Bitcoin's 'Uptober' Fizzles, Why IBIT Is Stuck In Neutral

Summary iShares Bitcoin Trust ETF is rated hold as seasonal bullish trends have not materialized, with shares down 4.4% since mid-Q3. IBIT's volatility remains high, and technical signals are mixed, with key support at $59-$62 and a concerning bearish momentum ￰0￱ strong YTD performance and high liquidity, IBIT faces choppy price action and a bearish megaphone pattern, suggesting caution through ￰1￱ IBIT may benefit from relative strength versus GLD and potential November seasonality, I remain neutral amid conflicting ￰2￱ happened to bitcoin “Uptober”? Seasonally, the kickoff to Q4 has historically been dominated by cryptocurrency bulls, but we haven’t seen that play out this time around.

Indeed, the so-called “debasement trade” has lost some steam, with both the iShares Bitcoin Trust ETF (IBIT) and the SPDR Gold Trust ETF (GLD) succumbing to some autumn selling ￰3￱ two alternative assets are now in notable drawdowns, though I don’t see recent price action as having the hallmarks of long-term tops. I reiterate a hold rating on IBIT. I was neutral on the world’s most valuable cryptocurrency back in the middle of the third ￰4￱ are down 4.4% since then, underperforming the S&P 500 by about 10 percentage points. I see more chop ahead, unfortunately.

I say “unfortunately” because I am long IBIT. Objectively, I need to see better price action, particularly during this bullish seasonal stretch. Drawdowns: IBIT & GLD Off the Highs Koyfin Charts According to the issuer , IBIT enables investors to get exposure to bitcoin through the convenience of an exchange-traded product, helping remove the operational, tax, and custody complexities of holding bitcoin ￰5￱ has garnered attention for its fast ascent in terms of assets under ￰6￱ an $89 billion ETF, it has quickly attracted retail flows, even as the year-to-date return has slipped from above 30% to just 18%. Its annual expense ratio is low at just 25 basis points, while there is no yield with this spot bitcoin ￰7￱ for that reason, I house IBIT in my taxable account, as there are no taxable dividends to worry ￰8￱ can also be a useful tax-loss harvesting product when volatility ramps up.

Share-price momentum is rated well by Seeking Alpha’s quantitative scoring system (an A), but I don’t agree with the assertion that Bitcoin is in a powerful uptrend. I’ll call out key price levels on the chart at the conclusion of the ￰9￱ terms of risk, IBIT’s standard deviation has ticked up lately, now at 48%. With such lofty annualized volatility, investors must acknowledge that the ETF will swing around ￰10￱ itself notoriously gets whippy outside of the 9:30 ￰11￱ – 4 ￰12￱ hours (something we saw in mid-October). But the fund is highly liquid , now with average daily volume north of 50 million shares, while the median 30-day bid/ask spread is within two basis points, per ￰13￱ deeper into why I think IBIT is caught in no-man's land, take a look at the below relative performance chart of IBIT versus ￰14￱ has generally been trending lower against gold, though we are potentially near a key support ￰15￱ and precious metals have routinely traded off in terms of periods of alpha, so we could see some outperformance in IBIT if this broad relative range plays ￰16￱ short, IBIT ￰17￱ may inflect up ￰18￱ the very least, it’s a chart to keep on your ￰19￱ vs.

GLD: Potential Support Spot ￰20￱ Next, I’d like to call out IBIT’s volatility ￰21￱ volatility, or the expected movement over the coming 30 days (annualized), has dipped below 45% after spiking to 50% earlier this ￰22￱ is another sanguine signal, in my estimation, as volatility dropping could lay the groundwork for a steadier and more sustainable price climb. What’s more, higher implied volatility compared to realized volatility makes call-writing quite attractive (for all the option-income investors out there!). Bitcoin's Implied Volatility Has Drifted Down from 50%, More Modest Historical Volatility Fidelity But we shouldn’t get too bogged down in near-term trends.

Longer-term (admittedly, just this year is shown in the graph below), gold and bitcoin are relatively strong. Bitcoin’s high volatility dings its Sharpe Ratio, but it’s hard to poke too many holes in an 18% YTD ￰23￱ Performance Stats Across Asset Classes Goldman Sachs I’ve honestly been quite disappointed by IBIT’s lackluster October return (or lack thereof). Down 3% MTD, the bulls have their work cut out for them if they are to take Bitcoin positive for the month. Generally, when price action bucks the usual seasonal trend, it’s important to take ￰24￱ course, November has been the best month in the token’s 15-year history, so perhaps the lousy trend will reverse soon.

Bitcoin: Bullish Q4 Trends Haven't Taken Hold Yet Barchart The Technical Take As we wait for bullish seasonality to take root, we can eye technical trends for near-term ￰25￱ in the chart below that shares are very close to a key point of ￰26￱ $59 to $62 range has long been a battleground for the bulls and bears to duke it out. It’s critical that IBIT hold support, but I’m worried that downward pressure could come ￰27￱ those conclusions? Well, take a look at the RSI momentum oscillator at the top of the ￰28￱ has dropped to about the worst level since the March-April timeframe after notching a bearish divergence to price earlier this ￰29￱ are wont to say that momentum leads price, so this could be a bearish ￰30￱ now, IBIT is holding its long-term 200-day moving ￰31￱ trend indicator line remains upward-sloping, suggesting that the bulls control the primary ￰32￱ 50dma, however, has turned down, with IBIT’s price failing to climb back above it on a test last ￰33￱ a high amount of volume by price between $45 and $70, we might just see more of the same (choppy price action) now through year-end.

Finally, look closely enough at the highs and lows since July, and you’ll find the ominous “megaphone” pattern, also known as a broadening formation. It’s a bearish distribution reversal pattern, so I’m not pleased to see that as I sit on my unrealized gain in ￰34￱ volume since the start of October underscores the threat of material distribution, too. IBIT: Shares At a Critical Juncture, 200dma In Play, Big Volume Recently ￰35￱ The Bottom Line I have a hold rating on ￰36￱ the fund myself, I see mixed bullish and bearish signals.