Bitcoin News, Articles, Charts, and Guides

Bitcoin News, Articles, Charts, and Guides






Bitcoin Magazine: Bitcoin News, Articles, Charts, and Guides https://bitcoinmagazine.com
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JP Morgan Revises Bitcoin Target To $130,000, Citing Decreased Volatility https://bitcoinmagazine.com/business/jp-morgan-revises-bitcoin-target-to-130000-citing-decreased-volatility
https://bitcoinmagazine.com/business/jp-morgan-revises-bitcoin-target-to-130000-citing-decreased-volatility
<!– tml-version=”2″ –><p>JPMorgan, in an email note released to clients on Thursday, cited decreasing Bitcoin volatility as a positive for institutional interest in the asset. In an <a href=”https://www.bloomberg.com/news/articles/2021-04-01/bitcoin-volatility-decline-paves-way-for-banks-jpmorgan-says?sref=9NhgVLqx” rel=”noopener” onclick=”return phoenixTrackClickEvent(this, event);” target=”_blank”>article</a> covering the release by <em>Bloomberg</em>, strategists including Nikolaos Panigirtzoglou at JPMorgan wrote: </p><p><em>“These tentative signs of Bitcoin volatility normalization are encouraging… In our opinion, a potential normalization of Bitcoin volatility from here would likely help to reinvigorate the institutional interest going forward.”</em></p><div class=”m-detail–body-item m-detail–body-item-inline”><figure class=”l-inline tml-image m-detail–tml-image–inline” itemscope itemtype=”http://schema.org/ImageObject”><phoenix-picture><a><picture class=”is-waiting-to-load”><source type=”image/webp” sizes=”(min-width: 1240px) 700px, (min-width: 675px) 620px, calc(100vw – 40px)” srcset=”https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_380/MTgwMDM5NjA5ODczMzQzNjEw/image1.webp 380w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_620/MTgwMDM5NjA5ODczMzQzNjEw/image1.webp 620w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_1240/MTgwMDM5NjA5ODczMzQzNjEw/image1.webp 1240w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_700/MTgwMDM5NjA5ODczMzQzNjEw/image1.webp 700w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_1400/MTgwMDM5NjA5ODczMzQzNjEw/image1.webp 1400w”><source sizes=”(min-width: 1240px) 700px, (min-width: 675px) 620px, calc(100vw – 40px)” srcset=”https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_380/MTgwMDM5NjA5ODczMzQzNjEw/image1.png 380w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_620/MTgwMDM5NjA5ODczMzQzNjEw/image1.png 620w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_1240/MTgwMDM5NjA5ODczMzQzNjEw/image1.png 1240w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_700/MTgwMDM5NjA5ODczMzQzNjEw/image1.png 700w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_1400/MTgwMDM5NjA5ODczMzQzNjEw/image1.png 1400w”><img class=”m-detail–tml-image m-image” alt=”image1″ decoding=”async” src=”https://bitcoinmagazine.com/.image/t_share/MTgwMDM5NjA5ODczMzQzNjEw/image1.png” data-src=”https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_700/MTgwMDM5NjA5ODczMzQzNjEw/image1.png” height=”1248″ width=”1596″ srcset=”data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7″ itemprop=”contentUrl url”></picture></a></phoenix-picture><figcaption></figcaption></figure></div><aside class=”m-in-content-ad-row l-inline not-size-b not-size-c not-size-d”></aside><p>On the basis of Bitcoin’s declining long term volatility, the strategists revised their Bitcoin price target to align with private market investment in Gold. </p><p><em>”Considering how big the financial investment into gold is, any such crowding out of gold as an ‘alternative’ currency implies big upside for bitcoin over the long term… Mechanically, the Bitcoin price would have to rise [to] $130,000 to match the total private sector investment in gold,” </em>JP Morgan<em> </em><a href=”https://markets.businessinsider.com/currencies/news/bitcoin-price-outlook-volatility-attractive-institutions-supports-price-target-jpmorgan-2021-4-1030270274″ rel=”noopener” onclick=”return