JP Morgan flips bullish as bitcoin approaches a decisive break
Hi everyone,
I trust you’re all ready to smash the week and hit the ground running this fine Monday morning.
Just recently, a series of events in the bitcoin space have underlined two narratives that are in conflict — the Crypto Twitter narrative — which is overwhelmingly bearish of late, and bitcoin’s fundamental narrative which could not be more bullish if it tried.
In today’s newsletter, we’ll cover JP Morgan’s complete 180 degree flip on bitcoin, Wilshire Phoenix’s prospective bitcoin ETP launch as well as Chainlink data as an emerging DeFi standard. Last but by no means least, we’ll dive into the technical picture. Let’s dig in.
JP Morgan — Bitcoin’s biggest critic flips into its most avid supporter
One of the top banks on Wall Street has gone through the bitcoin ring of fire — entering as an outspoken bitcoin critic and emerging as a full-on supporter of the world’s leading cryptocurrency.
JP Morgan, whose chief executive once labelled bitcoin a “fraud,” has now said that bitcoin is looking “mostly positive” and that the wider cryptoverse has acquired “longevity as an asset class.”
According to the report, led by head of U.S. interest rate derivatives strategy Joshua Younger and cross asset research analyst Nikolaos Panigirtzoglou, bitcoin weathered its “first stress test” well, and that “there is little evidence of run dynamics, or even material quality tiering among cryptocurrencies, even during the throws of the crisis in March.”
The analysts went on to argue that bitcoin will remain mostly a speculative asset in their view, stating: “[Bitcoin] price action points to their continued use more as a vehicle for speculation than medium of exchange or store of value.”
Thankfully, JPMorgan backed all their bullish talk with action recently, signing established US-based crypto exchanges Coinbase and Gemini as its customers after a lengthy vetting period. The news emerged after it was found that ex-bitcoin critic Jamie Dimon had been meeting with the Coinbase CEO Brian Armstrong since 2018.
While the turn of events is bullish for the macro picture, recent commentary by Adam Back alludes to the fact that bitcoin might not even need institutions in order to make it because the narrative and fundamentals are just that strong.
Last week, Adam Back noted that “ It might not require additional institutional adoption because the current environment is causing more individuals to think about hedging, and retaining value when there’s a lot of money printing in the world.”
Wilshire Phoenix to compete with Grayscale?
After having faced a rejection of its proposed exchange-traded product (ETP) back in March, investment firm Wilshire Phoenix has filed another proposal for a publicly traded fund with the Securities Exchange Commission (SEC).
The fund had attempted to get approval for the ETP that hedged bitcoin against US Treasuries in response to volatility worries cited in other SEC denials for cryptocurrency ETPs, the firm said last year. The attempt was shot down earlier n March, when to nobody’s surprise, the SEC rejected the last bitcoin ETP proposal.
However, Wilshire Phoenix is once again taking another shot in the dark. The latest filing states that the trust “will have no assets other than bitcoin,” but may also hold U.S. dollars for short periods related to the buying and selling of bitcoin, redemptions and fees.
In its characteristic stubbornness, the SEC has yet to approve a bitcoin ETP, with previous attempts from the WInklevoss twins and Bitwise failing to get approval in recent history. However, a glimmer of hope remains for the elusive ETP, with the SEC Commissioner Hester Peirce arguing that the SEC applied an “inappropriate standard” in its last rejection in March. The firm is currently considering “all possible routes” in order to finally crack the code for its much anticipated ETP approval.
Meanwhile, Grayscale continues to devour freshly minted bitcoin as its sold in the market place, and with little tangible competition is the front-runner to being the best performing bitcoin fund in cryptocurrency history.
ChainLink Price data becomes the defacto DeFi standard?
The recent integration of Chainlink’s DeFi price data into KyberSwap speaks to a growing trend that will probably see Chainlink’s data sets becoming the default industry standard within the emerging niche market.
At least three DeFi (decentralised finance) projects have incorporated the company’s data in June so far, with AVA announcing the Chainlink price-feed integration ahead of its mainnet launch in early June. The following day, ETH-powered decentralised exchange (DEX) Opium also launched support for Chainlink’s price data alongside its mainnet launch.
The Kyber network is an on-chain liquidity protocol similar to ether (though much smaller) and as per their mission statement offers greater interoperability through cross-chain solutions with other players in the DeFi ecosystem.
Technically speaking
Lower Time Frame (LTF) 4-hour knife catching time?
Bitcoin broke down from its ascending triangle formation, hitting a higher low at $8,900 ( Bitfinex) at the time of writing. The sell-off came with slow-moving price action that eventually found support above the local low set on the 25–26th May. Currently, bitcoin has printed a bullish divergence on the 4-hour RSI, painting a bullish descending falling wedge formation with flashing buy signals.
Notably, bitcoin has bounced from a supporting trendline which has been present since March. Having said that, bulls are in a precarious situation and should this level fail to provide a clear bounce then a bigger sell-off to the lower $8,000 and $7,500 regions is likely.
At the time of writing, bitcoin is testing the previous low at $9,190, which if broken would open the door to retest $9,463, which would in turn make the prospect of another $10,000 retest likely. Prices tend to back-test previous levels and formations, which would confirm a trend reversal (or a fake-out if conquered).
That being said, it’s clearly a make it or break it moment for the bulls. A 4-hour rejection at the $9,463 level would signal a bull-trap. On the flip side, if this is reclaimed then another retest of $10,000 is likely.
Higher Time Frame (HTF) daily finds support
On a daily timeframe, bitcoin has found support on both the 50-EMA and just above the .382 fib level (measured from the 21st of April just before the breakout). The Money Flow Index (MFI) has flashed a buy signal, but this should be taken with a grain of salt given that buy signals only suggest oversold conditions and do not necessarily mean that a reversal is imminent.
The daily RSI has also fallen into bearish territory with much more room to the downside. This bearish turn of events is also confluent with last week’s TD-9 sequential being printed on the weekly chart. If bitcoin fails to hold $8,755 (.382 fib), then it’s safe to assume that a trend reversal is in effect. For now, however, bitcoin is still in an uptrend and if bulls show up, the fireworks could go off to the upside.
As with the last newsletter, the mid-term picture remains marginally bearish until at least $10,000 ( Bitfinex) is tapped, with bullish confirmation coming at $10,500. This would open the door to $11,000 and beyond.
Noteworthy post-scriptum
Having said all that, I’d like to point out the clear discrepancy between Crypto Twitter sentiment and bitcoin’s fundamentals. More specifically, while most of my Twitter feed is bearish (if that’s any barometer to go by), bitcoin’s fundamentals could not be more bullish. Of course, everyone is entitled to their own opinion but one can’t help but notice the possibility that bitcoin price action might act on the basis of Twitter sentiment, which changes more often than a wind vane. Often enough, CT finds a way rationalize its own collective bias, which would in turn influence the wider community into a position that does not necessarily reflect the underlying reality.
(TLDR) In short, it’s better to be aware of the echo-chamber of analysts that is Crypto Twitter. At the end of the day, a significant bearish break only delays the inevitable. Bitcoin will break all time highs and will probably catch many off guard when it does.
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