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Crypto News Updates

Elon Musk Gifts Bitcoiners A Stacking Opportunity

Tesla CEO Elon Musk continues to spread misinformation about Bitcoin, demonstrating that he doesn’t understand it and isn’t ready to HODL.

Yesterday, in a response to a thread from Bitcoin podcaster Peter McCormack on his misinformed shilling of $DOGE in recent weeks, Elon Musk replied “Obnoxious threads like this make me want to go all in on Doge,” in what was most likely a troll for the known jokester.

 Equally funny was Musk’s misinformed meltdown that followed.

While Musk no doubt is one of the most successful businessmen in the world, let’s not get caught up in credentialism. What is taking place with bitcoin is far bigger than Musk, and it’s more than probable that his ego is damaged by the fact that he doesnt matter.

“How can you say that Elon doesn’t matter when he’s moving the market with his tweets?” you might ask.

It’s simple: Bitcoin is solving the biggest problem in the world today, providing a sound base layer peg for money to the world. If the market collectively pumps or dumps on the news/rumor that a Fortune 500 CEO is going to move his company’s billion-dollar-plus stash of BTC, the Bitcoin network does not care. Blocks will continue to be mined, and the Bitcoin network will continue to provide a sound money alternative to the great central bank monetary experiment that is plaguing our world. Musk doesn’t change this, no one does. That’s the whole point.

But yesterday’s debacle does raise a question: What might be Musk’s ulterior motives? Tesla the company has struggled to become profitable for the existence of the business, and without the tap of government subsidies, it most likely would not exist today. Musk has in large part built his empire because of handouts from the state, and the very existence of a non-sovereign hard money standard put’s Musk’s empire into question. While the pull of bitcoin’s price appreciation is extremely strong, does Musk realize what’s at stake? It’s tough to know.

What is known is that the individuals around the world that actually understand bitcoin are unbothered and unfazed, and continue to accumulate at a feverish pace.

Bitcoin is centralized because a large proportion of hash rate resides in China.” What is this, 2017?

It would seem plausible that the CEO of a company that bought $1.5 billion of the asset would do some proper due diligence. Well, apparently not. Nodes control the network, and there are 10,000 public nodes running around the world, with tens of thousands more running privately routing over the Tor network. Not your node, not your rules, and node runners control the network’s consensus rules, as was shown during the 2017 user-activated soft fork.

If Musk wants to buy dogecoin, encourage it. Let Musk be taught a lesson in monetary economics in real time. If Musk wants to buy a proof-of-work cryptocurrency with inferior development, global liquidity and security compared to bitcoin, all the power to him. That is simply a gift to all bitcoin accumulators, who will happily continue to hoard the hardest monetary asset known to man at the expense of an ill-informed jokester with an ego problem.

Just remember Musk:

Thanks for the stacking opportunity, truly,

Bitcoiners everywhere. 

Source: Bitcoin magazine

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Crypto News Updates

Elon Musk Gifts Bitcoiners A Stacking Opportunity

Tesla CEO Elon Musk continues to spread misinformation about Bitcoin, demonstrating that he doesn’t understand it and isn’t ready to HODL.

Yesterday, in a response to a thread from Bitcoin podcaster Peter McCormack on his misinformed shilling of $DOGE in recent weeks, Elon Musk replied “Obnoxious threads like this make me want to go all in on Doge,” in what was most likely a troll for the known jokester.

 Equally funny was Musk’s misinformed meltdown that followed.

While Musk no doubt is one of the most successful businessmen in the world, let’s not get caught up in credentialism. What is taking place with bitcoin is far bigger than Musk, and it’s more than probable that his ego is damaged by the fact that he doesnt matter.

“How can you say that Elon doesn’t matter when he’s moving the market with his tweets?” you might ask.

It’s simple: Bitcoin is solving the biggest problem in the world today, providing a sound base layer peg for money to the world. If the market collectively pumps or dumps on the news/rumor that a Fortune 500 CEO is going to move his company’s billion-dollar-plus stash of BTC, the Bitcoin network does not care. Blocks will continue to be mined, and the Bitcoin network will continue to provide a sound money alternative to the great central bank monetary experiment that is plaguing our world. Musk doesn’t change this, no one does. That’s the whole point.

