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How Grayscale Bitcoin Trust at a discount could change everything for BTC

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After spending the entire month of March at a loss, the downtrend in Grayscale Bitcoin Trust premium has extended.  At the time of publication, the premium stands at -11.45%, near its all-time low at -14%.

Bitcoin BTC Grayscale BTCUSD
GBTC trading at a discount. Source: Ycharts

In contrast, the Canadian Purpose Bitcoin ETF had a nearly month-long streak at record inflow levels begging April. Comparing the data, GBTC at a discount, and the growth in the BTC ETF, there is a trend in investors favoring the latter.

Unlike other financial products, GBTC shares cannot be freely traded. They must go through a 6-month “lock-up” period. Although they give exposure to the price of BTC, stakeholders’ strategy to profit is based on the premium, as analyst Ben Lilly points out:

30% return is pretty impressive, and natural economic pressures should bring this premium down to 0%. Yet, for some reason we just haven’t seen that happen yet. That’s because of the way it operates and no other option being available.

If after 6 months, the GBTC premium is high, it can be sold for a large percentage of profits. Otherwise, losses can be just as steep.

Grayscale investors have started to express discontent. Investment firm Marlton issued a press release on April 6, to call for Grayscale to take “immediate action to address GBTC’s significant discount to net asset value” (NAV).

Marlton’s data indicates that GBTC’s premium discount represents an estimated $3.1 billion in losses to stockholders. The firm has called for a modification to the stock trading mechanism that would allow them to sell or buy shares at specific prices and at a specific time.

As Ben Lilly points out, the advent of new options to gain Bitcoin exposure in Canada appears to be hurting GBTC. Researcher Jan Wuestenfeld supports this thesis:

(GBTC) trading at a discount since the beginning of march and their Bitcoin holdings have been stagnating. It looks like with new alternatives coming to the market investors might turn to other products to get exposure to Bitcoin.

High demand for Bitcoin-based regulated financial products

The above indicates a clear demand from institutions looking to acquire exposition to Bitcoin. In parallel, the Security and Exchange Commission (SEC) is under a lot of pressure to approve a Bitcoin ETF. The Commission has received over 6 petitions to approve a Bitcoin ETF in the U.S. in under 4 months.

The discount in the GBTC suggests that investors are favoring products with better trading mechanisms. The performance of Canada’s BTC ETF could create even more pressure for the U.S. regulator.

Senior Commodity Analyst for Bloomberg, Mike McGlone, sees a major inflection point in terms of adoption. New Bitcoin-based financial products could create a new “rising tide” from institutions and individuals investors trying not to “miss out on the potential for Bitcoin”. McGlone claimed:

(…) we see rising potential for 2021 to mark a migration milestone into traditional investment portfolios. Publicly traded cryptocurrency funds’ assets, dominated by Bitcoin, have surged to almost $60 billion as of March 25 from less than $10 billion in October. Growth has been driven by both rising inflows and skyrocketing prices for the funds’ underlying holdings. A U.S. Bitcoin ETF, on the back of recent launches in Canada, would likely accelerate expansion.

BTC is trading at $57,948 and is showing moderate gains in the 24-hour chart at 3.5%. On the 7 day chart, BTC is still moving sideways.

BTC with moderate gains in the 24-hour chart. Source: BTCUSD Tradingview

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://www.newsbtc.com/news/how-grayscale-bitcoin-trust-at-a-discount-could-change-everything-for-btc/

Blockchain

China Securities Journal Says Cryptocurrency Trading Is Risky and Calls for Strict Supervision

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Chinese officials warned the public about the risks associated with trading with digital assets. The authorities pointed out three major considerations which might harm investors – false transactions, security breaches, and illegal and criminal activities involving cryptocurrencies.

Tighter Regulations on Crypto Trading

According to the China Financial Stability Report, investors should be extra vigilant when operating with bitcoin and other crypto assets. Officials from China Securities Journal have called for better regulation and pointed out three major risks that trading with digital assets may carry.

First, digital assets are highly decentralized, which means they lack supervision and legal protection. According to the journal, this is a huge disadvantage and can cause price manipulation and false transactions.

Second, the price of most cryptocurrencies, including bitcoin, can easily become an instrument for speculation and can go through sharp declines.’

Third, the movement of funds on blockchain technology is difficult to be observed. This can create an excellent environment for money laundering. Additionally, illegal and criminal activities can also thrive with these conditions as lawbreakers have the opportunity to make drugs or gun transactions using cryptocurrencies.