phoenixTrackClickEvent(this, event);” target=”_blank”>reportedly</a> said in the email. </p><div class=”m-detail–body-item m-detail–body-item-inline”><figure class=”l-inline tml-image m-detail–tml-image–inline” itemscope itemtype=”http://schema.org/ImageObject”><phoenix-picture><a><picture class=”is-waiting-to-load”><source type=”image/webp” sizes=”(min-width: 1240px) 700px, (min-width: 675px) 620px, calc(100vw – 40px)” srcset=”https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_380/MTgwMDM5NjI0MTAwNDIzMDAw/image2.webp 380w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_620/MTgwMDM5NjI0MTAwNDIzMDAw/image2.webp 620w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_1240/MTgwMDM5NjI0MTAwNDIzMDAw/image2.webp 1240w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_700/MTgwMDM5NjI0MTAwNDIzMDAw/image2.webp 700w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_1400/MTgwMDM5NjI0MTAwNDIzMDAw/image2.webp 1400w”><source sizes=”(min-width: 1240px) 700px, (min-width: 675px) 620px, calc(100vw – 40px)” srcset=”https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_380/MTgwMDM5NjI0MTAwNDIzMDAw/image2.png 380w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_620/MTgwMDM5NjI0MTAwNDIzMDAw/image2.png 620w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_1240/MTgwMDM5NjI0MTAwNDIzMDAw/image2.png 1240w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_700/MTgwMDM5NjI0MTAwNDIzMDAw/image2.png 700w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_1400/MTgwMDM5NjI0MTAwNDIzMDAw/image2.png 1400w”><img class=”m-detail–tml-image m-image” alt=”image2″ decoding=”async” src=”https://bitcoinmagazine.com/.image/t_share/MTgwMDM5NjI0MTAwNDIzMDAw/image2.png” data-src=”https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_700/MTgwMDM5NjI0MTAwNDIzMDAw/image2.png” height=”1240″ width=”1718″ srcset=”data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7″ itemprop=”contentUrl url”></picture></a></phoenix-picture><figcaption></figcaption></figure></div><aside class=”m-in-content-ad-row l-inline not-size-a not-size-b”></aside><aside class=”m-in-content-ad-row l-inline not-size-a not-size-c not-size-d”></aside><aside class=”m-in-content-ad-row l-inline not-size-b not-size-c not-size-d”></aside><p><br>In what has been a landmark year for Bitcoin, the continued support from incumbents in the legacy financial sector is very bullish, with <a href=”https://bitcoinmagazine.com/business/goldman-sachs-to-offer-clients-bitcoin-investment-vehicles”>Goldman Sachs</a> and <a href=”https://bitcoinmagazine.com/markets/morgan-stanley-set-to-offer-clients-access-to-bitcoin-funds”>Morgan Stanley</a> both filing to offer products in the space. </p><p><br>As time passes and the Bitcoin price continues to fly on the back of additional adoption and entrance into the space, expect additional upward price target revisions from JPMorgan and others, who have historically <a href=”https://www.bloomberg.com/news/articles/2021-01-25/bitcoin-return-to-40-000-in-doubt-as-grayscale-fund-flows-slow?sref=9NhgVLqx” rel=”noopener” onclick=”return phoenixTrackClickEvent(this, event);” target=”_blank”>remained far too bearish</a>. Matching the private sector investment in gold is <a href=”https://bitcoinmagazine.com/markets/the-trojan-horse-bitcoin-is-just-digital-gold”>just the start</a>, as Wall Street will come to find out.</p><p><strong><a href=”https://blockads.fivefilters.org”></a></strong> <a href=”https://blockads.fivefilters.org/acceptable.html”>(Why?)</a></p> Sun, 04 Apr 2021 16:00:00 +0000 Dylan LeClair
en
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https://bitcoinmagazine.com/business/jp-morgan-revises-bitcoin-target-to-130000-citing-decreased-volatility
Jpmorgan
Institutions
Business








The Importance of Accurate On-Chain Data https://bitcoinmagazine.com/markets/the-importance-of-accurate-on-chain-data
https://bitcoinmagazine.com/markets/the-importance-of-accurate-on-chain-data
