Lyn Alden - The TRUTH About Bitcoin Correction And Rebound

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Lyn Alden - The TRUTH About Bitcoin Correction And Rebound

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In this interview, Lyn Alden shares her views on the major causes of the recent 55% correction in Bitcoin price and factors that can sustain the long-term success of the digital asset.

One of the biggest and most unreported reasons, Alden reveals, is the fact that GrayScale Premium Bitcoin Trust turned into a discount. Meanwhile, in the second half of 2020, GrayScale was the largest buyer of Bitcoin. Many investors who wanted Bitcoin exposure bought GBTC, an imperfect vehicle that they heavily relied on.

But a lot of that was a neutral arbitrage trade because someone could buy into the fund at Net Asset Value (NAV), which takes liquid Bitcoin and converts it into GBTC, making it illiquid and shorting it somewhere else. Then, the investors could sell their GBTC shares for the market price which was trading at a premium over their NAV, at which they bought it. So, Alden adds, regardless of Bitcoin price, as long as there was no risk or counterparty, investors would short their Bitcoin and sell their GBTC, extracting the premium because it is risk-free.

Added to the above factor, Alden says, is the increased competition to GrayScale such as Canada's Bitcoin ETF and Skybridge Fund, offering lesser transaction fees. So, investors now have choices of institutions, basically custodians such as Coinbase or other major exchanges.

Other factors that led to the Bitcoin crash include Elon Musk's backtracking on his Bitcoin stance and Chinese hash rate migration. In summary, GrayScale, which is one of the biggest sources of Bitcoin, dried up thereby causing the market to rebalance itself.

So, when those underlying fundamental factors triggered less demand, prices started going down. Tesla and other big leveraged positions also worsened the downfall. But 30,000 seems to be the support, as buyers add to their positions.

Alden explains that Bitcoin, unlike S&P 500 or other markers, is a single asset that you're betting on. She suggests that investors diversify into commodities, property, and others, rather than putting 100% of their portfolio on Bitcoin. She states that dollar-cost averaging into Bitcoin and other assets is good for long-term strategy.

For Bitcoin to be successful in the long run, Alden says, it must have a persistent free market so that when the block subsidies fall in the next couple of halvings, Bitcoin will be increasingly reliant on generating enough fees. Bitcoin, she states, doesn't have to reach $10 trillion or $100 trillion to be successful; $1 trillion is a good landmark.

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