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Bitcoin Explodes – Ways to Play

February 27, 2024

I don’t normally show the Bitcoin chart like this with the perpendicular rise from nowhere in 2013. The effect of including it is to flatten all the trading since 2014 into what could be an extended consolidation. Bitcoin has just moved decisively through $50,000, the subject of the previous alert. If it keeps climbing from here we could have a monster breakout.

When thinking about Bitcoin I was intrigued by this recent story about ‘safe’ currencies.

The scarcity of safe currencies is a growing problem with the yen effectively excluded from an already small pool of potentially safe assets. This lack of safer currencies has led to dollar rallies even when the source of worries fuelling risk aversion stems from the United States.

While that is illogical, the dollar’s status as a safe haven has grown now that it is supported by an interest rate greater than those for other major-traded currencies.

Having dropped to a record low last year, the yen – once deemed safe – can surely no longer be viewed safe, and those that have chosen to hold it would certainly have lost on those investments.

There are few alternates. The pound has never been regarded as safe and like the yen, it has been falling over the long term. Investors have never been keen to hold the euro – the existence of which was in doubt not too long ago, while the yuan (currency of world’s second largest economy) isn’t even fully convertible. Switzerland’s franc and gold lack the liquidity needed to make them truly safe.

As a result nations are holding trillions of dollars in reserves that are much greater than the total of every other currency held when those are combined.

They are maintaining the size of these dollar holdings even while trying to stem declines in their own currencies, and because dollars sold to stem local currency drops are bought back, local currencies are remaining under pressure and may well fall further.

Although central banks have been seen selling dollars – or authorising sales on their behalf to support yuan, rupee and Turkish lira, all remain extremely weak while FX reserves are little changed.

The big issue for investors is that should an increasingly attractive dollar draw more buyers then there will be a point when investment in it becomes overcrowded, and then it too won’t be safe.

Reuters, 21 February 2024

If you can’t trust any currencies where do you go? Bitcoin could look like a haven.

Ether also has a strong chart with a smiley buy signal and a large consolidation developing.

The problem with cryptos is that they are hard to buy.

A new development is the availability of Bitcoin ETFs like iShares Bitcoin Trust (IBIT). I advised buying these in opening dealings since when the price has advanced strongly. Unfortunately, thanks to the b****y regulators, this is yet another ETF the nanny state does not trust us feckless morons to buy. If only we were as wise as the spotty youths from London Polytechnic, who have just found their first clerical job at whoever makes these ridiculous rules and probably had to make the rules as their first task.

Shares Linked to Bitcoin Include Coinbase and Microstrategy

We cannot buy IBIT, but we can buy Coinbase, a platform for trading cryptocurrencies.

This is a new type of chart where every candlestick equals two months. There has been one highly successful buy signal. Since then the shares are up 6.4 times. This compares with Bitcoin, which, over a similar period, is up 3.7 times. This makes Coinbase look like an attractive way to invest in Bitcoin.

Imagine if the crazies are right and Bitcoin goes to $2m; think what might happen to Coinbase shares as the world goes crypto-crazy!

Microstrategy is the company that decided to bet the ranch several years ago on Bitcoin. Currently, it holds 193,000 Bitcoins worth just over $11bn, which is not too far from the market value. MSTR is up 6.3 times since the recent lows, better than Bitcoin and very similar to the performance of Coinbase.

My conclusion is that shares in either Coinbase or Microstrategy are an alternative to buying Bitcoins directly. IBIT, if you have a way of buying the shares, should perform in line with Bitcoin. Ether plots a path of its own but certainly direction-wise similar to Bitcoin. Since the recent lows, Ether is up 3.8 times, slightly better than Bitcoin.

Strategy – Buy Something that Relates to Bitcoin

All the charts above are full of potential. If Bitcoin is going to some insane high level, in six or even seven figures, all these shares and cryptos will benefit. Buy whatever works for you.

Share & Crypto Recommendations

Bitcoin BTCUSD. Buy @ $56,630

Ether. ETHUSD. Buy @ $3,233

IShares Bitcoin Trust. IBIT. Buy @ $32.50

Coinbase Global. COIN. Buy @ $200

Microstrategy. MSTR. Buy @ $855

Further reading

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