<!– tml-version=”2″ –><p><strong>Bitcoin market manipulation still exists:</strong></p><p>The importance of on-chain analytics and blockchain data providers is rising in importance right alongside bitcoin’s price and overall adoption. However, with this increase of importance comes an increase of responsibility. Tens of thousands of traders now use popular on-chain data providers such as Glassnode, CryptoQuant and Coinmetrics. These traders are making instant reactions/decisions based on this data, trying to gain an edge over others. This incentive structure to be the first to act on the data creates a dangerous precedent for the influence of bad data on the market. These actions based on bad data can have serious outcomes for bitcoin’s price. Let’s take a look at a recent example from just two weeks ago.</p><aside class=”m-in-content-ad-row l-inline not-size-b not-size-c not-size-d”></aside><p>On March 14, 2021, an alert was sent out to over 28,000 traders subscribed to CryptoQuant’s telegram alert service saying $1 billion of bitcoin was transferred onto Gemini’s exchange, presumably to be sold. Within a minute, this immediately triggered a sell-off from traders, ultimately leading to a cascade of long liquidations totaling 14,396 BTC, or roughly $850,000,000. This was ultimately the catalyst for a massive drop in price and the several day consolidation that followed.</p><aside class=”m-in-content-ad-row l-inline not-size-a not-size-b”></aside><aside class=”m-in-content-ad-row l-inline not-size-a not-size-c not-size-d”></aside><div class=”m-detail–body-item m-detail–body-item-inline”><figure class=”l-inline tml-image m-detail–tml-image–inline” itemscope itemtype=”http://schema.org/ImageObject”><phoenix-picture><a><picture class=”is-waiting-to-load”><source type=”image/webp” sizes=”(min-width: 1240px) 700px, (min-width: 675px) 620px, calc(100vw – 40px)” srcset=”https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_380/MTgwMDQyMTM5MzQwNjQ1NzIw/image1-1.webp 380w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_620/MTgwMDQyMTM5MzQwNjQ1NzIw/image1-1.webp 620w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_1240/MTgwMDQyMTM5MzQwNjQ1NzIw/image1-1.webp 1240w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_700/MTgwMDQyMTM5MzQwNjQ1NzIw/image1-1.webp 700w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_1400/MTgwMDQyMTM5MzQwNjQ1NzIw/image1-1.webp 1400w”><source sizes=”(min-width: 1240px) 700px, (min-width: 675px) 620px, calc(100vw – 40px)” srcset=”https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_380/MTgwMDQyMTM5MzQwNjQ1NzIw/image1-1.png 380w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_620/MTgwMDQyMTM5MzQwNjQ1NzIw/image1-1.png 620w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_1240/MTgwMDQyMTM5MzQwNjQ1NzIw/image1-1.png 1240w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_700/MTgwMDQyMTM5MzQwNjQ1NzIw/image1-1.png 700w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_1400/MTgwMDQyMTM5MzQwNjQ1NzIw/image1-1.png 1400w”><img class=”m-detail–tml-image m-image” alt=”Image via Glassnode” decoding=”async” src=”https://bitcoinmagazine.com/.image/t_share/MTgwMDQyMTM5MzQwNjQ1NzIw/image1-1.png” data-src=”https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_700/MTgwMDQyMTM5MzQwNjQ1NzIw/image1-1.png” height=”1080″ width=”1920″ srcset=”data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7″ itemprop=”contentUrl url”></picture></a></phoenix-picture><figcaption><p class=”tml-image–caption” itemprop=”caption”>Image via Glassnode</p></figcaption></figure></div><aside class=”m-in-content-ad-row l-inline not-size-b not-size-c not-size-d”></aside><p>It turned out that the transfer was actually Blockfi transferring bitcoin into Gemini’s custody solution service, making the transaction actually bullish. This is a classic example of how misinformation can be the catalyst for a market dump. When funding levels go up and traders become increasingly bullish, more leverage naturally moves into the market. </p><p>You can think of this like a