Wall Street Reports On Bitcoin

[fillippone]

In this thread I will collect various Research papers published by Wall Street Banks  on Bitcoin.

Banking sectors have begun to cover Bitcoin in Various aspects. A few reports are quite remarkable, so will deserve their own thread. Some other are important for a minor reason, but maybe they are referenced on other news, or papers without  proper reporting, and it is often difficult to read the original article.

I will use those to collate and reference into other thread, publishing graphs and paragraph linked to these research.

I won't always be able to post full documents to protect my sources, obviously, as often those materials come with a watermark.

All reported material will be quoted.
My comments will be out of quotes.

If you find some missing article, or want to read a particular one, just ask, I will unleash my hounds to fetch the missing pieces.

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[fillippone]

JP Morgan Flows & Liquidity
How has the investment landscape changed during 2020?
21 December 2020

Summary:

• In percentage terms, the expansion of the equity universe has been smaller than that of the bond or cash universe.
  
• Private asset classes lagged the growth of public asset classes.
• Alternative “currencies” such as Gold and Bitcoin have been the main beneficiaries of the pandemic in relative terms.
• Within equities, the EM Asia universe grew the most, while Latam contracted.
• With credit, the strongest growth has been in Euro HY.
• Among investor types, retail funds such as Mutual Funds and ETFs and SWFs appear to have seen double-digit growth in their AUM this year, thus increasing their share in the total investor universe. HFs, as well as pension funds and insurance companies saw low single digit AUM growth instead.
• We find it difficult not to characterize bitcoin as overbought at the moment.
• At the same time, we acknowledge that the inflows into the Grayscale Bitcoin Trust, at $1bn per month currently, are too big to allow any position unwinding by momentum traders to create sustained negative price dynamics similar to the ones seen before in the second half of 2019.
• Any signs of significant slowing in the flow trajectory for the Grayscale Bitcoin Trust would raise the risk of a bitcoin correction similar to the one seen in the second half of 2019.

Relevant Bitcoin Parts:

• As the year comes to a close it is useful to look at how the investment landscape changed during 2020.
  How have different asset classes and types of investors fared in terms of overall growth during a year dominated by the impact of the global pandemic and policy responses to it? Figure 1 and Figure 2 show the overall changes in broader asset classes in dollar terms as well as relative to their end-2019 levels, and includes the 4% contraction in global GDP for 2020 that our economists have in their forecast for context. The most striking increase has been in the total outstanding debt which in 1H20 had already increased by around $14tr, almost matching our previous projection for 2020 in total of $16tr 16tr (see F&L More debt, more liquidity, more asset reflation, Jul 6th). As a result, we now project total debt growth for 2020 of $21tr, reflecting continued strong bond issuance in particular. Of this total, the increase in bonds accounts for around $13tr reflecting a significant increase in government deficits as they sought to smooth the impact on incomes as well as record corporate bond issuance as companies sought to increase their cash buffers to weather the shock on cash flows. The remainder is a combination of bank loans, shorter-maturity paper such as bills, EM local debt and other non-marketable debt.
  
  

	Fig.1	Fig.2

• Moreover, this increase in debt is also reflected in a significant increase in cash, by $9tr in terms of M2 global money supply. Partly, this is a consequence of the increase in debt as bank loans directly create deposits. And while bond issuance does not create deposits directly in the same way bank lending does, when QE purchases by central banks absorb (mostly government) bonds from the portfolios of private non-bank investors, such as pension funds, asset managers and insurance companies, liquidity or money supply is being created.
• The universe of global equities has expanded by a similar order of magnitude to the expansion in bonds, i.e. by around $11tr. That is lower in dollar terms than the expansion in bonds, but larger than either cash or bonds held by non-bank investors. However in percentage terms the expansion in the equity universe has been smaller. This helps explain why equity weights in non-bank investor portfolios have only risen just above their post-Lehman averages despite global equity prices reaching new all-time highs.
• Private asset classes such as private equity, private debt, infrastructure, private real estate and natural resources, a $7.2tr universe at the end of 2019 according to Preqin, likely grew by around $640bn this year based on our estimates. This represents close to 9% growth, significantly below the 15%/17% growth for public equities/bonds. Alternative “currencies” such as Gold and Bitcoin have been the main beneficiaries of the pandemic in relative terms growing their assets (for investment purposes) by 27% and 227%, respectively.
• Looking across asset classes at a more granular level we find that just over half of the increase in the equity universe comes from US equities, with EM Asia another strong beneficiary. In percentage terms, however, EM Asia has seen a larger increase, likely in part reflecting the fact that China is one of the few countries globally where our economists forecast positive GDP growth for 2020, while Latam has seen a contraction in dollar terms. Within credit, unsurprisingly the largest increase in terms of market value has been USD HG, reflecting that nearly $1tr of net issuance. In percentage terms, however, the strongest growth has been by far in Euro HY, which is up by almost 50% over the past year.
• Across investor types retail funds such as Mutual Funds and ETFs (a $52tr universe currently) have seen the strongest percentage growth with Equity funds leading, followed by Money Market funds and Balanced/Hybrid funds, while Bond funds saw more muted growth (Figure 3 and Figure 4). SWFs, despite suffering liquidations in Q1, have benefited from their high exposure to public equities of 60%-70% and as a result they likely saw close to 13% growth (or $1tr) in their AUM this year, bringing their total assets to above $9tr currently. In contrast, hedge funds (a $3.4tr universe currently) and pension funds/insurance companies (a $58tr universe currently) saw more modest low single digit growth this year. In other words, among investor types, retail funds such as Mutual Funds and ETFs appear to have seen the strongest growth this year, thus increasing their share in the total investor universe.

	Fig.3	Fig.4

Now a really interesting part:

Inflows the Grayscale Bitcoin Trust still too big to allow any position unwinding by momentum traders to create sustained negative price dynamics

• We had argued in our F&L publication of Dec 11th that the previous week’s announcement by MassMutual life insurance company that has already invested $100mn in bitcoin for its general investment fund, represented another milestone in bitcoin adoption as it suggests that institutional investors’ adoption of bitcoin is spilling over from family offices/HNWI to more traditional real-money investors such as insurance companies and pension funds.
• That MassMutual announcement was followed this week by a wave of speculative bitcoin buying, likely reflecting a renewed impulse by speculative investors to front run real-money institutional investors.
  Indeed, bitcoin futures, the preferred vehicle of speculative investors, saw new record high volumes on Thursday this week (Figure 5), which combined with a sharp increase in open interest (Figure 6), points to intense buildup of futures positions. In fact Figure 6 shows that the open interest of CME bitcoin futures has increased by an astonishing 45% since last Friday, more than reversing the previous decline of Nov 25th and making a new record high of $1.4bn.
  This is also true with our more carefully calculated bitcoin futures position proxy shown in Figure 7 which experienced a similarly steep ascent this week to unprecedented territory. As a reminder to our readers to infer positioning in bitcoin futures, we use our open interest position proxy methodology that we also apply to other futures contracts, where we look at the cumulative weekly absolute changes in the open interest multiplied by the sign of the futures price change every week. The rationale behind this position proxy is that when there is a price increase, the net long position of spec investors increases also with the magnitude of the increase determined by the absolute change in the open interest. It does not matter whether the open interest rises or falls as the net long position can increase either via fresh longs (increase in open interest) or a reduction of previous shorts (reduction in open interest). And vice versa. When there is a price decrease, the net long position of spec investors decreases also with the magnitude of the decrease determined by the absolute change in the open interest. It does not matter whether the open interest rises or falls as the net long position can decrease either via fresh shorts (increase in open interest) or reduction of previous longs (reduction in open interest). Looking at Figure 6 and Figure 7 it is difficult to not become concerned about a buildup of speculative long futures positions in bitcoin. At the same time, any previous attempts to call for mean
  reversion in these two indicators proved futile.
  

	Fig.5	Fig.6	Fig.7

• What about momentum traders? There is little doubt that momentum traders, such as CTAs and quantitative crypto funds, amplified this week’s surge. How much of vulnerability do these momentum traders pose for bitcoin at the moment?
  We had argued in previous weeks that the near term outlook for bitcoin was skewed to the downside due to a potential decay of its momentum signals into January, unless the bitcoin resumed its uptrend by rising above $20k. Clearly, this week’s surge to above $23k has not only cancelled our previous momentum-signal-decay thesis, but it has reversed it by shifting these momentum signals to even higher territory. This is shown in Figure 8 which depicts our short and long lookback period momentum signals for bitcoin. Figure 8 shows that the short lookback period momentum signal rose this week to 2.0 stdevs and the long lookback period to 1.6 stdevs. Both are above our 1.5stdev threshold typically associated with overbought conditions and a high risk of mean reversion. According to Figure 8 the last time momentum traders were so long bitcoin was in June 2019.
• 
  Taking Figure 6, Figure 7 and Figure 8 together, we find it difficult not to characterize bitcoin as overbought at the moment. At the same time we acknowledge that the inflows into the Grayscale Bitcoin Trust, at $1bn per month currently (Figure 9), are too big to allow any position unwinding by momentum traders to create sustained negative price dynamics similar to the ones seen before in the second half of 2019. In other words, monitoring on a high frequency basis the flow trajectory for the Grayscale Bitcoin Trust remains very important. Any signs of significant slowing in the flow trajectory for the Grayscale Bitcoin Trust in Figure 9 would raise the risk of a bitcoin correction similar to the one seen in the second half of 2019.
  
  

	Fig.8	Fig.9

Apart every speculation about Grayscale, I think I have addressed in my thread, I think the interesting part is the proxy positioning based on Open Interest. An Indicator I will try to reproduce in TradingView.

EDIT: Zerohedge referenced to this article, with various comments

Bitcoin At $650,000? One Stunning Chart, And Why JPMorgan Thinks Nothing Can Stop It Now

[fillippone]

There is an interesting bit here:

As a reminder to our readers to infer positioning in bitcoin futures, we use our open interest position proxy methodology that we also apply to other futures contracts, where we look at the cumulative weekly absolute changes in the open interest multiplied by the sign of the futures price change every week.

The result is the following graph:

	Fig.7

Is anyone able to reproduce it in Tradingview?

[The Sceptical Chymist]

Cool idea for a thread, OP.  It's kind of amazing to me how mainstream bitcoin has become in terms of its coverage in the financial news compared to when I started getting interested in it about six years ago.  There was some coverage back then, but it was almost as if bitcoin was a freak-show asset that was performing like a carnival act.  Now there's just straight reporting on it as if it were just another investment class.

This caught my eye:



I would not have expected stock values to lag that far behind bitcoin, considering stocks have been in a prolonged bull market for over a decade now--but nonetheless the bitcoin growth numbers are incredible!  There's certainly been huge demand for it, particularly by all those companies that bought it as an alternative to cash (like MicroStrategy).  Whew.  It's been one hell of a year in many ways, but at least one positive that came out of 2020 is that bitcoin reached a new ATH.

[fillippone]

Well, the explanation is in the previous graph:

	Fig.1

Bitcoin is barely visible. Bitcoin is tiny, so a minuscule amount of money can send it to the sky.
Of course once BTC will prove itself as a viable SoV, it will begin sucking value from all other asset classes, as at least some percentage of those are held because...SoV.

Anyway, the Gold amount doesn’t seems correct to me, as Gold capitalisation looks more 10 trln to me (they might be referring only to privately held Gold) equivalent to a Bitcoin priced at 485,000 USD.

EDIT: Zerohedge referenced to this article, with various comments and a slightly different Gold Estimate!

Bitcoin At $650,000? One Stunning Chart, And Why JPMorgan Thinks Nothing Can Stop It Now

[fillippone]

JP Morgan Flows & Liquidity
Has bitcoin equalised with gold already?
04 January 2021

Summary:

• We believe that the valuation and position backdrop has become a lot more challenging for bitcoin at the beginning of the New Year.
• While we cannot exclude the possibility that the current speculative mania will propagate further, pushing the bitcoin price up towards the consensus region of between $50k-$100k, we believe that such price levels would prove unsustainable.
• Risk markets look vulnerable ahead of this week’s Georgia runoffs..

Relevant Bitcoin Parts:

• We note that the spectacular bitcoin rally of the past few weeks has moved bitcoin into more challenging territory not only in terms of its positioning backdrop, but also in terms of its valuation. We had previously used two valuation metrics for bitcoin, one based on its comparison to gold and one based on its mining cost or intrinsic value.
• Bitcoin's competition with gold has already started in our mind as evidenced by the more than $3bn of inflows into the Grayscale Bitcoin Trust and the more than $7bn of outflows from Gold ETFs since mid-October (Figure 1). There is little doubt that this competition with gold as an "alternative" currency will continue over the coming years given that millennials will become over time a more important component of investors' universe and given their preference for "digital gold" over traditional gold. Considering how big the financial investment into gold is, a crowding out of gold as an "alternative" currency implies big upside for bitcoin over the long term. As we had mentioned previously in the Oct 23rd F&L, "Bitcoin's competition with gold," private gold wealth is mostly stored via gold bars and coins the stock of which, excluding those held by central banks, amounts to 42,600 tonnes or $2.7tr including gold ETFs. Mechanically, the market cap of bitcoin at $575bn currently would have to rise by x4.6 from here, implying a theoretical bitcoin price of $146k, to match the total private sector investment in gold via ETFs or bars and coins.
  
  
• But this long term upside based on an equalization of the market cap of bitcoin to that of gold for investment purposes is conditional on the volatility of bitcoin converging to that of gold over the long term. The reason is that, for most institutional investors, the volatility of each class matters in terms of portfolio risk management and the higher the volatility of an asset class, the higher the risk capital consumed by this asset class. It is thus unrealistic to expect that the allocations to bitcoin by institutional investors will match those of gold without a convergence in volatilities. A convergence in volatilities between bitcoin and gold is unlikely to happen quickly and is in our mind a multi-year process. This implies that the above $146k theoretical bitcoin price target should be considered as a long-term target, and thus an unsustainable price target for this year.

