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JPMorgan is finally awakened to the #BTC 
https://abs.twimg.com/hashflags... draggable="false" alt=""> contango trade & issued a report on it!
TLDR: #BTChttps://abs.twimg.com/hashflags... draggable="false" alt="">& #39;s contango will drive institutions to buy BTC, reducing its supply and creating a virtuous cycle that drives BTC& #39;s price higher.
The trade is another reason $GBTC& #39;s premium stays -ve.https://abs.twimg.com/emoji/v2/... draggable="false" alt="🧵" title="Thread" aria-label="Emoji: Thread">
TLDR: #BTC
The trade is another reason $GBTC& #39;s premium stays -ve.
1/ What& #39;s the #BTC https://abs.twimg.com/hashflags... draggable="false" alt=""> contango trade?
The trade exists because BTC futures (not perpetual swaps) price is higher than its spot price. The current annualized premium for the 6/21 contract is from 15.1%-49.4%!
The trade is to buy spot BTC and short BTC futures to pocket the premium.
The trade exists because BTC futures (not perpetual swaps) price is higher than its spot price. The current annualized premium for the 6/21 contract is from 15.1%-49.4%!
The trade is to buy spot BTC and short BTC futures to pocket the premium.
contango trade?The trade exists because BTC futures (not perpetual swaps) price is higher than its spot price. The current annualized premium for the 6/21 contract is from 15.1%-49.4%!The trade is to buy spot BTC and short BTC futures to pocket the premium." title="1/ What& #39;s the #BTC https://abs.twimg.com/hashflags... draggable="false" alt=""> contango trade?The trade exists because BTC futures (not perpetual swaps) price is higher than its spot price. The current annualized premium for the 6/21 contract is from 15.1%-49.4%!The trade is to buy spot BTC and short BTC futures to pocket the premium." class="img-responsive" style="max-width:100%;"/>
2/ The #BTC https://abs.twimg.com/hashflags... draggable="false" alt=""> contango exists because of:
1. Difficulty in obtaining #BTChttps://abs.twimg.com/hashflags... draggable="false" alt=""> exposure
2. Long time to unwind futures position to free up capital (quarterly duration)
3. Counterparty risk if trade is done between different exchanges
1. Difficulty in obtaining #BTC
2. Long time to unwind futures position to free up capital (quarterly duration)
3. Counterparty risk if trade is done between different exchanges
3a/ When $GBTC& #39;s premium is in double digits, the arbitrage trade is to borrow #BTC https://abs.twimg.com/hashflags... draggable="false" alt=""> to subscribe to GBTC shares. These shares have a 6 mo. lock-up. When the lock-up expires, sell the shares on the OTC market usually for a premium and pay back the lender of #BTC https://abs.twimg.com/hashflags... draggable="false" alt=""> + interest.
3b/ Once $GBTC& #39;s premium flips to -ve, institutions switch over from the GBTC arb trade to #BTC https://abs.twimg.com/hashflags... draggable="false" alt="">& #39;s contango. The big jump in BTC futures OI is a sign of this institution switch over.
GBTC& #39;s premium won& #39;t flip to +ve unless Grayscalehttps://abs.twimg.com/emoji/v2/... draggable="false" alt="⬇️" title="Pfeil nach unten" aria-label="Emoji: Pfeil nach unten">its fees/its parent buys back GBTC shares.
GBTC& #39;s premium won& #39;t flip to +ve unless Grayscale
& #39;s contango. The big jump in BTC futures OI is a sign of this institution switch over.GBTC& #39;s premium won& #39;t flip to +ve unless Grayscale https://abs.twimg.com/emoji/v2/... draggable="false" alt="⬇️" title="Pfeil nach unten" aria-label="Emoji: Pfeil nach unten">its fees/its parent buys back GBTC shares." title="3b/ Once $GBTC& #39;s premium flips to -ve, institutions switch over from the GBTC arb trade to #BTC https://abs.twimg.com/hashflags... draggable="false" alt="">& #39;s contango. The big jump in BTC futures OI is a sign of this institution switch over.GBTC& #39;s premium won& #39;t flip to +ve unless Grayscale https://abs.twimg.com/emoji/v2/... draggable="false" alt="⬇️" title="Pfeil nach unten" aria-label="Emoji: Pfeil nach unten">its fees/its parent buys back GBTC shares." class="img-responsive" style="max-width:100%;"/>
4a/ What are the implications as more institutions enter the #BTC https://abs.twimg.com/hashflags... draggable="false" alt=""> contango trade?
