Joe007 Alerts路Groups路Funds=Scam!

Joe007 Alerts路Groups路Funds=Scam!



So it seems like most people have no idea why GBTC premium/discount is so important and what role @BarrySilbert's creation played in jump-starting (and ruining) the latest Bitcoin bullrun, huh. 馃憞馃У

Grayscale庐 Bitcoin Trust (GBTC) is the oldest and the largest stack of "paper" Bitcoins ever created. From its humble beginnings in 2013, it grew to its current value of $27B, managed by @Grayscale (+$28B in "digital assets" shitcoins).

GBTC is kinda "quasi-ETF". Since ages, it allowed "traditional" investors to get exposure to Bitcoin without holding species (spot BTC) or risks associated with shady crypto-exchanges. You just go to your broker/OTC, buy yourself some paper Bitcoins and Barry's your uncle.

There are 3 ways to obtain GBTC shares: 1. Buy from Grayscale for USD at NAV (net asset value) 2. Bring your BTC to Grayscale, get GBTC equivalent in return 3. Buy "secondary" GBTC shares over the counter (pink sheets)

Importantly, the ONLY way to get rid of your GBTC shares is to sell them OTC. And if you got GBTC directly from Grayscale, you have to wait 6 months first. Also, you CAN'T go back to Grayscale and convert your GBTC back into BTC or USD. Nope, once you got GBTC you're trapped.

This wasn't much of a problem previously. There was always a steady inflow of people willing to buy GBTC rather than spot BTC. So much so that GBTC always traded at premium to NAV prior to 2021. Sometimes, the premium was as high as 120% even. Imagine that.

"Normal" GBTC premium fluctuated between 20% and 40% for years. It was so reliable that many people started playing extremely profitable game "capture GBTC premium" game. It goes more or less like this:

There are variants of this game where you buy spot BTC first instead of borrowing and hedge it selling BTC futures (thus capturing futures basis as well for added profit). The bottom line, you get double-digit returns in a few months WITHOUT any BTC exposure! Almost risk-free!

As more and more people caught on to this game, GBTC AUM (assets under management) really exploded, reaching a peak of $58B early 2021. What does it mean? Literally billions in BTC taken off the market and locked into GBTC, reducing free float dramatically. Supply squeeze, dummy.

But there is a catch. Most players only want to capture premium, they don't care or want BTC exposure. In fact, they want to sell BTC asap. They only bring forward future demand for BTC, and they DEPEND on this demand for their game to work. Billions in future BTC demand. Oh-oh.

So once BTC rally started going H1'21 (in no small part due to GBTC-engineered supply squeeze), demand for paper BTC got... exhausted. Turns out, there isn't $58B waiting to buy GBTC at premium. Turns out, paper BTC holders also want to fix their fiat gains from BTC rally. Ooops.

Premium game players need to sell GBTC badly to unwind their position. Paper BTC paper hands want to sell to capture fiat profits. Despite hot rally/Saylor/Elor/brrrr, fiat inflow still not enough to buy them all out. GBTC premium sours, turns into discount. Supply squeeze ends.

With GBTC discount getting only worse since March, there is a new game in town for long-term BTC holders. Sell your spot BTC, buy GBTC equivalent, wait for convergence. Yes, it's paper and convergence may be far off but your basis price improves by 25%.

This game only gets more interesting as GBTC discount increases and BTC price falls (because capital gains tax concerns get less important). So, people sell more spot BTC. The game is dragging BTC price down same way it dragged BTC up before. Supply squeeze in reverse.

Of course, when you're betting on convergence between GBTC and spot, there is always the possibility that the opposite happens instead. GBTC discount may also becomes systematic due to strong opposition to Bitcoin ETF or whatever other reason.

GBTC discount to spot is now 28.7%. So it LOOKS LIKE you can make 28.7% if you sell your BTC and buy paper GBTC equivalent, right? Wrong. You make 饾煖饾煒.饾煕% upon convergence (Spot-GBTC)/GBTC. In other words, your effective buy-in price ~$26.5K per BTC. Such play is hard to ignore.

Good news guys, we've got new ATH! GBTC discount ATH, that is. At 30.8% discount to spot, it's incredible bargain. It's never been cheaper to buy exposure to BTC using traditional markets tradable instrument. But you not gonna take advantage of this opportunity anyways, are you?

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