	Fig.1

• In fact, an argument can be made that, in terms of risk capital, bitcoin has largely equalized with gold already. To see this, one could compare the volatilities of bitcoin and gold or the volatilities of the biggest bitcoin and gold funds given many institutional investors are only allowed or prefer to invest in fund format. The 3m realized vol for bitcoin currently stands at 57% vs. 17% for gold. In other words, the ratio of the two vols suggests that bitcoin currently consumes x3.4 more risk capital than gold.  This ratio rises further if one looks at the biggest bitcoin and gold funds. The 3m realized vol for the Grayscale Bitcoin Trust stands at 87% vs. 17% for GLD, the largest gold ETF by AUM. I.e., the ratio of the two vols suggests that the Grayscale Bitcoin Trust currently consumes x5.1 more risk capital than gold.
  Taking the average of the x3.4 and x5.1 ratios, suggests that bitcoin and its biggest fund on average consume x4.3 more risk capital than gold and its biggest fund, which is very much close to the x4.6 ratio needed to equalize the market cap of bitcoin to that of gold for investment purposes. In other words, bitcoin has already almost equalized gold in risk capital terms. In our opinion this challenges the consensus idea that a price in the region of $50k-$100k region is a sustainable bitcoin target for 2021 in the absence of a significant decline in bitcoin volatility.
  
  
• Our second valuation metric is based on the mining cost or intrinsic value of bitcoin. The ratio of the bitcoin market price to its intrinsic value is shown in Figure 2. The current ratio is higher than its previous mid-2019 peak and matches its end-2017 peak, again raising concerns about valuations. This is not say that the mining cost is driving the market value. The opposite is likely true. In the early years, bitcoin’s production cost had naturally stronger influence on the price because new coin generation was a  higher percentage of existing stock or supply. Now that more than 18m bitcoins have been mined already (vs. max supply of 21m) and new coin generation is a smaller percentage of the existing supply, the influence of the production cost on the price has likely diminished. Thus, in the current conjuncture, the market price is likely driving the production cost rather than the other way round. However, this causality does not mean that the bitcoin price would be diverging from its mining cost on a sustained basis. Similar to gold, when the bitcoin market price is well above the production cost, mining activity and mining difficulty should increase pushing the cost of production up towards the market price, thus inducing some convergence. But similar to previous episodes, some of that convergence could happen with an adjustment in the market price also. We thus view the acute divergence of Figure 2 as another valuation challenge for bitcoin.     
  

	Fig.2

• What about positioning? There is little doubt that the institutional flow impulse into bitcoin is what distinguishes 2020 from 2017. And there is no better metric to capture this institutional impulse than the flow trajectory of the Grayscale Bitcoin Trust in Figure 1. This is because many institutional investors are only allowed or prefer to invest in bitcoin in fund format for regulatory or other reasons. In fact, many of them are not even allowed to hold restricted shares of the Grayscale Bitcoin Trust via private placements given the 6-month lock up period, and are thus forced to pay a premium by buying these shares in the secondary market.
  
  
• It is, however, wrong to view all these institutional flows of last year as entirely driven by long-term investors. We believe that a significant component of last year’s institutional flows into bitcoin reflect speculative investors seeking to front run other more real-money institutional investors. The frothy positioning in CME bitcoin futures is one manifestation of this speculative institutional flow which encompasses momentum traders such as CTAs and quantitative crypto funds. Indeed, bitcoin futures, the preferred vehicle of speculative investors, saw a sharp increase in open interest in recent weeks (Figure 3), pointing to intense buildup of futures positions. This is also true with our more carefully calculated bitcoin futures position proxy shown in Figure 4, which experienced a similarly steep ascent in recent weeks to unprecedented territory. As a reminder to our readers, to infer positioning in bitcoin futures, we use our open interest position proxy methodology that we also apply to other futures contracts, where we look at the cumulative weekly absolute changes in the open interest multiplied by the sign of the futures price change every week. The rationale behind this position proxy is that when there is a price increase, the net long position of spec investors increases also with the magnitude of the increase determined by the absolute change in the open interest. It does not matter whether the open interest rises or falls, as the net long position can increase either via fresh longs (increase in open interest) or a reduction of previous shorts (reduction in open interest). And vice versa. When there is a price decrease, the net long position of spec investors decreases also, with the magnitude of the decrease determined by the absolute change in the open interest. It does not matter whether the open interest rises or falls, as the net long position can decrease either via fresh shorts (increase in open interest) or reduction of previous longs (reduction in open interest). Looking at Figure 3 and Figure 4 it is difficult to not be concerned about a buildup of institutional speculative long futures positions in bitcoin.
  
  

	Fig.3	Fig.4	Fig.5

• What about momentum traders? There is little doubt that momentum traders, such as CTAs and quantitative crypto funds, amplified the past weeks’ surge. How much vulnerability do these momentum traders pose for bitcoin at the moment? Clearly, the past weeks’ price surge to above $30k has shifted our bitcoin momentum signals to even higher territory. This is shown in Figure 5 which depicts our short and long lookback period momentum signals for bitcoin. Figure 5 shows that the short lookback period momentum signal rose this week to 3.0 stdevs, and the long lookback period to 2.3 stdevs, i.e. to even higher levels than the previous peaks of mid-2019. Both are well above our 1.5stdev threshold typically associated with overbought conditions and a high risk of mean reversion.
  
  
• What about retail investors? The speculative mania by retail investors characterized the bitcoin surge during 2017. Unfortunately, there are some signs that retail interest has also increased sharply. For example, as we had argued previously the broadening of corporate support for bitcoin, e.g. via Paypal and Square, has been facilitating and enhancing over time the usage of bitcoin by Millennials. And while we do not yet have data for 4Q volumes, one way to gauge the impact from retail purchases via Paypal is to look at volumes on itBit. These volumes have increased markedly since Oct 21st when Paypal announced the launch of services to enable trading and holding of cryptocurrencies.
  
  
• Another proxy suggesting increased retail participation is new account openings on ‘traditional’ cryptocurrency exchanges. Figure 7 below shows unique cryptocurrency wallet accounts on blockchain.com. While the number of accounts clearly has an increasing trend over time, there are sharp pickups in new wallet accounts during the retail-driven price spikes in end-2017 as well as mid-2019. Since the start of November 2020, there has been a proportionally similar rise in new wallet accounts to those two previous episodes.
  
  
• Moreover, data on the distribution of bitcoin balances held in wallet accounts is also suggestive of retail participation. Figure 8 shows percentage change in total bitcoin held in wallet accounts by bucket of bitcoin balance, e.g. < 1 shows the % change in bitcoin held in wallet accounts with a balance of less than one bitcoin. It shows that between the start of 2020 and 2021 accounts with less than one bitcoin or between one and ten bitcoin have seen a marked increase in holdings that is more likely to be retail driven. Similarly, there has been a significant increase in balances held in accounts between 1,000 and 10,000 bitcoin, which is more likely to be institutionally driven. By contrast, balances held in accounts with more than 10,000 bitcoin have declined significantly, suggesting early investors and miners have been selling bitcoin to facilitate the increase of new entrants.
  
  
• Taking all the above together, we believe that the valuation and position backdrop has become a lot more challenging for bitcoin at the beginning of the New Year. While we cannot exclude the possibility that the current speculative mania will propagate further pushing the bitcoin price up towards the consensus region of between $50k-$100k, we believe that such price levels would prove unsustainable.

	Fig.6	Fig.7	Fig.8

[Upgrade00]

Those are pretty impressive figures. $3 billion inflows into Bitcoin is quite significant and when you consider it's only being charted from Grayscale investments, it gives the idea that there is a global paradigm shift in investment destination as individuals and companies alike are trusting Bitcoin to preserve the value of their funds and speculatively give them profits.

What's your comment on the suggestion that mining cost represents intrinsic value for Bitcoin?
Mining cost varies depending on location and some other factors and would you consider it to be the metric that gives Bitcoin its value and as such any price spike above that could be considered to be purely speculative?

[fillippone]

What's your comment on the suggestion that mining cost represents intrinsic value for Bitcoin?
Mining cost varies depending on location and some other factors and would you consider it to be the metric that gives Bitcoin its value and as such any price spike above that could be considered to be purely speculative?

As the article itself stated mining costs are becoming less and less relevant determining the value of bitcoin. My point here is the following: "Why bother trying to infer the price of Bitcoin from mining costs when the Stock to Flow model already correctly captures the 95% of the value of Bitcoin? I am not that worried about that 5%"

[exstasie]

My point here is the following: "Why bother trying ti infer the price of Bitcoin from mining costs, when the Stock to Flow model already correctly captures the 95% of the value of Bitcoin? I am not that worried with that 5%"

Based on a very small sample. How long that plays out into the future, we shall see. I think stock-to-flow comes off as voodoo to many. It's just so out of touch with traditional fundamental analysis.

But this long term upside based on an equalization of the market cap of bitcoin to that of gold for investment purposes is conditional on the volatility of bitcoin converging to that of gold over the long term.

This implies that the above $146k theoretical bitcoin price target should be considered as a long-term target, and thus an unsustainable price target for this year.

I think these are weak conclusions. Too much emphasis on the need for a decline in gold to fuel a rise in Bitcoin. I don't think they fully understand Bitcoin's scarcity dynamics, and how few consistently circulating BTC there really are.

As for $146K being unattainable this year.....maybe, maybe not. Related to the above, I don't trust their ability to recognize the prospects for a speculative blow-off top.

[fillippone]

I think these are weak conclusions. Too much emphasis on the need for a decline in gold to fuel a rise in Bitcoin. I don't think they fully understand Bitcoin's scarcity dynamics, and how few consistently circulating BTC there really are.

You have to understand where they come from. Jp Morgan is (one of the best) investment banks in traditional finance. Hence their mindset is all about the difference between yielding and not yielding bearing assets. Scarcity is not a feature they are really understanding, as they are applying the traditional way of thinking in those investments.
I am pretty satisfied, as it's a nice U-turn since the infamous Jamie Dimon statements a few years back.
Just give them a few more years to complete their transformation.

[fillippone]

JP Morgan Flows & Liquidity
Retail investors’ euphoria returns
08 January 2021

Why the approval of a bitcoin ETF in the US would be negative for bitcoin in the near term?

• Optimism around the prospect of the SEC approving a bitcoin ETF in the US this year has risen in anticipation of SEC leadership changes. While the introduction of a bitcoin ETF in the US would be positive for bitcoin over the longer term, in the near term it could have a negative impact. The reason is a potential decline in the Grayscale Bitcoin Trust (GBTC) premium to NAV from the introduction of bitcoin ETF in the US, which would unwind a big portion of GBTC investments currently placed for monetizing this premium.
  
• An important support for the large premium to NAV in GBTC arises from the fact that many institutional investors are only allowed or prefer to invest in bitcoin in fund format for regulatory or other reasons. In fact, many of them are not even allowed to hold restricted shares of the Grayscale Bitcoin Trust via private placements given the 6-month lock up period, and are thus forced to pay a premium by buying these shares in the secondary market. 
• The typical GBTC premium monetization trade involves borrowing bitcoin (typical cost of 5-7% per annum), placing these bitcoins to GBTC at NAV via private placement for in-kind shares locked up for 6 months, and hedge the exposure during the lockup period by borrowing GBTC shares (typical cost of 7- 10% per annum) and selling them short. Alternatively one could hedge via shorting CME futures, but this entails some basis and rollover risk. The cost of this GBTC premium monetization trade is around 10-15% per annum and this is why it has been difficult so far for the GBTC premium to NAV to fall below this threshold.   
• Some institutional investors likely subscribed to GBTC (at NAV) during the second half of last year with the intention of selling after the 6m unlock period to monetize the premium (selling price minus subscription at NAV). Gauging by the amount of GBTC shares on Loan (around 8% of outstanding stock) and by the short base in CME bitcoin futures, we believe that the GBTC premium monetization trade could account for around 15% of outstanding GBTC stock. As the 6m unlock period expires, some of these institutional investors might sell GBTC during the first half of 2021 to monetize the premium. If it materialises, this selling pressure would put downward pressure on GBTC premiums. 
• This unwinding of the GBTC premium monetization trade could become more violent if a bitcoin ETF is approved in the US. The introduction of a bitcoin ETF would erode GBTC’s effective monopoly status and cause a cascade of GBTC outflows and a collapse of its premium. ETFs allow for daily creation and redemption of shares and thus a more efficient arbitrage of the premium to NAV. A cascade of GBTC outflows and a collapse of its premium would likely have negative near-term implications for bitcoin given the flow and signaling important of GBTC. 
  

[fillippone]

JP Morgan Flows & Liquidity
Policy Shift
22 January 2021

• With bitcoin failing to break out above $40k, the balance of risks is still skewed to the downside over the near term.

A review of the past year for bitcoin

• The virus crisis by boosting money supply as well as demand for an “alternative” currency supported both gold and bitcoin over the past year. The older cohorts preferred gold, while the younger cohorts preferred bitcoin as an “alternative” currency. Both gold and bitcoin investment vehicles have experienced strong inflows over the past year, as both cohorts saw the case for an “alternative” currency. This simultaneous flow support has caused a change in the correlation pattern between bitcoin and other asset classes, with a more positive correlation between bitcoin and gold but also between bitcoin and the dollar (Figure 4). In addition, the simultaneous buying of US equities and Bitcoin by Millennials has increased the correlation between bitcoin and S&P500 since last March, so it is more appropriate to characterise bitcoin as a “risk” asset rather than “safe” asset also, given its still very high 70% realized volatility. To some extent, this is also true with gold. Gold’s correlation with the S&P500 has been predominantly positive over the past year and its volatility at close to 20% is more similar to that of equities than to currencies or bonds (Figure 5). In other words, both bitcoin and gold could be more characterised as “risk” rather than “safe” assets based on their behavior over the past year and investors’ preference for them is likely more of a reflection of a need for an “alternative” currency rather than a need for a “safe” asset or “hedge”.

