Bitcoin (BTC): The Sovereign Wealth Fund Wild Card

February 5, 2019 / by Bill Noble

Good financial market research is like cooking in some ways. The main ingredient for good research, as is often the case with good food, is imagination.

With Bitcoin (BTC) mired in another phase of no price action, it is easy to fear a repeat of November. Miners are bringing new hardware on line and may get cheaper power prices once existing six-month contracts roll off. This is bearish — and we know about it. It’s the main reason Bitcoin (BTC) does not move. Miners sell all day to leveraged longs, who are likely looking at the Wyckoff scenario shown below in Figures 1 & 2.

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While the Wyckoff scenario is interesting, in order for it to have meaning, we need to add imagination. Specifically, what is the potential bullish catalyst for Bitcoin (BTC). What could bring in an overwhelming amount of buying that would dwarf the constant selling by miners?

One idea that came to mind is that Sovereign Wealth Funds could announce they are diversifying part of their holdings into crypto assets like Bitcoin (BTC) and Ethereum (ETH).

Two wealth funds that caught our eye are funds in the United Arab Emirates and Saudi Arabia. UAE and Saudi Arabia have been in the news in recent memory as a crypto friendly countries.

UAE’s sovereign fund has $34 billion in it, and the Saudi Wealth Fund has $515 billion. Can you image if these groups collectively decided to put two percent of their assets to work in Bitcoin (BTC) or crypto as a whole? That would be almost $11 billion worth of Bitcoin (BTC).

Safe to say, Bitcoin (BTC) would likely break out above the key level of $4,250 if any such announcement were made.

Bottom Line: From a chart perspective, Bitcoin (BTC) seems stuck in neutral. Sometimes, neutral can be a good thing as it provides an opportunity to imagine would potentially surprising and positive catalysts may be out there.

The Crypto.IQ Trading Desk is up more than 200 percent since July, and we’re ready to take advantage of the next move once Bitcoin (BTC) gets out of neutral.

Join me there.