The crash is late but it is coming. Another coin price pusher besides Grayscale

Today's story comes from some recent insights into market trends. To be more precise, it is just a possibility or conjecture, which may also be wrong. After all, facing a global market, it is impossible for ordinary writers to really have a God's perspective.

Survival statement: The author loves Bitcoin.

Hello everyone, I am Pepe. Yesterday, Gray Brother added 2,499 BTC and launched an investment advertisement in the United States saying "abandon gold and get on the train of cryptocurrencies". It is another day for the spectators to study the Grayscale mechanism in depth.

What puzzles people is that with Bitcoin worth nearly $20,000 per coin, who can actually "add to their holdings" by 1,000 or 2,000 coins every day? In November, Grayscale's holdings grew by twice the amount mined by miners. The arbitrage theory, which has been talked about for almost a year, does not seem to make people feel at ease.

I recently saw an article that proposed another possibility.

Original link: Who are the people who bought GBTC through the Grayscale Investment Private Placement Channel, and how much did institutional users buy? (Author: Alex_dare to be the first in the world)

https://weibo.com/ttarticle/p/show?id=2309404577854775230472#_0

One conclusion of this article is that the publicly listed companies in the Grayscale Fund did not really buy large amounts of GBTC , and the impact on the secondary market was limited. The main factor driving the price increase still came from the market.

One argument for this is that for such SEC-reported funds, not only Grayscale has to report data, but listed companies as buyers also have to disclose some data. This data update can be viewed through the link below:

https://fintel.io/so/us/gbtc

The shares in the above table are GBTC shares (non-incremental), each share is approximately equal to 0.00095 BTC. The red ones are liquidations, the green ones are additions, and the rest are position adjustments.

It can be seen that the holdings of companies (I see some of them are funds) are not too large. For example, one of the more famous companies, ARK, has holdings of only about 4,900 BTC (of course, this is enough for us workers [bitter]). In addition, there may be a time delay in this update, that is, the data in the November report may have changed in September. The above-mentioned positions are only a few million US dollars, but Grayscale’s private placement in September has now increased to 20,000+ BTC, which shows that it is not the main increase.

So where does the main deposit come from? One is the old-fashioned arbitrage. According to Grayscale’s previous public report, 80% of the first-level entry is physical BTC deposits. There are two obvious whales here, and note that they are both in the circle:

One is blockFi, a well-known overseas crypto lending company that has emerged in the past two years. The data updated on October 27 showed that it held more than 24 million GBTC, ranking first and accounting for nearly 5% of the total.

According to the blockFi official website, the current deposit interest rates are as follows, with Bitcoin's annualized rate being 3-6 points:

The mortgage loan interest rate is calculated based on the mortgage rate. If you only borrow 20% of the assets, you will be charged 4.5% interest:

Regarding blockfi's GBTC holdings, some overseas netizens previously thought that it might be using users' deposited coins for arbitrage, otherwise how would it get interest income? However, according to an interview with the platform's CEO in October this year, this holding is part of the platform's lending service, which means that these tens of thousands of BTC holdings are not all its own.

The other one is Three Arrows Capital, which is also an investment institution that does hedge funds in the circle. I guess it doesn’t have many fans. It is not the protagonist today. If you are interested, you can search for it.

In addition to the above, the author of the above article also gave another guess, that is, is it possible to exclude the arbitrage factor, and a large part of it comes from the mining industry, because the GBTC model can provide overseas large miners with a very compliant monetization channel , exchanging the newly mined BTC for GBTC, and selling it after six months to enjoy the market premium. If it can be used as collateral for loans during the lock-up period to exchange for liquidity, it would be even more perfect.

One of the things that supports this possibility is a piece of information from theblock a few days ago:

This year, more mining machines were sold overseas, and institutional buyers were placing large orders crazily.

Another thing is, have you noticed that almost all the tokens on Grayscale are mining coins? Is it possible that they also consider this demand? [dog head].

However, it is unknown whether there are brokers overseas that can provide loans for trusts like GBTC, so I personally still have some doubts about this speculation. But if this is true, then the Gray Brother that everyone thinks is buying, buying, buying, may be...

Think about it again, when the price was above 15,000, you heard some big guys say that they bought so many bitcoins, and that all the sell orders in the market were eaten up by me. That was all before. Now to be honest, they are probably just talking nonsense. Hahaha. And Grayscale, if I were Grayscale, I would also promote it heavily. It charges a 2% management fee every year.

