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Bitcoin Reaches a Critical Junction; What Analysts are Watching For

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  • It has been a wild past few weeks for Bitcoin and the crypto market, with the benchmark cryptocurrency posting massive gains while the rest of the market also shows continuous signs of strength
  • Altcoins are beginning to take the spotlight as BTC’s rally begins stalling, with the selling pressure at $19,000 slowing its ascent while Ethereum and smaller altcoins all rocket higher
  • Where BTC trends in the near-term will depend entirely on its continued reaction to $19,000
  • One trader is noting that Bitcoin is now at a junction, with its near-term trend potentially being a pivoting point for its mid-term outlook

Bitcoin has been flashing some signs of immense strength throughout the past few days and weeks, with the selling pressure seen at around $19,000 being quite intense.

Where the market trends in the mid-term will depend entirely on this level, as a rejection here could be incredibly dire.

That being said, a break above this level could be all that it needs to catch some immense momentum that sends it rocketing higher in the days and weeks ahead.

The coming few days should provide some insight into the crypto’s trend, as one analyst is noting that it is now trading at a junction point.

Bitcoin Pushes Towards $19,000 as Buyers Take the Wheel

At the time of writing, Bitcoin is trading up just under 1% at its current price of $18,725. This is around the price at which it has been throughout the past few days.

The selling pressure just above where it is currently trading has proven to be quite intense, but it has yet to catalyze any intense rejection.

This has led analysts to widely flip bullish on Bitcoin, anticipating an imminent break above this crucial resistance level.

Analyst: BTC Reaches a Crucial Junction

One analyst explained that Bitcoin is now reaching a critical junction, and how it trends in the near-term could set the tone for where it trends in the days and weeks ahead.

He is specifically looking for its reaction to both $19,000 and its $18,500 support.

“IMO we’re at that BTC junction where… -Buyers show up aggressively from 18.5k support zone, like they did after early Asia dip past week, and we take a shot at 19k again. OR -18.5k buyer get [destroyed], we break down and break down again, buy the dip market is no more.”

This means that the coming few days will be crucial for understanding where the entire market trends in the days and weeks ahead.

Featured image from Unsplash.
Pricing data from TradingView.



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Here’s how the Purpose Bitcoin ETF differs from Grayscale’s GBTC Trust

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Since 2017, investors have been anxiously awaiting a Bitcoin ETF approval as the existence of such a fund was an important symbol of mass adoption and acceptance from the realm of traditional finance. 

On Feb. 18, the Toronto Stock Exchange hosted the official launch of the Purpose Bitcoin ETF and the fund quickly absorbed more than $333 million in market capitalization in just two days.

Now that the long-awaited Bitcoin ETF is here, investors are curious about how it will compete with Grayscale Investments GBTC fund. On Feb. 17, Ark Investment Management founder and CEO Cathie Wood said the likelihood that U.S. regulators will approve a Bitcoin exchange-traded fund has gone up.

Although exchange-traded funds (ETF) and exchange-traded notes (ETN) sound quite similar, there are fundamental differences in trading, risks, and taxation.

What is an exchange-traded fund?

An ETF is a security type that holds underlying investments such as commodities, stocks, or bonds. It often resembles a mutual fund, as it is pooled and managed by its issuer.

ETFs have become a $7.7 trillion industry, growing by 65% in the last two years alone.

The most recognizable example is the SPY, a fund that tracks the S&P 500 index, currently managed by State Street. Invesco’s QQQ is another EFT that tracks U.S.-based large-capitalization technology companies.

More exotic structures are available, such as the ProShares UltraShort Bloomberg Crude Oil ($SCO). Using derivatives products, this fund aims to offer two times the daily short leverage on oil prices.

What is an exchange-traded note?

Exchange-traded notes (ETN) are similar to an ETF in that trading occurs using traditional brokers. Still, the difference is an ETN is a debt instrument issued by a financial institution. Even if the fund has a redemption program, the credit risk relies entirely on its issuer.

For example, after Lehman Brothers imploded in 2008, it took ETN investors more than a decade to recoup the investment.

On the other hand, buying an ETF gives one direct ownership of its contents, creating different taxation events when holding futures contracts and leveraging positions. Meanwhile, ETNs are taxed exclusively upon sale.

GBTC does not offer conversion or redemption

Grayscale’s Bitcoin Trust Fund (GBTC) is the absolute leader in the cryptocurrency market, with $35 billion in assets under management.

Investment trusts are structured as companies — at least in regulatory form — and are ‘closed-end funds.’ Thus, the number of shares available is limited and the supply and demand for them largely determines their price.

Investment trust funds are regulated by the U.S. Office of the Comptroller of the Currency (OCC), therefore outside the Securities and Exchange Commission (SEC) authority.

GBTC shares cannot easily be created, neither is there an active redemption program in place. This tends to generate significant price discrepancies from its Net Asset Value, which is the underlying BTC fraction represented.

An ETF, on the other hand, allows the market maker to create and redeem shares at will. Therefore, a premium or discount is usually unlikely if enough liquidity is in place.

An ETF instrument is far more acceptable to mutual fund managers and pension funds as it carries much less risk than a closed-ended trust like GBTC. Retail investors may not have been aware of the possibility that GBTC trades below net assets value. Thus the recent event might further pressure investors to move their position to the Canadian ETF.

To sum up, an ETF product carries a significantly less risk due to greater transparency and the possibility to redeem shares in the case of shares trading at a discount.

Nevertheless, the impressive GBTC market capitalization clearly states that institutional investors are already on board.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.