But yesterday’s debacle does raise a question: What might be Musk’s ulterior motives? Tesla the company has struggled to become profitable for the existence of the business, and without the tap of government subsidies, it most likely would not exist today. Musk has in large part built his empire because of handouts from the state, and the very existence of a non-sovereign hard money standard put’s Musk’s empire into question. While the pull of bitcoin’s price appreciation is extremely strong, does Musk realize what’s at stake? It’s tough to know.

What is known is that the individuals around the world that actually understand bitcoin are unbothered and unfazed, and continue to accumulate at a feverish pace.

Bitcoin is centralized because a large proportion of hash rate resides in China.” What is this, 2017?

It would seem plausible that the CEO of a company that bought $1.5 billion of the asset would do some proper due diligence. Well, apparently not. Nodes control the network, and there are 10,000 public nodes running around the world, with tens of thousands more running privately routing over the Tor network. Not your node, not your rules, and node runners control the network’s consensus rules, as was shown during the 2017 user-activated soft fork.

If Musk wants to buy dogecoin, encourage it. Let Musk be taught a lesson in monetary economics in real time. If Musk wants to buy a proof-of-work cryptocurrency with inferior development, global liquidity and security compared to bitcoin, all the power to him. That is simply a gift to all bitcoin accumulators, who will happily continue to hoard the hardest monetary asset known to man at the expense of an ill-informed jokester with an ego problem.

Just remember Musk:

Thanks for the stacking opportunity, truly,

Bitcoiners everywhere. 

Source: Bitcoin magazine

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Crypto News Updates

Shortsighted Sellers Made This A Great Week To Buy Bitcoin

A bitcoin price crash this week provided investors with an attractive moment to enter positions in the bitcoin market.

While most people reading this article are likely aware of the tweets that were sent out by Elon Musk on Bitcoin mining, his comments are simply noise, and the resulting price crash and derivative market liquidations provide investors who may have been waiting for an attractive moment to enter positions with a great opportunity.

The long-term trends observable in and around the Bitcoin space remain extremely bullish, and the recent three-month consolidation can be thought of as UTXOs simply transferring from weak hands to strong ones, as short-term leveraged traders in derivatives markets have chopped the price of bitcoin in the range of $44,000 to $64,000.

Short-Term HODLer SOPR: Flashing Buy Signal

Short-term HODLer SOPR (36h MA)

With short-term traders setting the price at the margin over this period of consolidation, it is telling to look at short-term HODLer SOPR, which measures the ratio of profit/loss of UTXOs being spent that are less than 155 days old.

Over the course of the last six months, any SOPR break below one has, in hindsight, presented investors with an attractive buying opportunity, and this week’s move should be treated no differently.

An SOPR value less than one implies that the coins moved that day are, on average, selling at a loss (the price sold is less than the price paid), thus when SOPR breaks under one, it is a signal that short-term market actors are capitulating.

Derivatives Markets: Short-Term Tail Wagging The Dog

Futures perpetually funding rate across exchanges since November 2020

While the long-term price action is driven by the monetary preferences of the world changing from fiat money to BTC, short-term price action is driven by leverage and derivatives markets. There have been very few times during this bull market when funding across perpetual futures markets went negative on average for more than 12 hours. This occurred earlier this week, and presented investors a screaming buy signal.

Total long liquidations across bitcoin exchanges

Big Withdrawal Following The Sell Off

Directly following the cascade of liquidations and the sharp correction in the price of bitcoin all the way down to $45,000, a massive outflow of bitcoin could be observed leaving exchanges, an indication that some big time players secured positions at attractive prices as a result of the sell off. While this is purely speculation, it would not surprise me at all if the FUD (read: fear, uncertainty and doubt) thrown out all toward the end of this week was simply chance.

Short-Term HODLer Market Value To Realized Value Ratio

Short-term HODLer MVRV

The short-term HODLer market value to realized value ratio has dropped significantly from where it was in early January. While market capitalization takes the market price of bitcoin and multiplies it by the total outstanding supply, realized cap takes the price of when the coin last moved into account in the calculation. When you take the ratio of market cap by realized cap, it gives you MVRV, and in this case, it measures UTXOs (bitcoin) that moved less than 155 days ago. This metric can give you a sense as to whether the market is above “fair value” in terms of the short-term price action, which is being driven predominantly by speculators in the derivative markets over the last few months.

