This is a free preview of MTC 25. In it, I discuss some sneaky bullish signals from the SEC, crypto vs. risky asset price action, and the now-stabilizing NFT market.
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Today’s note is 2000 words (8-minute read)
Intriguing Resilience
Before we get started today, some financial comedy and the best reason in the world to be bullish bitcoin right now.
SEC: “We are here to protect you!”
A friend of mine pinged me yesterday and asked: “What is the best proxy way to trade short-term bitcoin views on a US exchange?” This is a common question as day traders view bitcoin as another product to watch and trade but don’t always have a direct way to trade BTC.
Not everyone wants to open a crypto trading account given concerns about comingling of funds, high transaction fees, tax confusion, and so on. Some crypto curious peeps just want to have the crypto trading madness without opening up a separate account, etc. I’m not saying that’s right or wrong, it just is.
For what it’s worth, my friend made the observation midday Wednesday that BTC was not responding to the fear and loathing in other capital markets and she thought maybe that was a tell. “Maybe all the liquidation in BTC and crypto is done for a bit? Intriguing resilience, no?” Bitcoin went straight up after that, so yes, maybe!
My kneejerk answer to her question on day trader bitcoin proxies was to suggest GBTC or MSTR, so that’s what I answered. But later, when I dug a bit deeper, I came up with some other alternatives that could be better. Here’s the basic work I did. I’ll explain under the table.
Beta, correlation and other stats for US-listed bitcoin proxies
Takeaways:
The miners and MSTR are high-beta BTC. They are the best way to go.
The fourth column (% up / down days match BTC) is simply a test of (check if bitcoin was up or down on the day—then check: was the proxy?). This is similar to correlation but gives a different angle on whether the thing works as a proxy or not. If bitcoin is up and the thing you are trading as a bitcoin proxy is down, you are going to be mad at your thing!
MSTR trades much higher volumes than the miners so if you care about liquidity and consider that the best measure of liquidity, MSTR wins. On the other hand, depending on your account size, you might appreciate the tinier sticker price on some of the miners. BITF, for example trades at $1.29.
I threw in COIN, NVDA and TSLA just for kicks and so that you can see what a proxy looks like vs. a stock that’s not a proxy.
BITO and GBTC are lower beta than the miners and MSTR and I don’t really see any advantage to trading those if you’re a short-term punter.
TSLA volume = insane in the membrane! Obviously, but still, when you see the numbers it’s kind of mind-boggling. TSLA is the meme stock that won’t die.
In case you are curious to see a more detailed analysis of bitcoin proxies, I wrote a longer report on bitcoin proxies in October 2021. The main output was this next table. I cross-checked, and the correlations in that table are roughly the same as now, though miner correlation to bitcoin has risen a tad…
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This has been a free preview of the latest MTC. The rest of the note is about NFTs, ENS names and some reasons I think NFT Winter might be warming up a tad.
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bd