GBTC Craters During The Bitcoin Price Spike

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Trading futures calendar spreads is a good way to express a long or short opinion an underlying index or commodity, without the volatility and margin requirements of a fully directional naked future contract.

We are using Interactive Brokers IB to trade future calendar spreads, but many other future brokers offer this. This bull future spread means long a front month future contract, and short a back month future contract. This is the exact logical opposite of trade entry. Before you place any real trades here it is highly recommended use the IB demo trading mode of Paper Trading. The IB future trading interface is gbtc advanced chartbitcoin investment trustseeking alpha non intuitive and requires a reasonable learning curve to fully understand what futures positions are being represented.

Trade Entry was on 27th Feb These are screenshots of entering the order from the demo system. For some historical gbtc advanced chartbitcoin investment trustseeking alpha, this is the 1 year chart of the spread: This is where to select the relevant menu item from the SpreadTrader utility: This is how to select the front month and back month.

As we are sellingmake sure the limit price starts higher than current Ask. Followed by this order display: Walk down the limit price downwards because we are selling by 0.

This trade update was on 18th April to enter a GTC order to allow possible trade exit after the time frame for the 30 day rule has elapsed. Identify the long future leg in the front month from the Account Positions, and select Contract Description menu:. Review the contract description and note the symbol. In this case the symbol is NGM8. Verify that the futures contract named month and actual expiration date are as expected.

Repeat process for the gbtc advanced chartbitcoin investment trustseeking alpha future leg in the back month from the Account Positions, and select Contract Description menu: In this case the symbol is NGQ8.

Now look at the chart to identify a target exit price. Now create limit order exit trade to Buy. Right click on the chart and select Buy and drag down the line significantly underneath the chart. To exit this trade need to sell the near month that is long Jun gbtc advanced chartbitcoin investment trustseeking alpha position and buy gbtc advanced chartbitcoin investment trustseeking alpha the far month that is short Aug 18 position.

IB defines this exit trade as a Buy 1 Calendar Spread. Since we are buying, start limit order with a low limit price, so that it can be cancel and corrected updated multiple times to achieve a better price. In this example started at 0. See the screenshots below for an example order. Looking at the chart, trying to achieve the lowest price makes sense, as we wish the difference between the near month Jun 18 and far month Aug 18 to shrink not expand.

This can be a good gbtc advanced chartbitcoin investment trustseeking alpha cancelled GTC order that can be hung out there until a price gbtc advanced chartbitcoin investment trustseeking alpha is achieved — historically there seems to be support at 0. If you want to get an immediate fill on a trade exit today, then just cancel and correct the order in 0. Alternatively you can leave the order out there for the trading day to see if anyone nibbles at it, then get more aggressive on closing it nearer the end of the day.

In theory most futures calendar spreads are mean reverting, so we are looking for a move back towards the long gbtc advanced chartbitcoin investment trustseeking alpha mean to capture some gain. To recap the GBTC is an investment trust whose price is tied to bitcoin. The historically high premium to the actual underlying bitcoin price is the main reasoning for selling our GBTC position and replacing it with bitcoin and etheruem products that can replicate similar exposure without that premium.

This trade was IRA eligible so there was no issue of paying extra capital gains by selling after 11 months instead of waiting for 12 months for long term capital gains to kick in. The charts below gbtc advanced chartbitcoin investment trustseeking alpha an European based Bitcoin fund SE: This clearly shows that throughout people have been prepared to pay gbtc advanced chartbitcoin investment trustseeking alpha huge premium to own bitcoin in their US based brokerage account.

GBTC Feb 1 year trailing premium. GBTC Feb 3 month trailing premium. Combined with bullish Bitcoin price action and inflated premium, the GBTC price gbtc advanced chartbitcoin investment trustseeking alpha moved up strongly. The premium trades aggressively higher on rallies and lower on sell offs. This behaviour has the effect of amplifying trading extremes, but increasingly makes it a less reliable buy and hold product. Once that was announcement was negativethe GBTC premium returned with a vengeance.

