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Bitcoin had been underperforming most altcoins for the past two months, but that trend reversed this week when (BTC’s) 20% rally pushed its market capitalization to break the $1 trillion mark on Oct. 6. That shifted investors’ attention back to the leading cryptocurrency, and altcoins are currently in the red for the day.
The current positive momentum could be dangerous if Bitcoin traders become overconfident and abuse leverage to open long positions. To avoid this, traders need to carefully analyze derivatives markets to exclude this risk.
Notice above how the altcoin market capitalization increased by 5.8% while Bitcoin posted a 20.8% gain in the same period. Sure enough, there were some outliers like Shiba Inu (SHIB) which rose by 200%, Fantom (FTM), which rallied 60%, and Klaytn (KLAY), which gained 36%. However, the aggregate market capitalization from altcoins did not accompany Bitcoin’s performance.
Some well-known personalities, such as billionaire Wall Street investor Bill Miller recently expressed their optimism for Bitcoin while raising concerns on most altcoin projects. Miller explicitly mentioned the “big banks” getting involved and referred to “huge amounts” of venture capital money flowing into Bitcoin.
The recent Bitcoin frenzy seems driven by the macro-economic scenario. The United States increased its debt limit by $480 billion to pay off its obligations until early December. The inflationary pressure brought by unending stimulus packages and meager interest rates has been fueling the long rally in commodities.
For example, oil reached its highest level in seven years, and wheat futures recently hit a record high not seen since February 2013. Even the S&P Case-Shiller home price index has presented an annualized 23.3% gain.
To understand if Bitcoin traders got overly excited, traders should analyze Bitcoin’s derivatives indicators like the futures markets premium and options skew.
The basis rate measures the difference between longer-term futures contracts and the current spot market levels. This indicator is also frequently referred to as the futures premium.
A 5% to 15% annualized premium is expected in healthy markets, which is a situation known as contango. This price difference is caused by sellers demanding more money to withhold settlement longer.
The recent 20% Bitcoin price rally caused the indicator to reach the upper limit of this neutral zone, meaning investors are bullish but not yet overconfident. Whenever buyers demand excessive leverage, the basis rate can easily surpass 25%, as seen in mid-May.
To exclude externalities specific to the futures instrument, one should also analyze options markets.
The 25% delta skew compares similar call (buy) and put (sell) options. This metric will turn positive whenever “fear” is prevalent because traders expect potential downside.
The opposite holds when option traders are bullish, causing the 25% delta skew indicator to shift to the negative area. Readings between negative 8% and positive 8% are usually deemed neutral.
The above chart shows that there hasn’t been a single instance of options traders becoming overconfident in the past six months, which would signal “greed” because the 25% delta skew dropped below negative 8%. Meanwhile, the indicator has ranged near 0 for the past week, showing balanced risks between the bears and bulls.
Those findings necessarily show a lack of confidence from buyers, but it is quite the opposite. Had Bitcoin bulls already been overly confident at $57,000, there would be little room for additional leverage, increasing the risk of a cascading liquidation if a momentary price correction occurred.
Bulls are modestly confident and even a 20% price correction is unlikely to change the situation because the futures market’s basis rate shows a reasonable premium after the recent rally.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Bill Miller, a renowned Wall Street investor and the founder and Chief Investment Officer of Mille Value Partners, continued to advocate for the rising value of Bitcoin cryptocurrency but raised his skepticism towards the majority of altcoins.
The renowned investor engaged in a recent interview with Author William Green, featured on Monday, October 11 by Business Insider media outlets.
Based on the conversation, Miller considers Bitcoin as digital gold whose demand is driven by investors seeking to hedge their assets against financial devaluation. He stated that:
“I think of Bitcoin as digital gold. The key is the demand for this particular type of protection against financial catastrophe.”
The billionaire investor stated that Bitcoin could see its value rise by 10 times if investors adopt it as a store-of-value asset, saying that would only be the beginning of the cryptocurrency realizing its potential.
Miller mentioned that Bitcoin should be more attractive today than in the previous years when investment companies and banks were still shying away from crypto. He stated that: “Bitcoin is a lot less risky at $43,000 than it was at $300. It’s now established, huge amounts of venture-capital money have gone into it, and all the big banks are getting involved.”
