How do you think just the idea of narratives for BTC took a big hit last week? Prices were in the red again this morning. Bitcoin has now lost more than half its value since its record high last year. The utility is not necessarily a bad thing and it’s normal to see 30 to 50 volatility in the crypto markets in any given month. When I think of narratives, I actually think of the newspaper.
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Almost a Bloomberg report stocks fell today because so- did this or the market without fear because of that. It’s absolutely right, if you’re in the market, you go – actually it hit the technical resistance and there was a bearish divergence. We rejected that because all traders will have to sell because of that signal that’s why it was rejected. Then someone found a narrative that also coincided to this day and when I look at the Bitcoin price. I’m like looking at fundamentally who’s buying, who’s selling, and then you can attach recently. The prices sold down very quickly a week ago and the narrative that’s been attached to. It’s a tax season sell-off and they left at the last minute because the 18th of April is the deadline for many Americans and is assumed that let’s take a selloff. You look on at the data and it’s under overall. There was very mild selling from hobblers. The overall spot was buying a mass amount of coins moving off, the chain on, chain off the exchanges. They actually spotted was buying who was selling oh that was the futures markets (particularly the calendars market) which is linked to the CME and the sophisticated institutions who are trading the correlation to tech stocks in the SP. So, you got this narrative. There was a tax sell but actually t it was traders, trading this correlation.
So that’s what I think about narratives in terms of price action. 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, do you think narrative terms go ahead of time? Well, in terms of what you just outlined yields increasing ticks tech stocks get pressure then that is right. It’s those guys that are selling down Bitcoin. Do you think there’s a reflexive aspect to narratives though? Plainly, you want to answer “so sorry for hopping”. Before you spoke but no worries. Do you think there’s reflexivity to narratives? As price drives, upright the whole kind of George Soros theories or theory price drives up their narrative follows that drives price up further which pushes the narrative even further. It has this positive feedback loop, do you think we get that at Bitcoin? For example, with the inflation hedge narrative at the end of 2020? Or do you think it’s just irrelevant?
I think plan B has taught and a lot of people have taught who have come from mainstream finance world that might have been true in 2017. but man there’s the beautiful carry trade to take the other side and yield. What is it like? I think it was up to 60 annualized taking the other side and taking the heat out of the market. So, I don’t think it’s so reflexive now. You see that with a blunt top and a rollover none of these exponential spikes. You’ll see where people can’t take the other side. So, I’m not so much now about to say the exact same thing. I mean narratives are nice because it’s for newspapers, for marketing stuff and there are some deeper trends. Things going on here and it’s what he said. Of course, technology is the better money. So, the internet, if you want it or not – it will be the less the thermodynamically better thing. It will win in the end the earth is round not flat. Whether you spin a narrative around it that it’s flat – it doesn’t matter it delays. But it will win.
Also financially it is an accepted asset, more than a couple of years ago and markets are maturing and the cash and carry trade that we talked about a lot last year almost completely disappeared: which is normal, which is a sign of maturing markets because a contango premium of 40-50 even 60 percent. It can’t go forever people, so in my world view 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 the Korea, in Europe, and in US. Then making the differences which were an easy way to make money 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 five percent.
What is it today? Which is still better than Europe? Your minus one percent on your bank account or something so they’re still? But those parties are now in place. They have their funds, they’re doing this trade and this market is more efficient and bigger and stronger. So, what’s left is, for example, the volatility trade. That’s one of the big things. You can still make 25 a year with cover call-writing and capturing the volatility, the insane volatilities that have lowered. But it’s obvious for Bitcoiners that rent at the price. The fact that it’s better technology and it will win and it will be adopted over time. It is larger than the volatility that’s caused by narrative X-Y-Z. So, that’s one of the other things and, of course, the big play. We’re seeing it right now and it’s very interesting. It 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 foreign currency. It has an interest rate and you can exchange it with other currencies. So, you can make very hard arbitrages there with enormous sums of money and it wouldn’t surprise me actually I know that some traditional parties are doing that the central bank as long as the central banks do crazy stuff which they have to do. In case, they have positions and set themselves in the corner where 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! Nobody wants to do that. So, they’re doing stupid stuff, like printing money and more while saying they’re tapering which is 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.
This article is a transcription of a video made by Jamie Tree
Original video: https://youtu.be/KeXhYOoSGxk