game of Jenga where you’re stacking pieces higher without a strong foundation. As the Jenga tower is built higher, it takes increasingly less of a push to collapse the entire thing. This is the same way leverage works in the bitcoin market. The more bullish speculative traders become, the more leverage is in the market, ultimately making it more fragile. A catalyst such as the bad data CryptoQuant put out is all that’s needed to initiate a cascade of liquidations. As one trader hits their stop loss, they have to sell (or liquidate) which pushes the price even further down, causing the next trader to hit their stop loss. This is what I am referring to as a “cascade of liquidations.” </p><aside class=”m-in-content-ad-row l-inline not-size-a not-size-b”></aside><aside class=”m-in-content-ad-row l-inline not-size-a not-size-c not-size-d”></aside><p>I strongly encourage data providers to be warier of the information they are putting out, as, at the end of the day, they are manually labeling these wallet addresses. One mistake can cause the loss of massive sums of money. With this being said, I encourage traders to look at multiple data providers to get the most accurate picture of what’s going on in the market. Hopefully, as we move closer to hyperbitcoinization, new data providers will come about. This is ultimately bullish for the ecosystem and a net positive for traders, as information confirmed across 10 data providers is much more likely to be accurate than reported by just one. I also encourage the data providers that do exist currently to be more cautious and hesitant to put out information publicly without being absolutely sure that the data is accurate. Although a great deal of respect is due to these providers and the value that they are bringing to the space, we must keep them in check to get the most accurate information possible. After all, the mantra of Bitcoin is don’t trust; verify, and billions are on the line here. </p><aside class=”m-in-content-ad-row l-inline not-size-b not-size-c not-size-d”></aside><p><em>This is a guest post by William Clemente III. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or </em>Bitcoin Magazine<em>.</em></p><p><strong><a href=”https://blockads.fivefilters.org”></a></strong> <a href=”https://blockads.fivefilters.org/acceptable.html”>(Why?)</a></p> Sat, 03 Apr 2021 18:00:00 +0000 William Clemente III
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https://bitcoinmagazine.com/markets/the-importance-of-accurate-on-chain-data
Research
Data
On-chain Analysis
Markets






A Deep Dive Into Bitcoin’s Contango https://bitcoinmagazine.com/markets/a-deep-dive-into-bitcoins-contango
https://bitcoinmagazine.com/markets/a-deep-dive-into-bitcoins-contango
<!– tml-version=”2″ –><p>Bitcoin is trading in contango. But what does this mean?</p><aside tml-render-layout=”inline” class=”m-pullquote l-inline” readability=”2.6814159292035″><p>“Contango is a situation where the futures price of a commodity is higher than the spot price.” -<a href=”https://www.investopedia.com/terms/c/contango.asp#:~:text=Key%20Takeaways-,Contango%20is%20a%20situation%20where%20the%20futures%20price%20of%20a,strategies%20to%20profit%20from%20contango.” rel=”noopener” onclick=”return phoenixTrackClickEvent(this, event);” target=”_blank”>Investopedia</a></p></aside><p>Now, what’s a futures contract?</p><aside tml-render-layout=”inline” class=”m-pullquote l-inline” readability=”3.7272727272727″><p>“A futures contract is a legal agreement to buy or sell a particular commodity asset, or security at a predetermined price at a specified time in the future.” -<a href=”https://www.investopedia.com/terms/f/futurescontract.asp” rel=”noopener” onclick=”return phoenixTrackClickEvent(this, event);” target=”_blank”>Investopedia</a></p></aside><div class=”m-detail–body-item m-detail–body-item-inline”><figure class=”l-inline tml-image m-detail–tml-image–inline” itemscope itemtype=”http://schema.org/ImageObject”><phoenix-picture><a><picture