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Macro Investor Sees Bitcoin Supply Deficit as Grayscale Boosts Stockpiling

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Bitcoin (BTC) traders and investors may face a supply deficit as major firms increase their stockpiling of the cryptocurrency, according to Dan Tapeiro of New York-based global macro fund DTAP Capital.

“SHORTAGES of Bitcoin [is] possible,” the founder tweeted on Thursday. “Barry Silbert’s Grayscale Investments Trust is eating up BTC like there is no tomorrow. If 77 percent of all newly mined turns into 110 percent, then it’s lights out.”

The statement came after Grayscale released its third-quarter financial report. The New York firm stated that it had amassed about $1.05 billion worth of cryptocurrencies for its investment products. Its benchmark public share, the Grayscale Bitcoin Trust (GBTC), has received the top portion of the said massive inflow – of about $720 million.

Meanwhile, a yearly outlook of Grayscale’s financial reports shows that it is raising its Bitcoin purchases against its mining supply rate every quarter. For instance, in the first quarter of 2020, the firm bought 27 percent of the Bitcoin mining supply. That figure surged to 70 percent in the second quarter, and 77 percent in the third.

Grayscale BTC purchased against its quarterly supply rate. Source: Grayscale Investments

Mr. Tapeiro saw it as a sign of a potential shortage in the future. Bitcoin’s total supply stands at just 21 million. So far, miners have mined about 18 million BTC tokens. Atop that, Bitcoin’s tendency to reduce its supply by half after every four years ensure that there will be less of it available in the open market.

The macro analyst, meanwhile, also presented the deficit as a bullish indicator, stating that traders placing bearish bets on Bitcoin will face losses because its “price can go to any number.”

Bitcoin HODLING Surges

Mr. Tapeiro’s statements also came amid a booming Bitcoin “HODLING” sentiment among mainstream firms.

According to data fetched by Bitcoin Treasuries, public companies now hold about $7 billion worth of BTC. They include global payments platform Square, public-traded software firm MicroStrategy, as well as a privately-held hedge fund dubbed as Stone Ridge Asset Management.

Other firms have also gained exposure in the Bitcoin market but via GBTC. They include Fny Investment Advisers, Boston Private Wealth, Rothschild Investment Corp, amongst others.

bitcoin, btcusd, btcusdt, xbtusd, GBTC

Companies invested in GrayScale’s GBTC shares. Source: MMCrypto

The high-profile accumulation sentiment also raised the possibility of a Bitcoin liquidity crisis should the demand increase.

Bullish Bells

Bitcoin’s increasing prominence in mainstream asset managers’ portfolios validated its role as a safe-haven, store-of-value asset amid economic uncertainty.

Investors led themselves to seek investment alternatives as they could not earn better yields from the US Treasuries and the US dollar. That was due to the Federal Reserve’s near-zero interest rate policy and the US government’s $2 trillion relief measure amid the coronavirus pandemic.

With the economy still not out of the “pandemic shock,” the US central bank vowed to keep lending rates lower until 2023. Meanwhile, the US Congress hoped to release another stimulus package after the November 3 presidential election. It stands deadlocked for now.

bitcoin, btcusd, btcusdt, xbtusd, GBTC

Bitcoin investors wait for the second stimulus package to continue their 2020 rally. Source: BTCUSD on TradingView.com

Bitcoin, at the same time, is promising to become an alternative to fiat. Companies see their dollar reserves losing value in the coming years. That has prompted them to reallocate some part of it to the cryptocurrency and similar products like GBTC.

As the HODLING continues, the price of Bitcoin would likely increase due to lower supply.





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Bitcoin

Bitcoin Must Consolidate Above This Key Level, Or Risk Plunging to $11,900

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  • It has been a wild past few days for Bitcoin and the aggregated cryptocurrency market
  • Bitcoin has been able to post consistent gains throughout as of late, with buyers and sellers largely reaching an impasse following its slight rejection at $13,200
  • This has created a slight consolidation phase around $13,000 that it has been caught within throughout the past two days
  • If this phase persists in the near-term, BTC must continue holding above $12,800
  • One analyst noted that a break below this level could open the gates for a move down to lows of $11,900

Bitcoin and the aggregated cryptocurrency market have seen a roller-coaster week, with Bitcoin’s previous weakness being fully erased by bulls who sent it surging to fresh yearly highs of $13,200.

