Grayscale CEO: BlackRock ETF filing a ‘moment of validation’ for Bitcoin

July 12, 2023 Coin Telegraph

blackrock

BlackRock’s commitment to advancing its crypto efforts only lends to the validity of Bitcoin as an asset class, said Michael Sonnenshein.

The recent tsunami of spot Bitcoin (BTC) exchange-traded fund (ETF) filings should be seen as a “moment of validation” for Bitcoin, says Grayscale Investments CEO Michael Sonnenshein.

During a July 12 interview on CNBC’s Last Call, Sonnenshein rejected the notion that BlackRock’s entrance to the Bitcoin ETF race made it “uncool.”

“To see, literally, the largest asset manager in the world publicly commit to advancing their crypto efforts only lends to the validity of the asset class and the staying power it has.”

In just the last four weeks, at least seven major institutional firms including BlackRock have applied for a spot Bitcoin ETF in the United States.

"It's a moment of validation," says @Grayscale CEO @Sonnenshein on $BLK aiming to launch a $BTC spot ETF. "To see the largest asset manager in the world publicly commit to advancing their crypto efforts only lends validity to the asset class and the staying power that it has." pic.twitter.com/agt7emHWt0
— Last Call (@LastCallCNBC) July 11, 2023

If approved, both institutional and retail investors in the U.S. would have a simple, legally compliant way of getting exposure to the price of Bitcoin without actually owning any.

“The ETF wrapper is tried and true and it has become the access point for so many different assets, whether they’re commodities or stocks,” said Sonnenshein.

“Bitcoin is an asset that’s not going away. Investors want and deserve access to it.”

Up until this point, Sonnenshein’s Grayscale has been offering U.S. investors a roundabout way of gaining exposure to Bitcoin — by enabling investors to trade shares in trusts holding large pools of Bitcoin via its Grayscale Bitcoin Trust (GBTC).

Today, our attorneys filed a letter with the DC Circuit highlighting the disparity between the SEC’s approval of a leveraged #bitcoin futures ETF while continuing to deny approval of spot bitcoin ETFs like $GBTC. Let’s dive deeper. /6 pic.twitter.com/z7WyGBthhT
— Grayscale (@Grayscale) July 10, 2023

However, the firm wants to convert it to a spot Bitcoin ETF too, which would allow inventors a far simpler method to trade the price of Bitcoin without GBTC’s pesky discount to net asset value.

“To be able to give investors Bitcoin exposure through GBTC, like we do today has been an unbelievable milestone [...] But moving to an ETF structure will give investors the additional protection that they want.”

In June 2022, Grayscale filed a lawsuit against the United States Securities and Exchange Commission over the rejection of its 2021 application to convert its GBTC.

“If we’re successful in that challenge, there’s actually billions of dollars of investor capital that would be unlocked through that,” said Sonnenshein.

The price of Bitcoin shot upwards of 20% in the days after BlackRock’s filing for a spot Bitcoin ETF on June 15, reaching a year-high of $31,460 on July 6. It is currently trading at $30,633.

Magazine: Should you ‘orange pill’ children? The case for Bitcoin kids books

Grayscale resolves lawsuit with Fir Tree over proposed changes to Bitcoin Trust

July 11, 2023 Coin Telegraph

bitcoin investment trust

Fir Tree hinted at potential additional litigation against Grayscale and parent company Digital Currency Group based on what its GBTC documentation may reveal.

Grayscale Investments has reached an agreement with New York-based investment firm Fir Tree Capital Management over its Bitcoin Trust.

According to a July 11 announcement from Fir Tree, Grayscale agreed to provide additional documentation related to its Bitcoin Trust (GBTC) after Fir Tree filed a lawsuit in December 2022. The complaint against Grayscale aimed at having the asset manager stop plans to turn its GBTC trust into a spot exchange-traded fund (ETF) and provide documentation on its relationship with Digital Currency Group, Grayscale’s parent company.