By comparison the Bitcoin tracker fund premium was 0. Additionally gbtc advanced chartbitcoin investment trustseeking alpha is a 2. The Bitcoin tracker fund management fee is 2. This is amazing given that the stated aim of the products is identical — the GBTC out performance results are exclusively due to premium.

For reference here are the Bitcoin and Ethereum products available that trade in Europe but can be traded in a US based brokerage account. These products do not have a huge premium to spot bitcoin and are IRA eligible.

Bizarrely the swedish Krona product has the higher volume, over the Euro based product. All of these fund products introduce some currency risk exposure, but that is likely less to be way less variable than the GBTC premium risk. This risk management part was not poor trading, but the management of the resulting price action in can be improved — as discussed below.

This is not purely hindsight — it was clear the short term nature of the blow off top, even during Dec Therefore about shares of GBTC buys approximately one bitcoin, but the book value is about shares. That does not mean GBTC price cannot rise further, or the premium increase more in That is a very hefty premium to spot.

Since shares of GBTC represents approximately 1 Bitcoin, these trading approaches could be taken:. This maintains bitcoin only gbtc advanced chartbitcoin investment trustseeking alpha. This has created a slightly gbtc advanced chartbitcoin investment trustseeking alpha diversified crypto portfolio — but still fully invested in crypto, with no cash on hand. This gives a less aggressive portfolio because it keeps some cash on hand in case of a pull back.

Sell GBTC and maintain cash to wait for a big pullback to invest. If you are a believer in the long term crypto currency bull, this is arguably the biggest opportunity risk — crypto prices are hard to predict and can be notoriously bubbly — so it having exited once at lower prices it is hard to reestablish at significantly higher prices.

However there need to be discipline to recognize when that the GBTC trade now has premium risk outside of just Bitcoin spot price risk. That risk can be resolved by selling GBTC and buying bitcoin tracker funds. This is gbtc advanced chartbitcoin investment trustseeking alpha necessarily a price extreme for bitcoin, but a potentially a premium extreme in GBTC.

Still bullish on bitcoin and crypto assets for the next few years, however GBTC may not prove to be a good long term buy and hold product due to the premium. In summary this is not purely a bitcoin play, but has become a play on the premium investors are prepared to assign for the convenience of exchange traded bitcoin product. Importantly selling GBTC is a not a bearish call on bitcoin or crypto in general, just trying to avoid being the last one out when playing musical chairs with the premium trade.

This is a bitcoin investment trust premium idea from seekingalpha. GBTC is an investment trust whose price is gbtc advanced chartbitcoin investment trustseeking alpha to bitcoin, with an extreme caveat that historically it has traded as sometimes astronomical premiums to the actual bitcoin price. The chart below clearly shows people have been prepared to pay a huge premium to own bitcoin in their brokerage account. The chart is not easily available online.

Note that each individual GBTC share represents 0. These are some highlights from the chart: It currently trades on OCTBB and if it moves off the bulletin board this should improve product liquidity and investor access. GBTC premium might trend up in anticipation of this a few months out from the announcement something to watch. Excitingly it is now possible to lend out your Monero and other crypto currencies to other investors. Crypto currency lending is a bit like peer to peer lending for crypto, but the lending purpose is exclusively for other customers margin requirements so not diversified.

Lending crypto currency needs to be done via a crypto currency exchange where your currency is loaned to other exchange customers so that they can establish short or margin long crypto currency trading positions.

This article chiefly considers lending out Monero XMRbut the principal applies to any other crypto currency that allows exchange lending.

The rates on exchanges are typically quoted in daily returns, so a daily rate of 0. An example annual to daily interest rate calculator is here no affiliation. We use Poloneix for lending, and find it gives good liquidity and relatively simple trading interface and order book.

As of October to our knowledge, no one has ever lost significant money lending Monero or any crypto currency on poloniex or other exchanges so far. The attractive returns are not just a free lunch. Here are some basic risks…. The main issue with exchange lending is it assumes that the exchanges algorithm for exiting customers out of their margined positions will not result in major loss.

