Given some of the improvements we’ve seen, is now the time to hop back aboard the crypto train?
Cryptocurrencies were in the depths of despair earlier this year, with Bitcoin and altcoins facing declines of 50% or more from their 2025 highs. Bitcoin peaked at $125k last October but fell as low as $60k in February. However, the last couple of months have offered signs of renewed hope for the crypto space. Bitcoin rallied more than 30% to return above $80k, bringing about notable technical developments. Given some of the improvements we’ve seen, is now the time to hop back aboard the crypto train?
The iShares Bitcoin Trust ETF (IBIT) is one of the most popular ways to gain exposure to Bitcoin. The fund completed its third consecutive buy signal this week and moved back into a positive trend last month. With recent action, it faces no traditional resistance until the $55 levels. Additionally, Bitcoin is back to passing its “bogey check,” reversing back into Xs against cash (MNYMKT) on 6.5% scale. Bitcoin sees the majority of its gains when “passing” and in Xs, so the reversal is a positive development.
That said, not all that glitters is gold. Previous support on IBIT’s chart from $47 to $48 could serve as potential resistance, and the fund has a surprisingly low score of only 2.14. One of the biggest knocks against Bitcoin, and by extension IBIT, has been its underperformance relative to domestic equities. The coin moved to a market RS sell signal against the S&P 500 Equal Weight (SPXEWI) in January. And while Bitcoin reversed back into a column of Xs on its RS chart in April, it remains on an RS sell signal, indicating it’s still unfavored in the long term.
The market RS chart for Bitcoin has historically been one of the best indicators of Bitcoin’s strength. If you had invested $100 in Bitcoin at the beginning of 2012, it would be worth $1.7 million. However, if you had rotated between Bitcoin and SPXEWI based on RS buy signals, you would have made more than triple that, at $6 million. Additionally, the strategy experienced less downside, with a max drawdown of 70% compared to 85% for Bitcoin. For context, a security down 70% from its highs would need to fall by another 50% to be down 85%.
While the improvement in Bitcoin is encouraging, it would need to sustain its rebound for longer before its technical picture gives a full green light. History has shown that extreme downside within crypto can persist for longer than anticipated. Meanwhile, global equities and commodities exhibit high levels of relative strength, rounding out the top three spots in DALI. Investors seeking capital appreciation might be better off targeting those groups until there is further confirmation that crypto has turned a corner.
