Remember when inflation was basically temporary and the US Federal Reserve blew interest rates close to zero for several quarters? What relatively calm times those were.And what a glorious time they had Crypto and blockchain related stocks.
But now, as governments around the world embrace aggressive interest rate hikes, the cryptocurrency market is collapsing. Bitcoin (BTC-USD) itself is down 76% from its all-time high.
In this article, Global X’s Blockchain ETF (Nasdaq: BKCH):
Composition of the BKCH ETF
BKCH’s top five holdings include Block Inc. (SQ), Coinbase Global (COIN), Riot Blockchain (RIOT), Applied Digital Corp. (APLD), and Marathon Digital (MARA). Overall, these top five holdings account for 51.2% of total exposure. This indicates a moderately high concentration.
Here we discuss some of the fundamental drivers of BKCH.
There are many moving parts and fundamental driving forces in the cryptocurrency and blockchain industry, but Bitcoin (BTC-USD) is arguably the single most important factor. When Bitcoin smiles, the market laughs, and when Bitcoin frowns, the market grieves.
That said, Bitcoin is currently trading at painfully low prices, dragging the entire market into crypto winter and BKCH to all-time lows.
Since November 2021, my outlook for Bitcoin is bearish. attention signal About top local formations on Twitter. So far it’s working beautifully as expected.
I expect the price to continue to drop closer to the $12,000 monthly support.
Market trust in the abyss
Aside from the high interest rate situation plaguing the cryptocurrency and blockchain markets, the series of unfortunate explosions, layoffs and bankruptcies seen by cryptocurrency companies this year has taken a noticeable hit to investor confidence levels. I was. This can take a long time to recover. bubble pop recovery.
Internally, there are also signs of weakness. For example, Coinbase (COIN), the second largest cryptocurrency exchange in the BKCH portfolio with a weight of 10.1%, laid off 1,160 employees during the current crypto winter.
Other companies, such as Core Scientific (CORZ), in which BKCH has a 3.8% weighting, recently filed for Chapter 11 bankruptcy protection, and their shares have fallen 98%. Post-bankruptcy vultures are probably also keenly interested in Michael Thaler’s Marathon Digital Holdings (MARA).
Risk-off mood still a headwind for BKCH
High interest rate hikes by the US Federal Reserve and other governments have triggered a general risk-off sentiment across financial markets, shifting investors from risky and optimistic to cautious and pessimistic. That has changed. The crypto and blockchain markets are associated with a high degree of speculative activity associated with investors being adventurous and taking risks. The current market mood therefore has a direct impact on BKCH’s prospects.
The Fed’s rate decision sets the tone for this risk-on or risk-off mood. This affects whether the BKCH swims with or against the current.
Now let’s take a look at BKCH’s technology.
If you are new to hunting alpha articles using technical analysis, I encourage you to read this post where I explain how and why I read charts using the principles of flow, location and traps. To do.
Read relative money flow
The BKCH/SPX500 pair is literally in free fall at the moment, with no support for targeting pairs. The signs are overwhelmingly bearish, but the commodity still doesn’t meet all my trade setup criteria. Specifically, we need to look at bull traps to enter bearish play. No proof of that yet.
read absolute money flow
The same is true for the standalone BKCH ETF. BKCH is hovering around $12.80 and is in price discovery mode creating a good sell position. However, the price is not currently in an ideal bull trap position to encourage a short position.
We would be more interested in becoming bearish if the price accidentally breaks out to the upside after returning to the $30.58 monthly resistance. Until then, it’s a “hold” stance.
Overall, we recognize that the current flow for BKCH is compellingly bearish. However, to participate in a sell, we need to see a bull trap, so we keep waiting for a high-probability (>70% probability based on my stats) entry. On the other hand, be aware that any upturn in the crypto market will lead to an immediate upturn in the BKCH ETF. This is because they share a close correlation. And the crypto market upturn (pun intended) will follow the heartbeat of central bank policy.
Editor’s note: This article covers one or more microcap strains. Please be aware of the risks associated with these stocks.