Bullish: Riding The Crypto Wave, Be Patient

Summary Bullish offers a unique automated market maker platform, aiming to provide deep liquidity and near-zero spreads for institutional crypto traders. The company holds a significant Bitcoin treasury and operates CoinDesk, adding value beyond its core exchange business. Despite strong fundamentals, the technical chart looks weak post-IPO, with potential for further downside unless volume increases and key resistance is broken. Given current price action and IPO history, I recommend holding BLSH for now and waiting for a potential retest of lower support levels. Introduction If you missed the Circle Internet Group ( CRCL ) IPO earlier this year, don’t worry, there’s a new, shiny crypto-related stock in town: Bullish (BLSH). I love watching these stocks when they debut, which BLSH did on Wednesday the 13th (yesterday as of time of writing), because they tend to rocket up on their launch and then sell off later. It’s a typical pattern we can watch over and over. Remember Coinbase’s ( COIN ) IPO? That was mild, but followed the pattern many “hot IPOs” end up in. Data by YCharts And Circle earlier this year. Data by YCharts There are other examples, like the announcement of Upexi ( UPXI ) converting to a crypto treasury company, which caused the 600% jump before the sell-off. Data by YCharts The question isn’t whether folks made money on these — some did and some didn’t. It depends on where you bought in. No, the question is: should you buy in on Bullish now, considering it’s in the middle of this movement? Bullish The Company Here is the Bullish timeline, from their founding in 2021 to the IPO: Bullish BLSH operates a crypto exchange as their primary business, but it has an edge, so to speak. It operates an automated market maker, or “AMM,” which is effectively an algorithm that works to collect bids and asks from across the exchange to provide “deep liquidity,” to use their marketing. They claim to have near-zero spreads even during times of volatility, which would make trading crypto on the platform very similar to trading stocks with most large brokers. Here’s their direct marketing on the subject: Our proprietary Automated Market Maker (AMM) efficiently converts liquidity that is exclusively available on Bullish in the form of Automated Market Making Instructions into thousands of bids and offers. Once placed, these bids and offers create more predictable depth across varying market conditions. Bullish’s AMM evolves and improves upon the constant product market maker model (xy=k) often seen in DeFi. This makes Bullish more reliable and efficient than other exchanges—centralized or decentralized. Liquidity on Bullish is derived from customer assets in the form of AMM Instructions. This feature enables customers to seamlessly make markets on the Bullish Order Book by allocating their assets within specified trading parameters. Upon submitting an AMM Instruction, the Bullish AMM instantaneously generates thousands of individual bids and offers. As other market participants trade against these bids and offers, the customer who initiated the AMM Instruction can receive AMM payments through trading fees, spreads, and dynamic price adjustments when trades are matched against those specific bids and offers. The AMM works with tokens and derivatives, and can take custom instructions from institutional users on the Bullish platform. They claim to be able to take the limit order book, which looks like a jagged whipsaw, and create a smoother system without large spreads between bids and asks, which creates the staircase pattern in traditional books. While Bullish operates both books, the AMM book is their unique spin on it, and they claim it more reliable and efficient than other exchanges. Bullish Why does this matter? For most investors, it doesn’t. For traders, and those traders interested in illiquid crypto token trading, this could make a huge difference and is actually a selling point. It’s also a big selling point for many crypto hedge funds and large private traders (non-reporting smart money traders or “whales” in crypto-speak) which currently operate through other institutional exchanges that don’t have the same systems, such as Coinbase, or through decentralized exchanges, which are far more prone to attracting bad actors. Both have their pros and cons, but Bullish is working on creating an exchange that combines the pros of institutional, centralized exchanges that are audited with the AMM of a decentralized exchange. Market share is the name of the game in the business of running an exchange, and so having an edge in bid/ask spreads, liquidity, and execution is critical. It’s unclear yet, because Bullish is so new (founded in 2021), whether it is attractive enough to gather and hold onto assets. Gathering is one thing, keeping it is another. For now, the numbers in trading volume and liquidity look good and make them competitive with other exchanges in the marketplace. Bullish They own more than an exchange; they also operate CoinDesk, a crypto information service likely familiar to most investors in the cryptocurrency space. It’s unclear to me how large the fees generated on the AUM are, but $41B is nothing to sneeze at, and index licensing fees can be expensive. Bullish They Have a Treasury The market loves crypto treasury companies, and it makes sense. This is the Strategy ( MSTR ) playbook: take out debt and convert operations cash into cryptocurrencies. Hold said cryptocurrencies. It’s done really well for MSTR, to be fair. Data by YCharts Bullish doesn’t seem to be using debt in the same way that MSTR is, but it is still hoarding a pile of Bitcoin ( BTC-USD ) for itself, with a market value around $2.8B assuming their pile is still around the 24,000 mark, but that was in Q1. Bullish That accounts for at least a third of BLSH’s current market cap, not accounting for any premium given to the holdings, which is likely also present in propping up the nearly $10B BLSH now sits at after its IPO. Bullish Technical Analysis Let’s take a look at BLSH’s chart so far, now that it’s been one full day from IPO, to the minute. Barchart Consolidation, the last low that set the new support floor, coincided with the lower Bollinger band (white) at the 70 level at the end of the day on IPO day. Now the 50 EMA (yellow) has set an upper ceiling, resistance at 82. Breaking down through the lower band with bearish momentum on both the MACD and PPO signal more weakness ahead. A base could form around the 70 mark again, unless we see volume increase significantly. This chart looks a little ugly right now, and I see us breaking down further unless BLSH can break above the 79 level on high volume. That would signal the potential to retest at the 82 level. That early volume may have been institutions like Ark Invest, who bought $2.5M shares , as well as frenzied traders trying to get in. The latter are the ones shaking out now, as the price falls on low volume. The frenzy is dying out, and more volume will be needed to push this stock any higher than it already is. If we see a break below 70, watch out for further pain. There’s a reason it was priced at IPO at $32 and not the $118 peak it hit. The market may not be able to sustain that much hype. This is a stock that I am fundamentally bullish on, but the technicals are too ugly to walk in now. The chart, and the history of similar IPOs before this, say to wait it out and see for a retest of the 70 level in the coming days. Conclusion Ultimately, I have no doubt that traders both long and short have made money on Bullish so far. It is a business that, if their claims are true, may change the way institutional crypto traders operate, and could suck volume out of the decentralized exchanges — something Coinbase and other competitors have not been able to do. The edge Bullish’s business has in its operations makes me bullish on it, but its price seems too high currently, still driven up by frenzied trading and infamous investors like Cathie Wood over at Ark Invest. We likely have more room to the downside in front of us, but I see another bottom forming soon before volume picks up. If volume doesn’t pick up, it’s likely that BLSH will have the strength to get back above $80 anytime soon. For that reason, it’s a hold. I’ll revisit this soon, in case that changes as the market plays out. Thanks for reading.

Source: Seeking Alpha