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The premium at which the Grayscale Bitcoin Trust (GBTC) trades has turned negative — and two factors are likely behind the shift, according to an analysis by JPMorgan. 

Grayscale’s GBTC has historically traded at a high premium relative to the underlying bitcoin it tracks. Since mid-December, that premium has steadily declined from 35.79% the week of December 18 to a discount of -2.66% last week, according to data from The Block. 

Analysts at JPMorgan attribute the reversal to two factors. First, institutions are taking profits on one of the more popular trades in crypto markets. The trade involves subscribing to the GBTC trust at net asset value (NAV) and then, after a six-month lock-up period, selling shares to pocket the premium.

“Some of these institutional investors are now selling GBTC to monetize the premium,” the JPMorgan research note stated. “As it materializes, this selling pressure has been not only putting downward pressure on GBTC premium to NAV, but also on bitcoin prices given the still high flow and signalling important of GBTC.”

The second factor leading to the collapse of the GBTC premium is the recent launch of new bitcoin exchange-traded funds in Canada, according to the JPMorgan analysts.

“We argued before in our previous F&L of January 8th that the introduction of a bitcoin ETF accessible to US-based investors would erode GBTC’s flow impulse and cause a collapse of its premium to NAV,” the note stated. “In turn, we had also argued that an erosion of GBTC inflows and a collapse of its premium would likely have negative near-term implications for bitcoin markets given the flow and signaling importance of GBTC.”

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Let’s call it a meme reversal. 

One of the defining characteristics of the crypto market this year has been price action turning bearish during the Asia session. But that appears to be shifting, according to two trading executives.

“I can confidently say that we are seeing less selling,” said Phillip Gillespie, who runs trading shop B2C2’s Japanese office. 

“For months, there has been selling pressure in APC hours–primarily from miners and others taking profit during Asia sessions, but we are seeing less of that recently.”

Indeed, the most recent Asia session saw bitcoin par much of its losses from the weekend. Bitcoin was trading at $47,677 at 8:33 PM HKT.

Aya Kantorovich, head of institutional coverage at brokerage firm FalconX, told The Block that it began noticing this shift in its flows early mid-last week. 

“Hopefully there is a new level of confidence in Asia,” she said. 

B2C2’s Gillespie said US brokers were behind the recent selling. 

“We can’t disclose specific names, but there are some large US OTC brokers that started selling since last week.  Aggressive flows.”

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

US banking giant Citi has authored a new report which suggests bitcoin could become “an international trade currency” as it evolves.

The report, entitled “Bitcoin: At the Tipping Point”, charts the evolution of bitcoin from a form of payment to its current status as a store of value. The authors forecast that bitcoin’s core properties combined with its global reach and neutrality could see it morph into the “currency of choice” for international trade in around seven years.

“Perceptions about what makes bitcoin important continue to evolve and create new opportunities while increasing its perception towards becoming mainstream,” the report states.

“A focus on global reach and neutrality could see bitcoin become an international trade currency. This would take advantage of bitcoin’s decentralized and borderless design, its lack of foreign exchange exposure, its speed and cost advantage in moving money, the security of its payments, and its traceability.”

Citi’s report explain that bitcoin, in the role of a global trade currency, could be used by importers and exporters to pay for goods and services directly – simplifying the process of international trade. A decentralized cryptocurrency may be preferred to a Central Bank Digital Currency, it argues, because “no government or outside entity can take steps that might affect the supply of the trade currency, helping to decouple trade from political considerations.”

Citi’s researchers noted, however, that a number of potential barriers stand in the way of this vision coming to fruition.

The report highlighted bitcoin’s scalability issues, pointing to 2020 analysis which suggests that bitcoin can handle on average 5 transactions per second – which is some 4,800 times slower than the Visa network’s capacity.

Increased adoption of bitcoin by institutional investors has been a big tailwind for bitcoin in the past year, the report states, but a range of potential risks could derail uptake.

“The entrance of institutional investors has sparked confidence in cryptocurrency but there are still persistent issues that could limit widespread adoption,” the report states.

“For institutional investors, these include concerns over capital efficiency, insurance and custody, security, and ESG considerations from bitcoin mining.” 

The report concludes by stating that bitcoin is as “the tipping point of its existence”, noting that its evolution will have wide-ranging repercussions.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The government of China’s Inner Mongolia region is seeking for public feedback on a regulation proposal, which includes plans to shut down all crypto mining farms in the area.

The Inner Mongolia Development and Reformation Commission (DRC) published a proposal last week on various regulatory measures that aim to help the region achieve energy saving goals under China’s 14th five-year economic plan that spans from 2021 to 2025.

As part of the scope to eliminate industries that consume excessive energy, the government agency’s proposal seeks to “fully clear out and shut down all virtual currency mining projects by the end of April 2021.”

Regarding how to speed up the restructuring process for energy-intense industries, the proposal further seeks to “properly control the development scale of data centers and prohibits constructing any new virtual currency mining projects.”

