Synthetic Bitcoin Report – May 28

This report presents the daily trading premium to NAV and Bitcoin equivalent volume for any exchange listed investment securities that track Bitcoin. The report will analyse GBTC (the OTC Markets listing of the Bitcoin Investment Trust), and XBT ( an ETN listed on the Nasdaq OMX Nordic).

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Yesterday was a slow day for Bitcoin volumes the world over. GBTC volume crashed to 40 XBT. It is hard to keep anyone excited about any Bitcoin product when the price isn’t moving.

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XBT volume declined to 431 XBT. The ETN closed the trading day at fair value.

Synthetic Bitcoin Report

This report presents the daily trading premium to NAV and Bitcoin equivalent volume for any exchange listed investment securities that track Bitcoin. The report will analyse GBTC (the OTC Markets listing of the Bitcoin Investment Trust), and XBT ( an ETN listed on the Nasdaq OMX Nordic).

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GBTC trading volume nose dived to 115 XBT. The product is losing steam vs. its European competitor XBT. The premium stayed flat at 35%.

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XBT had its second biggest volume day at 756 XBT yesterday. The ETN continues to trade at a slight 0.30% discount to fair value.

Synthetic Bitcoin Report – May 23

This report presents the daily trading premium to NAV and Bitcoin equivalent volume for any exchange listed investment securities that track Bitcoin. The report will analyse GBTC (the OTC Markets listing of the Bitcoin Investment Trust), and XBT ( an ETN listed on the Nasdaq OMX Nordic).

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GBTC premium declined slightly to 32.5%. The market is settling around a 35% premium for this product. Volume recovered to 500 XBT.

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The XBT discount widened to -0.30%. Volume held steady at 643 XBT. The product has demonstrated encouraging demand especially since it trades more than the better publicised GBTC.

Synthetic Bitcoin Report – May 22

This report presents the daily trading premium to NAV and Bitcoin equivalent volume for any exchange listed investment securities that track Bitcoin. The report will analyse GBTC (the OTC Markets listing of the Bitcoin Investment Trust), and XBT ( an ETN listed on the Nasdaq OMX Nordic).

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A lacklustre day for GBTC. Volume fell to 288 Bitcoin and the premium held constant at 35%.

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Volume picked up to 681 Bitcoin. The premium has remained in a -0.20% to 0.20% band the entire week.

Synthetic Bitcoin Report – May 20

This report presents the daily trading premium to NAV and Bitcoin equivalent volume for any exchange listed investment securities that track Bitcoin. The report will analyse GBTC (the OTC Markets listing of the Bitcoin Investment Trust), and XBT ( an ETN listed on the Nasdaq OMX Nordic).

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The GBTC premium is off sharply from last week. Yesterday it rose 10% to 25%. Volume has levelled off around the 500 Bitcoin mark.

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XBT’s second trading day had a respectable volume of 547 Bitcoin, which is down 50% from the listing date. The premium rose slightly to 0.20%.

New ETN On The Block: Bitcoin Tracker One

Yesterday XBT Provider AB a subsidiary of KnC Group (a large miner) launched the world’s first ETN (Exchange Traded Note) with a Bitcoin underlying. Bitcoin Tracker One tracks the equally weighted Bitcoin / USD price on Bitfinex, Bitstamp, and OKCoin. The ETN trades in SEK on the Nasdaq OMX Nordiq.

Trading volume on the first day went gangbusters. There is some confusion about how to convert the turnover figures listed into a Bitcoin equivalent number. On the exchange website, the turnover in SEK is listed, which was 1,837,196 SEK. Take this figure and divide by the price, 9.73 SEK to get shares. Approximately 188,817 shares were traded (it’s approximate because the exchange lists turnover instead of shares traded). The ETN provider specifies that each share is worth 0.005 Bitcoin. Which means 944 Bitcoin equivalent shares were traded on the first day.

