25th January 2024 > > The CCC is back!

tl;dr

The interregnum is over. Some squiggly line forecasts fail to prove their worth, highlighted by the reasons behind the recent minor sell-off in BTC, reasons beyond the ken of technical analysis.

Market Snap

Market Wrap

Reclaiming the psychologically important level of $40k as the CCC goes to print for the first time in ten days could possibly be taken as a portent of future fortune.

Occasional Series – Interregnum

After an ultimately futile search for a suitable location for the second overseas Curious Cryptos’ office taking in as diverse locations as Mae Rim, Pai, Chiang Mai, Sydney, Hunter Valley, Melbourne, Bangkok, and Les Houches, the board has decided to stick with the current locations of London and Knoydart.

The good news is that this means the CCC publication schedule is back on track from today, which is rather fortunate given the likely fillip to crypto prices as a result.

Curious Cryptos’ Commentary – We all love squiggly lines

Price action in the last two weeks demonstrates the futility of the squiggly lines above – they don’t mean a thing.

We were told this nearly a century ago: (https://www.youtube.com/watch?v=qDQpZT3GhDg).

Curious Cryptos’ Commentary – ETF flows

There is an obvious reason for the recent (short-term in my opinion) price weakness – more sellers than buyers:

GBTC, the Grayscale Trust that converted to an ETF, is losing assets at a rapid pace for three simple reasons. Firstly, fees at 2% are nearly 10x higher than the competition. Secondly, given that the discount to NAV has moved from 50% to zero, holders of GBTC have seen 430% gains compared to 170% gains by holding BTC over the last year. Finally, nearly $1bn of the GBTC outflows are linked to the asset recovery process around the FTX fiasco, a one-off event that will end at some point.

This selling is therefore not unexpected.

What has come as a surprise is the seeming lack of enthusiasm on the buyside. This probably also surprises all the sponsors of BTC ETFs. But it is worth stepping back a little and looking at the numbers in a different light.

Ignoring GBTC, nearly $5bn of cash has flowed into the BTC market, equivalent to approximately 125,000 BTC in eight days of trading. That’s more than 0.5% of the total BTC supply.

So, let’s make some assumptions to see what that might mean. First up, I suspect that 50% of the GBTC sells are recycled into the other ETFs, and 50% is leaving the BTC market, at least for now. If the other inflows maintain a steady rate, then every month 1% of the total BTC supply is locked up in these new ETFs. Currently about 0.12% is added via the mining process each month, soon to be reduced to 0.06%. Economics 1.0 tells us what happens in that scenario, a lesson that the UK Treasury mandarins are yet to take seriously, but that’s a discussion for another day.

These figures alone suggest a rosy future for BTC.

But in my head – and I know there are many out there who disagree with me – the inflows from institutions are only just starting up. They will grow over time. The reason I say this is that there is a herd mentality amongst many of the older TradFi firms. The image of swashbuckling traders fuelled by champagne and other substances is very far from the mundane reality of most risk-taking institutions.

In other words, you ain’t seen nothing yet.