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The Chinese authorities advised that due to these factors, the crypto community must stay alert to prevent these hazards. Furthermore, China Securities Journal reminded that there are no legal crypto trading venues in the country and no regulatory protections:

”Once you encounter risks, you can only bear the consequences. In short, speculation in coins is risky, and you need to be cautious when entering the market.”

China and BTC

Despite the government’s stance, the primary cryptocurrency is highly popular in China – there’s a high number of miners situated in the large Asian nation.

Recently, the country’s central bank announced that it was looking into bitcoin as an alternative investment. Zhou Xiaochuan, former governor of PBoC, outlined the potential of digital assets and their future implementation. However, he ascertained that whatever the case may be, cryptocurrencies must not be used for illicit activities such as drug or weapon trafficking, gambling, or money laundering:

”We believe that crypto assets should play a major role in the future, either as an investment tool or as an alternative investment. Many countries, including China, are also studying it as an investment tool.”

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Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://cryptopotato.com/china-securities-journal-says-cryptocurrency-trading-is-risky-and-calls-for-strict-supervision/

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Blockchain

Bitcoin price metric flashes rare ‘buy the dip’ opportunity at $42K lows

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Bitcoin (BTC) is facing a make-or-break moment this week as a classic indicator signals a price watershed. 

According to the network value to transaction (NVT) price, BTC/USD is in line for a reset at recent lows of just above $42,000.

NVT calls a significant BTC move

After dipping on negative sentiment as a result of tweets from Elon Musk, Bitcoin is attempting to establish definitive support near its old all-time highs from February.

At the same time, NVT, which is used to discover potential local price polarities, suggests that the market is looking at an event similar to early 2018 or last March’s cross-asset crash.

The start of 2018 heralded a year-long bear market, while last year, Bitcoin conversely bounced from lows to new all-time highs — a bull run that analysts argue is still in action.

With the $42,000 dip bringing Bitcoin below NVT price, however, statistician Willy Woo drew attention to similar events throughout its 12-year history.

“Here is some hopium for those of you losing your minds,” Filbfilb, co-founder of trading suite DecenTrader, added about the indicator.

BTC/USD vs. NVT price chart. Source: Willy Woo/Twitter

A “buy the dip” like few others?

As Cointelegraph reported, NVT and its derivatives correctly called the explosive growth of Q1 2021.

NVT is far from the only tool in bulls’ arsenal for calling a continuation, however, and fresh data is also highlighting a distinct difference between old and new BTC hodlers.

The price dip, for instance, came as recent buyers sold in panic, overwhelmingly at a loss. Older entities, by contrast, happily bought up the available liquidity.

“Translation: BTFD opportunities like this don’t come often,” analyst William Clemente flatly commented on the NVT data.

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://cointelegraph.com/news/bitcoin-price-metric-flashes-rare-buy-the-dip-opportunity-at-42k-lows

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Blockchain

Iran’s Energy Ministry warns of heavy fines for crypto miners using household energy.

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Crypto miners using household electricity in Iran will face a “heavy fine,” according to Mostafa Rajabi, a spokesperson for Iran’s Energy Ministry, as reported by the Tehran Times. The spokesperson also added that cryptocurrency mining is one of the two biggest threats to Iran’s electricity supply this year—alongside a reduction in power coming from hydropower plants due to a lack of rain. 

Iranian government is cracking down on unauthorized mining.

As per local reports, the Iranian government is cracking down on unauthorized mining using household electricity. The crypto mining industry is heavily reliant on Iran’s power grid, and thus it places heavy demands on the national power supply. Rajabi also added the practice might even cause blackouts across the country. In addition to the “heavy fine” facing miners using household electricity, those caught by the government will also be made to compensate for the damages they cause to the country’s electricity supply. The move is the latest in a long line of steps taken by the government to control the cryptocurrency mining industry in Iran.

Iran struggles to provide energy to crypto miners. 

Iran legalized industrial cryptocurrency mining two years ago in 2019. At that time, Irani ministers said the industry could pull in over $8.5 billion a year. The move was considered by many to boost state income amidst tough economic sanctions applied as part of former President Trump’s “maximum pressure” Iran doctrine. However, by October of last year, the crypto mining industry had boomed to such a height that even the Central Bank of Iran put forward new regulations that directed the proceeds of Iranian-mined Bitcoin into government funds so Iran would be able to finance imports. But despite the country’s embrace of crypto mining, the country has consistently struggled with balancing the industry’s needs with the country’s wider electricity demands. 

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://chaintimes.com/irans-energy-ministry-warns-of-heavy-fines-for-crypto-miners-using-household-energy/

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