Essentially when lending on the exchange, your xmr is loaned to other exchange customers so that they can establish short or margin long positions. As usual for margin trading the exchange requires some capital level to be maintained in a customers exchange account, for the duration of their short or margin trade.

If the crypto currency market moves against the customers positions and they no longer have the margin capital required to maintain their position, then the position will be exited by the exchange. This will likely be at gbtc advanced chartbitcoin investment trustseeking alpha sizable customer loss.

The theory is that the exchange has modeled the maximum likely amount capital required across ALL customers to meet an extreme move. In theory the crazy moves should occur rarely and the exchange should be able to control any loses by forcing customers to liquidate their positions in real time. Basically they can take out multiple customers over their margin limit, but in theory not all customers at the same time should be affected in theory!

However in practice these huge moves tend to happen more frequently than the statistics would predict. A good recent real life example is when the Swiss franc move meant several foreign exchange FX trading firms had to eat a few million of customer losses. This was in the FX currency market, but the principal could easily apply to crypto currency lending.

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Hero Member Offline Posts: Mixing reinvented for your privacy Chip Mixer. Summary Gbtc Bitcoin Investment Trust Bitcoins are not covered by insurance, and the current insurance situation is explained.

This is why I say so: Instead, gbtc need bitcointalk look at the Xapo Bitcointalk. What is the problem? It is one of the few legitimate options like this out there. Up, Down and Sideways. Thanks again for your quality work and precision, it is appreciated. They opened up a site for claims, but I'm pretty sure the brokers have to use it, not individual share holders.

Insurance won't save you, and trust in Xapo Vault is required to sleep well at night. I think any of us that are in it is because it is accessible through our retirement accounts. Thanks for sharing this great advice. Does anyone know what Interactive Brokers is doing with the Bitcoin Cash distribution? I bitcointalk trust anyone but bitcointalk to manage it, but gbtc eats up a lot of time. Before I talk about the risk, let me quickly expose you gbtc Xapo.

Powered by SMF 1. Grayscale Bitcoin Investment Trust Bitcoins are bitcointalk covered by insurance, and the current insurance bitcointalk is explained. Xapo is the Bitcoin custodian of the Grayscale Bitcoin Investment Trust, which matters due to the protection and security Xapo provides. Bitcointalk Arbitrage Opportunity ," caught my attention because of this:. Since the monetary value bitcointalk holdings is substantial, and Xapo serves other customers gbtc addition to the trust, Xapo may targeted bitcointalk sophisticated cybercriminals, insiders, or other gbtc.

Without insurance, this could wipe out the value of GBTC shares. Before Bitcointalk talk bitcointalk the risk, let me quickly expose you to Bitcointalk. The public view goes like this:. Keep the bitcoins you want to use for daily spending in your Xapo Wallet, and the bitcoins you want to store gbtc your secure Xapo Vault.

The Xapo Gbtc has no delays bitcointalk geographical limitations. There is gbtc fee for receiving an external transaction less than this specific limit and the Xapo Wallet is also linked directly to the Xapo Debit Card - the world's first bitcoin debit card!

If the Xapo Debit Card is available in your country then you can spend your bitcoins at any online or offline establishment that accepts Visa. While that doesn't tell us much about Xapo's relationship gbtc GBTC, it does give us a view into some of the things that Xapo provides.

Instead, we need to look at the Xapo Vault:. The Vault is Xapo's core product. The Vault has become the preferred gbtc solution of many of the largest institutions and individuals in the world gbtc it holds one of the largest stores of bitcoins bitcointalk existence. The Vault caters to large and small holders of bitcoin who need highly secure and diversified measures to protect their holdings.

The Vault is based in Three gbtc continents: America, Europe, and Oceania. Additional locations are being evaluated to diversify any geographic risk. A team with two decades of experience each in international financial and transactional gbtc developed our proprietary storage product, the Xapo Vault.

The Vault bitcointalk advanced encryption and gbtc management, multisignature bitcoin addresses, military grade physical security like faraday bitcointalk and former military bases and highly secure processes to keep bitcoins offline and geographically dispersed across three continents. I've highlighted the important parts for quick reference. Xapo provides Bitcoin security, and gbtc what we care about bitcointalk. Grayscale doesn't gbtc this on its site:.

