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Analysis
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Ahead of Coinbase’s direct listing on the Nasdaq this Wednesday, Bitcoin and Ethereum are pushing to new highs and taking the overall crypto market above $2 trillion on a market capitalization basis. To give some background on Coinbase, it is the leading cryptocurrency exchange in the US. It allows users to exchange up to 50 different cryptocurrencies and has a debit card feature for purchasing goods and services with cryptocurrency. Coinbase also offers cryptocurrency wallets to store the digital currency in a safe place (they’ve never been hacked). They have around 6.1 million active users. The price tag for the listing is around $100 billion, which is quite frothy. Looking at price action in Bitcoin, the excitement surrounding the listing is clearly helping see some buyers step in.
Bitcoin has been benefiting at the expense of gold as flow data indicates. Rising real yields are not good for the shiny yellow metal, but Bitcoin can produce high single digit yields in a crypto savings account. Therefore, in an environment of rising yields, Bitcoin becomes the more attractive option vs yieldless gold. A British Quant firm, Quant Insight Ltd. has also indicated through their research that Bitcoin is positively correlated with inflation breakevens, further cementing the idea that Bitcoin is being used as a hedge against runaway inflation/fiat debasement. With today’s US inflation data beating across the board, the inflation narrative is still in play.
Bitcoin had been moving sideways in a range between $55500 and $59500. Price bounced strongly off the range support and uptrend line and is now comfortably above range resistance of $59500 and taken out the March 14 highs of $61680.The RSI remains above the 48 support level, keeping the uptrend intact, but is now beginning to sniff close around overbought levels. To the upside $64/65k could be a good first initial target. However, if we some profit-taking then I’d look to the previous range resistance as support at $59500 and below that the 21-day EMA and uptrend line around $58k.
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