	Figure 4	Figure 5

• In the second half of 2020, bitcoin started receiving more support via corporate adoption, initially with Square and MicroStrategy and last October with Paypal. Paypal’s adoption of bitcoin was a big step toward corporate support for bitcoin, which in turn appears to have triggered demand for bitcoin by institutional investors such as family offices, hedge funds and even insurance companies such as MassMutual. Some of that institutional impulse into bitcoin likely came at the expense of gold based on the more than $4bn of inflows into the Grayscale Bitcoin Trust and the more than $7bn of outflows from Gold ETFs since mid-October (Figure 6). There is little doubt that this competition with gold as an “alternative” currency will continue over the coming years given that millennials will become over time a more important component of investors’ universe and given their preference for “digital gold” over traditional gold. 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. As we had mentioned previously in the Oct 23rd F&L, “Bitcoin’s competition with gold”, private gold wealth is mostly stored via gold bars and coins the stock of which, excluding those held by central banks, amounts to 42,600 tonnes or $2.7tr including gold ETFs. Mechanically, the market cap of bitcoin at $600bn currently would have to rise by almost x4.5 from here, implying a theoretical bitcoin price of $146k, to match the total private sector investment in gold via ETFs or bars and coins. 

	Figure 6

 

• But we mentioned previously this long-term potential upside based on an equalization of the market cap of bitcoin to that of gold for investment purposes is conditional on the volatility of bitcoin converging to that of gold over the long term. The reason is that, for most institutional investors, the volatility of each class matters in terms of portfolio risk management and the higher the volatility of an asset class, the higher the risk capital consumed by this asset class. It is thus unrealistic to expect that the allocations to bitcoin by institutional investors will match those of gold without a convergence in volatilities. A convergence in volatilities between bitcoin and gold is unlikely to happen quickly and is in our mind a multi-year process. This implies that the above $146k theoretical bitcoin price target should be considered as a long-term target, and thus an unsustainable price target for this year.
• In fact, an argument can be made that, in terms of risk capital, bitcoin has largely equalized with gold already (see Jan 4th F&L “Has bitcoin equalised with gold already?”). To see this, one could compare the volatilities of bitcoin and gold or the volatilities of the biggest bitcoin and gold funds given many institutional investors are only allowed or prefer to invest in fund format. The 3m realized vol for bitcoin currently stands at 72% vs. 19% for gold. In other words, the ratio of the two vols suggests that bitcoin currently consumes x3.8 more risk capital than gold. This ratio rises further if one looks at the biggest bitcoin and gold funds. The 3m realized vol for the Grayscale Bitcoin Trust stands at 103% vs. 19% for GLD, the largest gold ETF by AUM. i.e., the ratio of the two vols suggests that the Grayscale Bitcoin Trust currently consumes x5.4 more risk capital than gold. Taking the average of the x3.8 and x5.4 ratios, suggests that bitcoin and its biggest fund on average consume x4.6 more risk capital than gold and its biggest fund, almost equal to the x4.5 ratio needed to equalize the market cap of bitcoin to that of gold for investment purposes. In other words, bitcoin, at current market prices, has already almost equalized with gold in risk capital terms. In our opinion, unless bitcoin volatility subsides quickly from here, a price level of close to $35k should be considered as an upper bound of its fair value range at current levels of volatility. This challenges the idea that a price in the region of $50k-$100k region is a sustainable bitcoin target for 2021 in the absence of a significant decline in bitcoin volatility.
• What about the lower bound of its fair value range? In our opinion one way of thinking about the lower bound of its fair value is based on the mining cost or intrinsic value of bitcoin. The ratio of the bitcoin market price to its intrinsic value is shown in Figure 7. The current ratio is higher than its previous mid- 2019 peak and matches its end-2017 peak, again raising concerns about valuations. This is not say that the mining cost is driving the market value. The opposite is likely true. In the early years, bitcoin’s production cost had naturally stronger influence on the price because new coin generation was a higher percentage of existing stock or supply. Now that more than 18.6m bitcoins have been mined already (vs. max supply of 21m) and new coin generation is a smaller percentage of the existing supply, the influence of the production cost on the price has likely diminished. Thus, in the current conjuncture, the market price is likely driving the production cost rather than the other way round. However, this causality does not mean that the bitcoin price would be diverging from its mining cost on a sustained basis. Similar to gold, when the bitcoin market price is well above the production cost, mining activity and mining difficulty should increase pushing the cost of production up towards the market price, thus inducing some convergence. But similar to previous episodes, some of that convergence could happen with an adjustment in the market price also. We thus view the acute divergence of Figure 7 as another valuation challenge for bitcoin and the current mining cost of $11k as a lower bound of its fair value range.

	Figure 7

• What about positioning? There is little doubt that the institutional flow impulse into bitcoin is what distinguishes 2020 from 2017. And there is no better metric to capture this institutional impulse than the flow trajectory of the Grayscale Bitcoin Trust in Figure 6. This is because many institutional investors are only allowed or prefer to invest in bitcoin in fund format for regulatory or other reasons. In fact, many of them are not even allowed to hold restricted shares of the Grayscale Bitcoin Trust via private placements given the 6-month lock up period, and are thus forced to pay a premium by buying these shares in the secondary market.
• It is, however, wrong to view all these institutional flows of last year as entirely driven by long-term investors. We believe that a significant component of last year’s institutional flows into bitcoin reflect speculative investors seeking to front run other more real-money institutional investors. The frothy positioning in CME bitcoin futures is one manifestation of this speculative institutional flow which encompasses momentum traders such as CTAs and quantitative crypto funds. Indeed, bitcoin futures, the preferred vehicle of speculative investors, saw a sharp increase in open interest in recent months (Figure pointing to intense buildup of futures positions. This is also true with our more carefully calculated bitcoin futures position proxy shown in Figure 9, which experienced a similarly steep ascent in recent months to unprecedented territory. As a reminder to our readers, to infer positioning in bitcoin futures, we use our open interest position proxy methodology that we also apply to other futures contracts, where we look at the cumulative weekly absolute changes in the open interest multiplied by the sign of the futures price change every week. The rationale behind this position proxy is that when there is a price increase, the net long position of spec investors increases also with the magnitude of the increase determined by the absolute change in the open interest. It does not matter whether the open interest rises or falls, as the net long position can increase either via fresh longs (increase in open interest) or a reduction of previous shorts (reduction in open interest). And vice versa. When there is a price decrease, the net long position of spec investors decreases also, with the magnitude of the decrease determined by the absolute change in the open interest. It does not matter whether the open interest rises or falls, as the net long position can decrease either via fresh shorts (increase in open interest) or reduction of previous longs (reduction in open interest). Looking at Figure 8 and Figure 9 it is difficult to not have been concerned about a buildup of institutional speculative long futures positions in bitcoin up until the beginning of this year. 

	Figure 8	Figure 9

 

• How much vulnerability do these momentum traders pose for bitcoin at the moment? Clearly, the price surge to above $40k had shifted our bitcoin momentum signals to even higher territory. This is shown in Figure 10 which depicts our short and long lookback period momentum signals for bitcoin. Figure 10 shows that the short lookback period momentum signal rose above 3.5 stdevs in early January, and the long lookback period to above 2.5 stdevs, i.e. to even higher levels than the previous peaks of mid-2019. Both are well above our 1.5stdev threshold typically associated with overbought conditions and a high risk of mean reversion. As we mentioned in our publication last week, the current challenge for bitcoin is that, if its price fails to break out above $40k soon, the momentum signals would keep decaying till the end of March, given a lookback period of around 2-3 months for our short lookback period momentum signal. Bitcoin faced a similar challenge at the end of November when its price was hovering just below $20k. At the time, we had argued that if the bitcoin price had failed to break out above $20k, the momentum signals would have naturally decayed until the end of January creating negative dynamics for bitcoin. Luckily, at the time the institutional flow impulse behind the Grayscale Bitcoin Trust was so strong that bitcoin managed to break out above $20k inducing further position build up rather than position unwinding by momentum traders in December. At the moment, the institutional flow impulse behind the Grayscale Bitcoin Trust is not strong enough for bitcoin to break out above $40k as the 4-week pace of the flow into GBTC (Figure 11) appears to have peaked. Thus the risk is that momentum traders will continue to unwind bitcoin futures positions even after the large almost 30% decline in our position proxy of Figure 9 since its peak on January 7th.

	Figure 10	Figure 11

 
 

• What about retail investors? The speculative mania by retail investors characterized the bitcoin surge during 2017. Unfortunately, there are some signs that retail interest has also increased sharply in recent months. For example, as we had argued previously the broadening of corporate support for bitcoin, e.g. via Paypal and Square, has been facilitating and enhancing over time the usage of bitcoin by Millennials. And while we do not yet have data for 4Q volumes, one way to gauge the impact from retail purchases via Paypal is to look at volumes on itBit. These volumes (Figure 12) had increased markedly since Oct 21st when Paypal announced the launch of services to enable trading and holding of cryptocurrencies. Admittedly volumes have slowed over the past two weeks pointing to some slowing in the retail impulse via Paypal.

	Figure 12

• Another proxy suggesting increased retail participation is new account openings on ‘traditional’ cryptocurrency exchanges. Figure 13 below shows unique cryptocurrency wallet accounts on blockchain.com. While the number of accounts clearly has an increasing trend over time, there are sharp pickups in new wallet accounts during the retail-driven price spikes in end-2017 as well as mid- 2019. Since the start of November 2020, there has been a proportionally similar rise in new wallet accounts to those two previous episodes.

	Figure 13

• Moreover, data on the distribution of bitcoin balances held in wallet accounts is also suggestive of retail participation. Figure 14 shows percentage change in total bitcoin held in wallet accounts by bucket of bitcoin balance, e.g. < 1 shows the % change in bitcoin held in wallet accounts with a balance of less than one bitcoin. It shows that between the start of 2020 and 2021 accounts with less than one bitcoin or between one and ten bitcoin have seen a marked increase in holdings that is more likely to be retail driven. Similarly, there has been a significant increase in balances held in accounts between 1,000 and 10,000 bitcoin, which is more likely to be institutionally driven. By contrast, balances held in accounts with more than 10,000 bitcoin have declined significantly, suggesting early investors and miners have been selling bitcoin to facilitate the increase of new entrants.

 

	Figure 14

 

• In all, while bitcoin is currently trading within our fair value range of between $11k and $35k (at current levels of bitcoin volatility), the apparent peaking of the flow pace into the Grayscale Bitcoin Trust and a mechanically decay of our momentum signal till the end of March, both imply that the near term balance of risks is still skewed to the downside. In the long term, our theoretical price target of $146k is conditional on bitcoin vol converging to that of gold, which is not only likely to be multi-year process but would also depend on bitcoin ownership becoming more institutional and less retail over the coming years.

[Lucius]

Interesting reading, especially if we take into account that it was written by JPM, which still has a very high place in the world of finance. The report focuses in large part on comparisons of gold and Bitcoin, and interestingly, the Bitcoin market cap should grow by about x4.5 to reach the value of all private investment in gold, which includes gold ETFs. According to JPM, millennials will play a big role in this in the coming years because they prefer digital then physical gold.

The fact that Bitcoin has equalized gold in terms of risk capital says a lot, especially if we take into account the fact that gold ETFs have recorded an outflow of $7 billion in the last few months. If the trend of institutional investment continues, with the evident growth of investment from retail investors, JPM predicts that in 2021 it is realistic to expect the price of BTC from $50k - $100k.

[fillippone]

Hello.
I have been finally able to reproduce JPM Position proxy.
They described it as:

to infer positioning in bitcoin futures, we use our open interest position proxy methodology that we also apply to other futures contracts, where we look at the cumulative weekly absolute changes in the open interest multiplied by the sign of the futures price change every week. The rationale behind this position proxy is that when there is a price increase, the net long position of spec investors increases also with the magnitude of the increase determined by the absolute change in the open interest. It does not matter whether the open interest rises or falls, as the net long position can increase either via fresh longs (increase in open interest) or a reduction of previous shorts (reduction in open interest). And vice versa. When there is a price decrease, the net long position of spec investors decreases also, with the magnitude of the decrease determined by the absolute change in the open interest. It does not matter whether the open interest rises or falls, as the net long position can decrease either via fresh shorts (increase in open interest) or reduction of previous longs (reduction in open interest)

This the latest image:


This is what I got (added price for convenience):



This is the Spreadsheet I used for.

Position Proxy Indicator

Sadly, I haven't been able to find a publicly available source for aggregated open interest positions, maybe I have to dig a little bit more on tradingView.
Also yes, it would be interesting if someone could reproduce this indicator in trading view!

Stay tuned!

[beerlover]

It is awesome that JP Morgan type of companies are finally seeing what we have seen for a decade now. Bitcoin has always been a great investment if you could make it at a good level but these companies never really understood or seen that for a long time. We are finally seeing these companies making a change and they are really doing it for smart reasons as well basically validating what we have been doing so far.

Five years ago or so if you invested 100k into bitcoin all-in and you said it is going to go up people would say that you were gambling your money away and you would be losing a lot of money from that investment, today people are investing tens of billions of dollars into bitcoin from huge corporations, that 5 year change from 100k being risky to tens of billions of dollars is basically a way of saying people who bought bitcoin were smart people and not idiots like people claimed back then.

[fillippone]

It is awesome that JP Morgan type of companies are finally seeing what we have seen for a decade now. Bitcoin has always been a great investment if you could make it at a good level but these companies never really understood or seen that for a long time. We are finally seeing these companies making a change and they are really doing it for smart reasons as well basically validating what we have been doing so far.

Five years ago or so if you invested 100k into bitcoin all-in and you said it is going to go up people would say that you were gambling your money away and you would be losing a lot of money from that investment, today people are investing tens of billions of dollars into bitcoin from huge corporations, that 5 year change from 100k being risky to tens of billions of dollars is basically a way of saying people who bought bitcoin were smart people and not idiots like people claimed back then.

What puzzles me the most is how the banking sector, that has traditionally poached the best mind across all sectors, due to the financial power they had (for years salaries in the banking sector have been well above average), completely oversaw this opportunity.
I can understand if we were talking about central bankers, the real target of the bitcoin revolution. But all other banks could well thrive in a new bitcoin standard, nevertheless, they decided to keep the eyes shut until the phenomenon was too big to ignore, and then they decided to ride it...

[jaysabi]

I would not have expected stock values to lag that far behind bitcoin, considering stocks have been in a prolonged bull market for over a decade now--but nonetheless the bitcoin growth numbers are incredible!  There's certainly been huge demand for it, particularly by all those companies that bought it as an alternative to cash (like MicroStrategy).  Whew.  It's been one hell of a year in many ways, but at least one positive that came out of 2020 is that bitcoin reached a new ATH.