The Inner Mongolia region, after Sichuan and Xinjiang, is the third largest spot in China where bitcoin mining farms would call home, which rely on local fossil power plants. 

The public consultation period will last until March 3 and it remains to be seen if the Inner Mongolia DRC would eventually modify the language around crypto mining. 

The Inner Mongolia DRC is a local branch of China’s National Development and Reformation Commission (NDRC) – the country’s highest level economic planner and one of the 21 cabinet ministries that form the State Council.

In 2019, when the NDRC sought to update its macro guidance on industrial reorganization, it initially added crypto mining to a group of industries that should be eliminated in a draft proposal.

But months after a public consultation process, the agency deleted the entire language about crypto mining in the final reorganization guidance. 

This isn’t the first time that the Inner Mongolia government is trying to curb crypto mining activities. In last August, it stripped of electricity perks for 21 bitcoin mining farms that included the ones belonging to bitcoin miner makers Bitmain and Ebang. 

Such a stance is different to the approach taken by counterparts in the Sichuan province.

As previously detailed by The Block, the Sichuan government has established several state-sanctioned industrial parks where bitcoin mining farms can operate in a compliant environment since 2020 to help consume excessive hydropower that would otherwise go wasted.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The adjusted, monthly on-chain stablecoin volume hit a new high in February, rising above $360 billion for the first time.

As expected, the volume figures were dominated by Tether (USDT). USDT saw 63.5% of the volume, with 18.7% going to USD Coin (USDC) and 9.6% to DAI. 

USDT also saw its most-ever volume of $232 billion in February.  The stablecoin surpassed $30 billion by market cap on February 10, suggesting more than 30 billion USDT currently in circulation. 

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Furucombo, a drag and drop tool for users to create DeFi transactions, has been exploited.

The exploiter has stolen roughly $14M in ETH and ERC-20 tokens. According to The Block Research’s Igor Igamberdiev, the exploiter used a fake contract to trick Furuсombo into thinking that Aave v2 had a new implementation and used this contract to transfer all approved tokens from Furucombo into their wallet.

According to a tweet from Furucombo, the project “believe” that the vulnerability has been patched and is “working on the next steps and will update our community as soon as we can.”

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Crypto exchange data collected by The Block Research shows monthly traded volumes surpassing $1 trillion in February, a new record.

As of February 27, the monthly volume figure stood at $1.05 trillion. That represents an increase of $143.9 billion — or 15.9% — from January when the previous monthly high was registered. Two-thirds of the trillion-dollar volume comes from Binance, with 10.6% from Coinbase and 5.3% from Kraken. 

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Regulators in Canada approved two bitcoin exchange-traded funds (ETFs) in recent days, marking the first approvals of their kind for North America.

Since launch, the products have seen considerable inflows. With the demand for a bitcoin ETF now proven, many wonder what a Canadian approval could mean for a U.S. offering. 

The Scoop spoke with Eric Balchunas, a senior ETF analyst at Bloomberg, about what an approved bitcoin ETF means for the landscape. During this week’s episode Balchunas broke down the winding road to approval and why Canada was always likely to be a first.

Now that Canada has its BTC ETFs, he argued that an approval from the U.S. Securities and Exchange Commission (SEC) is just around the corner.

“I think it’s just a matter of the SEC coming around, and then once they come around mentally, I imagine it will happen pretty quickly,” he said. “But again, I’m not in that bubble. I’m not a regulatory analyst. That’s just my sense from talking to people.”

• How Canada has historically been a proving ground for novel financial products.
• The differences and similarities in the Canadian and U.S. approval processes.
• Why Balchunas thinks 2021 will be the year of a U.S. BTC ETF approval.
• Why it’s only a matter of time before a meme ETF launches.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Crypto giant Kraken has been offering refunds to traders hit with heavy losses as a result of a sharp dip in the price of Ether (ETH) on the exchange earlier this week.

The price of ETH on Kraken fell to $700 on February 22, significantly below its low point on other major exchanges. With investors licking their wounds, Kraken investigated the sell-off and found that its trading engine had “processed orders correctly”.

Chief executive Jesse Powell took to Twitter to explain that the price move was caused by extreme selling while also calling for customers not to trade with leverage if they don’t understand the risks.

But in an apparent volte-face, Kraken has been offering to refund customers throughout the week. A report from New Money Review, the news site, suggests that Kraken clients have been offered refunds ranging in size from 5% to 50% of their losses.

In a series of tweets on February 26, Kraken’s Powell said the business was “coming out of pocket to help some people out for the sake of client retention.”

“Larger cases are evaluated individually. Smaller cases received an automatic credit. Amounts are based on what they would have received had the price floor been what it was at another venue. Generally, 80-100% of that is credited, combo of cash + fee credits,” he continued.

Powell added that Kraken would do what it could to help its customers but would not “bend over backwards to meet unreasonable demands.”

Kraken did not respond to requests for comment by the time of publication.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Quick Take

• Bitcoin is under selling pressure despite the news of Coinbase’s S-1. 
• Could recent activity in the bond market finally slow the coin’s rally?

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