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Career Trader Claims Current Bitcoin Bull Run Is Most “Orderly” Yet

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Bitcoin price is already back headed toward all-time highs set last weekend, after a short-lived, yet steep selloff on the back of a ban potentially hitting India. The full correction thus far was a mere 13% from top to bottom – mundane by the normally notoriously volatile cryptocurrency’s standards.

In fact, one career commodities trader that’s been around markets for decades, says that this current bull run in Bitcoin is “extraordinarily orderly” compared to past crypto market cycles in terms of corrections. Here are the factors that could be behind the overall lack of volatility, as well as a look at what has happened in the past and could soon be ahead.

Bitcoin Price Pulls Back 13%, But Barely A Blip Compared To Past Volatility

Bitcoin price at this very moment is inching back closer to $60,000 after a rejection from that level last weekend. A bloody Monday began the week, but the hotly trending cryptocurrency shook off what ended up being barely a scratch for bulls.

A “bogus” whale alert, says Bitcoin researcher Willy Woo, spooked the market, causing a selloff, combined with some uneasiness surrounding a potential ban coming in India, as well as a CFTC probe into Binance.

RELATED READING | HOW LASER EYES COULD HAVE BITCOIN INVESTORS SEEING RED

Despite the negative news and 13% crash, Bitcoin has already recovered the entire move, preventing the types of corrections and volatility seen even during past bull markets. Compared to past cycles, corrections have been meager and few and far in between.

According to iconic career trader Peter Brandt, this bull market, Bitcoin has behaved “extraordinarily orderly.”

bitcoin brandt compared

This bull market has been "extraordinarily orderly" compared to the past | Source: BTCUSD on TradingView.com

Brandt’s data shows that aside from the 2019 peak and the resulting 71% correction, this entire bull market has only experience two corrections of under 32%. During the last bull market, only one of eight corrections were under 32%, while the rest ranged from there up to as high as 41%.

As far as what has made things far less likely to correct with as much severity, it could be due to a variety of factors. Institutions are buying every dip they can, and supply is extremely low. Their existence was always said to reduce volatility in Bitcoin as the asset’s market cap grows and more liquidity pours in.

RELATED READING | SORRY BULLS, THIS DANGEROUS BITCOIN FRACTAL CANNOT BE UNSEEN

Another factor that could be fueling unprecedented growth, is due to the rapid expansion of the monetary supply. With so much more money to go around, and such a limited supply of BTC, the floodgates of stimulus money combined with inflation and digital scarcity, could be the perfect storm that’s long been talked about over the course of the last year since the pandemic struck.

On the other side of the coin, this could theoretically mean that a larger correction is long overdue. Looking at Brandt’s data, the notoriously volatile cryptocurrency certainly has some living up to do.

Featured image from Deposit Photos, Charts from TradingView.com





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GBTC discount presents a unique challenge for Grayscale and investors

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Since 2013 the Grayscale Bitcoin Trust Fund (GBTC) has offered its investors exposure to Bitcoin (BTC) through a publicly quoted private instrument. However, the trust’s convertibility and liquidity vastly differ from an Exchange Traded Fund (ETF).

Trusts are structured as companies, at least in regulatory form, and are ‘closed-end funds’ which can initially only be sold to accredited investors. This means the number of available shares is limited, and retail traders can only access them via secondary markets. Furthermore, a GBTC share cannot be redeemed for the underlying BTC position.

Historically, GBTC used to trade above the equivalent BTC held by the fund, which was caused by the retail crowd’s excess demand. The common practice for institutional clients was to buy shares directly from Grayscale at par and sell at a profit after the six-month lock-up period.

During most of 2020, GBTC shares traded at a premium to its Net Asset Value (NAV), which varied from 5% to 40%. However, this situation drastically changed in March 2021. The approval of two Bitcoin ETFs in Canada heavily contributed to extinguishing the GBTC premium.

ETF funds are less risky and cheaper compared to trusts. Moreover, there is no lock-up period, and retail investors can attain direct access to buy shares at par. Therefore, the emergence of a better Bitcoin investment vehicle seized much of allure that GBTC once possessed.

Can DCG save GBTC?

Grayscale GBTC premium vs. net assets value. Source: Ycharts

In late February, the GBTC premium entered adverse terrain, and holders began desperately flipping their positions to avoid getting stuck in an expensive and non-redeemable instrument. The situation deteriorated up to an 18% discount despite BTC price reaching an all-time high in mid-March.

On March 10, Digital Currency Group (DCG), Grayscale Investments’ parent company, announced a plan to purchase up to $250 million of the outstanding GBTC shares. Although the conglomerate did not specify the reason behind the move, the excessive discount certainly would have pressured their reputation.

As the situation deteriorated, DCG announced a roadmap for turning its trust funds into a U.S. ETF, although no specific guarantees or deadlines have been informed.

On May 3, the firm announced that it had purchased $193.5 million worth of GBTC shares by April. Moreover, DCG increased its GBTC shares repurchase potential to $750 million.

Considering the $36.3 billion in assets under management for the GBTC trust, there’s reason to believe that buying $500 million worth of shares might not be enough to ease the price discount.

Because of this, some important questions arise. For example, can DCG lose money by making such a trade? Who’s desperately selling, and is a conversion to an ETF being analyzed?

Looking forward

As the controller of the fund administrator, DCG can buy the trust fund’s shares at market prices and withdraw the equivalent Bitcoin for redemption. Therefore, buying GBTC at a discount and selling the BTC at market prices will consistently produce a profit and there’s no risk by doing this.

Apart from a few funds that regularly report their holdings, there’s no way to know who has been selling GBTC below net asset value. The only investors with 5% or more holdings are BlockFi and Three Arrows Capital, but none have reported reducing their position.

Therefore, it could be potentially multiple retail sellers exiting the product at any cost, but it is impossible to know right now.

While buying GBTC at a 10% or larger discount might seem a bargain at first, investors must remember that as of now, there’s no way of getting out of those shares apart from selling it at the market.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.