The reconquest of $ 41,000 on Bitcoin (BTC) mentioned last week is almost on target. However, the hardest part is yet to come for buyers. Aware of how close prices are around this key level, sellers will be hard pressed to preserve the bearish momentum that began on November 10, 2021. Expect rock & roll sessions on BTC in the coming days, but also on listed companies, directly or indirectly related to cryptocurrencies.
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Listed Crypto Companies: Bitcoin Trend Followers But Fundamental Analysis Will Catch Them
If you regularly read the JDC, you know respectively and surely Microstrategy (MSTR), Coinbase (COIN), Riot Blockchain (RIOT), Digital Marathon (MARA)or Hut 8 Mining (HUT). Maybe some readers are even shareholders of these companies to diversify their crypto exposure. However, distrust; While these companies have sparked a lot of enthusiasm, this new investment sector harbors its share of hidden dangers.
By comparing the performance between Bitcoin (black curve) and the companies concerned, it is clear that they are strongly correlated both upwards and downwards. As in raw materials, investing in these companies means benefiting from the leverage effect of the price of BTC. In period of bull run, everything smiles at you. But when the table suddenly turns, it’s an absolute deluge, so almost the majority of them underperform the king of cryptos.
However, these companies can detach themselves at some point from their dependence on the major movements of Bitcoin, because they have an obligation of results and transparency vis-à-vis their shareholders and the financial markets. Imagine that Microstrategy announces poor results or misses the consensus of financial analysts while at the same time Bitcoin prices are rising. This will not prevent the decline of the title of the American company.
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Will Bitcoin’s recovery continue?
At the time of writing, the latest moves are particularly positive. Buyers try to push Bitcoin above $41,000, which is the neckline from shoulder-head-shoulder (validated last week). Listed crypto companies have taken advantage of this short-term windfall.
In weekly units, BTC prices are moving back inside Kumo and distancing themselves from SSB. The Chikou Span, the centerpiece of the Ichimoku, which still remains above the Kumo, constitutes a restoring force against a structurally bearish market.
On the side of the daily chart, the horizon is clearing up somewhat. The downtrend line from its Nov 10, 2021 ATH is about to be broken, the same for the Tenkan and the Kijun. It would be wise to wait for confirmation of Saturday’s closing above $41,000 to see a continuation of the rally.
If this technical signal were to be validated, the resistance of $46,000 would be the next objective. This would coincide with a return of the king of cryptos inside the Kumo and would possibly favor the rise in the prices of companies concerned with the universe of cryptos.
In contrast, yet another failed bounce would take us back to the depths of last summer towards support around $30,000. From cause to effect, the respective prices of MSTR, COIN, RIOT, MARA and HUT would continue to suffer due to their high correlation with Bitcoin.
In summary, investing in listed crypto companies does not equate to direct exposure to Bitcoin. I consider them part of a diversification in a crypto portfolio. If their correlation is currently proven, it should be put into perspective given that the crypto universe remains in a period of price discovery and low participation on the side of institutional investors.
As for Bitcoin’s next moves, we’ll be keeping an eye on the key $41,000 level. Crossing it could cause a buoyant wind on the equity indices, and therefore a return of risk appetite, conditioned by a decline in volatility.
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