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It was the buzz early Monday morning that caught the attention of Wall Street and crypto enthusiasts alike: the long-anticipated spot Bitcoin ETF – specifically, BlackRock’s iShares Spot Bitcoin ETF – had been approved. Or so it seemed.

Those tuning into Twitter were met with a flurry of posts from analysts and influencers echoing the news.

A glance at the trading charts revealed bitcoin's (BTC) price was surging by more than 6%. It appeared as if the pivotal moment many had been waiting for had arrived.

But, in a twist that perfectly encapsulates the funny world of crypto, the celebrations were premature.

The pump and all the chaos that ensued was all based off nothing but a lie.

The Real Story Behind the Buzz
The catalyst for the frenzy? A fake news tweet, which had all the hallmarks of a novice error, from CoinTelegraph.

Shortly after the false report, BTC surged from $27,900 to $30,000, only to cascade back down to ~$28,000 after everyone realized, with added confirmation from BlackRock, that the report was indeed false.

According to data from CoinGlass, ~$81 million worth of short positions were liquidated on the move to $30,000, and ~$31 million in longs, were liquidated on the way back down.

Put it all together and you can say that just one tweet can move about $110 million in less than an hour.

So, What Did We Learn?
Naturally, the whole fiasco illustrates the notoriously volatile nature of crypto investing and just how quickly misinformation can spread online and cost people massive sums of money.

But one thing is for sure. Whoever thought the ETF was already priced in has just been proven wrong.

When this ETF does get approved, is it that far fetched now to expect to a 10-20% move? Probably not.

But it didn’t stop there, as we saw various “bitcoin stocks” benefit from the news as well.

Coinbase (COIN) and MicroStrategy (MSTR) both opened 5% higher. PayPal (PYPL) jumped 2%. And Novogratz’s Galaxy Digital (GLXY) surged 8%.

Now, many of these stocks have come back down since, but it still goes to show that when the approval does hit the market in a legitimate manner, investors should expect an uptick there as well.

Perhaps the most interesting takeaway is the latest movement on Grayscale’s Bitcoin Trust (GBTC).

To catch you up, last week, the SEC said it wouldn’t appeal the loss in its case against Grayscale, which is thought to boost the chances of GBTC eventually being converted to a spot ETF.

Then, during Monday’s fake news event, GBTC’s discount to NAV fell sharply. But, unlike bitcoin itself and the equities highlighted above, the discount didn’t quickly revert back.

In other words, the GBTC discount narrowed on the news and continues to narrow.

If anything, this is a direct indication that the chances of an ETF approval are increasing, despite this week’s big fake out. 🙂 

Last week, legendary investor Paul Tudor Jones was asked on CNBC about his thoughts on bitcoin – in which he obviously replied that he was long.

But what caught our interest wasn’t his comments on bitcoin, but rather how he lumped in together his thoughts on gold.

Here’s what he said about the “barbarous relics:”

So it got us thinking… How should we be looking at a portfolio of gold vs bitcoin?

It seems like gold bugs hate bitcoin and bitcoin bulls hate gold, but from an agnostic perspective, which is best?

Gold bugs will point to history – stating that while gold has been around for thousands of years, bitcoin has been around for a mere instant of time. Bitcoin bulls, on the other hand, point to the divisibility and portability of the digital currency as a main driver.

A chart from Fidelity Digital Assets illustrates the two sides well.

What’s obvious is both are better than fiat. But let’s look at a couple other metrics:

Size of the markets
As of today, the market capitalization of all the physical gold above ground is 23x greater than that of bitcoin.

To put this into perspective, last week’s 3.5% gold price jump, due to the conflict in the Middle East, added ~$444 billion to gold’s market cap – more than 85% of bitcoin’s entire market cap.

For years, bitcoin bulls have been stating that if bitcoin is truly a better gold then it should have a comparable market cap. At today’s gold:bitcoin ratio that would give bitcoin a price of more than $650k per token (assuming no upward price movement in gold).

Volatility
One of the main critiques from gold bugs towards bitcoin is that it just has too much volatility. And while that’s true, the reality is that the realized and implied volatility has been on a steady downwards turn.

Now, it may still be too high, but it is moving in the right direction.

ETFs
We don’t need to get into our thoughts around how powerful an ETF could be for the bitcoin market (see story above, or here), but it is worth noting what happened to the price of gold when an ETF was first approved in 2004.

Over the next 10 years, the price of gold rose 4x. Could BTC do the same?

Scarcity
The thing about gold is it isn’t really useful as an investment, rather it is useful to keep purchasing power. That’s because there is only so much gold in the Earth.

Similarly, Bitcoin is designed to match increases in computer power through “halvings”, leading to more scarcity.

Right now, bitcoin and gold have roughly the same inflation rate of 1.8%. But very soon, after bitcoin’s next halving in 2024, the inflation rate will be cut in half.

War
Wars are inflationary. This is primarily due to two reasons:

Now you might be saying though, “well I'll just hold stocks.” The only problem though is that stocks perform poorly during war due to uncertainty. For example, in WWII, stocks in the West did not rally until it was obvious which side was going to be victorious. Furthermore, Germany’s stock market fell more than 80% at the end of the war.

Commodities, like gold though, do very well. Will bitcoin do the same? We just don’t know.

As we pointed out a few weeks ago:

Although a recession is looking more and more likely, the two major ongoing conflicts lead to an even bigger question: how would bitcoin perform in war? Will it rise like gold and other commodities?

How to invest?
Whether it’s the demise of fiat currencies, or from war, or recession, or [enter stupid government decision here], we highly suggest hedging your portfolio.

And while there will be major debates on the best way to do so, here is the amazing thing… you don’t actually have to choose one or the other. You can have both.

TWEET OF THE WEEK

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