Stocks typically return 8-10% annually in aggregate, so 15% is quite robust. You have to remember that this is an the entire asset class of all stocks, and it's weighed down by a significant number of under performers. You would see the same weighted down effect if you looked at the entire crypto asset class instead of just bitcoin, and crypto as a whole would be significantly weighed down by the vast majority of under achievers. There are plenty of individual stocks that have outperformed bitcoin in the time period shown in the graph, however the graph only shows a single asset versus a broad asset class, so it is misleading in that it's not a like comparison.

[fillippone]

<...> There are plenty of individual stocks that have outperformed bitcoin in the time period shown in the graph, however the graph only shows a single asset versus a broad asset class, so it is misleading in that it's not a like comparison.

I do agree.
Think of Tesla. The stock had a better return than Bitcoin this year. Not only, TSLA had a greater volatility than bitcoin during such period.
This is something that I usually oppose to someone telling me "bitcoin is a toxic, volatile asset".

[TheGreatPython]

This is a good thread and I noticed that other stocks/assets has been seriously lagging behind Bitcoin which has been seeing some huge increases in price. I am happy about that, and as we are now starting to have a lot of institutions that are becoming part of this great community I believe there will still be more to it, so I look forward to that.

Stocks typically return 8-10% annually in aggregate, so 15% is quite robust.

Yep, I also noticed that, 15% is an improvement. Although in the case of bitcoin, I think it’s because it is still new and when it grows huge it might stop being as volatile, and the up and down wouldn’t be as much as it is now.

[aesma]

fillippone : good finds. I wouldn't use Tesla as a benchmark as it is overvalued as a company, and it's not that special, it's still a car company, with some technology that doesn't really work yet (self-driving).

Bitcoin on the other hand is its own beast, and it is special for a couple reasons, one being the limited supply, the other being the mother/father of crypto.

I'll keep that in mind : "current mining cost of $11k" and set up a buy order at that price...wait, I already did some time ago, I guess we think alike with JPM...

[fillippone]

Morgan Stanley:

Why Crypto Is Coming Out of the Shadows

If you were trying to doom a newly invented currency to irrelevance, naming it “cryptocurrency”1 would have been a crafty first step. “Crypto” means hidden or secret, and often describes a target of popular suspicion and fear, as in crypto-fascist or crypto-communist. But now, despite the jitters natural in a global pandemic, cryptocurrencies are rapidly gaining popular support as alternatives to gold (a store of value) and the dollar (as a means of payment).

Nice read.
Not very technical, but I guess ti is written for their general customers, rather than their agents.

[fillippone]

JP Morgan Flows & Liquidity
Did Q4 rebalancing flows materialise?
9 February 2021

• While bitcoin got another boost with Tesla’s announcement this week, the 8% allocation of its cash reserves to bitcoin is unlikely to be followed by more mainstream corporates.
• Irrespective of how many corporates eventually follow Tesla’s example, there is no doubt that this week’s announcement changed abruptly the near-term trajectory for bitcoin by bolstering speculative institutional flows via bitcoin futures as well as retail flows.
• How sustained this week’s price surge becomes would depend in our opinion on whether less speculative institutional flows like those behind the Grayscale Bitcoin Trust follow suit.

Speculative bitcoin flows surge following Tesla’s announcement 

• Tesla’s announcement this week that it has invested $1.5bn in bitcoin or 8% of its corporate cash reserves surprised markets by the magnitude of the purchases and re-invigorated expectations that other corporates will follow with their cash reserves. Although we are skeptical that Tesla is a typical corporate and its example will be followed by more mainstream corporates, we recognize that Tesla’s announcement broadens corporate sponsorship, after a gap of five months with no corporate treasury announcements beyond MicroStrategy and Square last August. In our opinion, the main issue with the idea that mainstream corporate treasures will follow the example of Tesla is the volatility of bitcoin. The typical portfolio of a corporate treasury consists of bank deposits, money market funds and short-dated bonds. As a result, the annualized vol of a typical corporate treasury portfolio is around 1%. This implies that even small allocations of 1% to bitcoin would cause a big increase in the volatility of the overall portfolio. For example, if a corporate treasurer allocates 1% of her 1% vol portfolio to bitcoin, the overall portfolio volatility will rise from 1% to 1.3%, or more than a one-quarter increase. This is because of the large 80% annualized vol of bitcoin. 
• Irrespective of how many corporates eventually follow Tesla’s example, there is no doubt that this week’s announcement changed abruptly the nearterm trajectory for bitcoin by bolstering inflows and by helping bitcoin to break out above $40k. This reduces one downside risk that we saw previously with bitcoin, i.e. the idea that if its price fails to break out above $40k, the momentum signals would keep decaying till the end of March, inducing further unwinding by momentum traders. The opposite is now happening. With bitcoin breaking out above $40k, momentum traders are forced to amplify the current upmove by rebuilding their long bitcoin futures positions. 
  
• Indeed, our position proxy based on CME bitcoin futures, the preferred vehicle of momentum traders and other speculative investors, saw a sharp almost $1bn increase this week (Figure 4) pointing to intense buildup of futures positions. As a reminder to our readers, to infer positioning in bitcoin futures, we use our open interest position proxy methodology that we also apply to other futures contracts, where we look at the cumulative weekly absolute changes in the open interest multiplied by the sign of the futures price change every week. The rationale behind this position proxy is that when there is a price increase, the net long position of spec investors increases also with the magnitude of the increase determined by the absolute change in the open interest. It does not matter whether the open interest rises or falls, as the net long position can increase either via fresh longs (increase in open interest) or a reduction of previous shorts (reduction in open interest). And vice versa. When there is a price decrease, the net long position of spec investors decreases also, with the magnitude of the decrease determined by the absolute change in the open interest. It does not matter whether the open interest rises or falls, as the net long position can decrease either via fresh shorts (increase in open interest) or reduction of previous longs (reduction in open interest).
  
  

	Figure 4

• However, our second proxy for the institutional flow into bitcoin, i.e. the flow into the Grayscale Bitcoin Trust (GBTC) has not exhibited a similarly strong impulse. Figure 5 shows that the 4-week flow pace in GBTC looks more subdued close to $300m per week relative to the torrid $500m per week pace seen in December. And this makes the current backdrop for bitcoin somewhat different to last November/ December when its price was hovering just below $20k. At the time, we had argued that if the bitcoin price had failed to break out above $20k, the momentum signals would have naturally decayed until the end of January creating negative dynamics for bitcoin. Luckily, at the time the institutional flow impulse behind the Grayscale Bitcoin Trust had accelerated by so much in December that bitcoin managed to break out above $20k inducing further position build up rather than position unwinding by momentum traders. At the moment, it looks like the additional flow impulse that helped bitcoin to break out above $40k came from more speculative institutional investors like those behind bitcoin futures rather than the ones behind the Grayscale Bitcoin Trust. In addition, there appears to have been an increase in the flow impulse by retail investors also this week, as suggested by the spike in volumes at itBit i.e. the exchange via which retail purchases via Paypal are routed (Figure 6)
  
  

	Figure 5	Figure 6

• In all, while bitcoin got another boost with Tesla’s announcement this week, the 8% allocation of its cash reserves to bitcoin is unlikely to be followed by more mainstream corporates. Irrespective of how many corporates eventually follow Tesla’s example, there is no doubt that this week’s announcement changed abruptly the near-term trajectory for bitcoin by bolstering speculative institutional flows via bitcoin futures as well as retail flows. How sustained this week’s price surge becomes would depend in our opinion on whether less speculative institutional flows like those behind the Grayscale Bitcoin Trust follow suit. 
  

Interesting to note that, notwithstanding the apparent stall in GBTC inflows, these still is a very bullish positioning highlighted by the proxy positioning indicator.

[fillippone]

A very interesting and complete review of Bitcoin and Blockchain Technologies

BITCOIN At the Tipping Point

A 100 plus long piece.

I will report here the conlcusions:

Conclusion
The philosopher Schopenhauer once remarked that “All truth passes through three
stages. First it is ridiculed. Second it is violently opposed. Third it is accepted as
being self-evident.”187 Though this sentiment was expressed more than 150 years
before the emergence of Bitcoin, the introduction and evolution of the
cryptocurrency illustrates this very human response to change.

The idea that a new payment system relying on a decentralized cryptographic
approach to facilitate transactions in an extrajudicial manner might gain traction and
challenge traditional payment rails seemed like a pipedream in the early days of its
release. This gave way to denouncements and restrictions as governments, banks,
and regulators sought to limit its growth. As recent events have shown, however,
that resistance may now be melting away.

Large institutional investors and organizations are choosing to participate in and
support Bitcoin. Regulators are beginning to lay the groundwork for the asset to
potentially enter the mainstream. Governments themselves are being pressured
and many are re-considering their own currency offerings. The vision of Bitcoin as a
force that will transform the world may seem self-evident in just a few more years.
The fact this progression has occurred in just over a decade makes Bitcoin
remarkable regardless of its future.

Throughout this journey, the perception of what makes Bitcoin unique continues to
morph. Bitcoin is now many things. To some, it is a payment system based on new
technology set to potentially drive a re-wiring of the entire payments landscape. To
others it is a new currency that can store value in a unique way and marks a new
model of issuance beyond the control of any one nation. Many focus on the
limitations imposed on Bitcoin’s supply and liken it to digital gold, focusing on its
value as an asset class. Those thinking about its future see the potential for Bitcoin
to become a global facilitation currency helping to reduce the friction and complexity
of cross-border trade.

What Bitcoin has undoubtedly become is the inspiration for a rapidly evolving
blockchain-based economy. Its core innovations were the building blocks that
launched this ecosystem and those innovations themselves are now being
extended and levered in new ways that are remaking the world of commerce and
finance. Bitcoin’s existence has helped create a new landscape that in turn has
spawned a whole set of altcoins and created a new, decentralized cryptocurrency
market.

All of these views about Bitcoin’s potential and how it influences and helps to inspire
new business models emerging in the blockchain domain are what leads us to call it
the North Star. Whether it maintains this position and how far the potential
transformation it has inspired extends are both unknowable at this time, but
Bitcoin’s journey has clearly entered a new stage.
Our goal in this paper has been to help readers understand Bitcoin’s past, present,
and possible future. Armed with a fuller understanding of what has driven Bitcoin’s
growth and how it has spurred so much additional innovation and disruption should
allow readers to better assess and determine their own view about Bitcoin’s value
and understand how future news may facilitate additional growth or force a
retrenchment and re-evaluation of its potential.

Very long, yet interesting read.

Thanks to @Plutosky who made me aware of this.

[acquafredda]

After years of blockchain not bitcoin useless brainwash now all the big banks and the wall street firms have to spend liters and liters of ink on BITCOIN which is the only thing that has ever mattered here! Thanks for sharing, this might fill my night's insomnia.

[fillippone]

Another one!

Wall Street is on fire on those reports:


 Understanding Bitcoin Does bitcoin belong in asset allocation considerations?

KEY TAKEAWAYS

• Among an increasing number of investors and portfolio managers, bitcoin is considered a legitimate and distinct asset class.
• Bitcoin, by design, is a finite asset, with both a unique supply and a unique demand dimension, and as its network increases, bitcoin’s value and durability could increase even faster.
• Seen as a form of “digital gold,” bitcoin may act as a stable store of value and potentially offer protection against inflation—and even hyperinflation.
• Bitcoin, however, faces risks from volatility, competitors, substitutes, regulation, and other factors; further, bitcoin may not be an appropriate or prudent diversifier for all portfolios.
• In my view, some investors may wish to consider bitcoin, alongside other alternatives, as one component of the bond side of a 60/40 stock/bond portfolio
  

This one sports a more traditional approach. Very interesting on a the proposition in adding Bitcoin to a financial portfolio.

[acquafredda]

Another one!

Wall Street is on fire on those reports:


 Understanding Bitcoin Does bitcoin belong in asset allocation considerations?

KEY TAKEAWAYS

• Among an increasing number of investors and portfolio managers, bitcoin is considered a legitimate and distinct asset class.
• Bitcoin, by design, is a finite asset, with both a unique supply and a unique demand dimension, and as its network increases, bitcoin’s value and durability could increase even faster.
• Seen as a form of “digital gold,” bitcoin may act as a stable store of value and potentially offer protection against inflation—and even hyperinflation.
• Bitcoin, however, faces risks from volatility, competitors, substitutes, regulation, and other factors; further, bitcoin may not be an appropriate or prudent diversifier for all portfolios.
• In my view, some investors may wish to consider bitcoin, alongside other alternatives, as one component of the bond side of a 60/40 stock/bond portfolio
  

This one sports a more traditional approach. Very interesting on a the proposition in adding Bitcoin to a financial portfolio.

That is the most common strategy between traditional wealth and asset managers. Now that everyone's talking bitcoin they are suggesting a tiny exposure to counterbalance stocks, bonds and other traditional assets. Usually they propose between 1-5% btc exposure. Which is not bad on a multi-million portfolio.

[fillippone]

<...>That is the most common strategy between traditional wealth and asset managers. Now that everyone's talking bitcoin they are suggesting a tiny exposure to counterbalance stocks, bonds and other traditional assets. Usually they propose between 1-5% btc exposure. Which is not bad on a multi-million portfolio.

As I wrote elsewhere (on my infamous Proudhon post).

When I decided to buy bitcoin I made a few back of the envelope calculation. The first one was about gold parity, pointing to 350k dollar at the time (now more in the 500k region).

A second one was about the answer of the following question: what if everyone put 1% of their financial wealth on bitcoin.

So a few computation (getting updated figures for gold parity consistency):

World financial wealth (Credit Suisse 2020) : 360 Trln
1% : 3.60 Trillion
This has to becdivided over
21 million bitcoins (I want a conservative number)

Target price: 170,000 USD

Not bad.
Bullish.
My body is ready.

This is why I am particularly excited when I hear someone suggesting a tiny %age allocation to bitcoin in big portfolios.