class=”is-waiting-to-load”><source type=”image/webp” sizes=”(min-width: 1240px) 700px, (min-width: 675px) 620px, calc(100vw – 40px)” srcset=”https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_380/MTgwMDQwMjU0MTE4NzY1OTEy/vnrljxyacceac5cdmtoihvbuknwqhfx75momwb834flj2kj7jtqp4beide2kjjnpg-ir9ymrggmeogiki7ilhlzdbfr1-y5dwcag6zaby9d4x8wybvpuk_xytpr5yw2tvyesdse1.webp 380w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_620/MTgwMDQwMjU0MTE4NzY1OTEy/vnrljxyacceac5cdmtoihvbuknwqhfx75momwb834flj2kj7jtqp4beide2kjjnpg-ir9ymrggmeogiki7ilhlzdbfr1-y5dwcag6zaby9d4x8wybvpuk_xytpr5yw2tvyesdse1.webp 620w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_1240/MTgwMDQwMjU0MTE4NzY1OTEy/vnrljxyacceac5cdmtoihvbuknwqhfx75momwb834flj2kj7jtqp4beide2kjjnpg-ir9ymrggmeogiki7ilhlzdbfr1-y5dwcag6zaby9d4x8wybvpuk_xytpr5yw2tvyesdse1.webp 1240w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_700/MTgwMDQwMjU0MTE4NzY1OTEy/vnrljxyacceac5cdmtoihvbuknwqhfx75momwb834flj2kj7jtqp4beide2kjjnpg-ir9ymrggmeogiki7ilhlzdbfr1-y5dwcag6zaby9d4x8wybvpuk_xytpr5yw2tvyesdse1.webp 700w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_1400/MTgwMDQwMjU0MTE4NzY1OTEy/vnrljxyacceac5cdmtoihvbuknwqhfx75momwb834flj2kj7jtqp4beide2kjjnpg-ir9ymrggmeogiki7ilhlzdbfr1-y5dwcag6zaby9d4x8wybvpuk_xytpr5yw2tvyesdse1.webp 1400w”><source sizes=”(min-width: 1240px) 700px, (min-width: 675px) 620px, calc(100vw – 40px)” srcset=”https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_380/MTgwMDQwMjU0MTE4NzY1OTEy/vnrljxyacceac5cdmtoihvbuknwqhfx75momwb834flj2kj7jtqp4beide2kjjnpg-ir9ymrggmeogiki7ilhlzdbfr1-y5dwcag6zaby9d4x8wybvpuk_xytpr5yw2tvyesdse1.png 380w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_620/MTgwMDQwMjU0MTE4NzY1OTEy/vnrljxyacceac5cdmtoihvbuknwqhfx75momwb834flj2kj7jtqp4beide2kjjnpg-ir9ymrggmeogiki7ilhlzdbfr1-y5dwcag6zaby9d4x8wybvpuk_xytpr5yw2tvyesdse1.png 620w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_1240/MTgwMDQwMjU0MTE4NzY1OTEy/vnrljxyacceac5cdmtoihvbuknwqhfx75momwb834flj2kj7jtqp4beide2kjjnpg-ir9ymrggmeogiki7ilhlzdbfr1-y5dwcag6zaby9d4x8wybvpuk_xytpr5yw2tvyesdse1.png 1240w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_700/MTgwMDQwMjU0MTE4NzY1OTEy/vnrljxyacceac5cdmtoihvbuknwqhfx75momwb834flj2kj7jtqp4beide2kjjnpg-ir9ymrggmeogiki7ilhlzdbfr1-y5dwcag6zaby9d4x8wybvpuk_xytpr5yw2tvyesdse1.png 700w, https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_1400/MTgwMDQwMjU0MTE4NzY1OTEy/vnrljxyacceac5cdmtoihvbuknwqhfx75momwb834flj2kj7jtqp4beide2kjjnpg-ir9ymrggmeogiki7ilhlzdbfr1-y5dwcag6zaby9d4x8wybvpuk_xytpr5yw2tvyesdse1.png 1400w”><img class=”m-detail–tml-image m-image” alt=”vnRLJxyAccEaC5CDmtOiHvBUknwQHFx75MOmwb834flJ2kj7jTqP4BEIdE2kjjnpg-iR9YmRGgmEoGIkI7ilHLZdBfR1-y5dwCag6ZaBY9d4X8WYBvpUK_xyTpr5Yw2tVyeSDsE1″ decoding=”async” src=”https://bitcoinmagazine.com/.image/t_share/MTgwMDQwMjU0MTE4NzY1OTEy/vnrljxyacceac5cdmtoihvbuknwqhfx75momwb834flj2kj7jtqp4beide2kjjnpg-ir9ymrggmeogiki7ilhlzdbfr1-y5dwcag6zaby9d4x8wybvpuk_xytpr5yw2tvyesdse1.png” data-src=”https://bitcoinmagazine.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_700/MTgwMDQwMjU0MTE4NzY1OTEy/vnrljxyacceac5cdmtoihvbuknwqhfx75momwb834flj2kj7jtqp4beide2kjjnpg-ir9ymrggmeogiki7ilhlzdbfr1-y5dwcag6zaby9d4x8wybvpuk_xytpr5yw2tvyesdse1.png” height=”518″ width=”1409″ srcset=”data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7″ itemprop=”contentUrl url”></picture></a></phoenix-picture><figcaption></figcaption></figure></div><aside class=”m-in-content-ad-row l-inline not-size-b not-size-c not-size-d”></aside><p>Currently, the spot price (market price for bitcoin on exchanges) trades lower than futures prices. The spread for the June futures contract is more than 25 percent annualized on most major exchanges.</p><p>This means that anyone can buy bitcoin and use that bitcoin as collateral to sell the June futures contract. This trade locks in a risk-free 6 percent USD-denominated return (more than 25 percent annualized) no matter where the price of bitcoin goes over the following months.