Short-term MVRV trending lower is very bullish and should give investors confidence the lower it creeps down, that the next bitcoin run up is closer than ever.

Despite months of choppiness in price action, the long-term outlook has never been more bullish, and events such as a legendary Wall Street investor calling for the dollar to lose reserve currency status doesn’t even get the top mention of the week.

Continue to stack your sats friends, or someone else will. 

Source: Bitcoin magazine

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Crypto News Updates

Following Misguided Elon Musk Tweet, Bitcoin Price Dips

A tweet from Tesla CEO Elon Musk, making inaccurate claims about Bitcoin’s energy use, likely caused a dip in the bitcoin price.

At approximately 6:00 p.m. EST last night, May 12, CEO of Tesla Elon Musk posted a tweet in regards to Bitcoin and Tesla that appeared to have significant market impact.

Source

The tweet included a statement that was misguided in its assessment of Bitcoin’s energy use. While Musk claimed that Tesla is “concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions,” the mining industry appears to be growing in its use of renewable energy sources instead. He also seemed to suggest that bitcoin transactions consume energy, but that is not true.

Bitcoin Energy Use Is Not Alarming

It is important to remember what is actually unfolding here with the adoption of the Bitcoin network. With bitcoin, all energy production and consumption now has a distinct economic cost. The problem that bitcoin is solving is the separation of money and state. The reintroduction of free market money will eliminate vast amounts of energy waste, malinvestment and destruction inherent in the incumbent petrodollar system.

Proof of work is crucial to bitcoin, or more broadly, a decentralized monetary network (which only Bitcoin can claim to be). Only the proof-of-work function in the form of the SHA-256 hashing algorithm can ensure that the most recent block was mined fairly, and not by nefarious actors looking to compromise the validity of the chain/network. This is (one of many) killer features of Bitcoin. If you wish to “attack” the network, you need to expend vast amounts of energy and computational resources to do so, and the economic incentives therefore align with simply supporting the network.

When a climate alarmist demands for you to explain Bitcoin’s “alarmingly high energy usage,” ask them what the future looks like without Bitcoin? What does our world and climate look like without a distinct economic cost for energy inefficiency and waste, and how does one propose to solve for this otherwise?

Elon Musk’s Tweet And The Bitcoin Price

Anyway, back to the market’s reaction…

The bitcoin market was sent spiraling downwards as leveraged speculators and traders quickly exited their position, with the price of bitcoin falling to as low as $45,000 before catching a bid and rebounding quickly. Data from Coinalyze shows that nearly $1 billion worth of leveraged longs were liquidated directly after Musk’s tweet.

Source

Does this event have any meaningful impact on the ultimate longevity or success of the Bitcoin network? Unequivocally, it does not. Bitcoin is the energy bidder of last resort across the entire planet, and the economic incentives provided by the network to reach peak energy efficiency cannot be understated, and are extremely misunderstood.

Regardless, the Bitcoin network keeps chugging along, and the weak hands and speculators who do not have an understanding of Bitcoin sold their BTC to convicted HODLers, who understand the sound money attributes of Bitcoin, and are not shaken out by a tweet throwing FUD (read: fear, uncertainty and doubt) from the CEO of a company that has only recently became profitable thanks to massive amounts of environmental credits and government subsidies

Source: Bitcoin magazine

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Crypto News Updates

One Year After The 2020 Halving, Bitcoin Price Has Gained 533%

The most recent Bitcoin mining subsidy halving took place one year ago today, and its price has risen dramatically since.

The most recent Bitcoin mining subsidy halving occurred officially one year ago today, on May 11, 2020. In recognition of the event, let’s take a look back at what has transpired in the Bitcoin market over the last year and a look forward to what it could have in store.

The Importance Of The Halving’s Quantitative Tightening

Following the record plunge across all asset classes during the global liquidity crises at the beginning of March 2020, record monetary and fiscal stimulus had bitcoin trading around the $8,000 level at the halving on May 11, 2020. Investors around the globe began to understand that they needed a place to seek refuge and insulate themselves from the unprecedented monetary expansion, and bitcoin undergoing a quantitative tightening event — whereby the supply issuance of new bitcoin is cut by 50% irrespective of the choice of any policy makers — was quite the contrast.