Bitcoin Equivalent = Turnover / Price * 0.005

The next crucial factor is the premium or discount to intrinsic value at which the ETN traded. The exchange closes at 16:15 GMT + 0 each day. The closing price was 9.73, the Bitcoin / USD price at that time was 236.54 Bitfinex, 236.45 Bitstamp, and 236.34 OKCoin for an average price of 236.44. The Bloomberg SEK/USD rate is 8.2348. That equates to a per share intrinsic value of 235.44 * 8.2348 * 0.005 = 9.735, and a 0.05% discount. That is tight, the market maker is doing their job correctly.

Why is GBTC’s premium multiples of Bitcoin Tracker One’s? The structure of an ETN allows the market maker to create and redeem shares at will to keep the premium or discount in line. GBTC shares cannot easily be created, it takes a minimum of one year to create new shares. It is also practically impossible to short GBTC. With an ETN, the market maker can have a negative inventory and at the end of the trading day create more shares to deliver to buyers within the settlement timeline.

This is indeed a very successful launch of a new ETN. As the broader market learns of the liquidity and affordability of this product, trading volumes should grow faster than that of GBTC. The only issue is that any holders bear KnC Group credit risk. But if the first day’s trading is any guide, market participants are more than happy to shoulder that risk for an easier way to gain Bitcoin exposure.

GBTC Trades, And The Market Yawns

In the May 4th Crypto Trader Digest, I discounted the launching of GBTC because there had been no trades. Yesterday the first trade on GBTC occurred at a price of $42. Since each share represents 0.1 Bitcoin, that equates to a Bitcoin price of $420 or a 75% premium to the prevailing spot price at the time.

Many in the Bitcoin community were waiting for the first GBTC trade to initiate the resurgence of a bull market. However, the market digested the news and FELL. During US hours on May 4th, the price hovered around $240. Early morning May 5th, the price fell to a low of $231. GBTC while a step in the right direction for the investability of Bitcoin, has serious shortcomings that prevent it from being the catalyst that everyone wishes it to be.

As I have said previously, it is impossible to arbitrage the premium between GBTC and spot. The arbitrage mechanism is what would trigger a price rise. The buying pressure that leads to a premium over Net Asset Value (NAV) needs to find it’s way into the Bitcoin spot market. That happens when market makers, sell GBTC, buy Bitcoin, and deliver the Bitcoin to the fund manager in return for shares of GBTC. That allows the market makers to capture the premium. Even if GBTC had significant volume (only a handful of shares traded), the fund structure prohibits the creation of shares by tendering Bitcoin or cash to the fund manager within two settlement days. The creation process must happen within two settlement days to match the delivery of GBTC shares to the buyer. Then the sale by the market maker will be considered a long sell and not a short sell, which requires the trader to borrow the shares before selling on the open market. Currently it takes one year to create new GBTC shares.

GBTC will not save Bitcoin from the jaws of the bears. The premium it trades at is interesting, but not significant. If the first GBTC trade was your bull market thesis, it is time to go back to the drawing board. GBTC traded, and the market yawned.

Crypto Trader Daily – 27 March 2015

Price Action

Today was a quiet range bound trading day. The price touched a high of $255 and a low of $245. The GBTC or the first Bitcoin investment vehicle to be listed in America (on the pink sheets) went live today. It was an anti-climactic launch with no major price movements after it went live.

 

Trade Idea

Establish a short position with XBUJ15 above $250 on the hunt for a break down below $240 over the weekend.

 

In the News

Bitcoin Investment Trust goes live on the American pink sheets market (CoinDesk)

Isle Of Man clarifies Bitcoin regulations (CoinDesk)

Crypto Trader Daily – 12 March 2013

Price Action

The fade has begun. $300 couldn’t be topped today, and the price is drifting towards $290. It seems the rally has lost steam, and consolidation will occur below $290.

 

Trade Idea

Take a short position above $290 with a target price between $280-$285. Use XBUH15.

 

In the News

Cumberland Mining believed to be a winner in latest US Marshals auction (Qntra)

Bitcoin Investment Trust audited financial reports (OTC Markets)

Bter to return hacked funds (Coindesk)