Why we are in a Bitcoin bubble and how best to protect ourselves ?

The previous bull market was validated by two successive retests of the $28,000 mark, with institutional and historical whales twice placing an order for 1000 BTC

The average purchase price for Grayscale today is $28,000 and this is where the disaster is taking place…
We need to understand how the $GBTC asset (Grayscale Bitcoin Trust) and its “Premium” (or “Discount”) works…

Depending on the supply and demand among its investors, Grayscale will mark up by offering Premium/Discount to meet the demand and to protect itself by hedging its positions.
The main problem for Grayscale is to balance the GBTC between several investors in order to avoid the risks of a Premium or Discount surge…

And this is where the problem starts. They have failed in the area of a healthy distribution of GBTC among their investors, so that today, the fact that AIM (Ark Invest. Management) wants to decrease its exposure to BITCOIN plunges the GBTC discount to a record high…

The delta is widening day by day with a monthly balance of -764k shares between all mutual funds at Grayscale — taking the GBTC dangerously close to a record discount of -30%

What is the problem?
The average cost of BITCOIN for Grayscale is $28,000 +/-, they are currently selling it to their shareholders for $38,750 at a -29.19% discount (i.e. a net price of $27438.87)

So at a loss … and this while having AIM continue to drop its positions …

So, the market has never been so close to an implosion for two reasons:

1°) The bull-market 2020/2021 was done in a “non-organic” way, the BTC was pushed by the institustionals and the whales on the futures market…they cashed in their PERP positions and then went buy spot

2°) The current PERP fundings to encourage buying are ridiculous

We have never seen such ridiculous PERP fundings on PERP contracts with enough to break liquidation records…
There is no incentive for pro buyers to position themselves for a simple reason: There are none! (the PERP market is basically designed for PROs)

Most insiders understand the bomb that awaits us when Grayscale has no choice but to drop its positions!
All the hard caps are content with intraday and have no exposure to the crypto majors right now.

We have to watch if Grayscale’s attempt to switch to ETFs to dilute its shares goes through or not. As we can see in this tweet: the reaction of the regulator was not long in coming….

If they haven’t had done that ,they would have necessarily dragged us down given their exposure to bitcoin, which remains the king of the market… A case to be followed but which promises to cause a stir

For the moment, be careful with your exposure and turn to protocols that pay very well in stablecoin farming. Crypto projects with a real ecosystem that can survive a potential Bitcoin crash are also able to largely outperform the upcoming turmoil of the derivatives markets. (Ex. tokens with barter value on physical products/services, ultra innovative services backed with strong underlying assets like “new energies” etc…)

Our best recommendation is to farm your bitcoin and/or hold it in cold wallets until the scarcity phenomenon from the previous halving takes effect and futures contracts are annihilated by the reallocation of liquidity to media less subject to market turbulences

Author : Olivier S. Lemoine

https://www.linkedin.com/in/olivierlemoine/

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