Bitcoin rallied to a record high of $93,000 on Wednesday last week and remained near that high level mark on Tuesday. The digital currency has been on a strong winning streak since election results became known.
President-elect Donald Trump's favorable attitude toward cryptocurrencies is also powering a rally among crypto exchange traded funds. But are they a buy now?
On Monday, reports that Trump Media & Technology is in "advanced talks" to acquire crypto trading and brokerage company Bakkt sent shares of Bakkt soaring 162%.
Rather than hold volatile crypto plays, crypto ETFs offer a way of holding several digital currencies and stocks related to those currencies such as Coinbase, Mara Holdings and Riot Platforms.
Several of these ETFs rallied as well last week.
As of Tuesday's closing price, Coinbase had gained 67% since Nov. 5. But Mara Holdings had given up almost all of its gains while Riot Platforms rose 26%. Meanwhile, trading app Robinhood Markets, which is crypto-friendly, gained 41% since Nov. 5.
Crypto ETFs are different from ETFs that hold just stocks since they are affected by the prices of the underlying coins. Digital currencies also have to get some regulatory approvals, and those decisions can affect the ETFs that hold them.
But these ETFs are good ways to get around some risks that crypto assets have. They can be bought and sold like other ETFs and stocks and do not need a digital wallet or a crypto exchange.
On IBD MarketSurge, it is possible to see if the ETF has formed a proper base or has broken out of a base into a buy zone. In both cases, the ETF would be a buy. ETFs are also highly liquid, while some coins have limited supply.
Underlying Price Is Key
The price of the underlying coin is a factor that can affect the performance of these ETFs. Bitcoin soared to $93,000 for the first time on Wednesday. Analysts are predicting $100,000 as the next price target for Bitcoin.
Bitcoin's limited supply could also be a strong tailwind for ETFs exposed to bitcoin or bitcoin futures. There are some risk factors such as technology upgrades that affect the price of coins and that can affect crypto ETFs as well.
Coins also have several uses that can affect their pricing. Bitcoin is seen as a store of value, whereas ethereum is known for its staking feature.
As in the case of stocks, the market is an important factor. Understanding the market direction is vital.
Even a stock with strong earnings and forecasts can underperform when the market direction slopes down. On the other hand, a stock that has been trading above chart support levels may break out to new highs due to the momentum of an upward-trending market.
Regardless of the recommended exposure to markets, investors should be cautious because cryptocurrencies are volatile assets and continue to have high risks.
Best Crypto ETFs To Watch
ProShares Bitcoin ETF was the first U.S. bitcoin-linked ETF and holds bitcoin futures contracts. Shares are building a cup base with a buy point of 33.79 and have retaken the 200-day moving average in high volume.
But its chart has some weak features. The 200-day moving average is above the 50-day moving average. In a truly bullish set up, the 50-day line is above the 200-day.
Its Relative Strength Rating has improved from 34 just four weeks ago to 87. The best-possible score is 99.
The Amplify Transformational Data Sharing ETF invests in blockchain companies. Its top holdings include Core Scientific, MicroStrategy, Coinbase and CleanSpark.
The ETF also has a diversified portfolio across several sectors. Software is its biggest holding though it also holds several stocks in capital markets, information technology and financial services.
It has gained over 20% since it gapped up on Nov. 6 and is past a profit zone from a cup with handle buy point of 37.15. The Relative Strength Rating from Investor's Business Daily has risen to 95 from 88 over the past year.
Bitwise Crypto Breaks Out
Bitwise Crypto Industry Innovators ETF broke out on Oct. 29 but shares sold off before rebounding this month. The ETF has gained 30% since Nov. 5 as of Tuesday's closing price, according to IBD MarketSmith. That landed the stock in a profit zone from a buy point of 16.58.
The fund invests in MicroStrategy, Coinbase, Mara Digital Holdings, Riot Platforms and other prominent players in crypto assets.
The Valkyrie Bitcoin Miners ETF reversed lower after soaring as much as 24% from a buy point of 24.83. Shares are just above a buy zone, so too extended to buy.
The fund holds several companies with connections to bitcoin mining, such as CleanSpark, Bitfarms, and Hive Blockchain. The ETF also holds a position in Nvidia.
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