Bitcoin Preparing for a “Very Similar” Supply Shock as in October-November, says SkyBridge Capital CIO

As such, risk-reward for the “very non-correlated” asset Bitcoin is now “skewed again to the upside” as strong holders accumulate from those that got into the market late last year.

Trading around $33,000, nothing is changed for bitcoin price as it remains in a crab market, ranging between $30k-$40k.

In line with Bitcoin’s move down, Ether went below $2,000 momentarily to touch $1,975 with the total cryptocurrency market cap above $1.4 trillion. ETH 0.95% Ethereum / USD ETHUSD $ 1,870.51
Volume 23.54 b Change $17.77 Open $1,870.51 Circulating 121.93 m Market Cap 228.06 b
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Bitcoin (BTC) is currently up only about 13% YTD after wiping out all of its gains during the recent sell-off following the all-time high of $65,000 in April. Since then, its price has been down just under 50%.

With these YTD gains, Bitcoin is now one of the worst performing digital assets this year, so far, as it continues to underperform every bounce.

In comparison, in the traditional market, S&P 500 is up 16.73% year-to-date, WTI 55%, and the dollar has risen 1.32%, while gold is down 4.60% in 2021.

According to a list of risk-adjusted returns by asset class by Goldman Sachs, Bitcoin is near the bottom.

Based on Sharpe Ratio, adjusting the returns of an asset for volatility, the crypto asset has done better than gold and Treasuries but is worse than anything in the equity sphere.

Bitcoin, however, is a risk-on asset that, in just a year, went from $3,800 to almost $65,000. Its volatility is also a feature, as per crypto market participants, rather than a bug.

Meanwhile, Jeff Dorman of crypto asset management firm Arca says, bitcoin’s narrative of being store-of-value, digital gold, and inflation hedge “hasn’t changed” with most of the discussion now around where and how to invest in the leading cryptocurrency.

Risk Reward Now “Skewed Again To The Upside”

As we reported, Bitcoin's top in the first half of the year coincides with institutional firms selling their position, with Ruffer Investment being one of them, which bagged a $1.1 billion profit in just five months from investing in bitcoin.

Big Bitcoin proponent SkyBridge Capital is among this, as well as the fund manager’s Co-Chief Investment Officer​, Troy Gayeski, who shared in an interview with Bloomberg this week that they “trimmed the position to keep it from growing further,” which is a 9% position size.

“At the end of March, we had more outflows and inflows. And since then, we've rotated a small amount of the capital into Ethereum” for diversification, Gayeski said.

According to him, Bitcoin will be the market leader in terms of store value, and Ethereum (ETH) so far is a market leader in terms of transaction use.

Talking about Bitcoin’s ongoing condition, Gayeski said, on-chain data suggests “strong holders are reasserting themselves and accumulating from those that got into the market late last year. And that is setting itself up for some type of supply shock very similar to what we had last October-November.”

Overall, Bitcoin basically remains a volatile asset, but at the same time, it continues to be very non-correlated with the risk-reward now “skewed again to the upside.”

As active management, the idea is to find an asset with asymmetric risk-return, whose returns are differentiated from equities and fixed income.

“That's what drew us to Bitcoin initially,” said Gayeski adding; on top of that, we have a broader macro environment of the incredible money supply with yields at a record low while crypto’s adoption cycle continues.

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