Fir Tree claimed that roughly 850,000 retail investors had been “harmed by Grayscale’s shareholder-unfriendly actions” based on the firm’s lack of a redemption program from GBTC into cash or crypto. In addition, its legal team said Grayscale attempting to launch a spot crypto ETF could “cost years of litigation, millions of dollars in legal fees, countless hours of lost management time, and goodwill with regulators.”

“Once Grayscale provides Fir Tree with the GBTC documents that it has agreed to produce under this agreement, we will be able to further investigate Grayscale in order to determine our appropriate next steps, which may include filing additional litigation against Grayscale, Digital Currency Group (DCG), and their respective directors, officers, and advisors, or others who should be held accountable for destroying billions of dollars of GBTC’s market value,” said Fir Tree.

Grayscale filed a legal challenge against the United States Securities and Exchange Commission (SEC) in June 2022 after the regulator denied an application to convert its Bitcoin Trust into a spot Bitcoin (BTC) ETF. The lawsuit is ongoing, with the SEC having not approved any spot crypto investment vehicle despite applications pending from BlackRock and other investment firms.

Magazine: Get your money back: The weird world of crypto litigation

Grayscale lawyers refer to SEC allowing Volatility Shares’ investment vehicle in push for ETF

July 10, 2023 Coin Telegraph

Bitcoin

According to Grayscale, the Volatility Shares ETF was an “even riskier" product than Bitcoin futures ETFs, suggesting the SEC should allow its spot crypto ETF to begin trading.

Digital asset manager Grayscale has filed a letter in its lawsuit against the United States Securities and Exchange Commission (SEC) over the rejection of a spot Bitcoin exchange-traded fund (ETF), citing a possible precedent in furtherance of its case.

In a letter dated July 10, Grayscale’s legal team notified the U.S. Court of Appeals for the District of Columbia Circuit of the listing of Volatility Shares Trust’s leveraged Bitcoin (BTC) futures ETF. The crypto investment vehicle started trading on June 27 without interference from the SEC, which to date has not approved any spot crypto ETFs but ones tied to BTC futures.

According to Grayscale, the Volatility Shares ETF exposes investors to an “even riskier investment product” than BTC futures ETFs, suggesting a possible avenue for the SEC to approve its offering. The asset manager filed a legal challenge against the commission in June 2022 after the SEC denied an application to convert its Grayscale Bitcoin Trust into a spot Bitcoin ETF.

“The fact that the Commission has allowed a leveraged bitcoin futures ETP to begin trading demonstrates that the Commission continues to arbitrarily treat spot bitcoin ETPs differently than bitcoin futures,” said Grayscale. “The 2x Bitcoin Strategy ETF is therefore exposed to even more risks of the bitcoin markets than Grayscale’s proposed spot bitcoin ETP.”

Today, our attorneys filed a letter with the DC Circuit highlighting the disparity between the SEC’s approval of a leveraged #bitcoin futures ETF while continuing to deny approval of spot bitcoin ETFs like $GBTC. Let’s dive deeper. /6 pic.twitter.com/z7WyGBthhT
— Grayscale (@Grayscale) July 10, 2023

The letter added:

“The only way to eliminate the Commission’s unequal treatment of bitcoin-based ETPs is to allow proposed spot bitcoin ETPs like Grayscale’s to begin trading.”

Several firms have filed applications for spot crypto ETFs with the SEC including BlackRock — the largest asset management company in the world — and ARK Investment Management. Following a June report in which SEC officials claimed the crypto ETF filings were not “sufficiently clear and comprehensive,” some of the applications were refiled to include crypto exchange Coinbase as a surveillance partner.

Magazine: SEC calls ETF filings inadequate, Binance loses euro partner and other news: Hodler’s Digest, June 25 – July 1

Why approving a Bitcoin ETF might unleash $18 billion in sell-pressure

June 30, 2023 Coin Telegraph

bitcoin etf

Grayscale GBTC Trust conversion to an ETF will unlock a potential sale of up to $18 billion in Bitcoin.