</p><p>The only risk is exchange custody (losing coins due to poor management or hacks).</p><aside class=”m-in-content-ad-row l-inline not-size-b not-size-c not-size-d”></aside><h2>Why Does This “Free” Money Exist?</h2><p>The contango exists due to how profitable it is to leverage long bitcoin (and the amount of capital willing to go leverage long versus leverage short).</p><aside class=”m-in-content-ad-row l-inline not-size-a not-size-b”></aside><aside class=”m-in-content-ad-row l-inline not-size-a not-size-c not-size-d”></aside><p>Almost everyone goes leverage long on bitcoin in two ways:</p><ol><li>Long perpetual swaps</li><li>Long forward futures contracts</li></ol><p>Currently, <a href=”https://bitcoinfuturesinfo.com/market-share-and-futures-curve” rel=”noopener” onclick=”return phoenixTrackClickEvent(this, event);” target=”_blank”>there is $22 billion in open interest on perpetual swaps and futures</a>], so there is a significant amount of capital and liquidity.</p><p>If you go long on the perpetual swap, you are charged a funding rate every eight hours. This funding rate is set by the market to ensure the perpetual futures price stays near the index spot price. In a way, it is basically a futures contract that is only eight hours in duration and it always rolls over.</p><p>Over the last month, the perpetual swap has been averaging around 0.03 percent every eight hours, or 0.09 percent daily or 32.9 percent annually. This funding rate is the longs paying the shorts (because more capital is naturally going to be long bitcoin, especially when the price is going up).</p><p>So, if you want to go leverage long for an extended amount of time, and the perpetual swap funding rate is high, then you’re much better off going leverage long on a futures contract that may only be trading at a 23 percent annualized premium.</p><aside class=”m-in-content-ad-row l-inline not-size-b not-size-c not-size-d”></aside><p>But again, just like the swap market, not many investors want to leverage short-forward futures contracts. A large portion of the capital that is short bitcoin is likely doing the basis arbitrage trade.</p><aside class=”m-in-content-ad-row l-inline not-size-a not-size-b”></aside><aside class=”m-in-content-ad-row l-inline not-size-a not-size-c not-size-d”></aside><h2>What Are The Implications?</h2><p>It’s possible that bitcoin’s contango has created a super massive black hole.</p><p>The Ever-Growing Bitcoin Black Hole:</p><ol><li>Bitcoin is the world’s best monetary good designed to go up forever</li><li>Market participants buy and the price goes up</li><li>Price going up attracts more buyers (with leverage)</li><li>Leverage buyers drive up the contango spread</li><li>USD arbitrageurs attempt to capture the risk-free return</li><li>To capture the spread, they buy bitcoin and sell futures</li><li>Buying bitcoin causes the price to go up further</li><li>Price going up increases the contango spread, attracting more arbitrageurs</li><li>Investor recognize this feedback loop exists and just buy bitcoin to HODL</li><li>Repeat for all market participants until hyperbitcoinization?</li></ol><h2>Why Has This Not Been Arbitraged Out?</h2><p>The bitcoin contango basis trade is adding gas to the fire. As more and more capital begins to recognize this opportunity, the price of bitcoin will continue to increase.</p><p>There are a few possible explanations for why this spread hasn’t been arbitraged out. Since a truly “efficient” market would likely eat up any “risk free” 20 percent yield opportunities.</p><p>One possibility is that the only people in the bitcoin industry who have both a good understanding and the capital to move markets recognize that in order for the spread to be potentially closed, there must be billions of dollars’ worth of bitcoin purchased. If there’s an incentive to purchase billions of dollars’ of bitcoin and you know bitcoin is the world’s hardest monetary good, you likely aren’t going to accept the “risk-free” more than 20 percent because you know bitcoin will outperform that over the long run.