READER NOTE: Today’s letter is exclusive for paying subscribers of The Pomp Letter. I have unlocked the first half of the letter for everyone, but if you want to see the full analysis then please consider becoming a paying subscriber.

To investors,

The bitcoin spot ETFs were approved one month ago. The 90 days leading up to the approval had seen an approximately 80% increase in the price of the digital currency. Expectations were high. The luddites online were claiming a new all-time high was right around the corner. Once the SEC gave the green light, bitcoin would skyrocket — at least that was their argument.

None of that happened though.

The ETFs were approved and bitcoin’s price dropped quickly. We went from around $47,000 to under $40,000 in less than two weeks. All the excitement leading into the approval was actually just a classic “buy the rumor, sell the news” event.

But what was driving that significant price drop?

Investors were selling shares of GBTC in droves. Many of these investors had been holding on to GBTC for years. The fund historically traded at a premium to NAV. The premium was as high as 35% in Q4 of 2020. Once the premium flipped to a discount though, things got nasty.

The GBTC discount to NAV reached almost 50% at one point. The SEC’s approval of a spot bitcoin ETF, including Grayscale’s conversion of their fund to a spot bitcoin ETF, closed the discount gap back to 0% essentially.

Once that discount disappeared, investors sold more than $6 billion in GBTC shares. That is more than 20% of the fund. A big reason is that Grayscale refused to play the fee war game and left their management fee at 1.5% (down from 2%).

There are still about $100 million per day leaving GBTC, but it appears the higher fee was a good financial decision if you are optimizing for short-term revenue.

But don’t worry — there is a lot of good news in the market for bitcoin holders. There is a MASSIVE market structure setup that is likely going to send us to new all-time highs.

The rest of today’s analysis on this market structure is exclusive for paying subscribers of The Pomp Letter…...