What bitcointalk right now bitcointalk that Wesley Eddy has told us gbtc Xapo isn't able to insure its Bitcoin bitcointalk. Is that really true? That is to say, Xapo did not renew insurance coverage for its Bitcoins. That bitcointalk the truth per the quarterly report. Bitcointalk Eddy bitcointalk correct. In fact, this is further explained under Risks and Uncertainties in that same report:. Further, bitcoin transactions are irrevocable.

Gbtc or incorrectly transferred bitcoin may be irretrievable. As a result, any incorrectly executed bitcoin transactions could gbtc affect an investment in the Trust. We need to assume that the Bitcoins that Xapo holds are at risk. To make matters worse, if there is hacking and the Bitcoins "move," it's pretty much impossible gbtc get them back because those transaction are irrevocable. Being digital, Bitcoins are significantly easier to "move" and bitcointalk so that's bigger risk than, let's say, some kind of gold or silver backing a trust.

In any event, I think it's gbtc for gbtc to just gbtc per the GBTC quarterly bitcointalk ending June 30th,that there's a lack of insurance. Xapo has an excellent article on this exact topic on gbtc blog:. For reference regarding deep cold storage:. Deep cold storage, however, is a type of bitcointalk storage where not only are bitcoins stored offline, but also the system gbtc holds the bitcoins were never online bitcointalk connected to any kind of network.

The private keys associated with that system were generated in offline bitcointalk, and the signing process of the transactions is also made in bitcointalk systems.

The systems used in gbtc type of storage never touch the Internet; they are created offline, they are stored offline, and they are gbtc when signing transactions. Gbtc cold gbtc has online gbtc, but deep bitcointalk storage is "extremely" bitcointalk, so to speak; Bitcoin storage gbtc were never online. And here's more about what Xapo is doing to circumvent the insurance issues that spills over to GBTC.

The gbtc policies kept getting narrower and narrower, covering less and less risk. We eventually gbtc that the insurance policies were not covering bitcointalk significant risk and we decided not to gbtc the insurance.

Instead, we implemented the Xapo Bitcoin Reserve. The Xapo Bitcoin Reserve is an amount of bitcoins that Xapo owns and keeps in deep cold storage; the Reserve encompasses an amount of bitcoins that is bigger than the funds kept in our hot wallet bitcointalk any given time. As such, we are gbtc self insuring against a hack of our hot wallet.

If our hot wallet bitcointalk hacked Xapo would cover the loss for its customers gbtc full. We know that Xapo has no gbtc.

We also know that security is all about Xapo deep cold storage. This gbtc of security is generally robust gbtc fairly redundant. The only immediate and bitcointalk risk to deep cold-stored Bitcoins gbtc be employees of Xapo, or others who might otherwise have direct physical access.

Ultimately, confidence in the Bitcointalk in GBTC is directly tied to the trust you have in the security of the Xapo Vault and its deep cold storage. If you bitcointalk this, I only ask that you click the "Follow" bitcointalk. I am always looking to learn from others bitcointalk to increase my circle of friends here on Seeking Alpha. I appreciate your feedback and your comments. I wrote gbtc article myself, and bitcointalk expresses my own opinions.

I am not receiving compensation for it other than from Seeking Alpha. I have no business relationship with any company whose stock is mentioned in this article. Summary Grayscale Bitcoin Investment Trust Bitcoins are not covered by insurance, and the current insurance situation is explained.

An Arbitrage Opportunity ," caught my attention because of this: The public view goes like this: With Xapo, you gbtc buy, transact, store, manage and spend gbtc bitcoins.

Instead, we need to look at the Xapo Vault: Seeking Alpha bitcointalk for exclusive articles. Payment calculations gbtc based on a combination of coverage area, popularity and quality. Want to share your opinion on bitcointalk article? Bitcointalk with this article? To report a factual bitcointalk in this article, click here. The chat platform is currently undergoing maintenance. To see the chat, try to refresh bitcointalk about minutes. Chat is not supported in your browser version.

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