Bitcoin is back, but not as you know it - Kanebridge News
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Bitcoin is back, but not as you know it

The US Securities and Exchange Commission finally approved spot bitcoin ETFs this week

By Bronwyn Allen
Fri, Jan 12, 2024 10:11amGrey Clock 2 min

Several of the first spot bitcoin exchange-traded funds (ETFs) to ever be listed on United States stock markets began trading last night. This follows the US Securities and Exchange Commission (SEC) approving the listing of 11 spot bitcoin ETFs after a legal battle with fund provider, Grayscale. The approval follows six years of knock-backs for many fund providers seeking permission to offer spot bitcoin ETFs. This is considered a watershed moment in the investing world, allowing more investors to gain exposure to the cryptocurrency asset without buying bitcoin directly themselves.

ETFs are baskets of assets that are professionally managed by fund providers. Ordinary investors can buy them on the stock market just like any other share. Among the 11 fund providers approved to launch their ETFs this week are BlackRock, Fidelity, Grayscale and VanEck.

Spot bitcoin ETFs give investors direct exposure to bitcoin at its spot (current) price. The ability to buy bitcoin exposure via a traditional stock exchange will give investors some degree of regulatory protection as the fund managers must comply with the Securities Act, Exchange Act, and SEC rules. Investors may also feel more peace of mind buying bitcoin via a professionally managed ETF instead of buying it directly themselves through an unregulated cryptocurrency trading platform.

However, SEC Chair Gary Gensler emphasised that the decision to approve the spot bitcoin ETFs did not mean the SEC endorsed cryptocurrency assets. He said bitcoin was “primarily a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing. He added: “While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse bitcoin. Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto.

The SEC’s decision follows a lawsuit launched by Grayscale after the SEC refused to allow it to convert its Grayscale Bitcoin Trust into a listed ETF. The US Court of Appeals for the District of Columbia found that the SEC had failed to adequately explain its reasons for denying the listing. This meant the SEC had to review its ruling and either more fully explain its reasoning, or approve the listing of the ETF. Gensler said in light of these circumstances, “I feel the most sustainable path forward is to approve the listing and trading of these spot bitcoin [ETF] shares. The SEC not only approved Grayscale’s product but 10 other spot bitcoin ETF applications awaiting a decision.  

Gensler warned that the approval of spot bitcoin ETFs would not automatically open the door for other cryptocurrency ETF products. It should in no way signal the Commission’s willingness to approve listing standards for crypto asset securities, he said. Bitcoin closed slightly lower at US$46,382.60 in overnight trading. Cryptocurrencies are known for their volatility. In the case of bitcoin, it hit an all-time peak value of just under $69,000 in November 2021 before crashing to below $17,000 in 2022. Over the past 12 months, the bitcoin price has risen by almost 160%.



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These stocks are getting hit for a reason. Instead, focus on stocks that show ‘relative strength.’ Here’s how.

By KEN SHREVE
Wed, Jun 12, 2024 4 min

A lot of investors get stock-picking wrong before they even get started: Instead of targeting the top-performing stocks in the market, they focus on the laggards—widely known companies that look as if they are on sale after a period of stock-price weakness.

But these weak performers usually are going down for good reasons, such as for deteriorating sales and earnings, market-share losses or mutual-fund managers who are unwinding positions.

Decades of Investor’s Business Daily research shows these aren’t the stocks that tend to become stock-market leaders. The stocks that reward investors with handsome gains for months or years are more often  already  the strongest price performers, usually because of outstanding earnings and sales growth and increasing fund ownership.

Of course, many investors already chase performance and pour money into winning stocks. So how can a discerning investor find the winning stocks that have more room to run?

Enter “relative strength”—the notion that strength begets more strength. Relative strength measures stocks’ recent performance relative to the overall market. Investing in stocks with high relative strength means going with the winners, rather than picking stocks in hopes of a rebound. Why bet on a last-place team when you can wager on the leader?

One of the easiest ways to identify the strongest price performers is with IBD’s Relative Strength Rating. Ranked on a scale of 1-99, a stock with an RS rating of 99 has outperformed 99% of all stocks based on 12-month price performance.

How to use the metric

To capitalise on relative strength, an investor’s search should be focused on stocks with RS ratings of at least 80.

But beware: While the goal is to buy stocks that are performing better than the overall market, stocks with the highest RS ratings aren’t  always  the best to buy. No doubt, some stocks extend rallies for years. But others will be too far into their price run-up and ready to start a longer-term price decline.

Thus, there is a limit to chasing performance. To avoid this pitfall, investors should focus on stocks that have strong relative strength but have seen a moderate price decline and are just coming out of weeks or months of trading within a limited range. This range will vary by stock, but IBD research shows that most good trading patterns can show declines of up to one-third.

Here, a relative strength line on a chart may be helpful for confirming an RS rating’s buy signal. Offered on some stock-charting tools, including IBD’s, the line is a way to visualise relative strength by comparing a stock’s price performance relative to the movement of the S&P 500 or other benchmark.

When the line is sloping upward, it means the stock is outperforming the benchmark. When it is sloping downward, the stock is lagging behind the benchmark. One reason the RS line is helpful is that the line can rise even when a stock price is falling, meaning its value is falling at a slower pace than the benchmark.

A case study

The value of relative strength could be seen in Google parent Alphabet in January 2020, when its RS rating was 89 before it started a 10-month run when the stock rose 64%. Meta Platforms ’ RS rating was 96 before the Facebook parent hit new highs in March 2023 and ran up 65% in four months. Abercrombie & Fitch , one of 2023’s best-performing stocks, had a 94 rating before it soared 342% in nine months starting in June 2023.

Those stocks weren’t flukes. In a study of the biggest stock-market winners from the early 1950s through 2008, the average RS rating of the best performers before they began their major price runs was 87.

To see relative strength in action, consider Nvidia . The chip stock was an established leader, having shot up 365% from its October 2022 low to its high of $504.48 in late August 2023.

But then it spent the next four months rangebound—giving up some ground, then gaining some back. Through this period, shares held between $392.30 and the August peak, declining no more than 22% from top to bottom.

On Jan. 8, Nvidia broke out of its trading range to new highs. The previous session, Nvidia’s RS rating was 97. And that week, the stock’s relative strength line hit new highs. The catalyst: Investors cheered the company’s update on its latest advancements in artificial intelligence.

Nvidia then rose 16% on Feb. 22 after the company said earnings for the January-ended quarter soared 486% year over year to $5.16 a share. Revenue more than tripled to $22.1 billion. It also significantly raised its earnings and revenue guidance for the quarter that was to end in April. In all, Nvidia climbed 89% from Jan. 5 to its March 7 close.

And the stock has continued to run up, surging past $1,000 a share in late May after the company exceeded that guidance for the April-ended quarter and delivered record revenue of $26 billion and record net profit of $14.88 billion.

Ken Shreve  is a senior markets writer at Investor’s Business Daily. Follow him on X  @IBD_KShreve  for more stock-market analysis and insights, or contact him at  ken.shreve@investors.com .