Inflation rate of bitcoin (log) 

What Has Transpired Since The 2020 Halving

Federal Reserve balance sheet, May 11, 2020 to May 11, 2021

What has transpired since that Halving event was that investor sentiment around the record monetary expansion on the horizon has been proven to be correct. The Federal Reserve (and other major global central banks) continued to inject liquidity into the financial system to keep borrowing conditions loose, and this played a major role in the adoption of bitcoin as an alternative monetary asset that exists outside the system.

At the time of writing, bitcoin has gained 533% since the halving event, as the supply and demand dynamics of a surge in demand coupled with an inelastic (and 50% reduced) supply issuance caused the price of the asset to skyrocket above a $1 trillion market cap.

Price of BTC/USD since the start of 2020

Before the Halving event, legendary Wall Street manager Paul Tudor Jones published a report titled “The Great Monetary Inflation,” in which he outlined his beliefs about the incumbent monetary system and the path that it was headed on going forward, and why he believed Bitcoin was the “fastest horse.”

Shortly thereafter, in what will be remembered as a watershed moment in the ascent of Bitcoin, MicroStrategy, led by now prominent Bitcoin proponent Michael Saylor, announced that it was adopting bitcoin as a treasury reserve asset.

In what has since become an increasingly accepted view, Saylor and MicroStrategy decided that CPI was not an accurate measure of inflation and rather decided to use M2 monetary base as a measure for the inflation rate.

“Once the real yield on our treasury got to more than negative 10%, we realized that everything we are doing on P&L is irrelevant,” Saylor said. “We really felt we were on a $500 million melting ice cube.”

Are Future Halvings Priced In?

Bitcoin stock-to-flow model

Leading up to the Halving last year, many in the Bitcoin community and more broadly in the financial system were debating whether the Halving was “priced in,” as the event is known well into the future. While I won’t delve into my personal opinion on the debate, due to the nuance and all of the exogenous variables and factors that play into the price of bitcoin, it is extremely fascinating that price seems to be tracking the stock-to-flow model that was first introduced by the pseudonymous Twitter account Plan B back in March 2019.

Are future Halvings priced in? Who knows? But what is known is that with the 2024 Halving just 156,872 blocks away, it might be a good idea to front-run the event…

Remember, if you’re not long bitcoin, you’re short. Happy one year post Halving! 

Source: Bitcoin magazine

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Crypto News Updates

Market Analysis Demonstrates Bitcoin Price Is Nowhere Near Top Of Run

A deeper dive into bitcoin’s fundamentals and recent market trends shows that the price bull run is nowhere near its top.

Bitcoin has been consolidating around the $1 trillion market capitalization threshold for almost three months, which is a very healthy development during a bitcoin bull market. So, what’s happening behind the scenes, and how should investors be thinking about the recent price action of bitcoin?

Let’s dig in.

BTC price action over the last three months 

Long-Term Trend Still Clear: Bull Market Far From Over

While it is true that at the time of writing BTC is trading at a price it first saw 75 days ago, there is absolutely nothing to be concerned about in terms of the fundamentals and long-term outlook of the monetary asset. Many market spectators have been quick to call it a “top” because of the speculation occurring in the illiquid altcoin markets, but this is a shortsighted take that does not take into account the empirical data. New entrants and capital are entering the market every single day, and the fixed monetary policy of Bitcoin remains consistent.

Long-Term HODLers Are Accumulating

Long-term HODLer net position change in 2021 

The long-term HODLer net position change, which measures the 30-day change in supply held by long-term bitcoin holders, recently flipped positive, and the data from Glassnode shows that over the last 30 days, HODLers have accumulated 93,638 BTC more than they have sold. This shows that the conviction of bitcoiners is not the least bit shaken in regards to the choppy price action, and they are viewing the period of consolidation as a buying opportunity.

Miners Are Accumulating

Not only have long-term HODLers been net accumulating over the last month, but miners are as well. Over the last 30-day period, miners have accumulated a net position of 5,459 BTC, a bullish development as miners are the only natural sellers in the market, since capital expenditure and operational expenses force operations to occasionally liquidate a proportion of their treasuries.

