Crypto's Warning Shot. What the Charts of Bitcoin, Coinbase, Strategy Inc. Say. — Barrons.com
By Doug BuschBitcoin is certainly commanding attention. The digital asset often acts as a proxy for risk appetite, with gains reflecting investors' willingness to take on risk and declines signaling growing caution.The latter is unfolding now, and the weakness has the potential to spill over into broader markets. Last week's decisive break below the very round $100,000 level, puncturing a bear flag, could leave a lasting mark on sentiment. Bitcoin slid 9% last week, its worst weekly performance since late February.Astute investors had reason to stay alert. The failed bull-flag breakout in August and the rejected cup-base attempt in October were early indications that momentum was fading. With the recent breakdown, my near-term target is $85,000 based on the bear-flag structure shown on the chart below.Bitcoin was trading around $94,000 Monday.Stocks that often offer clues to Bitcoin's direction include Strategy Inc. and Coinbase Global. The former has fallen on hard times and appears locked in a relentless downtrend. Shares now sit 64% below their annual peak from nearly a year ago, on Nov. 21, 2024. Strategy hasn't posted back-to-back weekly gains since early July, and last week's 18% drop marked its worst weekly performance since April 2024. The quick failure of the cup-base breakout near $450 in July served as the canary in the coal mine. A bearish death cross followed in early October, with back-to-back doji candles on Oct. 31 and Nov. 3 unable to stop the selling pressure. Last Friday produced a spinning top near the very round $200 level. If the stock cannot stabilize here, another wave of selling could very well develop, potentially driving it toward $180.Strategy was trading around $198 Monday.Coinbase has held up better than Strategy on a relative basis, but is still 40% off its own annual peak. The weakness began with a doji candle on July 18, an adept signal of potential trend reversal. This capped a powerful run that saw the stock climb 300 points following the bullish engulfing candle on April 9 for a 17% gain in a single day. The stock has now finished lower four of the last five weeks, and price action has repeatedly reflected the influence of round-number theory. On Nov. 6 it broke below a bearish descending-triangle pivot at $300, prompting bulls to step in.The following session produced a bullish piercing line candle, but that recovery attempt quickly faded. Further clues of growing softness emerged with the upside gap fill near $400 on Oct. 10 from the July 31 session. Coinbase now sits below its 200-day simple moving average, and the move from the descending-triangle breakdown suggests a potential decline toward $150. I remain bearish unless the stock can reclaim the $300 level.Coinbase was trading around $268 Monday.Doug Busch is the senior technical analyst at Barron's Investor Circle . His technical view is added to stock picks, including those published exclusively for Investor Circle readers. A glossary of technical terms is updated regularly with new entries.This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.