NOT BORING ANYMORE . . .
Hold onto your hats and get ready to bust a move!
The sleeping giant has been rising very steadily. Thank you Santa Claus (aka BlackRock).
As you may recall our preferred BTC exposure has been gained through the purchase of GBTC in our regular old securities brokerage accounts. Why did we choose to use GBTC? For the enormous DISCOUNT that it provided compared to the actual amount of BTC it holds in its trust. And because that discount was just laying there for the taking, as wide as nearly 46% upon my first writing about taking advantage of the enormous opportunity.
The big news, which is now nearly actionable, is this:
The one or more spot ETF’s for buying BTC through a regular old securites brokerage accounts, are now widely expected to be approved on or about January 10, 2024. Why is that such a great big deal?
Because ETF’s are typically far more investor friendly than grantor trusts (such as GBTC) because their legal structure eliminates worries about big and persistent discounts like GBTC experienced AND because their fees are usually much lower (that is what really counts over the long run).
For example, the annual management fee charged to the GBTC trust has been 2%, where as the ETF’s will be likely charging far less than half of that amount (and perhaps as little as 0.2% which would be only 1/10 of GBTC).
So what will happen when the biggest asset managers in the world with the most and biggest clients, for the first time ever, can finally buy some exposure to BTC from the comfort of their regular old securities brokerage account without any fears about future discounts (when they want to sell) or any fears about high fees while they hodl? You can probably tell me.
Yes, good answer. That is widely expected to unleash many billions of new buying power into the BTC market. But the supply of BTC is already near its maximum 21 million coins (the amount hard coded to never be increased).
So if the maximum fixed supply of only 21 million BTC is confronted with billions of dollars in new demand from big new buyers, how does the very limited available BTC get rationed among the most serious new buyers?
So now say it again, what has to happen to the price to bring out enough sellers to satisfy all of the new demand from the new buyers?
Bingo! It must rise, and likely very dramatically so.
And the anticipation of all of that new demand explains why BTC and GBTC have been so rapidly rising in price while the GBTC discount has so quickly shrunk down to less than 6% as of this writing on 12/23/2023.
That also provides the perfect segue to our first caveat and our first new plan of action. Is it possible that the big BTC move up of more than 52% (with GBTC up more than 92% since the time of my August 6, 2023 article), was all of the price increase needed to bring out adequate amounts of new sellers to satisfy the new demand? If that is the case, the actual approval expected on January 10, 2024 could turn out to be a rather anti-climactic yawner that leads to disappointment and selling.
We need to brace ourselves for that possibility, because any selloff could become quite steep and deep. And if you have been thinking of selling some (or planning to sell some) at anytime in the near future, then the time of the New York Stock Exchange opening bell (or time closest to the time of SEC approval of the ETF’s), may present the best prices we will see for a few weeks or months.
But, in general, I am not selling. Because I believe that it is somewhat more likely that, as the big new money continues bidding to get in, the price will continue to grind higher on the hardest asset ever created.
However, more specifically, I do plan on selling around 10% of my GBTC and using those proceeds to buy an equivalent amount of the new BlackRock fund (with the anticipated symbol of IBTC).
Why? Because while GBTC’s trust manager, Grayscale, will likely be reducing its fees somewhat to be competitive in the new ETF world, there is no guarantee of that, and further they will be unlikely to match one of the low-fee kings like BlackRock. That could lead to a big decline unique to GBTC while IBTC gets the opposite boost. That is why I will immediately sell 10% of my GBTC and use those proceeds to buy IBTC, until I see more of how the whole potentially high drama looks to play out. Will keep you posted on that as it becomes clear.
That’s all on that topic for now.
Many thanks again for following!
Apologies for my long silence. I have been steeped in research for the next phase of this topic. It is important to note here that only self-custody BTC (not its derivative ETF’s or trusts), gives the hodlr the opportunity to enjoy the full potential (not just price) of all that BTC has to offer. But self-custody is very daunting and dangerous in many ways, even regardless of what some others may say. So I want to first learn how to avoid the many pitfalls to really do it right. But I have found that is no easy feat, and I am still digging to find the right answers.
I promise to write about the most useful findings when found!
Garry
LEGAL DISCLAIMER:
Nothing written here is advice of any kind. For financial advice it is recommended that you consult with a Registered Investment Advisor. Rather, this is information and speech including the (possibly clueless) opinions of the author for education and/or entertainment purposes only.
