BTL Group, a tiny bitcoin stock with a market cap of $50M, has been rising sharply in 2017. Today, the stock lost 21 percent. Is this bitcoin stock a buy or not?
Fundamentally, bitcoin and blockchain stocks have a great outlook. As explained in our Bitcoin price forecast for 2017, usage and acceptance of Bitcoin as a form of money is growing significantly. Moreover, as this article suggests, blockchain, the technology supporting bitcoin, will be mainstream in 2022.
So every bitcoin or blockchain company with a viable service has a great long term outlook. Investors could buy these companies at ridiculously low market capitalizations at this point, and hold for next 5 to 10 years. Most will be much more than 10-baggers. However, it goes without saying there is a very high risk involved in buying bitcoin stocks, so positions should be relatively small.
When it comes to BTL Group’s stock chart, we see two breakouts in the last 2 years. The first breakout level was $0.75, the second came in twice as high at $1.50.
After the second breakout, BTL.V went up threefold, only to peak around $4.00. Today, the stock fell sharply: more than 20 percent.
The key question is what can we derive from the chart? Current price levels are elevated, and falling trading volume suggests the stock peaked. However, overall, trading volume has exploded, which means there is an elevated interest in this company. But short term, emotions have to cool off.
A retracement will bring this stock potentially to the $2.30 to $2.50 level. We do not believe this stock would test its breakout level at $1.50, although that should not be excluded.
Investors which are very long term oriented could look at a first entry around $2.40 and a second around $2.00 to get the very best prices.