The World's Largest Crypto Is Making a Comeback
Bitcoin (BTC) and cryptocurrencies in general have had a volatile year.
And that's no surprise. More recently, cryptos took a hit after the U.S. Securities and Exchange Commission ("SEC") brought the hammer down on two of the world's largest crypto exchanges.
But last week, bitcoin saw a big move higher. Let's discuss the details.
Headline No. 1:
Bitcoin is trading near a one-year high.
McCall's Call: Once the news began circulating that the SEC had filed lawsuits against Binance and Coinbase, investors panicked amid the uncertainty of future regulation. That caused a sell-off that led to bitcoin briefly falling below $25,000.
With all the drama caused by the SEC, you might think bitcoin's price would still be around that level. But that's not the case...
Last week, bitcoin hit a fresh one-year high – surging to more than $31,000.
But let's rewind for a moment to see what caused this move higher.
The week after the SEC sued Binance and Coinbase, BlackRock – the world's largest asset-management firm – announced that it filed for a bitcoin spot exchange-traded fund ("ETF"). This ETF would be the first of its kind in the U.S. if approved.
What makes this announcement even more intriguing is that BlackRock listed Coinbase as the bitcoin custodian for the ETF. You read that right... the very same Coinbase the SEC sued one week earlier.
But that's not all. Since then, several other firms have filed for a bitcoin ETF, including large players such as fund-management company WisdomTree and investment-management company Invesco. Then, last week, Charles Schwab, Fidelity Investments, and Invesco announced that they created a new crypto exchange and are already facilitating transactions in bitcoin and Ethereum (ETH).
Talk about mixed signals...
Regular readers know I'm bullish on bitcoin and cryptocurrencies generally. So in my mind, the more the government attempts to overstep boundaries, the more bitcoin will benefit.
Plus, just think about it... Would several of the world's largest financial firms make big moves into the crypto space if there was a real threat to the future of Coinbase and bitcoin? I wouldn't think so.
In the next 12 to 18 months, I predict there will be a bitcoin-approved ETF. This approved ETF will lead to a massive influx of demand for the crypto, which in turn will push its price higher.
Of course, there will be volatility along the way. But I expect we'll see bitcoin's price continue to slowly climb higher from here.
Headline No. 2:
The S&P 500 Index's advance-decline line hit a new record high.
McCall's Call: I've highlighted this technical indicator before here in Daily Insight. The advance-decline line represents the number of stocks that are up on a day minus the ones that are down.
That number, whether it's positive or negative, is then added to a cumulative number. And last week, that number hit the highest reading on record.
This is an important breakout for the indicator. When the advance-decline line is rising, it shows that market breadth is improving. What's more, a new high in the advance-decline line is a very bullish signal.
Many analysts will argue that the stock market is in a bubble or due for a significant pullback. But I couldn't disagree more.
We know that stocks never go up in a straight line. And sure, pullbacks are common. But I don't expect to see a major downtrend in the near future.
Typically when stocks are in an uptrend – as they are now – and are nearing the end of the trend, the advance-decline line will be falling. This suggests that the majority of stocks are weakening and that, eventually, it will lead to the index rolling over.
But that's not the case right now. A new high on the advance-decline line tells us that the S&P 500 is actually healthy. And it also tells us that the headlines about the "Big 7" – Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla – leading the rally may be a thing of the past.
Now, it's true that only a few stocks have led the rally in the market this year. But again, that's in the past. We need to be focused on the future.
We're getting more and more indicators showing us that the rest of the stocks are finally catching up and starting to move higher. That could be enough to send the S&P 500 to a new all-time high by the end of the year.
I'll continue to monitor this technical indicator. But in the meantime, I'm remaining bullish on stocks through the rest of the year and the rest of the Roaring 2020s.
Here's to the future,
Matt McCall
Editor, Daily Insight
June 26, 2023
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