Bitcoin has recently experienced significant price fluctuations, reaching an all-time high in May before experiencing a subsequent decline of roughly 10% over the next nine days. However, it has shown resilience by trading back toward those peak levels in the last three days. At Inside Edge, we currently hold the iShares Bitcoin ETF (IBIT) in two of our growth-oriented portfolios. Given the robust fundamental, macroeconomic, and technical factors at play, I believe it’s an opportune moment to consider increasing our investment positions.
Factors Driving Bitcoin’s Rebound
Strong Institutional Demand: The launch of the IBIT ETF has resulted in unprecedented demand, setting new records for inflows. In just 341 days, IBIT accumulated $70 billion in assets, surpassing the previous record set by the SPDR Gold ETF (GLD) by more than five times. Additionally, MicroStrategy, led by Michael Saylor, continues to accumulate Bitcoin, now owning over 500,000 coins.
Macro Environment: Despite concerns regarding inflation driven by tariffs, U.S. bond yields have remained stable, which is favorable for riskier assets like Bitcoin. Many analysts believe that Bitcoin retains a positive correlation with growth assets, and expectations are that the Federal Reserve will likely lower interest rates soon, further supporting the growth sector. Additionally, the pressure on the U.S. dollar due to a constrained rates market and recession fears is advantageous for growth investments.
Improving Regulatory Landscape: Anticipated legislation and regulatory frameworks surrounding stablecoins in the U.S. are expected to promote broader acceptance of cryptocurrencies and stable-value coins. Furthermore, there is a rising interest from corporations to hold Bitcoin as part of their treasury reserves.
Technical Analysis of Bitcoin’s Price Movement
Examining the weekly Bitcoin futures chart reveals a clear upward trend that has been in place since late 2022. One fascinating aspect of this trend is the behavior of a volatility indicator known as the Average Percent True Range (APTR), which measures the market’s high-to-low price range in percentage terms rather than dollar amounts. Specifically, we are looking at the 10-week APTR, which simplifies the comparison of Bitcoin’s price movements across different price levels.
During periods of consolidation and pullbacks, the APTR tends to decline from its higher range of approximately 20%-15%. Past corrections have seen the APTR dip to around 9% and 7%, setting the stage for subsequent price increases following resistance breaks. Notably, as Bitcoin’s price rises, so does the average range—contrasting with the stock market, where volatility indices like the VIX typically rise during corrections and fall when markets stabilize. This inverse relationship suggests that lower volatility readings in Bitcoin might indicate an impending price increase.
Currently, the weekly chart shows a low APTR reading of 8.5%, coinciding with a resistance level near $110,000. Shifting to the daily chart, a similar pattern emerges, with low APTR readings hovering around 4%-3% over the past ten days. As we approach the critical resistance level of $110,000, I anticipate a significant push from buyers.
Investment Strategy and Position Adjustments
I have set a price target of $135,000 based on Fibonacci projections. Presently, I hold IBIT at a 3% allocation in our Tactical Alpha Growth portfolio and a 3.5% allocation in our Active Opportunities Portfolio, with plans to increase both to above 5%. The breakout level for the IBIT chart is approximately $64, and I intend to establish a risk-reduction threshold at $58 to safeguard our position.
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Disclaimer: The opinions expressed herein are those of the writer and do not necessarily reflect the views of any affiliated entities. This information is intended for educational purposes only and should not be construed as financial, investment, tax, or legal advice. Always consult with a professional advisor before making any financial decisions.