With hash rate lagging far behind price action over the past year, and a global semiconductor shortage occurring simultaneously, expect miners to continue to be net accumulators of BTC, as profit margins remain wide across the industry.

Miner net position change since the May 2020 Halving 

Another fascinating metric to look at is the Puell Multiple, which measures the dollar value of bitcoin issued to miners in relation to its 365-day moving average. The Puell Multiple measures when the market has run too far, too fast.

Obviously, the market value of new bitcoin issued greatly increases in a bull market, and this can be seen not only during the recent run up but also past bull market cycles following the halving. Currently, the Puell Multiple is at 2.5, following the healthy 75-day consolidation. When compared to previous bull markets, a similar pattern occurred around the $100 mark in 2012 and the $3,000 to $4,000 level during 2017. 

Puell Multiple over the history of Bitcoin 

Another promising metric which puts into context the exponential growth occurring around bitcoin and the Bitcoin network is realized market capitalization. Realized market capitalization shows the total market cap of bitcoin, but accounts for the time each UTXO was last moved in the calculation.

This measure can be thought of as a more reliable way to measure the true economic value of the Bitcoin network. Realized cap at the time of writing is sitting at $370 billion, increasing approximately $250 billion since November. To put this move into context, the realized capitalization of bitcoin at the height of the previous bull market was $90 billion. The recent parabolic rise in realized capitalization can be seen as an immense amount of capital flowing onto the network.

Realized capitalization of bitcoin 

A very telling metric when determining how “overheated” the bitcoin price is, MVRV is the ratio between the market capitalization to the realized capitalization. Short-term price fluctuations occur on bitcoin as price is set on the margin, and especially with the growing prevalence of derivatives and leverage in the ecosystem, total market capitalization can see explosive growth when actual capital inflows and economic activity remain somewhat muted. This is not what we are seeing, at all and is a key reason to be bullish at this moment in time.

MVRV Z-Score (market cap minus realized cap) divided by std. (market cap).
MVRV Z-Score, five-month view

The recent pullback in MVRV, or rather the rise in realized cap as market cap consolidates, is a very bullish sign, and should give investors confidence that this bull market has a long way to run.

The Macroeconomic Backdrop Remains Extremely Favorable For Bitcoin 

Total assets of major central banks 
Total assets of major central banks (stacked) 

One of the primary reasons for the surge in interest in Bitcoin over the past 12 months, the macroeconomic backdrop remains extremely favorable, and you shouldn’t expect that to change anytime soon.

Debt loads across the global economic system are at all-time highs, and central banks have painted themselves into a corner in terms of policy optionality. The only thing that markets know is ever-increasing liquidity injections, in what has become almost a competition between nation states and their respective central banks as to which can devalue against all of the others at a faster pace.

While it is true that rates being raised is not out of the question, it would be crippling for a global economy that has become accustomed to negative real rates over the past decade. In a very basic sense, investors should have two distinct intentions in regards to growing and preserving their capital in this macroeconomic environment:

  1. How do I protect against debasement/dilution risk?
  2. How do I protect against counterparty/contagion risk?

The market outcomes that can occur at this point is somewhat binary. Either central banks continue to inject liquidity into financial markets and the risk on everything rally continues, as debt continues to become cheaper in real terms, and the discounted valuations of every asset class skyrocket, or they collectively take away the punchbowl, credit contracts and markets witness a deflationary event similar to what was witnessed in March 2020. While this second possibility may not happen immediately, it is just reality that collectively, the domestic economy (in the U.S.) and the global economy are far too indebted.

In this deflationary scenario, anything with counterparty risk (any asset in the extremely leveraged banking system) is something you should hold with extreme caution. The interconnectedness of financial markets ensures that contagion spreads fast, and the default/credit risk of one market participant is something that should worry everyone.

Without going too much deeper on this matter, bitcoin is the solution to both of these market outcomes. With bitcoin, you are insulated from the record monetary debasement that is occurring in legacy financial markets, but you are also protected from a deflationary scenario in which systematic risk in the banking system does not affect you because of the network’s native self-custody attributes.