The introduction of a spot-based Bitcoin (BTC) exchange-traded fund (ETF) would make the asset more accessible to individual investors and mutual funds. What's more, unlike a futures-based Bitcoin ETF, a spot-based ETF involves actually buying BTC.

So will the approval of the first Bitcoin ETF be a bullish event? Not necessarily.

GBTC 'discount' remains in the double digits

Over the years, the U.S. Securities and Exchange Commission (SEC) has rejected every Bitcoin ETF applicant, and the latest denial was issued to VanEck Bitcoin Trust on March 10, 2023.

The SEC concluded that the offer did not have a "comprehensive surveillance-sharing agreement with a regulated market of significant size related to spot Bitcoin." Regulators are hesitant to release what many believe would be a more equitable and transparent Bitcoin product.

Investors now question whether the latest bids from ARK Investment and BlackRock to launch their spot Bitcoin ETFs might be the solution to Grayscale’s Bitcoin Trust (GBTC), an investment vehicle with shares traded on the stock exchange.

Interestingly, the GBTC "premium" jumped to its best levels in months after BlackRock announced its ETF filing.

*Grayscale GBTC premium/discount to net assets. Source: CoinGlass*

But while the potential approval of a spot Bitcoin ETF might seem bullish at first, its consequences for BTC price can be negative, at least in the short term.

What's an ETF?

First, an ETF is a form of security that holds diverse underlying investments, such as commodities, stocks and bonds. The ETF may resemble a mutual fund because its issuer pools and manages the given assets.

The most well-known example of this instrument is SPY, the ETF that tracks the S&P 500 index. State Street is in charge of managing the mutual fund's $436 billion worth of assets.

Buying an ETF grants the investor direct ownership of the fund's contents, resulting in different tax consequences than holding futures contracts or leveraged positions. While Bitcoin spot ETFs continue to be rejected, identical products have been available for decades for bonds, global currencies, gold, Chinese equities, real estate, and oil.

30% GBTC discount is likely justified

The Grayscale Bitcoin Trust (GBTC), an investment fund with $18.4 billion of assets under management, is currently trading at a -30% discount versus its Bitcoin holdings. This gap between their 626,778 Bitcoins at market value and the GBTC shares trading on regular stock exchanges reached as low as -49% in December 2022.

Consequently, this discount is likely justified as the instrument lacks the tools to allow arbitrage. Grayscale's GBTC is the undisputed leader in the cryptocurrency market, despite being classified as a closed-end fund, which means that the number of available shares is limited.

Shares of GBTC are not freely created, nor do they have a redemption plan. Due to this inefficiency, there are large price differences when compared to the fund's actual Bitcoin holdings. In contrast, an ETF gives the market maker the ability to issue and redeem shares, ensuring that the premium or discount is typically small.

GBTC charges a set 2% annual administrative fee; therefore, the discount may be acceptable given that the SEC continues to reject appeals and requests from all fund managers.

On the other hand, ETFs typically trade at par with net assets, as opposed to GBTC. For example, the Purpose Bitcoin ETF (BTCC.U) held a $5.63 net asset value per share on June 27, and the shares closed at $5.65 on the Toronto Stock Exchange.

Similarly, the U.S. derivatives ProShares Bitcoin Strategy ETF (BITO)'s underlying price was $16.89 on June 28, while its shares traded at $16.89.

Spot Bitcoin ETF approval might initially pressure BTC

Essentially, an investment trust product is considerably less desirable than an ETF, and Grayscale has done little to mitigate the impact on GBTC investors thus far. However, market sentiment improved modestly after the world’s largest asset manager, BlackRock, filed to launch a Bitcoin spot price ETF.

The share price discount versus its contents will eventually trend to zero as redemptions and arbitrage opportunities arise if the SEC grants the asset manager Grayscale permission to convert its GBTC Trust to a bonafideBitcoin ETF.