[acquafredda]

Yep, exactamundo!
You might find this interesting too
https://www.seba.swiss/research/portfolio-diversification-contribution-of-digital-assets/
SEBA Bank is talking about crypto diversification for quite some time now and that makes sense since it is a bank which is basing its business model and value propositions on digital assets like bitcoin.
They post quite interesting pieces every now and then, keep them monitored if you wish.

[fillippone]

One Piece I forgot to add:

JP Morgan Flows & Liquidity
US retail investors’ call option buying rises to new highs
2 February 2021

Will the CME launch of ethereum futures contracts reverse recent price dynamics in a repeat of Dec 2017? 

• In past F&L’s we have noted the gradual maturing of the cryptocurrency space as the influence of institutional investors has grown over time since the listing of CME bitcoin futures in Dec 2017.
• This week will see the launch of ethereum futures at CME with cash settlement as with CME bitcoin futures. The listing of ethereum futures on a regulated exchange should serve to enhance the crypto market structure by allowing investors to gain exposure to the second most important cryptocurrency as a diversifier to bitcoin, or for simply hedging existing ethereum exposures. As with CME bitcoin futures, one criticism with cash-settled futures is that they may only allow for imperfect hedging for existing holders of ethereum as hedgers are susceptible to price risk associated with converting ethereum to cash at maturity. And there is an issue of potential manipulation with cash-settled contracts as settlement is based on a collection of spot prices from a number of exchanges with variable liquidity, which traders may be able to manipulate around the time of the futures contracts expiry. While that was also the initial criticism with CME bitcoin futures, some of these criticisms eventually proved overstated as evidenced by the relative growth of cash settled CME bitcoin futures vs. physically settled Bakkt bitcoin futures on the Intercontinental Exchange.
• Initial volumes are likely to be low, echoing the initial listing of cash-settled bitcoin futures by the CME and CBOE in December 2017. At the time, the listing of CME bitcoin futures coincided with all-time highs in bitcoin prices, and researchers at the San Francisco Fed suggested that, by providing a market where bearish positions could be more readily expressed, the listing of these futures contributed to the reversal of bitcoin price dynamics. In a similar vein, it may be that this week’s listing of ethereum futures contracts will be followed by negative price dynamics by enabling some holders of physical ethereum to hedge their exposures.
• A successful launch of ethereum futures this month is likely to be followed by options on ethereum futures, perhaps as early as 2022, in a similar manner to the launch of options on bitcoin futures in the first quarter of 2020. That would expand the alternatives for investors to manage price risk for ethereum , the second most important cryptocurrency with a market cap of $170bn.
  
  

No pictures or graphs here. This was the original text.

[fillippone]

JP Morgan Flows & Liquidity
The retail impulse remains strong
16 February 2021

• The retail impulse remains strong with no signs of abating.
• The share of retail-driven equity trading volumes in the US rose to unprecedented levels in January even before the equity market correction of the last week of January.
• Has only $11bn of institutional flow into bitcoin since September-end caused a $700bn increase in its market cap?
• Similar to CME bitcoin futures three years ago, Ethereum futures have seen a rather slow start since launch. ago, Ethereum futures have seen a rather slow start since launch.

Has only $11bn of institutional flow into bitcoin since September-end caused a $700bn increase in its market cap?

• Since the end of September the market cap of bitcoin has grown by $700bn, from 200bn on Sep 30th to $900bn currently. This $700bn increase means that bitcoin has already surpassed gold in risk capital terms, i.e. after adjusting for the much higher vol of bitcoin relative to gold. To see this, one could compare the volatilities of bitcoin and gold, or the volatilities of the biggest bitcoin and gold funds given many institutional investors are only allowed or prefer to invest in fund format. The 3m realized vol for bitcoin currently stands at 87% vs. 16% for gold. In other words, the ratio of the two vols suggests that bitcoin currently consumes 5.4x more risk capital than gold. This ratio rises further if one looks at the biggest bitcoin and gold funds. The 3m realized vol for the Grayscale Bitcoin Trust stands at 113% vs. 16% for GLD, the largest gold ETF by AUM, i.e., the ratio of the two vols suggests that the Grayscale Bitcoin Trust currently consumes 7.1x more risk capital than GLD. Taking the average of the 5.4x and 7.1x ratios, suggests that bitcoin and its biggest fund on average consume 6.2x more risk capital than gold and its biggest fund, double the 3x ratio needed to equalize the market cap of bitcoin ($900bn) to that of gold for investment purposes ($2.7tr). In other words, bitcoin, at current market prices, has already more than doubled relative to gold in risk capital terms. In our opinion, unless bitcoin volatility subsides quickly from here, its current price of $48k looks unsustainable.
  
• What has been remarkable over the past five months is that the $700bn increase in the market cap of bitcoin has taken place with relatively little institutional flows. For example, proxying these institutional flows via the cumulative flows into the Grayscale Bitcoin Trust or other publicly listed bitcoin funds as well as the cumulative flows into CME bitcoin futures and announcements by institutions such as Tesla, Mass Mutual, Guggenheim and others, we get an aggregate flow of around $11bn since the end of September which accounts for just above 1.5% of the increase in the bitcoin market cap over the same period. How is it possible that such a limited flow would result in the magnitude of the increase in bitcoin market cap? One possibility is that, given the increase in interest from real money investors, and speculative investors seeking to front-run it, this limited flow is hitting a relatively inelastic supply of a predetermined increase in new bitcoins mined and having to offer a premium to get existing holders to part with their bitcoin holdings. A second possibility is that retail inflows have significantly magnified the institutional flow. As mentioned in the first section above the US retail impulse has been particularly strong since January and there is little doubt that this retail impulse has been a driving force not only for equities, but also for bitcoin.
• Figure 5 shows 2-week rolling flows into the Greyscale trust as a proxy for real money interest and 2-week rolling changes in our futures positioning indicator as a proxy for speculative institutional investor interest compared to 2-week rolling returns in bitcoin prices. It suggests that, after announcements from end-September onwards, real money inflows during Oct/Nov/Dec contributed to the rally in bitcoin prices at the time, while the movements since January this year appear to have been more influenced by speculative flows. This also suggest that some pickup in real money flows would likely be needed to sustain current prices in the absence of a re-acceleration of the retail flow.

	Figure 5

 

• Finally, as we noted recently, the new futures contracts on Ethereum have started trading on the CME. How does the initial experience compare to when Bitcoin futures were listed in December 2017? Figure 6 shows the cumulative open interest in dollar terms in the initial days after the contracts were launched. Thus far, similar to when Bitcoin futures were listed, the initial interest appears to have grown rather cautiously, but in our opinion it will likely not take as long for Ethereum futures to begin gaining traction as it initially took for Bitcoin futures, as investor interest in cryptocurrencies has had a few years to mature.
  

	Figure 6

[fillippone]

JPM has a complex strategy on Bitcoin.
There is a flurry of reports from them: the latest is a presentation deck for their private clients, UHNW Individuals with more than 10 Mios $ of financial asset allocation.

JPMorgan tells private wealth clients that bitcoin can be a portfolio diversifier 'if sized correctly'

In a slide entitled "How others are valuing crypto?" the bank broke down three commonly used metrics taken by market participants that "suggest significant upside [of bitcoin] is possible."

Under the so-called Metcalfe's law, which suggests the value of a network is proportional to the square of the number of users, bitcoin's per-coin valuation would be at $21,667.

If comparing the current global value of gold to bitcoin by using the 21 million max supply of bitcoin, then bitcoin's valuation would be at $540,814. Finally, if applying the global value of money supply to the max supply of bitcoin, its value would be $1.9 million.

Apparently, they see the demand, albeit not at full potential (yet) but they don't want their client to miss the opportunity. So they are moving in different direction with a various degrees of "risks" and "innovations".
See for example also this: a very conservative way of getting crypto exposure.

[jaysabi]

JPM has a complex strategy on Bitcoin.
There is a flurry of reports from them: the latest is a presentation deck for their private clients, UHNW Individuals with more than 10 Mios $ of financial asset allocation.

JPMorgan tells private wealth clients that bitcoin can be a portfolio diversifier 'if sized correctly'

In a slide entitled "How others are valuing crypto?" the bank broke down three commonly used metrics taken by market participants that "suggest significant upside [of bitcoin] is possible."

Under the so-called Metcalfe's law, which suggests the value of a network is proportional to the square of the number of users, bitcoin's per-coin valuation would be at $21,667.

If comparing the current global value of gold to bitcoin by using the 21 million max supply of bitcoin, then bitcoin's valuation would be at $540,814. Finally, if applying the global value of money supply to the max supply of bitcoin, its value would be $1.9 million.

Apparently, they see the demand, albeit not at full potential (yet) but they don't want their client to miss the opportunity. So they are moving in different direction with a various degrees of "risks" and "innovations".
See for example also this: a very conservative way of getting crypto exposure.

The problem with the last metric is it assumes that bitcoin is a perfect replacement for the global money supply and has no other competitors as to where to allocate dollars, so it seems faulty to me to assume that bitcoin's value has to be proportionally equivalent to the total money supply in the world.  In reality, as an asset class it competes against all other asset classes for an allocation in a portfolio, so people who don't want to hold dollars will choose between real estate, gold, equities, debt instruments, crypto and any other type of asset.  Bitcoin could never represent all of it because it's not the only asset class.

[fillippone]

DB Research
Part III. Bitcoins: Can the Tinkerbell Effect Become a Self-Fulfilling Prophecy?
17 March 2021

• Bitcoin’s market cap of $1 trillion makes it too important to ignore. Big players who buy and sell bitcoins have considerable market-moving power. As long as asset managers and companies continue to enter the market, Bitcoin prices could continue to rise.
  
•   But bitcoin transactions and tradability are still limited. And the real debate is whether rising valuations alone can be reason enough for bitcoin to evolve into an asset class, or whether its illiquidity is an obstacle.
• Bitcoin’s value will continue to rise and fall depending on what people believe it is worth. This is sometimes called the Tinkerbell Effect — a recognised economic term stating that the more people believe in something, the likelier it is to happen based on Peter Pan’s assertion that Tinkerbell exists because children believe she exists.
• Central banks and governments understand that cryptocurrencies are here to stay, so they are expected to start regulating crypto-assets late this year or early next year. They are also speeding up research on their own Central Bank Digital Currencies (CBDCs) and launching pilots. Click here for more details.
• In the medium to long run, due to very strong network effects, there will likely be little room for using cryptocurrencies as a widespread means of payment. The regulatory landscape related to CBDCs, current cryptocurrency projects, and future efforts (e.g. Libra/Diem by Facebook) is still uncertain.

In the short term, Bitcoin is here to stay and its value will remain volatile

• We estimate that less than 30% of transactional activity in bitcoins is related to payment for goods and services, with the rest largely used as a financial investment.
•   As an investment asset, Bitcoin liquidity remains low. In 2020, 28mn bitcoins changed hands (150% of total bitcoins in circulation), compared to 40bn shares of Apple (270% of its total shares in circulation).
• Due to its still limited tradability, Bitcoin is expected to remain ultra- volatile; a few additional large purchases or market exits could significantly impact the supply-demand equilibrium.
• The root causes of Bitcoin’s volatility include: small tactical asset allocations and the entries and exits of large asset managers.

In the long term, Bitcoin, like Tesla, will have to transform potential into results to sustain its value proposition

• Tesla’s current market capitalisation is $665 billion (as of 03/12/2021), which is almost five times the market cap of Ford and GM combined. That's remarkable because GM sold around 8 times as many cars as Tesla in 2020, while Ford sold more than 5 times as many. The ratio of market-cap to vehicle sold by Tesla and Ford shows that the current value of Tesla is 63 times that of Ford.
• Tesla’s valuation is pricing in a significant market shift toward electric cars, leading to the hypothesis that Tesla will remain an absolute leader in that market.
• Similarly, Bitcoin’s total value is $1,075 billion (as of 03/15/2021), which is around 102% of the yen in circulation, 65% of the euros, 53% of the USD, and 904% more than the GBP. Yet, the average number of bitcoins exchanged daily in USD is equivalent to only 0.05% of the yen and 0.06% of the GBP.
• Bitcoin’s current valuation is pricing in a shift toward cross-border digital currencies; the hypothesis is that Bitcoin, as
  the leader, will benefit from network effects and become an important means of payment in the future.
• Tesla is five years older than Bitcoin and has always sparked robust debates between people who see it as a soon-to-die fad and those who see it as the future of the car. Market sentiment has started to shift significantly in the last 18 months as Tesla delivered early results, such as Model 3, at scale.
• The next two or three years should be a turning point for Bitcoin; consensus about its future may emerge as people monitor digital currency developments. For more details, see Part II. When digital currencies become mainstream.

[fillippone]

Bloomberg Crypto Outlook
Rising Bitcoin Adoption Tide
05 April 2021



https://fillippone.altervista.org/1060725_Crypto-Apr2021Outlook.pdf

ï‚· Electricity, Internet, Bitcoin, Digitalization, Dollar Dominance
ï‚· Bitcoin Fills the Digital Reserve-Asset Need in Low-Yield World
ï‚· Bitcoin Replacing Old-Guard Gold Is More Sudden Than Gradual
ï‚· Dollar's Digital Dominance Eclipsing China Yuan Global Adoption
ï‚· Grayscale Bitcoin Trust Is Gaining the Upper Hand Over Tesla

[fillippone]

Atlantic Equities
Coinbase Global Inc.
1 April 2021



https://fillippone.altervista.org/CoinbaseListing.pdf

Just only one detail:

Overweight
Price Target $460.00

[fullhdpixel]

That "adoption" line is very important, it shows how much bitcoin is getting the usage case as well as the investment part and that is what I care about. Honestly these wall street companies talking about bitcoin all this much really improves our chances to be taken seriously, the more positive things they talk about the better will be for us and that is why I care about that a lot, but at the end of the day we do not need to just talk about it, we need them to act on it.

For the past 40 days or so we haven't received any decent investment from these big companies, those billions of dollars spent on late months of 2020 and early months of 2021 is not happening for the past 40 days. They can talk as much as they want but if it is not providing us with billions of dollars worth of investments again, that is not going to mean anything in the end.