Conclusion: Stay Bullish

The fundamentals of bitcoin and the Bitcoin network remain as strong as ever, and in hindsight the shortsightedness of many prominent bitcoin skeptics will prove to again be pure folly. The reasons to be bullish are greater than ever, and one should expect that once bitcoin breaks out of the recent range, the monetary asset will once again be off to the races as global FOMO picks up in ways that have never been witnessed before. 

Source: Bitcoin magazine

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Crypto News Updates

CFO Of World’s Largest Hedge Fund Joins NYDIG To Focus On Bitcoin

CFO of Bridgewater Associates, the world’s largest hedge fund, John Dalby has joined NYDIG to work on Bitcoin services.

Earlier today, NYDIG announced that John Dalby, CFO of Bridgewater Associates, the world’s largest hedge fund, is joining its team and bringing more than two decades of experience in capital markets, asset management and financial services to its bitcoin services.

Before joining Bridgewater, Dalby was CFO and COO at D.E. Shaw Renewables Investments, and the CFO of UBS Americas before that.

“The NYDIG team and I are extremely excited to welcome John,” CEO of NYDIG, Robert Gutmann, said in the announcement. “Working on Bitcoin is increasingly what many of the best and brightest employees seek — including industry leaders like John — and NYDIG is uniquely positioned to offer them the platform, resources, and culture to shine, in pursuit of our collective mission to bring Bitcoin safely to everyone.”

The announcement emphasized the growing interest that institutional leaders have in working on Bitcoin throughout.

“John’s move to NYDIG showcases an increasing trend of top talent voting with their feet to propel Bitcoin’s inclusionary role as the De(Central) Bank, and its dual mandate as ultimate risk-on asset and the ultimate risk-off asset,” Ross Stevens, founder and executive chairman of NYDIG, said.

The news comes just two days after NYDIG announced that it was partnering with FIS to enable hundreds of banks to offer their customers the ability to buy, sell and hold bitcoin via their accounts in the coming months.

It seems that with every coming day, another major development is announced out of Wall Street, as more big players from the legacy system come to understand the immense opportunity presenting itself with the ascent of the Bitcoin network. NYDIG continues to lead by example in this sense, and it will be exciting to see what moves it makes next. 

Source: Bitcoin magazine

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Bitcoin Miners Brought In $56 Million Per Day In April

Bitcoin miners generated more than $56 million on average per day in April 2021, making it the industry’s second strongest month ever.

The Bitcoin mining industry saw its second strongest month ever in April 2021, generating total revenue of $1,702,531,320, or $56,751,044 per day on average, as a spike in transaction fees helped make up for slight downward pressure on price.

Total miner revenue per day in the month of April 2021.

The strong total revenue figures can be partially attributed to the fall in hash rate that occurred earlier in the month, slowing the pace at which blocks were mined, leading to increasingly competitive (and expensive) transaction fees.

Three-month view of the mempool.
Percent miner revenue from fees (seven-day moving average).

The month of April was an excellent example of the set of economic incentives built into the protocol. A significant portion of the hash rate came offline earlier in the month, slowing blocks and increasing fees for settlement on the blockchain. The rise in fees created an increasing economic incentive to sell hash rate to the Bitcoin network while block times were coming in slow.

The Bitcoin network is more robust than ever, and total miner revenue is just one metric to quantify this empirical reality. 

Source: Bitcoin magazine

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Crypto News Updates

DCG Authorizes $750 Million In GBTC Purchases As Discount Persists

Grayscale’s parent company authorized up to $750 million in GBTC purchases as the trust’s shares continue to trade at a discount to NAV.

Earlier today, Digital Currency Group, the parent company of Grayscale Investments, announced that it had authorized up to an additional $750 million worth of the Grayscale Bitcoin Trust (GBTC) to be purchased by the company. This is an increase of $500 million compared to an authorization by DCG announced last month.

As of April 30, the parent company has purchased $193.5 million worth of GBTC shares, in an apparent attempt to bring the discount between GBTC’s shares and its net asset value (NAV) back to zero.

With many funds executing the cash and carry trade over the past year, and easy access to bitcoin products still very much lacking in the legacy financial system, GBTC exponentially grew in size as the “risk free” yield opportunity presented quite an allure to investors looking to capture yield, who could redeem shares at NAV directly from Grayscale.