In this scenario, odds are that a considerable amount of BTC could enter the market as investors will finally be able to exit their position at par.

The only question is: how much of that $18 billion will flow into other Bitcoin-related instruments or get sold on exchanges?

In any case, there's a good chance that a spot Bitcoin ETF approval will produce significant sell-pressure from Grayscale's GBTC conversion as BTC that's been locked for 3-8 years reenters the market.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Bitcoin ETF fever returns: ‘Biggest’ inflow to ProShares’ BITO in a year

June 26, 2023 Coin Telegraph

BITO

ProShares’ BITO Bitcoin ETF saw a weekly inflow of $65 million as institutional investors have seemingly regained their mojo for Bitcoin futures.

Bitcoin (BTC) exchange-traded fund (ETF) fervor is back with a raft of new applications and an increase in capital inflows from institutional investors.

On June 26, a surge of inflows to the ProShares Bitcoin Strategy ETF (BITO) — a Bitcoin futures fund — was observed by Bloomberg senior ETF analyst Eric Balchunas.

The fund had its largest weekly inflow in a year at $65.3 million with its assets topping $1 billion.

BITO was the first BTC-linked ETF in the United States and is one of the most popular among institutional investors.

Balchunas claimed BITO “pretty much has tracked Bitcoin perfectly,” lagging spot prices by 1.05% annually and has a fee of 0.95%.

The Bitcoin Futures ETF $BITO had its biggest weekly inflow in a year as assets top $1b again. It also traded half a billion in shares on Friday, which it's only done about 5 times before via @SirYappityyapp pic.twitter.com/Xrq0lUaaTO
— Eric Balchunas (@EricBalchunas) June 25, 2023

The BITO fund has made a 59.6% gain since the start of 2023 according to ProShares. There’s been an uptick in Bitcoin derivatives interest across the board since BlackRock filed for its own Bitcoin ETF on June 15.

According to the Deribit crypto options exchange, Bitcoin futures open interest (OI) has surged since last week. It is currently $319 million as of June 25, up around 30% from the same period last week.

OI is a measure of the total number of outstanding futures contracts that have not been settled.

*BTC futures OI over the past month. Source:* *Deribit*

The resurgence in ETF trading and the resultant BTC price pump has also been good news for the world’s largest crypto asset manager, Grayscale. The Grayscale Bitcoin Trust (GBTC), which has been trading at a massive discount to spot BTC prices for months, is heading in the right direction as that gap diminishes.

According to Coinglass, the Grayscale premium, also known as its discount, is -31.2%. It fell as low as -49% in December.

It remains unclear if the Securities and Exchange Commission (SEC) will approve a spot Bitcoin ETF, but the race is now on as a new wave of filings has followed BlackRock’s.

WisdomTree, for the third time, filed with the SEC to create a spot Bitcoin ETF, just hours later Invesco renewed its application for a similar product.

On June 25, ETF Store President Nate Geraci tweeted his list of ETF issuers that he “would keep an eye on” as he believes they will file or refile for a spot Bitcoin ETF based on past filings. Geraci named First Trust, VanEck, Global X, Fidelity, and what he called the “dark horse,” Schwab.

Magazine: Unstablecoins: Depegging, bank runs and other risks loom

Grayscale Bitcoin Trust Discount Shrinks Following BlackRock’s Application for Spot Bitcoin ETF

June 19, 2023 The Daily Hodl

BlackRock’s Bitcoin ETF ‘is the best thing to happen’ to BTC, or is it?

June 16, 2023 Coin Telegraph

Adam Cochran

Galaxy Digital CEO Mike Novogratz was among those over the moon with the news, others warn it could be the start of a major institutional takeover.

BlackRock’s latest filing for a spot Bitcoin (BTC) trust will drive investors’ confidence in Bitcoin and may even be “the best thing that could happen” to BTC, according to some crypto industry observers — but others warn of a hidden cost.

