The following is an excerpt from a recent issue of bitcoin Magazine Pro, bitcoin Magazine's premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis directly to your inbox, Subscribe now.
The first 5 days
The launch of the bitcoin spot ETF was one for the history books. By all accounts, it was the largest launch of an ETF product in history, surpassing the previous record set by the launch of the Proshares bitcoin Strategy ETF (BITO) in October 2021. The first day trading volume was huge, at 4,600 million dollars, and has remained relatively strong compared to typical post-launch declines for other products. We can trust volume figures, as opposed to inputs. After the first two days of trading, the market was left wondering about the flows because the data provided by TradFi was delayed and incomplete. Experts, such as Eric Balchunas of Bloomberg, said that it was normal to have delays in the notification of flows of up to T+3 (three days later). bitcoin is not used to such bad transparency.
In the table below, you can see that GBTC outflows now exceed $2 billion, with the largest day being day 3. However, it is very likely that the majority of the flows on day 3 were due to day trading. 2, and the same thing happened with day 2. day 1, and so on. We also cannot say if all issuers are up to date with their data. Are they all your flows or have you not finished counting? We just don't know.
Bitcoiners are supplementing slow TradFi data, which can take days, by tracking on-chain flows. Wednesday morning, James Van Straten of cryptoslate reported that 18,400 bitcoins were sent from Grayscale to Coinbase's Prime OTC desk right at the market open, following a pattern of outflows in the previous two trading days of 9,000 bitcoins on January 16 and 4,000 bitcoins on January 12. Arkham is trustworthy, the problem is that it doesn't match the reported outputs. Those three days of on-chain data add up to $1.3 billion in bitcoins and the reported outflows were only $1.1 billion. Also, interestingly there were no transactions on the morning of January 18, but they resumed this morning.
Source: Arkham via @DylanLeClair_
Coinbase already escrows Grayscale's bitcoin, so these are transfers from its escrow account to the OTC desk, where other ETF market makers can pick it up, limiting the effect on the spot price.
GBTC sale could be coming to an end
Grayscale sales were expected, but we still don't know the final amount that will end up selling when everything calms down. Will 100% of your coins slowly leave, or maybe just 10%? People speculate that the 1.5% expense ratio versus the other ETFs averaging 0.25% could cause people to trade ETFs. If that is the case, it would not result in any net sales. GBTC reduced their fee when they converted, from 2% to the new 1.5%. If GBTC holders have significant unrealized gains, they could choose not to sell until the next rally. Remember, the exchange also has tax implications.
Many early GBTC sellers do so for ideological reasons. The discount that formed in February 2021 caught them by surprise and they felt stuck. The question is how many bitcoins are there? GBTC still has over 550,000 bitcoins as of January 19, how many of them still feel stuck? Why wouldn't they have been exchanged already in the first days of negotiation? I think it's less than people think. Yes, all bitcoins will come out eventually if they keep the expense ratio this high, but not in a sustained move. I believe the dumping will be spread across several large rallies in the bull market. Selling from GBTC may already be slowing with the discount to NAV falling from 150bps on day 1 to 47bps on January 17th.
bitcoin price
Speaking of price, bitcoin has managed to hold support at $40,000 even with massive GBTC outflows and whale selling. Again, James Van Straten reports a whale that bought at $48,000 in the 2021 bull market, which withstood the massive drop and FTX debacle, possibly dumped 100,000 btc with a demand of $49,000. For context, all ex-GBTC ETFs are still below 79,000 btc. This was not a news selling event, it could have simply been a whale selling after breaking even. Which means the constant buying pressure on ETFs is only delayed by about a week.
We are still in the range dating back to early December, but we are now threatening to fall below it. My focus remains on $40,000 and the $44,193 line we have been watching all this time, created from the daily closing high on December 8th.
For those readers with a beautiful time preference, the monthly Ichimoku cloud is turning bullish. This is an extremely bullish signal that only occurs at the beginning of bull runs on bitcoin. It last happened in October 2020, after almost having changed pre-COVID in February 2020. Interestingly, if it had changed in February, it would have almost the same relationship to the halving as we have today. Before 2020, the only other time this occurred was in June 2016, at the beginning of that massive bull market, and a month before the July 2016 halving.
Mass buying pressure in context
Using the incomplete input data above, we can say that the average daily buying pressure, including GBTC selling, has been over $200 million per day. Interestingly, day 4 was the second highest, which adds some evidence to the theory that buying pressure could stabilize around the $250-$300 million mark. To put that amount into context, Microstrategy just started a bitcoin“>4 month process to sell $216 million in new shares to buy more bitcoins. ETFs do it in one day. Tether is also constantly purchasing bitcoins for its reserves. Recently, they bitcoin-holdings-latest”>reported adding another $380 million in bitcoin by the end of 2023. Two of the ETFs' first five days were more than that.
With all those sources of gigantic demand in mind, look again at the monthly chart above. There is a path this market can follow. Are you ready?
If you liked this post, please like and share on social media so we can spread our message! Thank you!
