Bitcoin Falls as GBTC Outflows Accelerate

• The latest GBTC outflow data and what it means for Bitcoin

• My game plan for buying bitcoin

• Quick update on Ethereum

• Why I’m short MicroStrategy

Read time: 4 minutes

GBTC is the largest holder of Bitcoin. By far.

And they’ve been selling about half a billion dollars worth of Bitcoin every day since it converted to an ETF. That’s about 10,000 Bitcoin per day.

Here’s a chart from Bloomberg ETF Analyst, Eric Balchunas, showing the outflows:

We all wanted the ETFs to increase demand for Bitcoin, but they also increased the supply by incentivizing GBTC shareholders to sell.

The other ETFs brought in about 79,618 BTC, but GBTC’s sale of about 50,500 BTC has spooked the market.

Bitcoin is down almost 20% since the SEC approved the ETFs.

Three main reasons:

• GBTC is no longer trading at a discount to its net asset value, so shareholders are selling their shares.

• GBTC management fees are too high compared to the other ETFs.

• Bitcoin almost doubled in price since September and ETF inflows might not be living up to the expectations.

• How much of the GBTC outflows will rotate back into Bitcoin (spot or other ETFs)? How much will leave crypto?

• How much of the ETF inflows are crypto natives rotating from MSTR, spot, or GBTC? How much of the inflows are from new investors coming in?

Bitcoin’s future depends on the down pouring of GBTC shares to slow and new money coming into the ETFs. We need to increase the size of the pie, not just slice it differently.

This new narrative about GBTC outflows is making people bearish, and when people get bearish, I get bullish. But let’s take a look at the weekly chart to form a game plan:

If Bitcoin goes below $40.5K, I’ll be expecting it to go down to around $36K.

I’d love to buy Bitcoin there within the next 3-5 weeks if it gets there.

I would have a tight stop-loss, so this trade would have a very favorable risk to reward ratio.

However, there’s still a fair bearish counter-argument to this trade:

• GBTC outflows could continue to wreak havoc on the market

• ETF inflows could fail to meet the high expectations that got priced in last quarter

As I said in my previous report, I bought Ethereum last week because:

• ETH showed strength by reclaiming the 0.055 level on the BTC pair after underperforming BTC for over a year

• I wanted to hedge my MSTR short position

• There was a narrative that ETH could be next to get an ETF

I’m looking to close out this position. Here’s why:

Ethereum has outperformed Bitcoin this month, but is now approaching an area of resistance on both the monthly BTC pair (above) and the weekly USD pair (below).

ETH is getting rejected at the $2,500 resistance level.

I’d be bullish above $2,500, but we’re below it now. In addition, the GBTC outflows might bring Ethereum down with BTC.

I’m flat on my ETH trade but it served it’s purpose. ETH has outperformed Bitcoin, and my MSTR short trade is in significant profit.

I’m looking to lock in gains and cover my MSTR short trade soon (ideally when it hits my target) because I want to be long Bitcoin for the long-term.

However, I do think that BTC will continue to outperform MSTR, and therefore could make for a good hedge for a BTC long position.

Here’s the short version of my thesis and some links to learn more from other analysts:

• MSTR is trading at around a 20% premium to the value of the Bitcoin it holds (estimates vary by analyst because MSTR’s capital structure is weird).

• MSTR was one of the only publicly traded proxies for Bitcoin, but now there are ETFs, which are superior in many ways, so I expect money to flow from MSTR to ETFs

• MSTR shares can’t be redeemed for Bitcoin or cash equivalent like ETF shares can. Therefore, it could trade at a discount to its net asset value, like GBTC did.

Report Summary: I’m looking to buy Bitcoin if it gets to $36K and sentiment continues to get bearish.