During an interview on June 16, Galaxy Digital CEO Mike Novogratz said the approval of BlackRock’s ETF application would be “the best thing that could happen to $BTC.”

“I say a Hail Mary every night that Larry Fink and @blackrock pull off a @bitcoin ETF," Novogratz reportedly said on a Fox News segment.

Fun being on @LizClaman show!! And yes, @BlackRock getting a $BTC ETF through would be the best thing that could happen to $BTC. https://t.co/2fFBeB9eyo
— Mike Novogratz (@novogratz) June 16, 2023

Meanwhile, cryptocurrency analyst James Edwards of Finder.com — a financial product comparison website — told Cointelegraph that the timing of BlackRock’s filing should provide “confidence” in both Bitcoin as an asset and also Coinbase in its upcoming legal battle fight with the SEC:

“BlackRock's willingness to press on with a Bitcoin ETF at a time when the SEC is on a warpath against crypto is very telling. It shows confidence in Bitcoin’s status as a commodity – rather than a security,” he said, adding:

“It’s unlikely that BlackRock would push forward with an ETF of this nature without serious consultation with regulators and confidence in Bitcoin's future legal status.”

BlackRock’s intention to use Coinbase Custody to control funds should also be seen as a massive confidence booster for Coinbase as it prepares its legal defense, Edwards explained.

He added that BlackRock — the world’s largest asset manager — likely wouldn’t partner with Coinbase had they not been “confident” in Coinbase’s legal position.

The downside

Others argue that the traditional investment giant's latest moves undermine the "ethos" of decentralized cryptocurrencies, or, that the company may find a way to profit from retail investors.

Investor Scott Melker explained in a June 16 interview that such an approval would be a disservice to crypto-native innovators who built the industry:

“As good as this may be for institutional adoption of the space, it kind of violates the ethos, it is a bit of a dishonest push away from the people who built the industry in the United States.”

Cinneamhain Ventures partner and Ethereum bull Adam Cochran believes that BlackRock will swoop in on the “discounted coins” of retail investors, a theory also shared by Melker.

Blackrock ETF… https://t.co/3g77QNdAun
— The Wolf Of All Streets (@scottmelker) June 15, 2023

Steven Lubka, a managing director at Swan Bitcoin shared a similar view, predicting that BTC will reach $1 million, but few retail investors will reap the rewards because the bulk of BTC will be owned by BlackRock, Goldman Sachs, and other ETF issuers.

Melker added that Wall Street firms will continue to move into the space and that U.S. regulators will likely “choose them” over incumbent platforms.

ARK Invest, Grayscale, Fidelity, Galaxy Digital, VanEck, Valkyrie Investments, NYDIG, SkyBridge and WisdomTree are among the other investment firms that have applied to the SEC for similar Bitcoin and cryptocurrency ETFs.

Since the news was first reported, the price of BTC has increased 2.2% to $25,584 at the time of writing.

Interestingly, the Fear & Greed Crypto Index increased from 41 to 47 — leaving the fear zone — following the news of BlackRock’s filing.

Magazine: Crypto regulation: Does SEC Chair Gary Gensler have the final say?

Grayscale and Bitwise distance themselves from Ether futures ETF plans

May 18, 2023 Coin Telegraph

Coin Telegraph

Grayscale has stopped its ETH futures ETF plans after a warning from the SEC, while Bitwise amended its SEC filing to halt any launch of Ether ETF products.

Two prominent crypto asset managers — Grayscale Investments and Bitwise Asset Management — have halted their Ether (ETH) futures exchange-traded fund (ETF) plans amid growing scrutiny from United States regulators.

On May 17, Grayscale filed an amendment to its Securities and Exchange Commission (SEC) filing to remove mentions of an Ether futures ETF. The amendment comes less than a week after sharing plans to launch a trio of ETF products. The other two flagship products include a semi-spot Bitcoin (BTC) ETF that would invest in the spot BTC market, and a privacy ETF focused on investing in privacy-focused blockchain companies and digital assets.