[jaysabi]

Atlantic Equities
Coinbase Global Inc.
1 April 2021



https://fillippone.altervista.org/CoinbaseListing.pdf

Just only one detail:

Overweight
Price Target $460.00

The price target is for Coinbase.  Interestingly, Coinbase hasn't started trading publicly yet but there is a tokenized version already trading and it's priced at $535 as of now.  I was unfamiliar with this concept, but from the description:

What are tokenized stocks?
Equities are stocks that trade on traditional regulated exchanges. FTX lists tokens on select equities. These spot tokens are backed by shares of stock custodied by CM-Equity. They can be redeemed with CM-Equity for the underlying shares if desired.

CM-Equity is fully regulated in Germany, and is a licensed financial institution permitted to offer such products. All FTX users who trade tokenized stocks may also have to become customers of CM-Equity, and pass through CM-Equity's KYC and compliance. Furthermore, all trading activity may be monitored for compliance by CM-Equity. CM-Equity custodies the equities at a third party brokerage firm. CM-Equity (not FTX Trading LTD) provides the brokerage services.

It's offered from a licensed and regulated firm in Germany, and because the tokens are backed by the the shares, the token should trade in near-unison with the stock.  So either Coinbase will is already expected to trade well above the target price listed above, or there's some information disparity currently and the token price will trade sharply down once Coinbase starts trading publicly.

[fillippone]

It's offered from a licensed and regulated firm in Germany, and because the tokens are backed by the the shares, the token should trade in near-unison with the stock.  So either Coinbase will is already expected to trade well above the target price listed above, or there's some information disparity currently and the token price will trade sharply down once Coinbase starts trading publicly.

Very interesting.
Gray markets have been there since the start of financial markets, but I would steer away from highly manipulated, unregulated markets if I were trying to infer anything on the real thing.

[fillippone]

J.P. Morgan Research
Why is the Bitcoin futures curve so steep?
9 April 2021


https://fillippone.altervista.org/JPM_Bitcoin_futures_Contango.pdf


Really, really interesting analysis on one of the most crowded trades in bitcoin.

[paxmao]

To be honest, Wall Street predictions are crazier than ever and particularly crazier regarding bitcoin. Seriously, they have prediction spreads of x10 between Morgan, Goldman and all the rest of the so called investment experts. It is quite unusual to see these people diverge so much and my take is that they are absolutely confused about the whole crypto because they do not have the usual sources and methods that they use to deal with companies and other resources.

[jaysabi]

It's offered from a licensed and regulated firm in Germany, and because the tokens are backed by the the shares, the token should trade in near-unison with the stock.  So either Coinbase will is already expected to trade well above the target price listed above, or there's some information disparity currently and the token price will trade sharply down once Coinbase starts trading publicly.

Very interesting.
Gray markets have been there since the start of financial markets, but I would steer away from highly manipulated, unregulated markets if I were trying to infer anything on the real thing.

Well, this one would have been hard to manipulate since the tokenized version trades based on custody of actual shares, so it's just a way to trade something more easily that was locked away for accredited investors. That's one area I think tokens are very useful, as long as the entity sponsoring the token is a regulated financial entity in a country with strong financial regulation, as is the case here.

To follow up on it, the token crashed hard when Coinbase started trading, which was one of the two outcomes I stated might happen. In retrospect, of course it was the cryptotraders who were wrong and hyped themselves into a risky position.  :]

I would expect the two to trade in near lockstep now.

[fillippone]

Well, this one would have been hard to manipulate since the tokenized version trades based on custody of actual shares, <...>

I would expect the two to trade in near lockstep now.

Oh really? Is there a share backing up a token? Who says that?
It took years to have an audit of the reserves of the biggest stablecoin: who is taking care of auditing this particular token?
How can be a share backing up a token if the share wasn't quoted in the first place?
Who am I trusting to deliver the payoff when needed?
I would love to trust those "code is law" token, but as usual, I feel uncomfortable trusting someone I don't know without a clear legal framework.

[jaysabi]

To be honest, Wall Street predictions are crazier than ever and particularly crazier regarding bitcoin. Seriously, they have prediction spreads of x10 between Morgan, Goldman and all the rest of the so called investment experts. It is quite unusual to see these people diverge so much and my take is that they are absolutely confused about the whole crypto because they do not have the usual sources and methods that they use to deal with companies and other resources.

Well yeah, it's hard to "value" something that's arbitrary and speculative. Bitcoin doesn't produce income and it doesn't produce cashflow, which are two things needed to determine a valuation of what it should be "worth" in the present.  Bitcoin is just worth what the largest group of people at any one time agree it's worth.  While this is true for stocks as well, stock valuations are at least tied to valuation metrics (not always at any given time, but ultimately always eventually).

[jaysabi]

Well, this one would have been hard to manipulate since the tokenized version trades based on custody of actual shares, <...>

I would expect the two to trade in near lockstep now.

Oh really? Is there a share backing up a token? Who says that?
It took years to have an audit of the reserves of the biggest stablecoin: who is taking care of auditing this particular token?
How can be a share backing up a token if the share wasn't quoted in the first place?
Who am I trusting to deliver the payoff when needed?
I would love to trust those "code is law" token, but as usual, I feel uncomfortable trusting someone I don't know without a clear legal framework.

Yes, the sponsor of the token (CM-Equity) has shares of Coinbase to back up each token and the tokens are redeemable for Coinbase shares on demand.

These spot tokens are backed by shares of stock custodied by CM-Equity. They can be redeemed with CM-Equity for the underlying shares if desired.

CM-Equity is fully regulated in Germany, and is a licensed financial institution permitted to offer such products. All FTX users who trade tokenized stocks may also have to become customers of CM-Equity, and pass through CM-Equity's KYC and compliance. Furthermore, all trading activity may be monitored for compliance by CM-Equity. CM-Equity custodies the equities at a third party brokerage firm. CM-Equity (not FTX Trading LTD) provides the brokerage services.

Since this is a regulated financial institution in Germany, I'd expect this to be true.  They'd be in for some huge fines if they made these representations and they were not true.

[fillippone]

Goldman Sachs
Top of Mind:CRYPTO: A NEW ASSET CLASS?
21 May 2021



https://fillippone.altervista.org/Top_of_Mind_Crypto_a_new_asset_class.pdf

[fillippone]

Wells Fargo
The investment rationale for cryptocurrencies
May 2021



https://www.wellsfargo.com/investment-institute/sr_investment_rationale_for_cryptocurrencies/

Key takeaways

• Improved regulatory clarity and rising interest in digital technologies, especially during the coronavirus pandemic, have accompanied a wider variety of cryptocurrencies and increased market capitalization.
• Risks remain, yet we view improved depth and breadth as components of a gradually maturing marketplace.

What it may mean for investors

• We view digital assets as an alternative investment for qualified investors through a professionally managed fund. Due to the uniqueness, complexity and continued evolution of these assets, we plan to produce a series of reports with a goal of increasing investor education and understanding of cryptocurrencies.

Executive summary – What’s changed and why now?

We believe that cryptocurrencies have evolved into a viable investment asset. There are over 9,000 cryptocurrencies, with $2.4 trillion in capitalization (as of May 7, 2021), and this depth and breadth allow additional analysis of their trends. 1 Short-term factors suggest further deepening of the market. We believe long-term supply and demand trends support further industry growth, the potential for further compression in price volatility, and a possible role as portfolio diversifiers.

Several crucial events in 2020 drew increased mainstream usage in transactions and accelerated the maturation of cryptocurrency markets. First, banks received regulatory permission to custody cryptocurrencies, and the investment industry and regulators took additional steps to extend a legal and oversight framework that should help solidify cryptocurrencies as investable assets. The coronavirus pandemic also played a role by fast-tracking the digital economy, as the return to near-zero interest rates sparked inflation fears and interest in alternative payment systems.

Evolving markets for investable assets often introduce unique risks that require deeper due diligence. The main known cryptocurrency risks include the possibility of additional regulation and various operational risks associated with making transactions. Periods of persistently high volatility remain likely as maturation occurs. These potential risks and the need for ongoing due diligence underscore our preference that qualified investors consider a professionally managed option.

We classify any cryptocurrency or digital asset investment as an Alternative Investment. In general, assets in the Alternative Investments category entail some combination of nontraditional sources of return, potential long-term diversification, complexity, potential illiquidity premiums, and higher volatility. Exposure through a professionally managed fund potentially may serve alongside private equity and debt strategies as the primary means of capturing long-term trends from fintech and other secular developments arising from digitization in the economy. 2 Additional investment structures may arrive in the not-too-distant future.

[fillippone]

A new report from Arane Research, powered by Bitstamp.

The case for bitcoin as collateral


The value of the global market for collateral is estimated to be close to $20 trillion in assets. Government bonds and cash-based securities alike are currently the most important parts of a well- functioning collateral market. However, in that, there is a growing weakness as rehypothecation creates a systemic risk in the financial system as a whole. The increasing reuse of collateral makes these assets far from risk-free and shows the potential instability of the financial markets and that it is more fragile than many would like to admit.
Bitcoin could become an important part of the solution and challenge the dominating collateral assets in the future.

Bitcoin's unique properties make it the perfect collateral asset

Bitcoin's combination of properties is unlike those of any other asset classes: It is an asset without both counterparty risk and credit risk. It is available for trading 24/7, 365 days a year, all over the world. In addition, it is the most portable asset the world has ever seen. Bitcoin can be transferred around the world, instantly, at almost no cost, any time of the day, and any day of the year, and with full finality. No other assets can match these properties today, making bitcoin the perfect collateral asset for the future.

A potential trillion-dollar market

The current size of the collateral markets is estimated to almost $20 trillion in assets. Our estimates show the huge potential for bitcoin as collateral, even if it just captures a few percentages of the existing market.
Based on our calculations and data collected for this report, we estimate that around 625,000 BTC are used as collateral in the crypto market today, or approximately $30 billion. This number is based on estimations of collateral held in the derivatives market, in relation to bitcoin collateralized lending and tokenized BTC in Decentralized Finance (DeFi). Comparing this number of 625,000 BTC to the total collateral market, shows that bitcoin collateral only accounts for 0.15% of the total collateral market today but the market is growing rapidly.

[bocyaj]

In this thread I will collect various Research papers published by Wall Street Banks  on Bitcoin.

Banking sectors have begun to cover Bitcoin in Various aspects. A few reports are quite remarkable, so will deserve their own thread. Some other are important for a minor reason, but maybe they are referenced on other news, or papers without  proper reporting, and it is often difficult to read the original article.

I will use those to collate and reference into other thread, publishing graphs and paragraph linked to these research.

 I won't be able to post full documents to protect my sources, obviously.

All reported material will be quoted.
My comments will be out of quotes.

If you find some missing article, or want to read a particular one, just ask, I will unleash my hounds to fetch the missing pieces.

Now bank accepted the online transaction for bitcoin.In countries like India,the liquidity and flow of coin was reduced by making 00101010he statement by RBI.Before investing,you should cross verify the team.The crowd sale will happen and team should concentrate on the future

[fillippone]

Either or this thread is becoming too big, or investment Banks are ramping up Bitcoin reporting:

Goldman Sachs
Digital Assets: Beauty Is Not in the Eye of the Beholder
June 2021

https://fillippone.altervista.org/digital-assets-beauty-is-not-in-the-eye-of-the-beholder.pdf

[fillippone]

JP Morgan Flows & Liquidity
The challenge from positive bond-equity correlation
resurfaces
06 October 2021

• The renewed increase in bond-equity correlation in September likely pressured multi asset investors such as risk parity funds and balanced mutual funds to de-risk. Given a decent amount of de-risking has taken place already, these types of investors should pose less vulnerability for equity and bond markets in October.
• In the near term, what perhaps presents greater vulnerability to both equity and bond markets is the risk from further downshifting by momentum traders such as CTAs which appear to have entered a phase of net long position reduction in equities and addition of net shorts in government bonds.
• Longer term, persistent inflation could make this year’s shift in bondequity correlation spill over into 2022. This would pose a bigger challenge for multi asset investors such as risk parity funds and 60:40 funds.
• At best tentative signs of stagflation fears translating into flows.
  
• Institutional investors appear to be returning to bitcoin perhaps seeing it as a better inflation hedge than gold.
• There are tentative signs that the previous shift away from gold into bitcoin seen during most of Q4 2020 and the beginning of 2021 has started re-emerging in recent weeks.

Institutional investors appear to be returning to bitcoin perhaps seeing it as a better inflation hedge than gold. There are tentative signs that the previous shift away from gold into bitcoin seen during most of Q4 2020 and the beginning of 2021 has started reemerging in recent weeks

• Cryptocurrency markets continued to rally over the past weeks exceeding a total market cap of $2.3tr (down only 10% from the May 12th peak of $2.56tr). The more recent rally has been driven by bitcoin the share of which in the crypto market has risen from a low of40.9% on September 12th to 44.7% currently (Figure 15). The increase in the share of bitcoin is a healthy development as it is more likely to reflect institutional participation than smaller cryptocurrencies. As we had argued before our position proxies based on CME futures had showed strong preference for ethereum vs. bitcoin by institutional investors during most of August and September. But as shown in Figure 16 this preference appears to be have been reversing since the end of September with a sharp rebound in the position proxy for bitcoin. This rebound reflects at least partly short covering as indicated by Figure 17 which depicts bitcoin futures liquidations across all futures exchanges. According to Figure 17 short bitcoin futures position liquidations appear to have picked up over the past week or two.

• What has triggered the bitcoin recovery? There are three main explanations: 1) the recent assurances by US policy makers that there is no intention to follow China’s steps towards banning the usage or mining of cryptocurrencies; 2) the recent rise of the Lightning Network and 2nd layer payments solutions helped by El Salvador’s bitcoin adoption. According to President Bukele 2.7m Salvadorians had onboarded by early October the Chivo wallet which uses the Lightning Network. We have to admit we are skeptical of this second explanation; and 3) the reemergence of inflation concerns among investors has renewed interest in the usage of bitcoin as an inflation hedge. Bitcoin’s allure as an inflation hedge has perhaps been strengthened by the failure of gold to respond in recent weeks to heightened concerns over inflation, behaving more as a real rate proxy rather than inflation hedge. Indeed Figure 18 shows tentative signs that the previous shift away from gold into bitcoin seen during most of Q4 2020 and the beginning of 2021 has started re-emerging in recent weeks.
  

