River, Time, and Noise

Market Update: 19 Jan 2024

No man degen steps foot in the same river market twice.

Yet, time is a flat circle.

It seems like two separate ways of looking at the world. But when we step back and look at Grayscale, we can see how it’s possible to hold both perspectives simultaneously.

It’s likely a name that has caught your attention today. Which is why we will go ahead and discuss it, but with a certain purpose in mind…

To rise above the noise.

It’s Toxic

Grayscale is the entity with the most successful product trading on Tradfi rails to date - GBTC.

And yet, it continue to be the most toxic asset. Something we are reminded of over and over - time is a flat circle.

In 2020, it was the vehicle that pumped crypto to new all-time highs.

By 2022, it started to become one of the most hated assets in the market as it became clear there was a small group of coordinated entities that exploited the nuances of how the vehicle worked, until it was no longer profitable.

We can think of Grayscale handing all these willing exploiters a hand grenade with the pin pulled… It was only a matter of time until each one entered the halls of rekt. That hall now holds portraits of Su Zhu, SBF, BlockFi, and others.

We can thank Gary for the protection on this instrument.

Fast forward to 2023, the team behind the Grayscale Bitcoin Trust helped knock over a key domino in crypto’s push against overbearing regulators. It’s one that arguable unlocked the door for the SEC to begrudgingly accept all pending Bitcoin ETF applications.

We can thank Gary for everyone now being able to trade a “volatile asset that’s also used for illicit activity…” (Gary’s comments after approving the ETFs).

Then in 2024, we are once again reminded of that dreaded flat circle concept.

Here we ares wrapped up in tracking the toxicity of that same honeypot of Bitcoin. Each 10k of BTC moving out of Grayscale wallets is like an ominous and unavoidable wave approaching an unescapable island.

Many dismiss this as an unnecessary fear. And are quick to point out Grayscale’s Bitcoin is being absorbed by ETF entities. This table is the sort of thing that is shared when we hear those comments.

Note the last row that says net flows are more than $1 billion since these have started to trade (as of January 18).

I don’t really buy the argument.

Pantera for instance mentioned they would drop upwards of $200 million into Bitwise’s ETF. Others pledged various amounts as well…

Meaning some of this isn’t fresh demand in the market. It’s more of just moving Bitcoin from the ledger in a cargo adorned pocket, to a pinstriped Wall Street pocket. For this, I remain skeptical of a lot of these netflow figures.

And to really hammer it home…

New York Session

Here’s a post from our friend ByzGeneral from the HoneyBadgers. He pointed out something that really resonated with our team.

So what’s he talking about?

Remember this part of the xChanging Good show by chance… if so, a similar concept - just much more broad.

What Byzantine General is talking about is how Coinbase is impacting the market. He wants to see Coinbase premium return to the market. His chart is highlighting volume, which is one of the best ways of looking at whether or not we are seeing confirmation of a move.

If you have a chance, check out his tweet as I believe he even attached the Tradingview scripts to it for those interested. Also listen in on the recent episode by clicking the chart image above.

In the meantime, let’s get back to this difference by oversimplifying things here…

Grayscale is sending coins to Coinbase. Coinbase prices and other indicators show its below what we can expect elsewhere in the market.

If Grayscale was being absorbed, this wouldn’t be happening shortly after the New York open yesterday.

That’s why we are talking about Grayscale today… Because price dropped over 10% during the New York session on Coinbase. It’s also why you are likely spending time on Arkham tracking wallet flows, checking out various alerts, and wondering if you should get out before the bottom falls out.

Frustrating, right? It’s one of the moments when you wonder who is driving the ship, because it isn’t you.

Well, do you recall what this post was about today?

Rise Above The Noise

How much time did you spend on Arkham today trying to decode things… how much time on Crypto Twitter… how much time in various chat groups reading messages?

Honest question, how much time - post in the comments below so people know they aren’t alone here.

Needless to say, these selloffs cause serious confusion, uncertainty, and ultimately moves that are not well thought out.

In fact, while some of our own clients were getting caught up in the noise asking us questions, one of our alert systems in testing showed the path forward in real-time (more below).

This is a very difficult market to trade if you are wrapped up in the noise day-to-day.

That’s the moral to this story. Take the time to form a thesis. Take the time to validate your thesis. Take the time to come up with alternative scenarios so that when things do change direction on your initial gameplan, you don’t get swept up into the noise.

The number will go up, don’t rush it. The longer it takes, the more opportunities there will be to build your portfolio.

Take some time to enjoy the weekend if you are able to.

As for the path forward…

For those that are part of our service… you should be excited.

Here is a snapshot of another alert system in testing. It was signaling longs right when the market did a fake out we were about to drop hard.

Here’s the fakeout when the alerts came in.

Tracking flows are great, but to really gain an edge, you need a system that can digest the millions of data points coming through and execute on it through autonomous software - That’s how I would sum up what we do If you’re wondering what sort of services we offer.

And in case you want to learn more, reach out and send us a message: askus@jlabsdigital.com.

Until next time…

Your Pulse on Crypto,

Ben Lilly

P.S. - Minimal change to the market update sent out two days ago and the update given in the latest xChanging Good episode. If you missed them, here’s the last post (linked) and latest episode (below).