Bitcoin Trust Plunges As Arbitrage Spreads Collapse

Just a week after CME started Bitcoin futures trading (and 2 weeks after CBOE), a number of massive arbitrage premiums have finally started to collapse as shorts dip their toes in a risk-limited way…

The first ‘arbitrage’ is the Bitcoin Futures-Spot spread which was well over $2000 in the first few days of Bitcoin Futures trading. As volumes have picked up in recent days, the premium has compressed to zero today…

This is the worst 3-day run for Bitcoin in over a month.

And perhaps an even more profitable arbitrage has been the compression of the spread between Bitcoin futures and the Bitcoin price implied by GBTC (The Bitcoin Investment Trust) which traded at a truly stunning premium to NAV, has collapsed in the last 3 days from over $35,000 to below $20,000…

This was the trade that Citron’s Andrew Left suggested…

“There’s an incredibly naïve investor base behind this who doesn’t want to check the extra boxes off to open a futures account,” he said.

The gap between the trust’s price and holdings “has to do with investors out there that do not know what they’re doing.”

Left also said that the current challenge for investors interested in shorting the trust is finding shares to borrow.

Still some room to go but the trend is coming back…

As liquidity picks up in Bitcoin futures, so these arbs should evaporate further.

We also note considerably higher volume today going through both futures contracts as more brokers begin trading and ‘shorts’ are enabled…

Cryptos are largely under pressure today…

With the recently heralded Bitcoin Cash crashing 45% and fading drastically against Bitcoin…