Bitcoin: After weekend dip, chart watchers share crypto clues

Bitcoin has yet to recover from its unexplained weekend swoon, and now the investing public is on edge about the notoriously volatile token’s next move. Enter the chart watchers.

Noting that “a chart is a chart is a chart,” Tallbacken Capital Advisors’s Michael Purves sent a note Wednesday with a technical analysis of the coin’s trading patterns. Bitcoin’s recent highs weren’t confirmed by its relative strength index, among other things, and its upward momentum is fading, he said.

“From purely a technical perspective, the bullish case looks highly challenged here in the near term,” after its recent rally, wrote Purves, chief executive officer at the firm.

It’s another sign that Bitcoin has become too big for Wall Street to ignore. With more firms allowing customers to dabble in the asset and more institutional money tied to its performance, no wonder chart watchers are capitulating and now lending their expertise to the growing batch of analysis.

Earlier, JPMorgan Chase & Co.’s analysts also chimed in with their take. The last few times Nikolaos Panigirtzoglou witnessed such negative price action in Bitcoin, buyers returned in time to prevent deeper slumps. This time, the strategist is worried.

If the largest cryptocurrency isn’t able to break back above $60,000 soon, momentum signals will collapse, strategists led by Panigirtzoglou wrote in a note Tuesday. It’s likely traders including Commodity Trading Advisers (CTAs) and crypto funds were at least partly behind the buildup of long Bitcoin futures in recent weeks, as well as the unwind in past days, they said.

“Over the past few days Bitcoin futures markets experienced a steep liquidation in a similar fashion to the middle of last February, middle of last January or the end of last November,” the strategists said. “Momentum signals will naturally decay from here for several months, given their still elevated level.”

In those three previous instances, the overall flow impulse was strong enough to allow Bitcoin to quickly break out above the key thresholds, yielding further buildups in position by momentum traders, JPMorgan noted.

“Whether we see a repeat of those previous episodes in the current conjuncture remains to be seen,” the strategists said. The likelihood it will happen again seems lower because momentum decay seems more advanced and thus more difficult to reverse, they added. Flows into Bitcoin funds also appear weak, they said.

Bitcoin rose as high as $64,870 around the time of the Nasdaq listing of Coinbase Global Inc., but has retreated back to $55,000. The cryptocurrency is still up about 90% year-to-date.

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