Blockstream Markets Weekly — July 23, 2021

ARK and Rothschild Investment buy the dip, BNY Mellon and State Street back new trading platform, JPM’s $630B wealth division opens GBTC to clients, Elon says SpaceX owns BTC, Tesla likely to reinstate BTC payments, and BTC bounces as sentiment falls to extreme fear

By Jesse Knutson

What’s happening in the markets?

Appetite for risk

Bitcoin is on pace to end on the top end of the week‘s range, bouncing after a brief drop below the $30,000 mark.

Overall risk sentiment looked to tick higher with equities shaking off mixed economic data, the USD stalling a bit after touching on a 16 week high, commodities recovering from a drop earlier in the week, and Bitcoin on pace for the best weekly gain in more than a month.

Return of the instos

Headlines showed follow through on last week’s institutional participation theme with reports that custody giants BNY Mellon & State Street were backing a new digital asset trading platform, JP Morgan reporting strong demand for Bitcoin exposure, titans of finance Paul Tudor Jones and Alan Howard investing in trading platform FTX, and Elon Musk indicating Tesla would likely reinstate Bitcoin payments and revealing that SpaceX has also established a Bitcoin position.

GBTC unlock death spiral

The GBTC discount looks to be fairly stable at ~ -11% vs NAV despite an estimated $550M of shares unlocking on July 18.

While there doesn’t seem to be any reason why a decrease in the price of GBTC shares should translate over to the price of Bitcoin, the past couple of weeks have seen a lot of speculation that the unlock would drive both Bitcoin and GBTC prices lower.

It looks like unlock selling could be offset by institutional and high net worth buying, though, with reports ARK Invest had increased its total position to more than 8.8 million shares, Rothschild Investment tripling their GBTC exposure, and JP Morgan’s $630B wealth management division opening GBTC trading to their private wealth clients.

Warming up

Volatility showed signs of life this week, with Bitcoin briefly dropping below the $30,000 mark before rallying to end at the top end of the week’s range.

Given expanding open interest, still negative funding rates, futures trading at a discount, and one of the lowest fear and greed prints on record, the market as a whole is positioned for further declines.

Maximum pain is for Bitcoin to do the opposite.

Technically, some interesting green shoots are developing including a bullish flip on the MACD and a tentative breakout of the YTD RSI downtrend.

That said, Bitcoin has a gauntlet of resistance sitting just above the current level with the 50-day moving average and the bulk of two months of volume sitting right around the $34,000 level.

We’re probably in for an interesting couple of weeks of trading. Over the last 600 days, the average 20-day move out of volatility as low or lower than recent levels is 26%. Up or down, I think we might just be getting started.

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Bitcoin markets news

Blockstream launches Greenlight — making lightning nodes easy

  • The new service provides simple, secure access to the Lightning Network, allowing anyone to spin up their Lightning node in the cloud while retaining complete control over their funds

Custody giants BNY Mellon & State Street join BTC trading platform

  • The notoriously anti-Bitcoin Financial Times notes that this represents

“…a move that points to growing demand from traditional asset managers for bitcoin and other digital tokens…”

  • Bank of New York Mellon has joined the consortium of six banks behind the launch of London-based Pure Digital, three months after State Street became the first to announce its support for the exchange
  • Pure Digital has secured a license from regulators in Bermuda
  • The exchange’s first trade will be a BTC trade sometime this week

ARK Invest buys the dip with Coinbase, GBTC and Square buys

  • Added an additional ~$8M of GBTC shares, $54M of Square, and ~$17M of Coinbase

Rothschild Investment triples GBTC position

  • A recent SEC filing shows that total GBTC exposure has increased from 38,346 in 1Q21 to 141,405 as of this week

JP Morgan opens Bitcoin products to all wealth clients

  • Advisors in JPM’s $630B wealth management division can now accept orders to buy and sell five crypto products including Grayscale’s Bitcoin Trust, Bitcoin Cash Trust, Ethereum Trust, Ethereum Classic products, and Osprey Funds’ Bitcoin Trust

JP Morgan: Demand for Bitcoin is high

  • Mary Callahan Erdoes, J.P. Morgan Asset & Wealth Management CEO says that most JP Morgan clients see Bitcoin as an asset class

Tesla, Space X, and Elon all hold Bitcoin

  • Elon Musk revealed in a panel discussion with Jack Dorsey and Cathie Wood this week that Tesla, SpaceX, and his personal account all have Bitcoin exposure
  • Elon also mentioned that Tesla would most likely resume accepting Bitcoin as a payment method

Paul Tudor Jones, Alan Howard invest in FTX

  • The trading platform announced this week that it had successfully raised US$900M at an $18B valuation
  • Interestingly, outside of normal VC investors, the exchange also secured investments from titans of finance Paul Tudor Jones and Alan Howard (Co-founder of Brevan Howard Asset Management)

Iris Bitcoin looks to raise $200M ahead of Nasdaq listing

  • Iris Bitcoin is a Sydney Australia based Bitcoin miner
  • The company’s flagship project is a 50MW data center in British Columbia, Canada

SEC Commissioner Hester Peirce: It’s time for a Bitcoin ETF

  • Pierce has been a long-time proponent of a Bitcoin ETF and has been one of the few dissenting opinions in rejected bitcoin ETF applications.

“…I would never have imagined that I would be in this situation where we would not yet have approved one and other countries are moving ahead…”

Charts

MACD flips positive, RSI breaks out of down trend

  • RSI looks like it’s broken above the downtrend it’s been stuck in for most of this year
  • MACD is also back in the green this week

Low volatility is normally followed by bigger price moves

  • Over the past 600 days, there have only been five occurrences of volatility (Bollinger bandwidth) as low or lower than recent levels
  • The average price move from the trough in volatility over the following 20 days (up or down) is ~ 26%
  • Think this means we haven’t seen the end of volatility yet

Extreme Fear

  • The Bitcoin sentiment index dropped to 10 this week, one of the lowest readings on record

Chart credit: Crypto Fear & Greed

The most concise roundup of Bitcoin market action in the industry.

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