Bitcoin Consolidates Below $30K
The May 2023 Monthly Report, my Bit Digital position, and more analysis of bitcoin and traditional markets as June kicks off.
Bitcoin wraps May almost right where it kicked off the month. Despite an early month push to $30,000, bitcoin couldn’t top $29,700 on most exchanges. The month saw continued consolidation that began in April.
Consolidation isn’t a bad thing. For a nascent, volatile asset, prolonged consolidation showcases the activity of long term holders. Two key metrics are on display right now for bitcoiners—the 200 week moving average and the realized price.
200 Week Moving Average:
The 200 week moving average and realized price (avg. cost basis for all bitcoin bought) are both trending below current market prices, showing signs of potential support. These levels put bitcoin right within the $20,000-30,000 range that I thought we’d see for the majority of the year. Since breaking above $20k in the second week of January, bitcoin has only dropped below that price once. That one time was in early March just prior to a near 30% upswing that took us to current levels.
Okay… we have an idea of what support looks like. What about resistance? Last month, I said $30,000 was the number to beat and that it looked like resistance. That proved to be the case. Large, round numbers mean support on the downside but also resistance on the upside and, historically, $30k has been a pivotal number on bitcoin charts.
Bitcoin didn’t drop below $30k between January 2021 and June 2022. $30k was essentially the new “higher low” price level during that period. Now, one year out from that time frame and just under a year to the next bitcoin halving, $30k flips from support to possible resistance ahead of what could be a next leg up.
I want to mention a publicly-traded company that I hold. Bit Digital (Nasdaq: BTBT) is a bitcoin mining company. They recently introduced ethereum staking into their operations as well but they have miners in the US, Canada, and Iceland. Bit Digital is pushing toward 100% sustainable mining (currently ~85%) and recently expanded operations to Iceland in order to hedge against possible North American regulatory crackdowns on mining and benefit from Iceland’s abundant renewable resources.
Founded in 2015, the company rebranded itself as Bit Digital in 2020 and has been one of the more tightly-run mining plays on public markets. They’re not the biggest mining company but that’s allowed them to grow reasonably. We all saw what happened when the largest miner in the world, Core Scientific, went under at the end of last year. They were caught up in fallout from the Terra and Celsius collapses. Smaller, more-focused mining plays like Bit Digital bottomed out around the time of Core Scientific’s unwind but have rallied back quickly alongside bitcoin markets.
The real question is… why not just buy more bitcoin? It’s a great question. Somedays, I wish I was just buying more bitcoin. But, that’s not realistic. Most people, including myself, aren’t set up to live on a 100% bitcoin standard. So, I look for opportunities in my traditional investment portfolios to gain indirect exposure.
The irony is that sometimes, in the short term, publicly-traded companies like BTBT can outperform bitcoin. Year-to-date, BTBT is up 410%. Over that same time period, bitcoin is up 62%.
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