Is This The Bottom (Finally) For Bitcoin?

Is This The Bottom (Finally) For Bitcoin?

 

Bitcoin Reboud Ahead?
A Quantitative View


Crypto’s “Lehman Moment.”

Not exactly. 

CNN, Axios, Cointelegrahph, and countless more had the same sentiment after the FTX collapse. 

It was the major collapse that brought it all down.

And they’d use this even as a signal a bottom is finally in for Bitcoin and crypto. 

They couldn’t be more off. 

Because less than a week later crypto was slammed again. 

Over the weekend aggressive selling pushed Bitcoin down 5% and Ethereum down nearly 10%. 

Wiping away more than $25 billion crypto market total value. 

Was that Crypto’s “Lehman Moment”?

Again, probably not. 

But we are getting to a point where crypto may or may not be at a bottom, but it’s at such an extreme low it could bounce big from here. 

Because this only happens at bottoms. 
 

 

This Only Happens At Market Bottoms


There is one positive I can find about crypto. 

It’s that it is absolutely hated right now. 

Crypto is beyond out of favor. 

If I had to wager, this article will only get viewed about 20% of what an average Dynamic Wealth Research article gets. 

That’s because it’s crypto. 

No one is even interested in it. 

And that’s precisely the point. 

And crypto has reached an extreme low. 

But it’s not just a feeling or hunch. 

We’ve got data. 

It all comes from Grayscale Investment Trust (GBTC), one of the largest Bitcoin holders in the world. 

Grayscale owns just over 636,000 Bitcoins, which is about 3% of all Bitcoins in the world. 

The total value of those is $10.5 billion. 

But here’s the thing though. 

Grayscale is a public company. 

It trades under the symbol GBC on the OTC (because its regulatory position is still in the gray area).

It’s like an ETF, but it’s more like a Closed-End Fund that invests in certain defined things and will trades at a discount or premium to underlying assets. 

The last part is the key here - a discount or a premium. 

Let’s face it. It’s not easy to buy Bitcoin or crypto’s directly.

Most everyone goes through an exchange like FTX, Coinbase (COIN), or many others.  

You need a wallet that gets directly connected to the blockchain of the crypto you want. 

Most people aren’t going to do that. 

That’s where Grayscale filled a critical role. 

Grayscale allowed many investors to get direct exposure to Bitcoin as easy as buying a stock. 

As a result, Grayscale traded for a premium over its net asset value (NAV) for years. 

When it’s trading at a premium of 15%, it’s like paying $1.15 for $1.00 worth of Bitcoin. 

The increased risk of paying a premium like that is like a “convenience fee” for buying the stocks. 

Investors were more than happy to pay a premium as long they could buy and sell it in brokerage and not have cash tied up at all. 

Let alone a digital wallet, direct to the blockchain, and risks of hacking and all other crazy stuff. 

Well, the current downturn is so bad and investors are so pessimistic, the premium on Grayscale is not only gone, it’s now a huge discount. 

Check out the chart below from Ycharts which shows the premium and discount to NAV over the last five years:
 



The collapse is obvious. 

The discount is massive. 

It's the point where this is  basically like buying Bitcoins for 55 cents on the dollar. 

It’s indeed crazy. 

It’s a sign of the crazy level of bearishness around crypto at the moment. 

But it also won’t last forever.

Something's Got To Give


This is an extreme low in crypto. 

It’s definitely not necessarily the “bottom” in a Lehman moment sort of way. 

That was a liquidity-driven sell-off. 

This is not that. 

This is definitely a sell-off, but  it hasn’t been driven by liquidity. 

But here’s the thing. 

If you’re reading this, you’re on the right path. 

Crypto is beyond out of favor. 

And judging by Grayscales massive discount, sentiment can’t get much worse.

We’re not saying it’s the bottom. 

But being able to get exposure to Bitcoin through Grayscale at 55 cents on the dollar is definitely the kind of thing that’s a sign of, at least, a short-term bottom. 

So if Bitcoin bounces, it could run hard and fast from these levels. 
 

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