BTC held by Grayscale since November 

Now, with the premium to NAV deep in negative territory, and with newly issued shares of the trust locked from six months before being able to be traded on the secondary market, these arbitrageurs are underwater.

At the time of writing, GBTC is trading at a -12.07% discount to NAV, as seen on https://bitbo.io/

Source: Bitcoin magazine

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Crypto News Updates

Genesis Global Trading’s Q1 Report Shows Growth In Bitcoin Markets

Genesis Report Shows Bitcoin Market Growth

On April 28, Genesis Global Trading, Inc., a subsidiary of Digital Currency Group, released its digital assets report for the first quarter of 2021. Genesis provides institutional clients with spot and derivatives trading, lending, custody and treasury and prime brokerage service products, so the report was full of interesting insights that showed the explosive growth in the bitcoin lending market that has taken place so far this year.

Growth In Bitcoin Lending

According to the report, Genesis saw:

  • $60 billion in trades, loans and transactions for digital assets over the first quarter
  • Over $20 billion in new loan originations, a $12.4 billion increase from Q4 2020.
  • Active loans outstanding increased to $9 billion, up 136.4% from $3.8 billion in Q4 2020. 

At the conclusion of the quarter, BTC made up 42.8% of Genesis’ loan portfolio, a decrease from 53.9% quarter over quarter. It cited one of the reasons for the decline in loans extended in bitcoin was the GBTC discount to net asset value (NAV) that first developed in January.

With the GBTC premium negative, demand to borrow BTC to execute arbitrage trades to generate “risk free” yield greatly decline.

Through the first quarter, the spread between bitcoin futures and spot price continued to widen as more demand to be leveraged increased throughout the bitcoin market. The widening basis and increasingly liquid bitcoin futures and derivatives market continues to drive more institutional capital to the market.

“This persistence in basis premium has led many more institutions to eye crypto yield opportunities, driving our cash portfolio’s continued growth. As the June basis continued to widen into the end of the quarter, our derivatives desk saw increasing demand from macro discretionary firms and arb shops to put on the basis / cash-and-carry trade through our desk.

Some key advantages for trading the basis in a bilateral OTC format include physical settlement of the forward and collateralizing the forward with the underlying crypto asset. In many ways, the persistence of basis is a cash-deficit issue within crypto market structure.” –Genesis’ “Q1 Market Observations”

Spot Trading

Genesis also reported on its digital assets spot trading volume, which witnessed explosive growth in Q1, trading $31.5 billion in spot,, an increase of 287% from Q4 2020, aided by the launch of Genesis Treasury. Corporates increased to 27.06% of total OTC volume, up from 0.49% of total volume last quarter.

Derivatives

According to the report, Genesis saw:

  • 133% growth from Q4 across OTC and negotiated derivative blocks to reach $10.5 billion in trading volume.
  • Counterparty base growth of 21% over the course of the quarter.

According to the report, the majority of this flow came from:

  • “HNW individuals and systematic yield funds taking advantage of higher implied vols and the spot rally to lighten up on length via call overwriting.
  • Recycling risk in medium- to long-dated calls between overwriters and counterparties looking to add length in a levered but limited loss format. (The relative implied funding cost of perpetual swaps vs. longer-dated futures sometimes made buying longer-dated calls a more attractive option.)
  • Corporate accounts and venture books using puts to hedge their business risk or illiquid portfolio risk.
  • Selective hedging of impermanent loss via short-dated gamma portfolios”

The numbers and growth reported by Genesis are extremely bullish, and show the continued maturation in the bitcoin lending, futures and derivatives markets, as sophisticated institutional capital allocators are incentivized to enter the market due to the contrasting yields offered across the legacy versus the bitcoin futures/derivatives markets.

At the time of the report, the aggregate open interest across the bitcoin futures markets is sitting at $18.9 billion, up from $2.9 billion from a year ago. The demand to be leveraged long on BTC is a major reason that yields in the bitcoin ecosystem are so large, and this in turn drives additional capital inflows and interest in the bitcoin markets. 

$18.9 billion in BTC futures aggregate open interest as of April 28.

Expect Genesis’ growth to continue to increase exponentially over the coming quarters and for large players from the legacy system to scramble to get exposure and get involved. 

Source: Bitcoin magazine