BY MARK SEBASTIAN
January 15, 2024
Hey Traders,
This is a chart of the Greyscale Bitcoin Trust since 10/1/2023
On Thursday November 10th, BTC ETF’s listed…
The novice is thinking…Bitcoin to the moon…but that is not what happened, instead Thursday represented a reversal for Bitcoin.
The physical looks much the same as the Greyscale Trust:
Bitcoin is back to where it was at the start of the year.
There are those on twitter that will tell you that the game is rigged…well…they aren’t completely wrong…but in this case…they mostly are.
So what happened? Why is bitcoin down? The story you might here from reporters is that this is a ‘sell the news’ event…In some ways it is.
But what you are seeing is structural.
Take a look at the run BTC had from the end of September through the launch. The asset went borderline straight up.
What caused this?
There are two things:
- The lesser of the two drivers: traders speculating that BTC would become listed and that would drive up demand.
- The more important driver: The ETF’s themselves…Invsesco, Franklin Templeton…these are not poorly run firms. These firms KNEW that they were going to list BTC ETFs. They were the main driver in the rally….let me explain.
Around the end of September is when these firms figured out they were going to list these ETFs…most planned on being able to list with 500 million to 2 billion in investment assets.
This is where many get confused. Invesco doesn’t buy bitcoin AS it is issuing shares…the firm pre buys the asset. The firm PLANNED on needing to have hundreds of millions of ETF creation units available…many were pre sold.
THus…here is what really happens…
The big ETF firms get wind that they are going to win…and they will get to list the etf…
The blue line represents when the firms were likely buying…AND the smart money was jumping on board. The GREEN line is when less sophisticated buyers were buying AND the smart money was selling to the less sophisticated buyers.
The lesson here is that the big banks tend to be a step ahead, and there is a group of traders that are talking to the banks as well.
By structurally understanding how these ETFs were going to list, one could have seen this happening.
Even worse was the plays in names like COIN
We are going to analyze COIN for our Pit Report this week…you don’t want to miss what we think (reminder every week we break down a stock and release a trade…you can view our trade ideas here).
So what is next for Bitcoin ETFs and the physical itself…
For starters…in the coming weeks many of these ETFs are going to get options…
Here is the good news…I happen to be an investor in THE SOURCE for bitcoin options data, and Greg Magadini is going to be sending you analysis on Bitcoin options and what he is seeing as we lead into these listings.
Once they list…I am going to start trading options.
For Bitcoin itself…there are likely a few more days of weakness before it finds its footing. It could get to 40k and on the low end…maybe 37,000.
If it gets to 37k that is probably a floor for the asset…Ill be doing option trades to take advantage of a move to 37k because at that point it is probably oversold.
Stay tuned for the analysis of what is happening in crypto options for Greg and Myself…if you aren’t checking the mails I am sending you every day you are going to miss this important insight….
Questions about that? Leave a comment below!
Your Only Option,
Mark Sebastian
Mark Sebastian
Founder & CEO, Option Pit
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