</p><aside class=”m-in-content-ad-row l-inline not-size-b not-size-c not-size-d”></aside><p>The second possibility is simply that the $100 trillion-plus of excess capital invested in bonds, stocks and real estate is held by investors who don’t know that the futures arbitrage trade exists, or they don’t feel comfortable deploying capital in the space yet.</p><aside class=”m-in-content-ad-row l-inline not-size-a not-size-b”></aside><aside class=”m-in-content-ad-row l-inline not-size-a not-size-c not-size-d”></aside><p>The last possibility is that the risk-free spread could represent a truly market-based, “risk-free” rate of return. Since bond yields have been manipulated lower and lower over the previous decades, this more than 20 percent could be the market’s way of saying it expects stocks, real estate and other assets to perform in line with this, plus a small risk premium. This high expected nominal return could be possible due to the endless fiscal spending by governments financed by the dovish monetary policies of central banks.</p><h2>What Could Break The Contango?</h2><p>Bitcoin only going up sounds great on paper, but what could eliminate the futures contango?</p><p>Since the futures contango is driven by more money wanting to leverage long than leverage short, this dynamic would need to flip, meaning more capital would need to be going leverage short than leverage long for bitcoin to switch from contango to <a href=”https://www.investopedia.com/terms/b/backwardation.asp#:~:text=Backwardation%20is%20when%20the%20current%20price%20of%20an%20underlying%20asset,months%20through%20the%20futures%20market.” rel=”noopener” onclick=”return phoenixTrackClickEvent(this, event);” target=”_blank”>backwardation</a>.</p><p>With the macro money printing backdrop, finite bitcoin supply and a growing number of bitcoin yield and lending products, there is little reason to expect this to occur, at least anytime soon.</p><aside class=”m-in-content-ad-row l-inline not-size-b not-size-c not-size-d”></aside><p>With that said, there are a few potential scenarios where bitcoin’s contango breaks and turns into backwardation.</p><p>One, old HODLers could start selling in size. This may not happen due to a growing number of financial products that make it easy to <a href=”https://mimesiscapital.medium.com/bitcoin-sellers-may-evaporate-in-2021-7616ab1943f9″ rel=”noopener” onclick=”return phoenixTrackClickEvent(this, event);” target=”_blank”>use bitcoin without selling it</a>.</p><aside class=”m-in-content-ad-row l-inline not-size-a not-size-b”></aside><aside class=”m-in-content-ad-row l-inline not-size-a not-size-c not-size-d”></aside><p>Two, people could read too deeply into <a href=”https://bitcoinmagazine.com/markets/what-the-stock-to-flow-model-says-about-bitcoins-future-price”>@100Trillion’s S2F and S2FX models</a>. If bitcoin’s price overshoots the models, some may consider selling in order to buy back lower. While this would be very risky, especially in the current macro environment, if enough market participants do it, it could become self fulfilling.</p><p>Last, a drastic change in monetary/fiscal policy could temporarily break the contango. For example, during the March 2020 crash, when the money printer wasn’t going brrr fast enough, bitcoin went into backwardation.</p><h2>Is This Hyperbitcoinization?</h2><p>We are not sure. Would we feel comfortable selling a significant amount of bitcoin at <em>any</em> price?</p><p>Absolutely not.</p><p><em>This is a guest post by Mimesis Capital. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or </em>Bitcoin Magazine<em>.</em></p><p><strong><a href=”https://blockads.fivefilters.org”></a></strong> <a href=”https://blockads.fivefilters.org/acceptable.html”>(Why?)</a></p> Sat, 03 Apr 2021 00:00:00 +0000 Mimesis Capital
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