The bitcoin price also set a new all-time high that day but, after that, went down alongside Coinbase’s stock price.įor altcoin traders, Coinbase’s direct listing meant that a large number of tokens were now available on a platform that operates on a bigger stage, sending their price expectations for these tokens upward. This event coincided with a number of executives selling their stock, causing a massive dump in the price of its shares that day. On April 14, Coinbase was indeed directly listed on Nasdaq. Within the broader crypto markets, anticipation of an upcoming Coinbase “IPO” was emerging. A large portion of the market was clearly looking for assets with extraordinary upsides, regardless of the risk profile that was attached to them. Around that same time, the GameStop stock frenzy was happening, where retail investors colluded on platforms like Reddit and Robinhood to pump the prices of certain stocks that hedge funds were massively shorting. Since the start of 2021, an increasing amount of capital has started flowing into other crypto assets like altcoins and non-fungible tokens (NFTs). In hindsight, this change likely played a key role in the lack of vigor in subsequent months to confidently keep bursting to new all-time highs, like it did during the 2017 bull run.Ĭapital Increasingly Flows Into Altcoins And NFTs In Q1 And Q2 Late February 2021, this GBTC premium dropped to negative levels, closing the window for this arbitrage opportunity that took so much bitcoin off the market. By doing so, investors could capture a “risk-free” spread between the price of GBTC shares and the spot bitcoin price, which peaked at a whopping 40.2% in December 2020 (figure 3). This introduced an arbitrage or “cash-and-carry trade” opportunity, where investors that would simultaneously go short GBTC via futures markets and long GBTC by actually buying shares, and closing both positions when the GBTC shares would be unlocked to be traded on secondary markets six months later.
During 2020, Grayscale Investments’ BTC holdings saw a massive rise, topping at just over 650,000 bitcoin in February (figure 2).ĭue to the popularity of the GBTC shares for entities that may not have been willing to self-custody large amounts of bitcoin themselves, the price of GBTC shares traded at a massive premium over the spot bitcoin price. Grayscale Investments, which is a fund where mostly institutional investors (81–84%) can buy shares that Grayscale would back with bitcoin (GBTC) and promise to never sell, with exception of their annually deducted fee.
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However, in February, one of the largest drivers of the price run-up into new highs also stopped doing so. During that time, there was still large institutional FOMO going on, likely triggered by the combination of MicroStrategy and NYDIG’s institutional onboarding event that was rumored to be very successful, as well as Tesla buying $1.5 billion worth of bitcoin in early February and accepting it for car sales. Most notably, sell pressure of long-term holders and miners started to drop off. In January 2021, the bitcoin price reached its first local top of its bull cycle, during which several on-chain trends changed.
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Bitoin’s full 2021 price history (on Kraken) is displayed in figure 1.
It closed the year at a price of $46,150, which is a $18,804 (68.8%) increase since the start of the year.
Hopes were very high, which was largely driven by the institutional fear of missing out (FOMO) that Michael Saylor and MicroStrategy triggered, in combination with PlanB’s Stock-to-Flow (S2F) and S2F Cross Asset (S2FX) models that predicted a price of around $100,000 and $288,000, respectively.īitcoin never saw those prices in 2021 but did set a new all-time high at $68,991 (on Kraken) in November. The bitcoin price opened the year at $27,346 (on Kraken) and actually never looked back. This eighth edition provides a year in review for 2021 and then assesses what current trends look like going into 2022. Cycling On-Chain is a monthly column that uses on-chain and price-related data to better understand recent bitcoin market movements.
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