Summary Bitcoin has broken out to new highs above $100,000, and I believe its fixed supply and energy-intensive mining provide a price floor. Technical analysis shows BTC-USD is bullish with strong price action, momentum, volume, and relative strength outperforming the S&P 500. I also own shares in the Fidelity Wise Origin Bitcoin Fund ETF and iShares Bitcoin Trust ETF, both showing bullish characteristics. My strategy is to continue systematic purchases of BTC-USD and buy FBTC and IBIT on dips as long as BTC-USD stays above its 30-week EMA. On November 10, 2024, I wrote about Bitcoin ( BTC-USD ) saying that I thought the asset was ready to rally. At the time of the article , BTC-USD was trading at $76,794.83. Now that BTC-USD has broken out to new highs above $100,000 I wanted to take another look at the asset by assessing the price action, momentum, volume, and relative strength to see if I should maintain, reduce, or add to my position. I will also take a look at two exchange-traded funds ((ETFs)) that I own and do a similar analysis. I will begin my analysis of BTC-USD by outlining some fundamental characteristics of BTC-USD which I believe give the asset a price floor. Fundamentally, Bitcoin is an interesting asset. While I’m still learning about many aspects of Bitcoin, it does have several characteristics that make it a solid fundamental choice for a portfolio. The idea that there is a fixed supply of Bitcoin is appealing to me. The 21 million bitcoin limits that can be mined makes it a limited supply asset. This is different than fiat currency, gold, silver, shares of stock, etc, which are not limited supply assets. A second characteristic that I appreciate is that it has to be mined. I don’t know much about that myself, but it shows that energy is required to produce the asset. I see this as being different than money printing that is done by governments with fiat currencies. It doesn’t seem to take much effort to print more fiat currency. I think these two items provide a floor under the price of Bitcoin. Additional fundamental drivers of Bitcoin are President Trump’s willingness to have the U.S. Government buy more Bitcoin to use it as a strategic reserve asset. Other large entities that are also considering Bitcoin as a strategic asset to own are, other foreign governments such as El Salvador , sovereign wealth funds , U.S. state governments like Ohio , and corporations like MicroStrategy . These entities are now considering Bitcoin as a legitimate investment asset that can be used as a hedge against inflation or as a hedge against political or economic risk. As I mentioned in my previous Bitcoin article, there are many people who I respect that have opposing viewpoints on the legitimacy of Bitcoin, yet it seems to be becoming more and more accepted as an investable asset. This acceptance helps maintain a price floor in my opinion. It will be interesting to see how this plays out in the future. Knowing that USD-BTC is volatile, I will utilize technical analysis to see how things look moving forward. Chart 1 – USBTC Weekly with 30-week EMA, Momentum, Volume, and Relative Strength www.stockcharts.com Chart 1 is the same chart I used in my November article. It just looks more bullish now. Price action shows that BTC-USD is comfortably above its 30-week exponential moving average ((EMA)) which is bullish. The 30-week EMA is also trending higher which is bullish. BTC-USD broke above the green box after trading sideways for several months. BTC-USD has been trading sideways for the last few months consolidating its recent gains. I see no reason to be fearful of a pullback or expect to see a large decline by analyzing the price action shown in Chart 1. I see the price action of BTC-USD as bullish. Momentum can be seen in the top pane of Chart 1 by analyzing the Percentage Price Oscillator (PPO)). PPO is showing bullish behavior in the short-term and long term. When the black PPO line is above the red signal line, that is an indication of bullish short-term behavior. The opposite condition would be an indication of bearish short-term behavior. PPO is showing long term bullish behavior because the black PPO line has a reading above zero. That means that the black PPO line is above the centerline of the chart. That is what I want to see. Notice that the black PPO line doesn’t often oscillate above and below zero. It usually stays above or below zero for months at a time. That is why I call that condition long term. In early 2023 the black PPO line crossed above zero, and it has maintained this condition ever since. Notice that the price of BTC-USD has rallied during this time. Bullish price action leads to momentum, and momentum is in concurrence with the recent price action. Volume is the next item I analyze when looking at stocks to buy. I want to see big black volume bars in the volume pane. The black volume bars show the number of BTC-USD traded when the asset was up for the week. The red volume bars show the same thing when the asset traded lower for the week. I want to see more black volume bars than red volume bars and I want to see the black volume bars dwarfing the red volume bars. It seems that since my last article, the volume picture has remained bullish. There are more black volume bars, and they are generally higher than the red volume bars. Volume leans bullish. Relative strength shows one asset compared to another and allows an investor to easily identify the better performer over a period of time. When the black line rises, that means that BTC-USD is outperforming the SP 500 index. When the black line falls then BTC-USD is underperforming the SP 500 index. Since early 2023, BTC-USD has greatly outperformed the SP 500 index. Relative strength is bullish. Chart 1 shows an asset that is still performing well in every technical element I concern myself with. Price action is bullish as BTC-USD has made a series of new highs. Momentum is bullish both short and long term. Volume shows people are willing to buy the asset even as it makes new highs. Relative strength is quite bullish, and it continues to outperform the SP 500 index. One way I choose to invest in Bitcoin is through exchange-traded funds which have recently become available. I own shares in both the Fidelity Wise Origin Bitcoin Fund ETF ( FBTC ) and the iShares Bitcoin Trust ETF ( IBIT ). These two ETFs are shown in Charts 2 and 3 respectively. Next, I will analyze these charts together using the same techniques outlined previously. Chart 2 - FBTC Weekly with 30-week EMA, Momentum, Volume, and Relative Strength www.stockcharts.com Chart 3 – IBIT Weekly with 30-week EMA, Momentum, Volume, and Relative Strength www.stockcharts.com Both of these ETFs are new, so the amount of price data is limited. Keeping that in mind, price action is bullish for both ETFs. Each are trading above their 30-week EMAs and the 30-week EMAs are trending higher. Momentum is bullish for each ETF. PPO shows both short-term and long term bullish characteristics. Volume is quite similar in both ETFs and mirrors the volume pattern in BTC-USD shown in Chart 1. It is interesting to see the difference in the number of shares traded in FBTC versus IBIT. IBIT trades far more shares each week than FBTC. Lastly, relative strength shows that each ETF has handily outperformed the SP 500 index. In summary, Bitcoin and the two ETFs that I highlighted continue to show bullish behavior in my opinion. The technical elements show bullish behavior, and the fundamental aspects of Bitcoin make me believe that higher prices are in the future. My investment strategy is to continue to add to my BTC-USD position through systematic purchases and to continue to buy shares in FBTC and IBIT on dips as long as BTC-USD is trading above its 30-week EMA.
