Institutional Capital Rotation Narrative
Jan 10, 2024
Institutional Capital Rotation Narrative
It is no secret that the Bitcoin halving cycle influences the cryptocurrency market overall. It is no secret that the crypto market works in waves of capital inflow/outflow. It is no secret that volatile assets such as crypto are influenced by macro economics and interest rates (i.e. if the economy is doing good, then volatile assets typically do better).
It is no secret that the crypto market trades on narratives. If any of these statements are new to you, then you need to start doing your research!
The secret I have been trying to uncover is this… How does the impending Bitcoin ETF approval introduce a new narrative to the crypto market, and how can we capitalize on that narrative to our advantage?
I have been working on this idea for the past few months. As you will see in previous news articles, I have mentioned that Institutional money will change the crypto landscape, but we don't know exactly how yet. I have been attempting to figure out how this overall theory will apply to the crypto market.
If you are not interested in how we got here, scroll down to the TLDR section for a summary.
On September 3rd, I wrote an article about how Grayscale Investments won a lawsuit against the U.S. Securities and Exchange Commission (SEC) in regards to its Bitcoin spot ETF application. When this article was published, BTC was trading just under $26,000. The article forecasted that anticipation for a Bitcoin spot ETF would drive the market to rally. Today's price for BTC is hovering around $47,000.
On September 30th, I wrote an article announcing that nine (9) Ethereum futures exchange-traded funds (ETFs) are set to launch on Monday, October 2, 2023, after receiving accelerated approval from the U.S. Securities and Exchange Commission (SEC). The theory is that Ethereum would be the next crypto asset in line to receive Spot ETF applications and eventual approval after the Spot Bitcoin ETF approval.
On November 21, I wrote an article about the crypto market cycle and how the narratives are starting to pop up again. Narratives are strong if you can identify them and use them to your advantage. But timing is everything with narratives. In this article, I also highlighted that BlackRock, the world’s largest asset manager, has filed an application with the SEC to launch a spot Ethereum ETF, which would track the price of ETH and hold it in custody. The proposed ETF, called BlackRock Ethereum Trust, would be the first of its kind in the U.S. and would compete with the existing Ether futures ETFs that launched in October. This move by BlackRock was followed by several other financial institutions after its announcement.
In this article I also mentioned the idea of a potential crypto cycle forming based on these moves by Blackrock and other financial institutions:
“There has been a cycle happening with these major coins, and a playbook of how they are being introduced to the institutions. It is no coincidence that BTC and ETH have moved this way for the past few months as huge institutions keep ringing the alarm about how safe and profitable Bitcoin and other crypto assets can be. If you are paying attention, Solana has made some insane moves since September of 2023. The asset has moved from approximately $17.90 to its current price of $60.00 on November 20th, 2023. Solana is now the number five (5) crypto asset by market cap if you remove USDT (stablecoin) and surpassing USDC.”
It should be noted that the Solana move mentioned above ended up reaching $123 before its recent retracement.
On December 4th, I wrote an article discussing updates on the BTC ETF approval with some deadlines and some potential price targets. I also mentioned this about Ethereum and other ETF products:
“While everyone is focused on the Spot Bitcoin ETF news, some of the largest asset managers in the world have been filing for Ethereum Spot ETF products. It is estimated that more Spot ETF crypto products will be introduced to the market after the Spot Bitcoin ETF approval. These ETF products are estimated to attract a lot of institutional and retail Tradfi attention in a pent up and restricted exposure market. Tradfi institutions and retail investors are demanding Spot ETF access to crypto assets. Keep an eye on XRP and Solana as potential future ETF applications.
This narrative is not just circulating in the crypto world, but the large asset managers and the analysts on big networks are also discussing future ETF products and the impact they will have on prices. https://www.youtube.com/watch?v=FLssEoYtHIk
So what does this mean and what is the theory?
We all know that crypto and specifically Bitcoin was innovative and disruptive. These new digital assets were not created by the traditional finance companies and did not follow the same rules. In fact, asset managers and financial institutions have ignored cryptocurrency since its creation, referring to it as “rat poison” among other things. All of the leading individuals from these financial institutions have attacked cryptocurrency at one time. Even as recent as December 06, 2023, Jamie Dimon lashed out against cryptocurrency and Bitcoin and stated, “If I was the government, I’d close it down”.
But more recently, these huge institutions have started to see the value in Bitcoin and other cryptocurrencies. Bitcoin is the best performing asset since 2011, period. Nothing else comes even close. At this point, it is financially irresponsible for fund managers to stop considering the addition of BTC to a balanced portfolio.
