GBTC Premium Collapses Under Zero For the First Time Ever, But its Biggest Holder Calls for ‘Up’

Another day, another Elon Musk induced pump. However, this time, it was a smaller one as Bitcoin only went to $34,700, and we are back under $33,000.

While sharing his support for BTC, Musk said he sees Bitcoin on the “verge of getting broad acceptance by conventional finance people.”

That's to be expected as ever since last year, with central banks around the world printing money and debasing fiat currencies, institutional investors, family offices, and endowment funds have been taking a special interest in Bitcoin.

“As Bitcoin gains more mainstream adoption, participants are now more sophisticated investors,” said Joel Revill, CEO of Two Ocean Trust, a wealth management firm.

Hedge Funds Short on Bitcoin

While Bitcoin is resting, for now, the market sees this as a healthy sign for a higher move later. Not to mention, the network fundamentals are stronger than ever, with a hash rate near ATH and difficulty at its peak.

January actually saw the Bitcoin network at its all-time high with more than 22.3 million unique addresses active in the network sending or receiving BTC – the highest monthly number in Bitcoin's history to date, as per Glassnode.

Bitcoin may also finally get the attention of retail investors from Wall Street Bets, given that hedge funds are record short on Bitcoin.

Wall Street bets have been pushing the prices of the heavily shorted company shares to the moon, which has led to the largest active hedge fund deleveraging to happen since Feb. 2009, as per Goldman Sachs.

As retail traders come together to pump the prices, hedge funds are selling their long positions and covering their shorts in about every sector in an attempt not to be the next Melvin Capital, which lost 53% on its investments in January.

While the traditional market investors have started to take the crypto route after Robinhood halted trading for the popular stocks and later limited their buy limits, we have yet to see the herd come for Bitcoin.

GBTC Premium Plunges into Negative

Hedge funds on CME are short on Bitcoin futures for more than $1 billion, which means they are betting that the price of the leading digital will fall. They have been increasing their short positions since October when the BTC price started climbing.

During this period, the price of Bitcoin went from about $10,000 to an all-time high of $42.000 in early January, and ever since then, it has been raging between $30k to $40k.

As data provider Skew has previously shared, these leveraged funds, while short on CME Bitcoin futures, are likely to be long on Grayscale Bitcoin Trust (GBTC) trying to collect the Grayscale premium and the CME futures basis.

Interestingly, for the first time ever, the GBTC premium, the difference between the market price of bitcoin and the implied price by GBTC, has gone negative today. This premium has been dropping ever since Dec. 22nd, 2020, when it was above 40%.

On Friday, as GBTC shares traded at a discount of -1.5%, Crypto enthusiast with Twitter handle AusteritySucks commented, “Whales who got in at NAV impatient, or retail dumping scared? guessing the former.”

This could be because of fading demand for Bitcoin over $30k or increasing competition with BlockFi, Ninepoint Partners, and other filings for a Bitcoin trust. Overall, it needs to be seen if it’s only been a blip or it will persist.

What’s important is that Three Arrows Capital, the biggest GBTC holders, are bullish on Bitcoin, with one of the co-founders Kyle Davies calling for “up.”He tweeted,

“BTC 30k to 40k, the mkt got greedy with leverage and was punished for its sins back to 30k. Reborn deleveraged, Robinhood’s centralized gaffe, and the planet’s wealthiest innovator publicly joining the winning team. The time has never been better for a decentralized future.”

Moreover, Guggenheim’s proposed SEC filing to buy $500 million in Bitcoin via GBTC has been officially effective from Jan. 31st, 2021.

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