DAPP: Crypto Stocks Lose Some Luster in 2024 as New ETFs Steal the Spotlight (NASDAQ:DAPP)

It’s been another great year for Bitcoin and other cryptocurrencies. With the SEC approving 11 Bitcoin ETFs in January and the subsequent signing of Ethereum funds recently, inflows into coins and tokens remain strong. However, after a quick In the run-up, Bitcoin’s rise paused near where it peaked in late 2021. Some of the shine has also been taken away from cryptocurrency-related stocks as artificial intelligence remains in the spotlight.

I Repeats Comment rating on VanEck Digital Transformation ETF (NASDAQ:DAB). Valuation remains a risk in my view, while the fund’s performance, which is close to the unchanged mark so far in 2024, has underperformed the IT sector (XLK) and the S&P 500 in recent months.

Bitcoin +53% in 2024

Bitcoin and Golden Bullet YTD (Sharpe Ratio)

According to to SourceDAPP seeks to track the price and returns performance of the MVIS Global Digital Asset Stock Index, as closely as possible, before fees and expenses, and aims to track the performance of companies participating in the digital asset economies. The ETF aims to invest in companies that are at the forefront of the digital asset transformation while providing diversification to investors through exposure to exchanges, miners and infrastructure companies. The issuer states that the DAPP provides access to companies that have the potential to derive 50% of revenue from digital assets.

The ETF’s assets under management have held steady above $100 million this year, failing to muster inflows despite widespread cryptocurrency ownership. DAP Annual expense ratio 0.51% It is in the middle of the package and the box Doesn’t pay dividends. Still, Stock price momentum It has remained high over the past year, although I will address the near-term momentum trend by highlighting the technical features later in the article.

DAPP remains High risk ETF When analyzing standard deviation trends and their portfolio is fairly concentrated. but Liquidity is a concern With an average daily trading volume of approximately 270,000 shares over the past 90 sessions and an average bid/ask spread of 55 basis points per VanEck, I would encourage investors to use a limit order when trading DAPP.

Looking closely at the portfolio, the box appears in the lower right corner of the style box. This indicates a growth allocation to small caps, although there is a material exposure of 29% to mid-cap companies. The main driver of price movement will be the cryptocurrency theme and the collective willingness of investors to take risks in companies with mixed fundamental characteristics.

All told, DAPP’s price-to-earnings ratio is down significantly from where it was when you looked at ETFs last year. The multiple is now below 20 while VanEck notes the price-to-book ratio is just 1.97 as of April 30, 2024. So, the valuation picture is much improved today.

DAPP: Portfolio and Valuation Data

My primary concern about DAPP is the heavy customization. More than 60% of the fund is invested in its 10 largest assets. This works well during periods of bullish price action, as we saw during the last three months of 2023.

But this year, prices have only stabilized, so the result is high volatility and poor risk-adjusted returns. Being a specialist and thematic ETF, there is significant exposure to the fintech space with no holdings from sectors other than fintech and IT.

DAPP: Sector Allocation and Positioning Details

Readers know that I like to look at seasonality when I’m investigating a stock or ETF. In this case, DAPP doesn’t have a very long history to analyze, so let’s take a peek at Bitcoin’s seasonal trends. You will see that June and July have been historically bullish months.

Both months were up 60% of the time, with typical gains in the 5% to 8% range. However, investors should be wary of crypto-related assets in August and September, as these months typically face weakness in Bitcoin prices, which could be bearish for digital asset stocks.

Bitcoin Seasonality: Bullish in June and July

Technical take

While Bitcoin has remained steady in the past few months following the big rally that started in January of this year, DAPP’s price action has been nothing to write home about. Notice in the chart below that there has been a series of lower highs and higher lows since the peak in early 2024. This is a consolidation pattern, and I see an upside price target of around $17.50 in the event of an upside breakout above the downtrend resistance line. , which is currently near the $11.50 mark – the symmetrical triangle range was around $6, so we add that above the potential breakout price of $11.50.

Also take a look at the bullish 200 day moving average, which is currently sitting just above the $8 level. This tells me that the bulls are still in control of the underlying trend despite the price being flat for several months. What also catches my attention is the large volume of DAPP shares traded since December last year. Therefore, we are seeing price consolidation with higher trading volume, which could amplify the breakout or eventual breakdown of the current symmetrical triangle formation.

Finally, the RSI Momentum indicator at the top of the chart is immersed in neutral territory between 30 and 70, so we are not seeing overbought or oversold conditions that lead to significantly oversold readings in DAPP.

Overall, I see current support near $9 with resistance in the $11.00 to $11.50 area.

DAPP: Consolidation pattern targets $17.50 area, waiting for a breakout

Bottom line

I repeat the comment rating on DAPP. I like that the valuation has arrived, but the technical situation is neutral as we wait for a breakout or breakdown. I warned potential investors that the late Q4 rally was a dangerous parabolic move, so I’m not surprised to see the fund decline and grow in its valuation.

Editor’s Note: This article discusses one or more securities that are not traded on a major U.S. exchange. Please be aware of the risks associated with these stocks.