Technical Analysis
Good Morning!
Before we dive into the charts, I would like to address a topic that seems to be bothering (or worrying) some traders and investors.
The topic I'm talking about is the collapsed premium of the GBTC product (Grayscale Bitcoin Trust). You can see this premium on the bottom of my chart (orange = BTC, and blue = ETH). It has been a premium for the past six years and just turned into a discount in January 2021. Since the end of February, we have been watching the discount increase.
Here's a short recap as to why there is a difference between the GBTC and the physical price of bitcoin:
The GBTC trust works with lock-up periods and a rather low frequency of issuing new shares. That on its own creates price disturbances to the underlying asset - in this case bitcoin. Additionally, GBTC was a very hot product in the US for retail investors since it was one of the easiest ways to gain exposure to bitcoin and it was possible to deposit it into your normal bank/brokerage account. It was even eligible to be put into your 401k plan account (private retirement savings plan in the US).
So, given all of these factors, it was clear that with the increasing demand for bitcoin exposure, the premium will stay as long as there is no better (or other way) to gain exposure to it.
But why are investors and traders worried about that premium evaporating? It basically shows that now everyone has more efficient ways to gain exposure to bitcoin, which is a good sign for this new asset class, and certainly also a sign of the beginning of mass adoption.
For the more sophisticated traders and investors out there, who have done some analysis of the borrowing and lending market, they know that there is some pain in the market with that GBTC premium being at a discount. Whenever there is a price difference, you will find smart people trying to arbitrage it and profit from it. Below, I provide you with a quick and dirty example of how an arbitrage trade works:
You can invest in GBTC with fiat or "in kind", which means with BTC. If you invest through fiat, you pay the price, incl. the premium; if you deliver BTC, you get your GBTC share without the premium. Hedge funds and crypto trading firms started to borrow BTC from the lending desks that started popping up, especially in the US (BlockFi, Genesis, Galaxy, Celcius...etc.).
- Borrow BTC and pay 5%
- Get your GBTC trust share at no premium
- Wait until the lock-up period is over
- Sell your GBTC versus fiat - lock in the premium (usually in the +20% area)
- Buy BTC on the market and return it to the desk where you borrowed it
Those lending desks were suddenly able to offer attractive deposit yields for their customers. Now, the premium is gone, and I believe that most of those hedge funds have unwound their trades and returned the borrowed BTC. But the lending desks are still committed to paying their liabilities to the depositors. Let's see if arbitrage unwind will end up creating some "collateral damage".
Now, let's hop on over to the BTC$ 4h chart:
Two weeks ago I mentioned the range of 44-50k, which kind of held true until we finally broke out of it yesterday. What is more important, though, to me are the structural changes that happened during the consolidation.
We saw the term future basis getting a lot more relaxed across the entire curve (down to Dec21), but with a continuously increasing OI across all trading venues. Also, the daily volume in spot and futures was healthy during the consolidation.
On the chart, I see a few positive signs for further upward momentum. First of all, we broke through the bearish Ichimoku cloud and printed a new local high (from the consolidation period). During consolidation, we built a solid liquidity pool at around 47k, which I believe should be the local bottom until we reach a new ATH.
I expect the price to hold above that 47k level over the next week, and that the Ichimoku cloud will turn bullish (green). To me, it is still a bit early to go in with a leveraged long position. What worries me a bit are the sell-side skewed order books (see print screen of the okotoki.com app below). But we have seen this before, and continuous market spot buying (mainly on Coinbase) made it possible for the price to go up.
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