin lower?
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