Offbeat Ideas and Commentary from the Depths of Gil's Trading Notes
Bitcoin and the GBTC Continue to Rally
The parabolic move and short-term peak of nearly two weeks ago in the Grayscale Bitcoin Trust (GBTC), which roughly tracks Bitcoin, quickly regained its feet and rallied back up to the parabolic highs. The gap-up move two weeks ago was a prudent one to sell into in whole or in part if one had purchased the GBTC at the time of my original discussion back on March 18 when it was trading at 4.60-4.70, and I posted a VooDoo Report discussing that possibility. I wrote that at the very least, the GBTC would need to consolidate its rapid gains. Thus, depending on how one wants to handle any GBTC position, one could either sit tight while using a trailing stop somewhere lower in the chart or take partial to full profits with the idea of looking for a re-entry.
As I write this report on Monday, Bitcoin futures closed a short while ago at $8775, up $635 after hitting an intra-session peak of $9035.
The recent pullback gives us some idea of what to look for in terms of trying to determine re-entry points on future pullbacks. Bitcoin tends to be volatile, and 20-30% pullbacks within an overall uptrend are not uncommon. Therefore, one has to decided how actively one wants to trade this. The fact is, the original entry at 4.60-4.70 per the original March 18th VooDoo Report has held very well. A buyable gap-up move back in early April set an intraday low of 5.52 and the GBTC has not looked back since.
Note that there was a re-entry point on the pullback in the GBTC that occurred right after the parabolic move through the $10 price level. The pullback was over 20.45% deep and took four days. The logical point for support would have been the 10-dma or the lows of the gap-fill down to the lows of the gap-up rising window (yellow highlighted area). The GBTC in fact found support at both 10-dma and the gap-fill two Fridays ago and, if the futures hold up until tomorrow morning, will gap-up to higher highs on a very short flag breakout tomorrow morning.
We're now approaching an area of overhead congestion within a descending triangle that formed in the seven months following the climactic, mania-like peak in Bitcoin back in December 2017. The current eight-week move is similar to the rapid seven-week ascent we saw on the weekly chart in July-August of 2017. So far, we have not seen a sharp pullback on the weekly, which may be coming given the extension of the current eight-week move and turn off the lows.
A sharp pullback from here that perhaps tests the rising 10-week/50-day moving averages might present an entry of the most opportunistic kind, depending on how it plays out. If I'm looking to add/re-enter a GBTC position, this is what I am looking for since the overhead congestion may induce some selling. This is something to watch for as Bitcoin and GBTC push higher.
