Many people ask about the reason for the decline of BTC and the mechanism of GBTC. Because we have been holding GBTC since last year, let me briefly share my analysis of the retracement from $490.48 million to $41,500 in the past 2 days:
Figure 1 BTC price trend
1. ETF expectations have been digested by the market, leading to profit-taking which is normal.
- Since October, the market has been digesting and anticipating the news of the adoption of ETFs
- The price when the Blackrock ETF ticker was leaked was $30,000. From that point on, a large number of institutions and investors began to make plans.
- So after the ETF is officially approved, it is normal for these investors to take profits
2. GBTC is converted into a redeemable ETF to unlock liquidity risks
- In the past, GBTC was not redeemable, had serious discounts, and had poor liquidity. The highest discount in history should have been -48%.
- After converting to an ETF redeemable, GBTC can be redeemed by selling BTC to obtain fiat currency.
- This is equivalent to unlocking 600,000 BTC in the "semi-destroyed" state on GBTC, 600,000 Bitcoins, equivalent to the positions of 3 MSTR micro-strategies, and 60 Bitcoins held by TSLA
3. But in fact, there is no need to panic, GBTC outflow can be monitored and measured
- Although the outflow pressure of 600,000 BTC seems to be high, the net inflow data on the first day shows that the market reaction is still rational. As can be seen in the picture, the net inflow through ETF on the first day was 650 million US dollars, and GBTC only outflowed less than $100 million - Currently, BTC is mainly circulating among ETF products, and there is no panic selling.
Figure 2 Fund flow data on the first day of ETF trading
Finally, I would like to share my views:
1. In the short term , market sentiment can be calculated using data, which is what an institution should do: expectations are unpredictable, but they can be calculated using data. Treating changes in market data rationally is our way of working.
2. In the long run , I think Bitcoin’s long-term investment prospects are still promising.
- The current volatility should not lead to undue panic. Bitcoin is a new asset class that exists and has value for a legitimate reason.
- As a unique digital asset, Bitcoin has the characteristic that it cannot be controlled and manipulated by a single entity. This "decentralization" gives it a unique value proposition in a world facing future uncertainty. This will be the most important reason for all institutions and countries to hold Bitcoin.
- Historically, there have been short-term adjustments after the approval of gold ETFs, but the subsequent 10 years have been a long bull market for gold. This gives us a reference. Even if Bitcoin fluctuates in the early stages of the ETF, its long-term trend may still be upward.
Figure 3: Trends in the first half year after the approval of the first gold ETF GLD
Figure 4: The trend of gold ETF since its approval