[fillippone]

Ark Investment published a really interesting report on Valuing bitcoin, focusing on this unique attribute as a financial assets, adding a new dimension to the analysis: onchain data.

Introduction
Bitcoin’s inability to fit neatly within the framework associated with traditional asset classes
has prevented many institutional investors from adopting it. Instead of considering its unique attributes, skeptical investors seem to have concluded that Bitcoin (the blockchain) and bitcoin (the cryptocurrency) cannot be analyzed fundamentally. In this white paper, we illustrate how on-chain data offers a new framework for analyzing emerging monetary assets like bitcoin. As institutional investors gain exposure to bitcoin, we believe that the network’s three data layers will enhance their understanding of and confidence in its underlying fundamentals.

Conclusion

Because bitcoin does not resemble a traditional asset, many investors seem to be grappling with ways to analyze it fundamentally. While conventional analytical frameworks are not suitable, the Bitcoin blockchain offers a unique set of tools that investors can leverage to assess its fundamentals.
In the same way that a government statistical agency publishes data about a country’s population and economy, or a public company publishes quarterly financial statements disclosing growth rates and earnings, Bitcoin provides a real-time, global ledger that publishes data about the network’s activity and inner economics. Without central control, Bitcoin’s blockchain provides open-source data, its integrity a function of the network’s transparency. In our view, investors increasingly will appreciate bitcoin’s investment merits through the lens of a completely new framework: on-chain data.

The authors of this paper are ARK’s Yassine Elmandjra and David Puell.

[fillippone]

I don't know if you can classify it as a Wall Street Report on Bitcoin, but it's a gargantuan 165 report on the status of the crypto world today and future theses for the next year from Messari:



Here you have the introduction:

Welcome

Ho, Ho, Ho.
’ll keep this brief, since the rest of this report is not.
The Theses started as a tweet thread four years ago on New Year’s Day. Along with the rest of the crypto
industry, the report has exploded in size and complexity each year since. I write it for our team - to highlight
the amazing work they’ve done throughout the year, and to synthesize the crypto chaos for any new hires. I
write it for myself - to organize my monkey mind and create a mental model for crypto and an index of the
best available research.
And, of course, I write for you. Whether you’re a crypto novice or a multi-cycle veteran, I try to deliver a free,
comprehensive 201-level crypto course with 101-level intros and links as an annual holiday gift to those who
will find it helpful.
In return, you get to yell at me for typos (thanks!), mis-summarizing your favorite coins (do better marketing!),
omitting the #246 asset by market cap (I’m not a short-seller!), and copy pasta-ing other people’s ideas
throughout (good artists copy, great artists steal).
A couple of disclaimers before you dive in:
1. The alpha in this report is free, and many have gleaned insights from past reports that helped them
make money, but nothing herein is investment advice. Be an adult.
2. I stand on the shoulders of giants. In certain chapters, I borrow liberally from other authors who have
already delivered amazing insights on a given topic. Nic Carter and Lyn Alden in the bitcoin section.
Punk6529 and Ben Yu in the NFT section. Watkins and Wilson and Mason and Roberto et al in the
DeFi, ETH & Friends, and DAO sections. Balaji and Chris Dixon throughout. By reading on, you
accept my terms of service, which includes the provision that any accidental plagiarism of the above
cited authors is unintentional and will be corrected ex post facto. (Do you want a free report or do
you want MLA-level standards and the boredom that comes with mind-numbing citation?)
3. This beast took me ~250 hours to write (8-10% of my annual bandwidth). Every year, I secretly root
for it to flop to spare me from the temptation of writing another one. If you like the report, you
can thank the Messari team for running the business in my absence last month. They accept thank
you’s in the form of followers and Pro subscriptions. I accept thank you’s in the form of 5-6 figure
Enterprise subs and Hub memberships.
4. I own assets discussed in this report. My core holdings are disclosed at the end of Chapter 1 (along
with those of the rest of the Messari team), and any angel or liquid investments I have made to date
are marked with an asterisk. No conflicts, no interest.
This report caps an epic year for crypto and for Messari. In 2021, we grew the size of our team ~4x and
revenues ~8x. We raised a Series A, and launched a killer new product every quarter - Intel in Q1, our
Analyst Hub in Q2, Mainnet in Q3, and some new tools for DAOs that we’ll be unveiling next week. Next
year will be even bigger. We’re hiring. A lot. And we pay $10,000 per engineering referral if you know any
good ones (or are one yourself).
We’re also doing something fun this year, and auctioning off a bunch of Theses-related NFTs for charity. Our
“heroes” collection includes artwork for the top people to watch this year. They’ll get a special personal
edition of the art as a keepsake, but the remainder are 1/1 NFTs that we’re auctioning through our partner
OpenSea. (Commissioner Peirce’s NFT looks particularly rare.) We also have a series of battlescenes in the
collection that are pure fire. Thanks to Jaen for the inspiring work and inspiration. This is an NFT test run for
us, and we’ll have more to come. You might want to buy an annual Pro subscription to keep up with 2022
developments. Just saying.
As always, I am humbled you would consider reading this report and appreci...oh who am I kidding, this
report is f*cking incredible, and like Kanye at one of his concerts, I’m jealous you get to read it with fresh
eyes.* Because I’m honestly sick of looking at it.
Happy Holidays, próspero año y felicidad, and as always, wear a helmet.
-TBI
*Kidding. Kinda

[paxmao]

To be honest, Wall Street predictions are crazier than ever and particularly crazier regarding bitcoin. Seriously, they have prediction spreads of x10 between Morgan, Goldman and all the rest of the so called investment experts. It is quite unusual to see these people diverge so much and my take is that they are absolutely confused about the whole crypto because they do not have the usual sources and methods that they use to deal with companies and other resources.

Well yeah, it's hard to "value" something that's arbitrary and speculative. Bitcoin doesn't produce income and it doesn't produce cashflow, which are two things needed to determine a valuation of what it should be "worth" in the present.  Bitcoin is just worth what the largest group of people at any one time agree it's worth.  While this is true for stocks as well, stock valuations are at least tied to valuation metrics (not always at any given time, but ultimately always eventually).

Yes, that is quite right. These guys are also used to value commodities, a market in which having the right (expensive) sources of information on the evolution of demand and offer do give all the advantage to the larger trading and investment houses over the shrimps out there. However, with bitcoin, those sources of privileged  - let's rather call them "advanced" - information are not that well known and are not that readily available only at the right price.

[fillippone]

ARK investment published their Big Ideas 2022.




Of course there is a section dedicated to Bitcoin.



Of course there is a lot of bullish materials in this presentation. Something you could use to convince as skeptics to invest in Bitcoin! Classic Katie Wood.

[fillippone]

Wells Fargo
Cryptocurrencies - Too early or too late
7 February 2022




The most interesting part is the comparison of Crypto adoption compared to Internet in the '90's

[fillippone]

Morgan Stanley
Buying a Coffee with Crypto
April 21, 2022





This report is a clear reference to Jack Maller's presentation at Bitcoin Conference 2022

[CaptainCrapper]

In this thread I will collect various Research papers published by Wall Street Banks  on Bitcoin.

Banking sectors have begun to cover Bitcoin in Various aspects. A few reports are quite remarkable, so will deserve their own thread. Some other are important for a minor reason, but maybe they are referenced on other news, or papers without  proper reporting, and it is often difficult to read the original article.

I will use those to collate and reference into other thread, publishing graphs and paragraph linked to these research.

I won't always be able to post full documents to protect my sources, obviously, as often those materials come with a watermark.

All reported material will be quoted.
My comments will be out of quotes.

If you find some missing article, or want to read a particular one, just ask, I will unleash my hounds to fetch the missing pieces.

some country trying to legalize this BTC and some county doing stopping the transaction it totally depends on the stop wair so we are just waiting to get very good something by using BTC transactions.

[fillippone]

BBG May crypto Outlook is Out:



Delusional analysis on how the monetary policies by the FED can influence theCryptos.

[fillippone]

Fidelity released a very simple “Valuing bitcoin” paper.


Valuing Bitcoin




They describe both supply side models, such as PlanB’s stock to flow, and demand based models, based on S-shaped adoption curves and Metcalfe’s law.

[$anounimus$]

In this thread I will collect various Research papers published by Wall Street Banks  on Bitcoin.

I really appreciate what you have done in conveying the key points of the Research paper published by Wall Street Banks on Bitcoin. However, the main question is whether the general public knows about it or not and whether they will consider using it in the future as a result.

[CageMabok]

I really appreciate what you have done in conveying the key points of the Research paper published by Wall Street Banks on Bitcoin. However, the main question is whether the general public knows about it or not and whether they will consider using it in the future as a result.

People in general will definitely know about it if a more widespread publication is made, because it is published to be known by many people, especially those who are familiar with Bitcoin and also often use banking services when withdrawing money or sending money in certain countries.

In the future the use of Bitcoin through adoption will be more and more because it is based on the development of Bitcoin which has penetrated throughout the world even though not everyone in this world has used Bitcoin.

[justdimin]

I really appreciate what you have done in conveying the key points of the Research paper published by Wall Street Banks on Bitcoin. However, the main question is whether the general public knows about it or not and whether they will consider using it in the future as a result.

People in general will definitely know about it if a more widespread publication is made, because it is published to be known by many people, especially those who are familiar with Bitcoin and also often use banking services when withdrawing money or sending money in certain countries.

In the future the use of Bitcoin through adoption will be more and more because it is based on the development of Bitcoin which has penetrated throughout the world even though not everyone in this world has used Bitcoin.

It is true that the more these big names end up doing publications regarding bitcoin and giving it credibility, the more there will be people investing into it. Places like citibank making claims about bitcoin, even if it was bad or when it is good, doesn't matter, it gives credibility to it, they speak it into existence, if it's good then because it is good, if it is bad then there are people who hate these big names and will invest because of that.

That’s why it’s going to be easy for us to grow in adoption due to these publications. It is great that they are collected all in here in a single topic, it allows us to read them easier instead of researching for them.

[fillippone]

It is true that the more these big names end up doing publications regarding bitcoin and giving it credibility, the more there will be people investing into it. Places like citibank making claims about bitcoin, even if it was bad or when it is good, doesn't matter, it gives credibility to it, they speak it into existence, if it's good then because it is good, if it is bad then there are people who hate these big names and will invest because of that.

I think that many publications have the added value of being proposed by opponents to the Bitcoin Standard, so they approach the question from an adverse point of view.
Reading about bitcoin in this "wrong" optic, also help you to focalise on "why" legacy banks are so averse to bitcoin, and so love the protocol even more.

[fillippone]

Fidelity
Fidelity Digital Assets Research

Institutional Investor Digital Assets Study: Key Findings
October 2022

Since 2018, Fidelity Digital AssetsSM has conducted an annual study to better understand institutional investors’ perceptions of and approach to digital assets. In this preliminary report on the Fidelity Digital AssetsSM 2022 Institutional Investor Digital Assets Study, we highlight key data showing trends in overall adoption across the U.S., Europe, and Asia, and how institutional investors are thinking about the role of digital assets in investment portfolios. Digital asset markets are incredibly dynamic and 2022 has been no exception. This study reflects the sentiments and behaviors of respondents in the first half of the year, but we recognize that the market developments of the second half and the macro environment look different. As a result, in the coming months, a follow-up to this key findings report will provide additional analysis on how the events of the latter half of the year may have shifted some perceptions—along with more institutional investor insights into broader use of blockchain technology, like tokenization and DeFi.

[fillippone]

BLOOMBERG
Bloomberg Intelligence:
Could GBTC Liquidate? What We Know
Liquidation of GBTC Isn't Viable Option for Grayscale's Business

[fillippone]

Goldman Sachs
Top of Mind:CRYPTO: THE NIGHT OF CRYPTO'S DISCONTENTS
9 December 2022

[Fullbear2222]

JP Morgan Flows & Liquidity
How has the investment landscape changed during 2020?
21 December 2020

Summary:

• In percentage terms, the expansion of the equity universe has been smaller than that of the bond or cash universe.
  
• Private asset classes lagged the growth of public asset classes.
• Alternative “currencies” such as Gold and Bitcoin have been the main beneficiaries of the pandemic in relative terms.
• Within equities, the EM Asia universe grew the most, while Latam contracted.
• With credit, the strongest growth has been in Euro HY.
• Among investor types, retail funds such as Mutual Funds and ETFs and SWFs appear to have seen double-digit growth in their AUM this year, thus increasing their share in the total investor universe. HFs, as well as pension funds and insurance companies saw low single digit AUM growth instead.
• We find it difficult not to characterize bitcoin as overbought at the moment.
• At the same time, we acknowledge that the inflows into the Grayscale Bitcoin Trust, at $1bn per month currently, are too big to allow any position unwinding by momentum traders to create sustained negative price dynamics similar to the ones seen before in the second half of 2019.
• Any signs of significant slowing in the flow trajectory for the Grayscale Bitcoin Trust would raise the risk of a bitcoin correction similar to the one seen in the second half of 2019.

Relevant Bitcoin Parts:

• As the year comes to a close it is useful to look at how the investment landscape changed during 2020.
  How have different asset classes and types of investors fared in terms of overall growth during a year dominated by the impact of the global pandemic and policy responses to it? Figure 1 and Figure 2 show the overall changes in broader asset classes in dollar terms as well as relative to their end-2019 levels, and includes the 4% contraction in global GDP for 2020 that our economists have in their forecast for context. The most striking increase has been in the total outstanding debt which in 1H20 had already increased by around $14tr, almost matching our previous projection for 2020 in total of $16tr 16tr (see F&L More debt, more liquidity, more asset reflation, Jul 6th). As a result, we now project total debt growth for 2020 of $21tr, reflecting continued strong bond issuance in particular. Of this total, the increase in bonds accounts for around $13tr reflecting a significant increase in government deficits as they sought to smooth the impact on incomes as well as record corporate bond issuance as companies sought to increase their cash buffers to weather the shock on cash flows. The remainder is a combination of bank loans, shorter-maturity paper such as bills, EM local debt and other non-marketable debt.
  