He, therefore, advised investors who lack a deep understanding of crypto and those who are not confident in its future to only allocate 1% of their portfolio to it.
In 2016, Miller invested 30% of his portfolio in Bitcoin at an average value of $500. He recently submitted a filing to the SEC for Miller Opportunity Trust to invest in Bitcoin via the institutional-grade $2.25 billion Grayscale Bitcoin Trust.
He also talked about his view on the potential of altcoins, stating that only a few coins of the thousands of altcoins will survive the market’s uncontrolled volatility over the coming years:
“There are 10,000 various tokens and stuff floating out there. The chances of more than a handful of them being worthwhile is very, very small. Bitcoin, Ethereum, and a few others are probably going to be around for a while.”
Miller also gave advice on holding investments like Coinbase stock, saying: “If you’re going to get shaken out by how the stock trades in three months or six months or nine months, you probably shouldn’t own it.”
He considers Coinbase as a growth investment and therefore advises investors not to be cautious over one or two years of fluctuations in the Nasdaq-listed stock Coin. He compared the market cap of Tesla motor maker giant and Coinbase, saying that the crypto exchange could reach and even surpass the former’s valuation, which stands at around $790 billion. He stated: “Coinbase could easily have a $500 billion or $1 trillion market cap as a disruptive company in a rapidly growing, changing industry.”
Bitcoin Going Mainstream
Bill Miller has long been bullish about Bitcoin and his hedge fund has been investing in the crypto for several years.
In May, the investor stated that he did not see Bitcoin as a bubble, instead, he said that the coin was firmly entering the mainstream, and the crypto’s rally at the beginning of this year was significantly different from its 2017 ascend and subsequent fall.
In November 2020, Miller predicted that banks would have exposure to Bitcoin. Since then an increasing number of major banks have begun providing or planning to provide Bitcoin investment services to customers.
Institutional adoption has been regarded as one major factor for the increase of Bitcoin’s value, with firms like Tesla purchasing the crypto using cash on its balance sheet. A good number of major banks such as Goldman Sachs, Morgan Stanley, Citibank, are taking steps to offer Bitcoin services to clients.
Image source: finance.sina.com
Bill Miller, a seasoned Wall Street investor and founder of Miller Value Partners, advocated for the rise of Bitcoin (BTC) during a recent conversation with author William Green, but voiced skepticism around many of the altcoins birthed during 2017.
Miller subscribes to the well-documented thesis that Bitcoin portrays digital gold, and unlike many of his financial contemporaries — Warren Buffet being the most prominent — he has been a keen investor in the digital asset space.
Back in early 2016, Miller dedicated 30% of his portfolio to the leading crypto asset Bitcoin at an average value of $500, and has more recently motioned a filing with the SEC for The Miller Opportunity Trust to invest in BTC via the institutional-grade $2.25 billion Grayscale Bitcoin Trust.
During the interview, Miller correlated his first acquisition of Bitcoin to the current risk proposition witnessed today, all the while donning a Bitcoin baseball cap:
“Bitcoin is a lot less risky at $43,000 than it was at $300. It’s now established, huge amounts of venture-capital money have gone into it, and all the big banks are getting involved.”
Miller also shared his perspective on the potential of altcoins, insinuating that few projects of the thousands on the marketplace will survive the market’s tumultuous volatility over the coming years:
“There are 10,000 various tokens and stuff floating out there. The chances of more than a handful of them being worthwhile is very, very small. Bitcoin, ethereum, and a few others are probably going to be around for a while.”
Related: Clean-water nonprofit launches celebrity-funded Bitcoin Water Trust
Discussing the burgeoning influence of crypto exchange Coinbase, Miller advised investors to not be cautious over one to two years fluctuations of the Nasdaq-listed stock COIN, as in his qualified opinion, the asset offers a “default position for growth investors.”
In addition, he drew comparisons between the market capitalization of electric-car giant Tesla and Coinbase, suggesting that the exchange could reach and even surpass the former’s valuation, which stands at approximately $790 billion due to its position in a “rapidly growing, changing industry.”
