There’s a lot of mystery around Bitcoin, what it will become, and how to buy, sell, and store it. Many investors, including myself, never bought bitcoin because the purchasing process seems complex and inconvenient. However, I feel confident that bitcoin is not going anywhere, there is a place in the world for this digital crypto-currency. For those of you that don’t know much about it you can review wiki: The Winklevoss twins (remember them from the movie Social Network aka Facebook?) noticed this problem of mystery and inconvenience and did something about it by forming a bitcoin ETF which will make buying and selling bitcoin exposure very simple. Well, 2 of the first bitcoin ETF’s are set to begin trading quite soon.
We think this will bring a lot of attention back to bitcoin in the investment community. The natural tendency of speculators is to find and buy a bitcoin stock that has potential. Interestingly, there’s only one public company in the US with “bitcoin” in its name! Bitcoin Shop (BTCS). We normally might have brushed off the company but noticed its very bullish chart a couple of weeks ago. Just yesterday April 6th, the stock clearly broke out on the upside from a triangle pattern then a tight basing trend over the course of several weeks.
Yesterday’s trading was exactly what I was waiting to see to confirm that my analysis of the chart was correct. As you can see above, there is very little resistance until the previous highs around 36/37 cents. There will be some sellers at 30 cents but probably not a considerable amount. Also, the MACD at the bottom of the chart just crossed over, indicating that the rally is just beginning. It’s also very far from being overbought with RSI only at 62 so there is definitely room to run in the coming days and weeks.
Bitcoin Shop is obviously a young company with minimal revenues/cash. But they have a viable business in the mining part of the sector, which should generate just under $1MM in sales this year. In addition, they are ambitiously building a bitcoin eco-system that does have a lot of potential. Bitcoin this past year has been very volatile with record high frenzied prices followed by a long descent. However, this pullback could prove healthy and the ETF’s will definitely create new sources of demand in the market (remember GLD for gold?).
Redchip has written a report on BTCS with a 59 cent price target.
I’ve taken a position based on 2 things: the bullish chart/technical picture is very compelling. 2. This is the only Bitcoin stock people will find when researching for ideas as the ETF’s begin to trade in the coming weeks. So, in essence this is a sympathy trade and we are still ahead of the curve on this because the ETF’s aren’t trading yet. The Bitcoin Investment Trust (GBTC) will begin trading before COIN (Winklevoss ETF) but this should just be a warm up in terms of public relations. COIN will have gone through all hurdles to become approved by the SEC and rest assured the twins PR machine will be cranking at full force.
It’s pretty easy for you to align or reject this “sympathy trade” idea. Just imagine that all of a sudden on Bloomberg/CNBC you see there’s a new Bitcoin ETF that you can buy or sell like a stock. This intrigues you because you’ve thought “if it’s now very easy to buy bitcoin then I will want to watch how this does”, or you flat out buy some. Then, I don’t know about you, but my second thought is “I wonder if there are any promising small cap bitcoin stocks I can play?” The search goes into Stockcharts.com or Yahoo Finance with me starting to type in the word “Bitcoin” to see what company names populate the search. Now, if dozens pulled up I would shift gears and search for “best bitcoin OTC stocks” or something to that effect to see if someone could condense my homework to the best of breed. However, as of right now, you will only find ONE stock during that search and it’s Bitcoin Shop (BTCS).
There is a lot of smart money and capital flowing into bitcoin startups but the VAST majority are private companies funded by VC’s and accredited/angel investors. Even the exchanges are placing bets.
Many more bitcoin businesses will be public in the future but for now myself, and I’m betting thousands of other investors intrigued by the sector, will focus on BTCS because it’s basically their only choice outside of the ETF. Stocks move based on supply/demand so I’m guessing with only one specific name to buy, demand is about to outstrip supply and maybe in a massive way these next weeks and months. Interestingly, approximately half of the supply of the company’s shares outstanding will not hit the market due to a lock up agreement with officers, directors, and Bitcoin Shop’s largest shareholders until 2017,
Our Premium/Elite subscribers have been accumulating BTCS for the past week and a half between .21-.225 cents and hopefully are nicely positioned already. With a big percentage move yesterday already I didn’t know if I wanted to publicize this idea. However, when taking a step back even further and looking at the weekly chart below, I realized this party is likely just starting (RSI is trending higher via blue line at the top right). I don’t see real resistance until the previous highs around 37 cents which is still almost 40% higher than yesterdays close at .265. Then, 45-50 cents looks like the next area it will slow down which is almost a double. The weekly viewpoint makes a run to 50 cents look very reasonable and even likely when adding in the pattern of the bullish daily chart that just broke out.
This is definitely a speculative play but an interesting one with a different angle than most ideas. BTCS also serves as a sort of bitcoin company incubator because of their various investments in other bitcoin companies. Do your own due diligence but this could be a fun one to watch. I would not chase the stock too much but if you can still buy in the mid .20’s the momentum looks like it may just be starting.
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Disclaimer: Eric owns shares in BTCS and may choose to buy or sell at any time without notice.
I am offering ideas for your consideration and education. I am not offering financial advice. I am not a financial or investment advisor and am acting in the sole capacity of a newsletter writer. I am a fellow investor and trader sharing his thoughts for educational and informational purposes only. This publication is a 100% subscriber supported. No compensation is received by the author from any of the companies mentioned for the recommendation of a stock in this service(if this changes or there is exception-it will be clearly disclosed to our readers).Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided on the Website is based on careful research and sources that are believed to be accurate, Mr. Muschinski does not guarantee the accuracy or thoroughness of the data or information reported. The opinions published on the Website belong to Mr. Muschinski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Muschinski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published on the Website have been prepared for your private use and their sole purpose is to educate readers about various investments. By reading Mr. Muschinski’s essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Muschinski, Gold Investment Letter’s employees and affiliates, as well as members of their families, may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.