  

	Fig.1	Fig.2

• Moreover, this increase in debt is also reflected in a significant increase in cash, by $9tr in terms of M2 global money supply. Partly, this is a consequence of the increase in debt as bank loans directly create deposits. And while bond issuance does not create deposits directly in the same way bank lending does, when QE purchases by central banks absorb (mostly government) bonds from the portfolios of private non-bank investors, such as pension funds, asset managers and insurance companies, liquidity or money supply is being created.
• The universe of global equities has expanded by a similar order of magnitude to the expansion in bonds, i.e. by around $11tr. That is lower in dollar terms than the expansion in bonds, but larger than either cash or bonds held by non-bank investors. However in percentage terms the expansion in the equity universe has been smaller. This helps explain why equity weights in non-bank investor portfolios have only risen just above their post-Lehman averages despite global equity prices reaching new all-time highs.
• Private asset classes such as private equity, private debt, infrastructure, private real estate and natural resources, a $7.2tr universe at the end of 2019 according to Preqin, likely grew by around $640bn this year based on our estimates. This represents close to 9% growth, significantly below the 15%/17% growth for public equities/bonds. Alternative “currencies” such as Gold and Bitcoin have been the main beneficiaries of the pandemic in relative terms growing their assets (for investment purposes) by 27% and 227%, respectively.
• Looking across asset classes at a more granular level we find that just over half of the increase in the equity universe comes from US equities, with EM Asia another strong beneficiary. In percentage terms, however, EM Asia has seen a larger increase, likely in part reflecting the fact that China is one of the few countries globally where our economists forecast positive GDP growth for 2020, while Latam has seen a contraction in dollar terms. Within credit, unsurprisingly the largest increase in terms of market value has been USD HG, reflecting that nearly $1tr of net issuance. In percentage terms, however, the strongest growth has been by far in Euro HY, which is up by almost 50% over the past year.
• Across investor types retail funds such as Mutual Funds and ETFs (a $52tr universe currently) have seen the strongest percentage growth with Equity funds leading, followed by Money Market funds and Balanced/Hybrid funds, while Bond funds saw more muted growth (Figure 3 and Figure 4). SWFs, despite suffering liquidations in Q1, have benefited from their high exposure to public equities of 60%-70% and as a result they likely saw close to 13% growth (or $1tr) in their AUM this year, bringing their total assets to above $9tr currently. In contrast, hedge funds (a $3.4tr universe currently) and pension funds/insurance companies (a $58tr universe currently) saw more modest low single digit growth this year. In other words, among investor types, retail funds such as Mutual Funds and ETFs appear to have seen the strongest growth this year, thus increasing their share in the total investor universe.

	Fig.3	Fig.4

Now a really interesting part:

Inflows the Grayscale Bitcoin Trust still too big to allow any position unwinding by momentum traders to create sustained negative price dynamics

• We had argued in our F&L publication of Dec 11th that the previous week’s announcement by MassMutual life insurance company that has already invested $100mn in bitcoin for its general investment fund, represented another milestone in bitcoin adoption as it suggests that institutional investors’ adoption of bitcoin is spilling over from family offices/HNWI to more traditional real-money investors such as insurance companies and pension funds.
• That MassMutual announcement was followed this week by a wave of speculative bitcoin buying, likely reflecting a renewed impulse by speculative investors to front run real-money institutional investors.
  Indeed, bitcoin futures, the preferred vehicle of speculative investors, saw new record high volumes on Thursday this week (Figure 5), which combined with a sharp increase in open interest (Figure 6), points to intense buildup of futures positions. In fact Figure 6 shows that the open interest of CME bitcoin futures has increased by an astonishing 45% since last Friday, more than reversing the previous decline of Nov 25th and making a new record high of $1.4bn.
  This is also true with our more carefully calculated bitcoin futures position proxy shown in Figure 7 which experienced a similarly steep ascent this week to unprecedented territory. As a reminder to our readers to infer positioning in bitcoin futures, we use our open interest position proxy methodology that we also apply to other futures contracts, where we look at the cumulative weekly absolute changes in the open interest multiplied by the sign of the futures price change every week. The rationale behind this position proxy is that when there is a price increase, the net long position of spec investors increases also with the magnitude of the increase determined by the absolute change in the open interest. It does not matter whether the open interest rises or falls as the net long position can increase either via fresh longs (increase in open interest) or a reduction of previous shorts (reduction in open interest). And vice versa. When there is a price decrease, the net long position of spec investors decreases also with the magnitude of the decrease determined by the absolute change in the open interest. It does not matter whether the open interest rises or falls as the net long position can decrease either via fresh shorts (increase in open interest) or reduction of previous longs (reduction in open interest). Looking at Figure 6 and Figure 7 it is difficult to not become concerned about a buildup of speculative long futures positions in bitcoin. At the same time, any previous attempts to call for mean
  reversion in these two indicators proved futile.
  

	Fig.5	Fig.6	Fig.7

• What about momentum traders? There is little doubt that momentum traders, such as CTAs and quantitative crypto funds, amplified this week’s surge. How much of vulnerability do these momentum traders pose for bitcoin at the moment?
  We had argued in previous weeks that the near term outlook for bitcoin was skewed to the downside due to a potential decay of its momentum signals into January, unless the bitcoin resumed its uptrend by rising above $20k. Clearly, this week’s surge to above $23k has not only cancelled our previous momentum-signal-decay thesis, but it has reversed it by shifting these momentum signals to even higher territory. This is shown in Figure 8 which depicts our short and long lookback period momentum signals for bitcoin. Figure 8 shows that the short lookback period momentum signal rose this week to 2.0 stdevs and the long lookback period to 1.6 stdevs. Both are above our 1.5stdev threshold typically associated with overbought conditions and a high risk of mean reversion. According to Figure 8 the last time momentum traders were so long bitcoin was in June 2019.
• 
  Taking Figure 6, Figure 7 and Figure 8 together, we find it difficult not to characterize bitcoin as overbought at the moment. At the same time we acknowledge that the inflows into the Grayscale Bitcoin Trust, at $1bn per month currently (Figure 9), are too big to allow any position unwinding by momentum traders to create sustained negative price dynamics similar to the ones seen before in the second half of 2019. In other words, monitoring on a high frequency basis the flow trajectory for the Grayscale Bitcoin Trust remains very important. Any signs of significant slowing in the flow trajectory for the Grayscale Bitcoin Trust in Figure 9 would raise the risk of a bitcoin correction similar to the one seen in the second half of 2019.
  
  

	Fig.8	Fig.9

Apart every speculation about Grayscale, I think I have addressed in my thread, I think the interesting part is the proxy positioning based on Open Interest. An Indicator I will try to reproduce in TradingView.

EDIT: Zerohedge referenced to this article, with various comments

Bitcoin At $650,000? One Stunning Chart, And Why JPMorgan Thinks Nothing Can Stop It Now

Omg that too complecated....
Just tell me guys Im getting money or losing?

[JayJuanGee]

[edited out]

Omg that too complecated....
Just tell me guys Im getting money or losing?

OMG Fullbear2222.  Get a grip!!!!!   Who knows what's happening with you, except for you (and maybe you don't even seem to know? since you are quoting posts from 2 years ago, and then not explaining how that 2-year old information relates to today).

Also, you have ONLY been registered on the forum for a couple of months - so it could be possible that your time preference is too high (you are expecting positive returns in too short of a timeframe.. perhaps?), and you may well need to chill the fuck out and figure out a financial management strategy that might include bitcoin accumulation that might work for you for 4-10 years or longer.. depending on your various other financial and mental circumstances.

When you invest into bitcoin, at minimum you should be attempting to consider your cashflow, how much bitcoin you have already accumulated, your other investments, your view of bitcoin as compared with other investments, timeline, risk tolerance, and your time, skills, goals (investment/lifestyle targets) and your abilities to strategize, plan, research and learn along the way including tweaking strategies from time to time to consider trading, reallocating, use of leverage and/or financial instruments.

It can take a long time to figure out each of the subcategories within the above-outlined individual considerations, yet no one has to figure them all out at one time or before getting started investing in bitcoin.. and accordingly any person could start by investing relatively small amounts or investing some amount that they believe to be reasonable and prudent - and continue to study their own circumstances along the way, and perhaps tweak their investing strategy from time to time along the way, as they are learning.

The first considerations on the above list are more basic, and the later considerations on the list are more advanced, so of course, on a personal level, I have frequently striven to get the basics in order before getting into the more advanced strategies and techniques.

So ultimately, if you are reading information that seems too complicated for you, and you are asking for feedback on a forum in respect to your own personal financial and perhaps mental circumstances, then you likely need to start out more slowly.. especially if you are having trouble understanding and appreciating how 2-year old information about bitcoin might relate to your own current personal financial/mental circumstances.

[fillippone]

[edited out]

<random shitpost>

<wall of text>

I applaud you, @JayJuanGee for the effort you put in that answer.
I was so happy someone posted on this thread that apparently is a monologue of mine (not that too much discussion is required here, btw). But when I realised the poor quality of the post I was a little bit discouraged.

Nevertheless, you showed me how to deal with that!

[fillippone]

I resume this thread to post a series of 2024 analysis by various Institutional players.

Messari	Crypto theses 2024
ECT GROUP	ETC Group Crypto Market Outlook 2024
VanEck	VanEck’s 15 Crypto Predictions for 2024
Global X	Crypto & Blockchain Quests
Bitwise	The Year ahead: 10 crypto predictions for 2024
Fidelity	Crypto Outlook 2024
Jp Morgan	https://lnkd.in/e2i-ZCMB
HashDex	2024 Crypto Investment Outlook
Coinbase Institutional	2024 Crypto Market Outlook
Crypto.com	2023 Year Review & 2024 Year Ahead
Pantera	A Year Of Progress
a16z crypto	A few of the things we’re excited about in crypto (2024)

All of these research are public available, some of them just require an email (even a throw away one) to read it. No restricted material has been provided.

[Wind_FURY]

The "Cockroach Theory" by The Economist.

¯\_(ツ)_/¯

https://www.economist.com/finance-and-economics/2023/12/18/why-bitcoin-is-up-by-almost-150-this-year

The title might confuse many people into believing that the article is merely another negative essay written to misinform and gaslight its readers. It's probably an article written by someone who is, or probably WAS against Bitcoin, BUT also probably has accepted the fact that it is not going away.

[JayJuanGee]

I resume this thread to post a series of 2024 analysis by various Institutional players.

Messari	Crypto theses 2024
ECT GROUP	ETC Group Crypto Market Outlook 2024
VanEck	VanEck’s 15 Crypto Predictions for 2024
Global X	Crypto & Blockchain Quests
Bitwise	The Year ahead: 10 crypto predictions for 2024
Fidelity	Crypto Outlook 2024
Jp Morgan	https://lnkd.in/e2i-ZCMB
HashDex	2024 Crypto Investment Outlook
Coinbase Institutional	2024 Crypto Market Outlook
Crypto.com	2023 Year Review & 2024 Year Ahead
Pantera	A Year Of Progress
a16z crypto	A few of the things we’re excited about in crypto (2024)

All of these research are public available, some of them just require an email (even a throw away one) to read it. No restricted material has been provided.

Wow!

No wonder so many people believe that there is such a thing as "crypto," especially since no one seems inclined to even use the word bitcoin in their title... Might it not be more accurate to entitle something like this.. "Report on bitcoin, and various shitcoins (and affinity scams)"?

The "Cockroach Theory" by The Economist.

¯\_(ツ)_/¯

https://www.economist.com/finance-and-economics/2023/12/18/why-bitcoin-is-up-by-almost-150-this-year

The title might confuse many people into believing that the article is merely another negative essay written to misinform and gaslight its readers. It's probably an article written by someone who is, or probably WAS against Bitcoin, BUT also probably has accepted the fact that it is not going away.

At least he was not afraid to use the word "Bitcoin" in the main title, but then still devolved into putting that dumb-ass meaningless term into the subtitle.  The title itself must be worth something in terms of showing how scared "they" are.

[Wind_FURY]

The "Cockroach Theory" by The Economist.

¯\_(ツ)_/¯

https://www.economist.com/finance-and-economics/2023/12/18/why-bitcoin-is-up-by-almost-150-this-year

The title might confuse many people into believing that the article is merely another negative essay written to misinform and gaslight its readers. It's probably an article written by someone who is, or probably WAS against Bitcoin, BUT also probably has accepted the fact that it is not going away.

At least he was not afraid to use the word "Bitcoin" in the main title, but then still devolved into putting that dumb-ass meaningless term into the subtitle.  The title itself must be worth something in terms of showing how scared "they" are.

Pardon those people. Because they are economists and "scholars" of an old system, for them it will probably take 10 more years before they could finally accept Bitcoin in its totality as the next evolutionary step for money. They might also say that it's "our" Tour De Force, and how it was ahead of its time. But was it?

Plebs have already known that it would be so, not because they were HODLing/using the asset, but because the common, Bitcoin pleb today had already a basic, fundamental understanding of the network, of the incentive structure - what makes everything stick together, and of the importance of censorship-resistance - Bitcoin's main value proposition.

[btc78]

The "Cockroach Theory" by The Economist.

¯\_(ツ)_/¯

https://www.economist.com/finance-and-economics/2023/12/18/why-bitcoin-is-up-by-almost-150-this-year

The title might confuse many people into believing that the article is merely another negative essay written to misinform and gaslight its readers. It's probably an article written by someone who is, or probably WAS against Bitcoin, BUT also probably has accepted the fact that it is not going away.

At least he was not afraid to use the word "Bitcoin" in the main title, but then still devolved into putting that dumb-ass meaningless term into the subtitle.  The title itself must be worth something in terms of showing how scared "they" are.
 

Pardon those people. Because they are economists and "scholars" of an old system, for them it will probably take 10 more years before they could finally accept Bitcoin in its totality as the next evolutionary step for money.

it is not uncommon for the older generation to reject ideas especially new ones because they think that their way is always the better one and probably the best too but economists or scholars as you call them being skeptical about new ways surprises me mainly because economists should know that there is nothing constant with markets and they are always fluctuating which goes the same way for trends and other systematic inventions

maybe in the next few years, even as early as next year, those who are still quite skeptical of bitcoin can finally realize that this is now the future