‘Narratives are nice, but they’re for newspapers’ marketing stuff, and there are some deeper trends. There are some deeper issues at work here.’ – Plan B
After a long hiatus, both Plan B and Willy Woo were guests on the Blockware Intelligence podcast, where they discussed many topics, including Elon Musk, Twitter macroeconomics, and the current state of Bitcoin. Woo and Plan B didn’t shy away from their woeful bitcoin price predictions at the end of 2021, with Woo recently taking to Twitter to call it quits for a subscription newsletter. Woo explained his reasoning for closing the subscription, showing remorse for people losing money on trades when his on-chain analysis didn’t seem to be as accurate as planned.
Despite no longer discussing cryptocurrency prices, Plan B and Willy Woo talked about the massive opportunity that’s not crypto mining. It involves not listening to the narrative and understanding the arbitrage opportunities available if you’re a savvy investor.
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Plan B says,
It doesn’t matter if you spin a narrative around it that it’s flat, it doesn’t matter. Maybe it will delay it a couple years, but it will win. So, and also financially, it’s an asset, it’s an accepted asset, more so than a couple of years ago, and markets are maturing. The cash and carry trade that we talked about a lot last year almost completely disappeared, which is normal and which is a sign of maturing markets because a contango premium of 40%, 50%, even 60% can’t go on forever.
In my view as an investor, as an ex-institutional investor, it’s all about arbitrage. And in the beginning, of course, there was arbitrage in Bitcoin only with exchanges in Korea, Europe, and the US, and then making, uh, catching the differences, which was an easy way to make money. And now in the future, the cash and carry trade was, of course, a very easy way to make money and everybody and his mother is doing it. So now that premium has gone down to like 5% or whatever it is today, which is still better than, uh, Europe, where you have minus 1% on your bank account or something, so they’re still but that
So, those parties are now in place, they have their funds, they’re doing this trade, and this market is more efficient, bigger, and stronger, so what’s left is, for example, the volatility trade. That’s right, you know, you can still make 25% a year with cover call writing and capturing the insane volatilities that have lowered, by the way. It’s obvious to bitcoiners that the trend in the price reflects the fact that it’s better technology, that it will win, and that it will be adopted over time. That’s caused by narrative xyz, but that’s one of the other things.
And of course, the big play we’re seeing right now, and it’s very interesting, is the arbitrage with the fiat world because Bitcoin can be seen as a foreign exchange thing, so not even a tech stock or a commodity, but a currency. It has an interest rate and you can exchange it with other currencies. You can make very hard arbitrages there with enormous sums of money, and it wouldn’t surprise me at all. I know that some traditional parties are doing that.
I guess, as long as the central banks do crazy stuff, which they, in my view, have to do because they have positions, they can’t get out, they can’t raise the interest rates because they will kill the stock market, bond market, real estate market, everything the economy.
Nobody wants to do that. So they’re doing stupid stuff like printing money and more and more while saying they’re tapering, which well, I think it’s the only thing they can do. But that creates opportunities for arbitrage-minded people and just savvy investors, so that will be a big drive in the market for years to come, I guess.
Willy Woo says,
When I think of narratives, I actually think of things like the newspaper or something like a Bloomberg report. Stocks fell today because of this or the market felt fear because of it. It’s absolutely right that if you’re in the market, you say “no,” but actually it hit the technical resistance. There was a bearish divergence. We rejected that because all traders would have to sell because of that signal. That’s why it was rejected, and then someone found a narrative that is still considered to this day. When I look at the bitcoin price, I’m looking at fundamentally who’s buying and who’s selling, and you can attach.
Recently, the prices sold down very quickly a week ago, and the narrative that’s been attached to it has been that it’s a tax season sell-off, and while they left it at the last minute, it’s been assumed that it’s a tax selloff. When you look at the data, it’s like, well under overall, there was very mild selling from hodlers. Overall, spot was buying a large number of coins moving off chain, off the exchanges. They were able to determine who was buying and who was selling. That was the futures markets, particularly the calendar market, which is linked to the CME and the sophisticated institutions that are trading the correlation to tech stocks and in the S&P. You got this narrative. ” There was a tax sell down, but actually it wasn’t. It was traders trading this correlation. That’s what I think about narratives in terms of price action.
You know, I think they’re too coincidental to some sort of reasoning, but not backed by any kind of fundamental data. If you’re looking at the markets properly, like yields increasing, tech stocks getting pressure, then that is right. You know, it’s those guys that are selling down Bitcoin but you can see that in the data. I think it’s very hard to attach a narrative to it without evidence. You know, it’s correlation, not causation.
[This article is a transcription of a video made by Only The SAVVY]
Original video: https://youtu.be/qkGAqj9-4X4 ]