Grayscale just filed for a semi-spot bitcoin ETF, as well as Ethereum Futures ETF and a Privacy ETF. Interesting.. pic.twitter.com/MPruDolp7G
— Eric Balchunas (@EricBalchunas) May 9, 2023

Grayscale’s amendment to its ETF filing came just days after SEC asked the asset manager to pull its application for a Filecoin Trust. The regulatory body warned that its underlying asset, Filecoin (FIL), qualifies as a security.

SEC tells Grayscale to withdraw the ether futures ETF filing, watch for the rest to follow suit, deja vu all over again. Scoop via ⁦@VildanaHajric⁩ pic.twitter.com/NUXy4pFfJi
— Eric Balchunas (@EricBalchunas) May 17, 2023

Grayscale responded to the SEC’s accusation, claiming the underlying asset does not qualify as a security. The firm “intends to respond promptly to the SEC staff with an explanation of the legal basis for Grayscale’s position.”

Bitwise, on the other hand, has withdrawn its application to launch an ETH-based futures ETF altogether. In its amendment filing with the SEC on May 17, the crypto asset manager claimed that it doesn’t “intend to seek effectiveness of the fund and no securities of the fund was sold, or will be sold, pursuant to the above-mentioned post-effective amendment to the trust’s registration statement.”

Bitwise didn’t respond to Cointelegraph’s request for comments on the issue by the time of publication.

A Bitcoin-based futures ETF debuted in the last quarter of 2021, making many in the crypto industry believe that a spot crypto ETF is on the way. However, after two years and a barrage of crypto carnages in 2022, regulators have grown more skeptical of such products.

Magazine: $3.4B of Bitcoin in a popcorn tin — The Silk Road hacker’s story

SEC believes Filecoin is a security, Grayscale warns investors

May 17, 2023 Coin Telegraph

Coin Telegraph

The regulator has asked Grayscale to withdraw its application for a Filecoin Trust product, saying its underlying asset "meets the definition of a security."

The United States Securities and Exchange Commission (SEC) believes Filecoin’s native FIL token is a security, crypto asset manager Grayscale Investments has revealed.

According to the May 17 announcement, Grayscale lodged an application with the regulator to launch a Filecoin Trust product on April 14, which would provide investors with indirect exposure to the underlying FIL token.

In a comment letter from SEC staff on May 16, the regulator then warned Grayscale that FIL “meets the definition of a security” under federal law and asked them to withdraw their application for the Trust product.

Grayscale stated that under its view, Filecoin is not a security and will be sending an explanation to the SEC for its reasoning.

“Grayscale does not believe that FIL is a security under the federal securities laws and intends to respond promptly to the SEC staff with an explanation of the legal basis for Grayscale’s position.”

Grayscale noted that it “cannot predict” whether or not the SEC will be persuaded into accepting its explanation, and may “seek accommodations” for the registration of the Trust. Alternatively, the investment firm warned that it may be forced to dissolve the Trust in its entirety.

This update from the SEC marks a continuation of the watchdog’s crackdown on crypto products, which has recently come down hard on a number of U.S. crypto exchanges.

On Feb. 9 the SEC fined U.S.-based crypto exchange Kraken for “selling unregistered securities” and ordered the exchange to shut down its staking-as-a-service program.

More recently on March 22, Coinbase, the largest publicly traded crypto exchange in the U.S. received a Wells Notice — a legal document that typically precedes enforcement action — from the regulator, for “potential violations of securities laws.”

Magazine: Crypto regulation — Does SEC Chair Gary Gensler have the final say?

This is a developing story, and further information will be added as it becomes available.

Bitcoin’s dive under $27K liquidates $100M — So why aren’t margin traders flipping bearish?