Around midnight on Sunday the Bitcoin price broke $50,000, the highest price seen since Bitcoin’s correction in May.
Around midnight on Sunday the Bitcoin price broke $50,000, the highest price seen since Bitcoin’s correction in May. After the dip, the Bitcoin price hovered between 30-40k for most of the summer.
Although it’s impossible to say for certain, many are projecting the price to significantly appreciate from here to close out the year. Recall that just one year ago today, the Bitcoin price was sitting at around $11,650.
In 2017 the Bitcoin price went from about $10,000 to $20,000 in eighteen days, achieving a blow off top all time high. On Monday investor Anthony Pompliano said on CNBC, “It would not surprise me to see something crazy like that happen before the end of the year.”
Here is a review of the increasingly bullish news from the past month that led to this exciting price milestone:
Bitcoin is up about 120% per year on average for the past 10 years. In the last year we had a 250% annualized return.
With a long eye toward the future, venture capitalist Alyse Killeen predicted Monday in an interview with Business Insider that, “Three or four years from now, most people will get access to Bitcoin through earning.”
On Friday, in typical eloquent bullish fashion, MicroStrategy CEO Michael Saylor spoke on the Blockchain Interviews podcast: “Bitcoin is one of the most, if not the most disruptive technology of the decade, and it’s disrupting the energy industry, it’s disrupting the investment community, it’s disrupting the technology community. That means it’s disrupting politics and economics in general. It’s disrupting the definition of assets and property rights. So that being the case, it gets people’s attention and it’s progressive and it gets people focused. So I think it’s been great for morale.”
Permabull Saylor continued, “Bitcoin is a 10 year old successful proof of work system, like you’ve only got two things in the blockchain that have been deemed as property or commodity Bitcoin. In theory, there’s only two, but there’s only one of them that has a consistent strategy for the next decade and a consistent path for the last decade. And that’s Bitcoin, right? So I think it’s pretty important to understand that Bitcoin is pretty much the most predictable thing in the entire blockchain universe, everything else is uncertain.”
Bitcoiners will likely continue to do as they have done, which is hodl, and stay the course as we brace ourselves for new all time highs.
Several investors expressed their negative confidence and commented about its future development in the midst of the recent dip in Bitcoin (BTC) price. However, Bill Miller – an American investor and fund manager, remained confident in BTC.
In an interview on CNBC media outlets a few days ago, Bill Miller, the founder and CEO of Miller Value Partners investment management company, showed his support towards BTC once again and continues to have confidence in the leading cryptocurrency despite its recent plunge from $65,000.
Miller still considers Bitcoin a good investment regardless of its price fall and urges investors not to be discouraged by its recent dip as such events are somewhat normal. Furthermore, the hedge fund manager said that investors should find it more attractive that the price has declined significantly.
“If I liked something at higher prices, it is a safe bet I will like it even more at lower prices,” Miller told CNBC’s Kelly Evans in a statement.
Miller acknowledged that normally he is not keen on discussing Bitcoin’s value nor commenting on “normal fluctuations” in stock or asset prices. But currently, he has been motivated to comment on the price now that the Bitcoin market is under intense pressure and the obstacles are quite unusual.
He termed the falling price of Bitcoin in March 2020 as a “historic four-week drop” but considered the crypto’s recent decline in price as “pretty routine.”
Although Miller said that Bitcoin’s dip might lead to “extreme consequences” for the financial industry, he stated that the crypto will soon be back to its previous position, and the turbulence will settle down.
Bitcoin for Corporations
Miller remains bullish on Bitcoin, a time when some fund managers see the cryptocurrency looking “very frothy.”
In February, Miller commented on Bitcoin’s rally when the crypto traded above $55,000, stating that he did not believe the crypto was a bubble. During that month, Miller invested 15% of its value fund “the Miller Opportunity Trust” assets into Grayscale’s Bitcoin Trust. Actually, the trust invested more than $300 million into Bitcoin through Grayscale’s Bitcoin Trust.
In a letter to investors, Miller described Bitcoin’s potential as a good investment for maximizing profits. The Miller Opportunity Trust is a good example of institutional investors that have put 10%-15% of their funds’ net worth indirectly into Bitcoin, understanding the risks and advantages associated with incorporating the crypto into their portfolios.
