Since the BTC ETF trading began, Bitcoin has shown the following performance:
From a local high of $48,900 to a local low of $40,683, and currently at $41,500.Who caused such a surprise at the launch of #ETF products by companies like Blackrock, Fidelity, and Bitwise?
Here's a brief recap:
"Cobie had stated in a message that buying Bitcoin at $26K in anticipation of the BTC ETF was practically 'free money.' He was almost certain - 99% - that the BTC ETF would be approved. He expected that by the time of approval, Bitcoin would be trading at around $50K.
However, he also warned that the approval of the BTC ETF could be a trap. This event might provide an exit opportunity for investors stuck in the Grayscale BTC trust, which is holding $35B. Barry Silbert's parent company is burdened with massive debts, and they have no plans to reduce their annual 2.5% management fee.
In summary - the attempt to keep 630K BTC as hostages could lead to negative trading volumes and withdrawals from GBTC. This, in turn, might result in a 15% loss for BTC ETF buyers in the first week itself, possibly triggering a widespread 'sell the news' sentiment, significantly dragging down the market.
Cobie advised to cash in on the fair gains since August 23rd and sell a day before the BTC ETF approval."
So, who's pouring cold water on us and on TradFi $BTC ?
It's Barry Silbert and his Grayscale hostage friends.
In the first five days, the BTC ETF saw:
A positive inflow of $722M on Jan 11,$707.8M on Jan 12,$549.6M on Jan 16,$932.3M on Jan 17, and$448M on Jan 18.
Despite $2.2B in Grayscale redemptions and $3.36B in inflows, why do we observe a 17% decline in BTC?
I propose three hypotheses:
Blackrock, in their BTC ETF application, accurately predicted the inflow and were able to accumulate BTC reserves on Coinbase through affiliated partners. For each required new share issuance and BTC purchase, they are transferring pre-purchased BTC from one account to another, formally meeting their reserve requirements.FTX and bankrupt BlockFi own a significant amount of GBTC shares. For example, FTX alone has about $720M in GBTC. Moreover, Grayscale shares are part of the liquidated assets of another bankrupt entity, 3 Arrow Capital. These liquidators might have dumped their holdings to capitalize on the high demand for BTC ETFs. Grayscale's hostages are also exploiting their long-awaited chance to escape the 2.5% annual fee of Silbert's commission.From a simple mathematical perspective, the process of issuing/redistributing BTC ETF shares usually follows a T+1 schedule.
Grayscale likely anticipates their large BTC transfers to Coinbase's deposit addresses, causing market volatility and declines.
I suspect Grayscale takes a short position on futures, anticipating the scale of the next day’s redemptions.
Blackrock's partners are likely aware of these movements.
Suppose Blackrock needs to buy $200M worth of BTC the next day. If the closing price on a given day was $43,000, they'd need about 4,650 BTC.
But if they know Grayscale's redemption will be around $600M and that Grayscale will be moving 10-15K BTC, causing a negative market reaction, why should Blackrock buy at $43,000? They could wait for the market to react to the BTC influx and then buy at a panicked price, say $40,700.
The savings? They could be passed on to affiliated partners. At the right time, instead of purchasing more, they could replenish the fund with these 'accidentally' cheap bitcoins.
How long will Grayscale continue this apparent dump? The key news is that Grayscale still has 600K BTC in reserve. The early buyers of Blackrock's BTC ETF are not endlessly patient. At some point, they may realize the predicament they're in and look to convert their Blackrock shares back into considerably devalued dollars.
#tradfi #BitcoinETFapproved

Risk management is one of the most important topics you will ever read about trading!

What is risk management?

These are individual actions that allow traders to protect themselves from the downside of a trade. More risk means a greater likelihood of significant gains, but also a greater likelihood of significant losses. Therefore, the ability to manage the level of risk to minimize losses while maximizing profits is a key skill for any trader.

How does a trader do it?

Risk management can include setting the right position size, setting stop losses, and controlling emotions when entering and exiting positions.

Why does it matter?

If implemented correctly, these measures can be the difference between a profitable trade and losing everything.

Drawdown vs. recovery The number one reason most traders fail is the lack of risk management rules... Any successful trader will tell you the same thing.

As traders, we are professional risk managers. Without established risk management rules, we fail. It's simple.

Drawdown > also known as "DD" is a measure of price decline, it counts for both balance and equity (this can vary), so let's say you enter a trade, you risk £500, and the price falls to -£250, then it comes back up, reaches your take profit, and you exit the trade...

In any case, that -£250 drop counts as a drawdown, even if you still won the trade... It also counts for losses, so if you entered a trade with £250 on the line and lost, your DD would be -£250.

The Recovery Factor > is how much profit you need to get back to breakeven. Let's say you lost -1%, you need to return +1% to get back to breakeven.

The lesson is to set limits for yourself and understand the risks involved. For me, if I lose -1.5% in a day, I stop trading and come back the next day (I risk 0.5%).

Please stick to your rules. This is a business, treat it as a business. Many people just keep trading and trading and trading, it's a gamble and it's not good, it's called over-trading...

At the end of the day your trade should have only 4 results: 

- big win 

- a small gain 

- break-even 

- small loss

Getting rid of big losses will keep you in the game for years to come. Regardless of the size of your account, treat it with respect. If you can't manage risk in a "small" account, you can't do it in a large account. Prove to yourself that you are capable of managing BIG funds.

#trading #tradfi #crypto2023 #dyor