This move’s intensity has sparked a sense of euphoria and hope amongst traders and investors, with may expecting further upside in the days and weeks ahead.

For this to come to fruition, bulls must continue defending against a break below $12,800.

One analyst noted that a break below this level could open the gates for BTC to see a sharp decline down towards $11,900.

Bitcoin Struggles to Gain Momentum as Selling Pressure Mounts 

On a short-term scale, Bitcoin’s momentum is faltering slightly due to some heavy selling pressure within the lower-$13,000 region.

Until it can break above this region, there’s a possibility that a retrace could be imminent in the near-term.

At the time of writing, Bitcoin is trading flat at its current price of $12,985. This is around the price at which it has been trading for the past couple of days.

Each selloff has been aggressively absorbed by bulls, which is a positive sign.

Analyst: Here’s the Crucial Defense BTC Needs to Defend

While sharing his thoughts on Bitcoin’s present technical outlook, a popular crypto-focused analyst and trader at the Amsterdam Stock Exchange noted that $12,800 is the key support level to watch in the near-term.

He contends that a defense of this level could lead BTC towards $13,500, whereas a rejection could cause it to drop towards $11,900.

“Bitcoin: As long as $12,750-12,800 holds, I think $13,500 is next. But if it doesn’t hold as a pivot, I assume the price drops further down toward $12,200 and potentially $11,900.”

Image Courtesy of Crypto Michael. Source: BTCUSD on TradingView.

How the entire market trends in the months ahead will depend on Bitcoin. This makes it vital for BTC and altcoins investors alike that the benchmark crypto maintains its newfound momentum.

Featured image from Unsplash.
Charts from TradingView.





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Top traders say Bitcoin log chart points to a 2017-style BTC bull run

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Peter Brandt, a well-regarded veteran trader, recently emphasized the high demand from institutions as a key catalyst for Bitcoin’s strong performance.

BTC/USD 1-month chart. Source: TradingView

The strong high time frame technical structure of BTC, especially the weekly chart, and the strengthening fundamentals are buoying the market sentiment. In a tweet, Brandt posted the above chart and said:

“Bitcoin—IF the current gains hold through end of Oct—is poised for the second-highest monthly close ever. $BTC Institutions are increasingly involved in Bitcoin ownership. Institutions mark the value of their assets monthly.”

In addition to the rise in trading volume and growing institutional appetite, investors are referring to the logarithmic chart to forecast a broader rally.

Raoul Pal focuses on the Bitcoin log chart

The log price chart is the most widely used scale by most technical analysts. A logarithmic chart simply means a chart that represents common percent changes with equal spacing in a scale.

Raoul Pal, the founder and CEO of Real Vision Group, says Bitcoin’s monthly log chart is highly optimistic. He wrote:

“Its a bitcoin kind of day. The monthly log chart with regression lines is really something to behold. One of the nicest, post powerful chart patterns I’ve ever seen.”

The technical reason behind the optimism towards the monthly log chart is mainly its clean breakout. Throughout the past four years, $13,000 has acted as a heavy resistance level.

The historical log chart of Bitcoin. Source: Raoul Pal

As such, on high time frame charts, like the weekly and the monthly chart, BTC always closed below $11,000, except for 2020.

Bitcoin’s clean technical breakout on the monthly timeframe is leading traders and investors like Brandt and Pal to make strong bullish calls on BTC’s price action. As Pal said, “if history rhymes, 2021 is going to be a BIG year.”

BTC/USD 1-month chart. Source: TradingView.com

Q4 2020 may end on a positive note

Apart from the numerous bullish technical and fundamental catalysts, the timing of the current rally is also in favor of a major Bitcoin bull cycle.

Bitcoin quarterly returns in percentage. Source: Skew

According to data from Skew, Bitcoin had not had three positive consecutive quarters since 2017. During that year, BTC reached its all-time high at $20,000 following its second block reward halving in 2016.

Bitcoin could possibly be on track to record a massively positive gain in the fourth quarter if it stays above $12,000. If so, that could lead to the same bull cycle pattern as 2017. Next year would also present the same post-halving cycle BTC saw in 2017, which further strengthens the narrative of a newfound bull cycle.