Image source: Shutterstock
Hedge fund legend Bill Miller is exhibiting an even larger appetite for Bitcoin (BTC). According to a Friday filing with the United States Securities and Exchange Commission, The Miller Opportunity Trust is seeking indirect exposure to BTC via the Grayscale Bitcoin Trust.
The planned investment is coming at a time when the GBTC premium is at its lowest level since April 2019.
If the GBTC shares acquisition does pull through, it will mark a significant departure from the usual investments in equities and derivatives for the $2.25 billion fund. Indeed, the trust’s website lists airlines, healthcare and financials among its core investment position focus.
With the fund’s Bitcoin exposure limited to 15% of its assets under management, the GBTC outlay could top $300 million. As part of the filing, the trust did comment on price volatility, stating, “There is relatively small use of Bitcoin in the retail and commercial marketplace in comparison to the relatively large use of Bitcoin by speculators.”
Miller is himself a noted Bitcoin proponent. Back in 2016, the legendary Wall Street investor committed 30% of his hedge fund into Bitcoin. This proportion has since increased to over 50% with the BTC play contributing to massive growth in the value of Miller’s hedge fund.
Back in January, Miller countered Warren Buffett’s infamous “rat poison” retort, by adding that cash was the rat in that instance. The comments echo sentiments espoused by Pantera Capital CEO Dan Morehead back in 2018 who said something akin to Bitcoin is rat poison because banks are the rats.
Bitcoin recently rallied to $40,000 over the weekend — its highest price level in almost a month. However, the move above $40,000 was met with a swift retrace below $38,000 with the largest crypto by market capitalization down almost 2% in the last 24-hour trading period.
Bill Miller’s Miller Value Fund is seeking permission from the U.S. Securities and Exchange Commission to allocate a portion of its $2.25 billion fund to Bitcoin.
In its official filing with the SEC, the Miller Value Fund says it may allocate a significant portion of its assets into the Grayscale Bitcoin Trust (GBTC) through the Miller Opportunity Trust.
“The Fund may seek investment exposure to Bitcoin indirectly by investing in the Grayscale Bitcoin Trust, an entity that holds Bitcoin…
The Grayscale Bitcoin Trust invests principally in Bitcoin. The Fund will not make any additional investments in the Grayscale Bitcoin Trust if, as a result of the investment, its aggregate investment in Bitcoin exposure would be more than 15% of its assets at the time of investment.”
Miller Value Fund reported managing $2.25 billion in assets at the end of 2020, indicating that the firm could invest anywhere up to $337.5 million in GBTC.
The fund’s filing comes weeks after Bill Miller said that not owning Bitcoin is a massive mistake. At the close of 2020, Miller released a letter on income strategy explaining BTC’s massive growth potential despite its wild price swings.
“Bitcoin has been the best performing asset over eight of the past ten calendar years, and its annualized performance has blown away the next-best performer, the Nasdaq, by a factor of ten over the past decade…
There is no other asset that combines Bitcoin’s liquidity with its upside potential. Bitcoin is still an emerging and under-owned technology in an enormous addressable market, and it has a brilliant, logically consistent protocol with distributed governance.”
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Miller Value Funds–run by veteran hedge fund manager and bitcoin bull Bill Miller–may invest in the Grayscale Bitcoin Trust through its flagship fund, the Miller Opportunity Trust.
“The Fund may seek investment exposure to bitcoin indirectly by investing in the Grayscale Bitcoin Trust, an entity that holds bitcoin,” the fund wrote in a filing with the U.S. Securities and Exchange Commission. “The Grayscale Bitcoin Trust invests principally in bitcoin. The Fund will not make any additional investments in the Grayscale Bitcoin Trust if, as a result of the investment, its aggregate investment in bitcoin exposure would be more than 15% of its assets at the time of investment.”
Miller Opportunity Trust had assets under management of $2.25 billion as of Dec. 31, 2020, making the fund’s potential maximum investment in GBTC $337 million.
In late January, Miller’s son, Bill Miller IV, said in a letter to investors in another Miller fund that taking part in MicroStrategy’s $650 million convertible senior note offering was like getting an almost-free call option on bitcoin.