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JPMorgan is finally awakened to the #BTC 
contango trade & issued a report on it!
TLDR: #BTC's contango will drive institutions to buy BTC, reducing its supply and creating a virtuous cycle that drives BTC's price higher.
The trade is another reason $GBTC's premium stays -ve.
contango trade & issued a report on it!TLDR: #BTC
's contango will drive institutions to buy BTC, reducing its supply and creating a virtuous cycle that drives BTC's price higher.The trade is another reason $GBTC's premium stays -ve.
1/ What's the #BTC 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.
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.
2/ The #BTC contango exists because of:
1. Difficulty in obtaining #BTC exposure
2. Long time to unwind futures position to free up capital (quarterly duration)
3. Counterparty risk if trade is done between different exchanges
contango exists because of:1. Difficulty in obtaining #BTC
exposure2. 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's premium is in double digits, the arbitrage trade is to borrow #BTC 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 + interest.
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 + interest.
3b/ Once $GBTC's premium flips to -ve, institutions switch over from the GBTC arb trade to #BTC 's contango. The big jump in BTC futures OI is a sign of this institution switch over.
GBTC's premium won't flip to +ve unless Grayscale
its fees/its parent buys back GBTC shares.
's contango. The big jump in BTC futures OI is a sign of this institution switch over.GBTC's premium won't flip to +ve unless Grayscale
its fees/its parent buys back GBTC shares.
4a/ What are the implications as more institutions enter the #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's price could skyrocket.
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
's price could skyrocket.
4b/ Supply of #BTC is reduced as they're locked up in the trade. The price of #BTC will be bid up as more institutions enter the trade.
Mimesis Capital has a piece that the #BTC contango could create a massive black hole to suck up capital and drive #BTC 's price to the moon.
is reduced as they're locked up in the trade. The price of #BTC will be bid up as more institutions enter the trade.Mimesis Capital has a piece that the #BTC
contango could create a massive black hole to suck up capital and drive #BTC 's price to the moon.
5/ What'd break #BTC 's contango?
Both JPMorgan & Mimesis Capital have good points on this:
a. Emergence of #BTC ETFs that allow for an efficient arb trade to normalize returns
b. Old whales sell #BTC in volume
c. Institutions take profit
d. Central banks cut back money printing
's contango?Both JPMorgan & Mimesis Capital have good points on this:
a. Emergence of #BTC
ETFs that allow for an efficient arb trade to normalize returnsb. Old whales sell #BTC
in volumec. Institutions take profit
d. Central banks cut back money printing
Conclusion: The #Bitcoin contango trade is definitely a fuel to propel #BTC 's price higher in its current bull phase.
More institutions will wake up to this trade and participate in it to drive #BTC's price to 6-digits.
Ref: https://bitcoinmagazine.com/markets/jpmorgan-eyeing-bitcoins-contango-releases-bullish-report https://twitter.com/IIICapital/status/1378335129827860480
contango trade is definitely a fuel to propel #BTC 's price higher in its current bull phase. More institutions will wake up to this trade and participate in it to drive #BTC
's price to 6-digits.Ref: https://bitcoinmagazine.com/markets/jpmorgan-eyeing-bitcoins-contango-releases-bullish-report https://twitter.com/IIICapital/status/1378335129827860480