The size of the global fixed income market is >$120T. Most bonds are yielding single digit or negative returns. If only a fraction of that pursue the contango trade, #BTChttps://abs.twimg.com/hashflags... draggable="false" alt="">& #39;s price could skyrocket.
The size of the global fixed income market is >$120T. Most bonds are yielding single digit or negative returns. If only a fraction of that pursue the contango trade, #BTC
contango trade?The size of the global fixed income market is >$120T. Most bonds are yielding single digit or negative returns. If only a fraction of that pursue the contango trade, #BTC https://abs.twimg.com/hashflags... draggable="false" alt="">& #39;s price could skyrocket." title="4a/ What are the implications as more institutions enter the #BTC https://abs.twimg.com/hashflags... draggable="false" alt=""> contango trade?The size of the global fixed income market is >$120T. Most bonds are yielding single digit or negative returns. If only a fraction of that pursue the contango trade, #BTC https://abs.twimg.com/hashflags... draggable="false" alt="">& #39;s price could skyrocket." class="img-responsive" style="max-width:100%;"/>
4b/ Supply of #BTC https://abs.twimg.com/hashflags... draggable="false" alt=""> is reduced as they& #39;re locked up in the trade. The price of #BTC https://abs.twimg.com/hashflags... draggable="false" alt=""> will be bid up as more institutions enter the trade.
Mimesis Capital has a piece that the #BTChttps://abs.twimg.com/hashflags... draggable="false" alt=""> contango could create a massive black hole to suck up capital and drive #BTC https://abs.twimg.com/hashflags... draggable="false" alt="">& #39;s price to the moon.
Mimesis Capital has a piece that the #BTC
is reduced as they& #39;re locked up in the trade. The price of #BTC https://abs.twimg.com/hashflags... draggable="false" alt=""> will be bid up as more institutions enter the trade.Mimesis Capital has a piece that the #BTC https://abs.twimg.com/hashflags... draggable="false" alt=""> contango could create a massive black hole to suck up capital and drive #BTC https://abs.twimg.com/hashflags... draggable="false" alt="">& #39;s price to the moon." title="4b/ Supply of #BTC https://abs.twimg.com/hashflags... draggable="false" alt=""> is reduced as they& #39;re locked up in the trade. The price of #BTC https://abs.twimg.com/hashflags... draggable="false" alt=""> will be bid up as more institutions enter the trade.Mimesis Capital has a piece that the #BTC https://abs.twimg.com/hashflags... draggable="false" alt=""> contango could create a massive black hole to suck up capital and drive #BTC https://abs.twimg.com/hashflags... draggable="false" alt="">& #39;s price to the moon." class="img-responsive" style="max-width:100%;"/>
5/ What& #39;d break #BTC https://abs.twimg.com/hashflags... draggable="false" alt="">& #39;s contango?
Both JPMorgan & Mimesis Capital have good points on this:
a. Emergence of #BTChttps://abs.twimg.com/hashflags... draggable="false" alt=""> ETFs that allow for an efficient arb trade to normalize returns
b. Old whales sell #BTChttps://abs.twimg.com/hashflags... draggable="false" alt=""> in volume
c. Institutions take profit
d. Central banks cut back money printing
Both JPMorgan & Mimesis Capital have good points on this:
a. Emergence of #BTC
b. Old whales sell #BTC
c. Institutions take profit
d. Central banks cut back money printing
Conclusion: The #Bitcoin https://abs.twimg.com/hashflags... draggable="false" alt=""> contango trade is definitely a fuel to propel #BTC https://abs.twimg.com/hashflags... draggable="false" alt="">& #39;s price higher in its current bull phase.
More institutions will wake up to this trade and participate in it to drive #BTChttps://abs.twimg.com/hashflags... draggable="false" alt="">& #39;s price to 6-digits.
Ref: https://bitcoinmagazine.com/markets/jpmorgan-eyeing-bitcoins-contango-releases-bullish-report">https://bitcoinmagazine.com/markets/j... https://twitter.com/IIICapital/status/1378335129827860480">https://twitter.com/IIICapita...
More institutions will wake up to this trade and participate in it to drive #BTC
Ref: https://bitcoinmagazine.com/markets/jpmorgan-eyeing-bitcoins-contango-releases-bullish-report">https://bitcoinmagazine.com/markets/j... https://twitter.com/IIICapital/status/1378335129827860480">https://twitter.com/IIICapita...