Starting with Bitcoin, there are currently thirteen (13) spot Bitcoin ETF applications awaiting approval from the SEC. And how ironic is it that On January 01, 2024, JPMorgan Securities (Part of JPMorgan) the company that Jamie Dimon is the CEO of, is now listed as an authorized participant in the Spot Bitcoin ETF approval process. Authorized participants typically manage the creation and redemption of ETF shares and help the product’s price align with the value of its underlying assets, in this case, Bitcoin. Even JPMorgan wants to benefit from Bitcoin and are willing to lie to everyone and potentially destroy the asset to get their way. In other words, Jamie Dimon would rather destroy Bitcoin than see someone else benefit from it financially. Their words are different from their actions. Pay attention to what these institutions are actually doing, rather than what they say.
Why is this important, and what does it reveal?
For the first time in history, we (retail/early market participants) are able to front-run all of these institutions before they list these assets, and provide them to their customers (retail traditional investors/institutional investors). Even the asset managers and the CEO’s of these companies hate the fact that they are being front-run. Trust me when I say, these companies do not want retail to make more gains than what they are making.
The idea is simple. If these large asset managers continue down this path, they will identify assets that meet the merit of being a digital asset that is also converted into a spot ETF. This has been proposed by 13 of the largest asset managers in the world with the Spot Bitcoin ETF.
In the event that the Spot Bitcoin ETF is approved, there should be price appreciation for the asset. Once people realize gains on this asset, they will be looking for the next pump, or the next narrative.
While everyone is focused on the Spot Bitcoin ETF, Blackrock filed another Spot Ethereum ETF that most people have already forgotten about. One narrative that can develop is front-running the institutions before they gain approval for Spot ETF products.
How can this be done?
There will be many ways to benefit from these institutional investments. One way would be to wait for news or announcements that asset managers apply for an ETF product for a digital asset, and purchase the asset prior to approval.
Another way would be to anticipate what digital assets would be next on the list for asset managers to target prior to their announcement. As of right now, the two cryptocurrencies being discussed as potential future Spot ETF products outside of Bitcoin are Ethereum and Solana. The real trick is to guess what the next three (3) or four (4) digital assets will be, and accumulate them prior to any announcements for even more gains.
How can I implement this idea? (Here is the TLDR section)
Nobody should tell you how to invest, and there are so many ways to trade the market. Some people will utilize the charts to anticipate their gains. Some people will use timing to enter and exit their positions. But ultimately, it is up to you as to when you buy and sell your assets. That being said, I anticipate a few potential strategies based on the Spot ETF Institutional Capital influx.
Institutional Capital Rotation: One theory would be to purchase the asset and sell it when it pumps after approval, and then rotate those gains into the next pending or anticipated Spot ETF product announcement. This is exactly the same idea as Capital Rotation from Bitcoin to Ethereum and Altcoins during the Crypto Market Cycle.
Buy BTC early at announcement (September 2023)
Wait until Spot BTC ETF is approved
Sell BTC for gains after approval
Move gains into Ethereum (or next Spot ETF)
Rotate and continue the cycle with the next Spot ETF
Crypto Market Cycle: Another theory would be to stick with the crypto market cycle built around the Bitcoin halving cycle and sell at the peak of the bull market.
Hodl: And another theory would be to hold some of these assets long term, because the influx of institutional investments will fundamentally change the asset, its gains, and its cycle long term.
It should be noted that this narrative is starting to present itself in different forms on mainstream media, on twitter, and other social media publications. Many youtubers are starting to catch on to this narrative as well. In my opinion, the more people that know about this, the better. Personally, I plan to take advantage of all of these possible strategies because we have no real idea of what could happen to these assets given this unprecedented conversion of a digital asset to a Spot ETF.
You also have the option to combine this narrative with other investment strategies such as day trading and longer term trend trades.
I will also continue to accumulate assets that I feel would be prime assets for institutional adoption. The challenge is, determining the next digital asset that will be converted into a Spot ETF. If you purchase the correct digital assets now, you might find yourself sitting on a fortune.
Will financial institutions adopt XRP? With the recent crazy runup on Solana, do insiders and whales know something that we do not know yet? Is Solana already on the list of digital assets that will be converted to a Spot ETF? Will asset managers accept Dogecoin as a legitimate asset? Are traditional markets even interested in something like a memecoin? What about Cardano? What about all of the digital assets that the SEC have labeled as being a “security”? Has that stance changed when the XRP lawsuit was won, and the GrayScale lawsuit was won?
What are your thoughts? Will the next capital rotation play center around front-running institutions? How would you feel about front-running institutions and dumping your bags on BlackRock and JPMorgan for huge gains? I can tell you, I would feel pretty great about it!
The material in this article is provided for educational and entertainment purposes only. The Gray Market is not providing individually tailored investment advice. The Gray Market is not acting as a financial adviser or a broker-dealer. The Gray Market is not responsible for any gains or losses that result from your cryptocurrency investments. Investing in cryptocurrency involves a high degree of risk and should be considered only by persons who can afford to sustain a loss of their entire investment. Investors should consult their financial adviser before investing in cryptocurrency or any other asset.