So the question is, if Gray Brother’s influence is limited, where does the driving force of this bull market come from?

Now everyone’s attention is on Brother Hui’s more than 500,000 bitcoins, but perhaps a greater driving force comes from the hundreds of thousands of BTCs from another place, which is WBT C , an ERC20 token that maps Bitcoin 1:1 on Ethereum.

By mortgaging bits to generate WBTC, you can participate in DeFi mining, but you can also mortgage loans to form more leverage, such as mortgaging wbtc to borrow USDT or USDC, recharging it back to the exchange to buy coins, and then repeating it.

It can be said that this round is still a leveraged bull market, but this time the leverage is no longer just a long-short battle in the exchange, but occurs in DeFi.

Supporting this argument is the distribution of WBTC holdings:

The current total amount is 119,000 wBTC, and the three major DeFi lending platforms COMP/Maker/Aave hold half of them. Let's take a look at the data of Compound, which accounts for nearly 20% of the total:

WBTC deposited 400 million U.S. dollars, but only lent out 5 million U.S. dollars. For DAI/USDC, basically 80% of the supply is lent out. It is easy to imagine what these funds are doing.

Another is the data from November, the amount and frequency of stablecoins entering the exchange are increasing:

On the other hand, those who are interested should remember a trend that the milk kings often talk about - the amount of coins held by exchanges is decreasing. It may not be that big whales or the public are buying and hoarding, but that there is continuous leverage. It is not only wbtc, but there are actually many derivatives such as renbtc and sbtc in the circle.

Before, I was still wondering why the scale of DeFi can still develop so rapidly when various exchanges already have very mature derivative products. For this reason, I also asked some friends. One of the main advantages of DeFi leveraged products is low cost. Like COMP, you borrow and get coins for free. If you are lucky, it is equivalent to interest-free, but many exchanges charge an annualized interest of 15% for borrowing coins.

There are no other constraints. Now, many products like WBTC are increasing in volume, and the amount of mortgaged stablecoins is also surging. For example, the supply of USDC in COMP was 180 million in October, but as of today, there is already a loan volume of 450 million, just in two months:

This provides a very convenient channel for medium and large households. Those who are interested can observe the on-chain records of compound borrowing U. I have seen the history of some addresses that have pledged wbtc to borrow u. It should be said that they are all veterans.

And not only Bitcoin, Ethereum is also a place where all kinds of leveraged products gather. You can take a look at the following content:

The on-chain life of the top 10 DeFi big players

https://www.chainnews.com/articles/769380224141.htm

It is about some long-term low-leverage masters on Ethereum.

Once this leveraged bull market starts, it is easy to form a positive cycle. When the price of the currency rises, it means that more stablecoins can be borrowed. The so-called continuous increase in leverage is always satisfying. This can be seen from the increase in wbtc. The increase was the strongest in October, and it has stopped in November, and has even declined recently:

Of course, if the rise is due to leverage accumulation, there will always be a day of chain liquidation. It may be triggered by some external events, like 312, or it may be that some big investors just took advantage of the situation and caused a chain reaction.

It seems that we can refer to a coin here - Link. Its previous craze was largely due to the DeFi lending leverage component. However, for Bitcoin, it is also intertwined with more complex influences such as retail investors' fomo sentiment and institutional orders such as Grayscale, so the energy will be greater and last longer.

Conclusion

1. The main guess today is that this wave is still a mortgage leverage bull market. In the past, people, including many POS coins, believed that mortgage locked liquidity, but what can trigger more growth is the mortgage generating more derivatives, which then gradually inflated the bubble.

If this is the case, it would explain why the cryptocurrency market seems not to be lively enough, but the price has rushed to a new high. In fact, there are fewer retail investors talking about Bitcoin overseas.

2. Bitcoin and Ethereum are stronger in this wave, which may be because they have more leveraged products, and the scale is large. The characteristics of the leveraged market tend to be somewhat straight up and down, better when it is good, and worse when it is bad. For those who follow the trend, this may be good news.

3. Although the title says that the crash will come sooner or later, we need to note that we don’t know when it will come. It may happen this month, or it may go higher. Even after the big whales have got off, the price is still rising.

4. There are many people who are self-moved at the $20,000 mark, but there are very few who can maintain clear logic when the market is sluggish or volatile. I hope you are the latter, and wait until the next time when chips are everywhere and bleeding, then rush in quietly and surprise everyone.