May 12, 2023 Coin Telegraph

<div>Bitcoin's dive under K liquidates 0M — So why aren't margin traders flipping bearish?</div>

Analysis

BTC price falls below the 55-day support level at $27,000, but futures market resilience sparks hope for a recovery toward $28,000.

Bitcoin’s price (BTC) broke below its 55-day support at $27,000 on May 12. In result, the two-day, 7% correction to $26,155 caused $100 million worth of long BTC futures contracts to be liquidated.

However, Bitcoin margin and futures markets displayed strength during the down-move, fueling hope of a recovery toward $28,000.

Regulatory pressure, stronger U.S. dollar bite

Regulatory uncertainty in the United States significantly increased after Bitcoin miner Marathon Digital received yet another subpoena. The publicly traded mining company informed investors on May 10 that it received a subpoena from the U.S. Securities and Exchange Commission (SEC) concerning whether it may have violated federal securities laws, among other things, by using related-party transactions.

Furthermore, there’s the additional risk of the 627,522 Bitcoins held by the Grayscale GBTC Trust Fund, which has been trading at a steep discount for over a year while Grayscale’s holding company, Digital Currency Group (DCG), struggles with some failing subsidiaries. DCG’s crypto lending and trading firm, Genesis Capital, filed for Chapter 11 bankruptcy protection in January.

Despite having separate corporate structures, Genesis Capital had "intercompany obligations" with the holding company DCG, so the consequences for the administration of the Grayscale funds are unknown. Additionally, the group reportedly owes Gemini's clients about $900 million, and the U.S. SEC charged Genesis and Gemini in January.

Bitcoin’s 7.2% correction happened as the dollar strength index (DXY), which measures the U.S. currency against a basket of foreign exchanges, displayed strength. The indicator reached 101 on May 8, nearing its 12-month low, a sign of low-confidence in the government’s ability to curb inflation while simultaneously managing to increase the debt limit.

Historically, there has been an inverse correlation between the DXY index and risk-on assets such as Bitcoin, given that a weaker dollar tends to drive demand for alternative store-of-values and scarce assets.

Let's look at derivatives metrics to better understand how professional traders are positioned in the current market environment.

Bitcoin margin market traders slightly less optimistic

Margin markets provide insight into how professional traders are positioned because they allow investors to borrow cryptocurrency to leverage their positions.

OKX, for instance, provides a margin lending indicator based on the stablecoin/BTC ratio. Traders can increase their exposure by borrowing stablecoins to buy Bitcoin. On the other hand, Bitcoin borrowers can only bet on the decline of the cryptocurrency's price.

*OKX stablecoin/BTC margin lending ratio. Source: OKX*

The above chart shows that OKX traders' margin lending ratio decreased between May 8 and May 11. Still, that is not concerning, given that those traders remain favoring bullish strategies as the stablecoin (long) demand currently surpasses the BTC (short) demand by a factor of 18 times — which is healthy.

No signs of panic selling after Bitcoin price crash

To exclude externalities that might have solely impacted the margin markets, traders should analyze the long-to-short metric. The metric gathers data from exchange clients’ positions on spot, perpetual, and quarterly futures contracts, thus offering better information on how pro traders are positioned.

There are occasional methodological discrepancies between different exchanges, so readers should monitor changes instead of absolute figures.

*Exchanges' top traders Bitcoin long-to-short ratio. Source: Coinglass*

Even though Bitcoin broke below the $28,000 support, professional traders have increased their leveraged long positions using futures, according to the long-to-short indicator.

At crypto exchange OKX, the long-to-short ratio increased, from 0.92 on May 8 to 1.01 on May 12. Meanwhile, at Binance, the long-to-short ratio stabilized at 1.13, indicating there was no shift to a bearish position from whales and market makers.

Therefore, despite the 12% price decline from a high of $29,865 on May 6, traders using margin and futures contracts did not abandon their bullish stance. The movement indicates confidence that Bitcoin is more likely to reclaim $28,000 than succumb to the next support level near $24,500.

Grayscale