How to Buy BTC and ETH at a Discount

The stETH/ETH Arbitrage Play

Regular readers of our newsletter know about the planned upgrade to Ethereum, a.k.a. The Merge, which will migrate Ethereum from the energy-wasting Proof of Work (PoW) to the energy-efficient Proof of Stake (PoS). It’s a big milestone in the history of crypto.

stETH to ETH price: the lower it goes, the more opportunity for arbitrage (courtesy Dune Analytics)
  • The Ethereum upgrade will actually happen. This looks likely (early tests have been successful), and it’s currently planned for September. But the launch date has already been pushed back several times, and there’s no guarantee that it will happen at all.
  • Lido will still be around. With the market volatility, Lido could run into financial trouble. This seems unlikely, however, given that Lido’s business model is different (in fact, the arbitrage is possible because traders had so much staked in Lido: deep dive here).
  • The price of ETH (and thus stETH) will go up. This comes down to whether you believe the world’s largest blockchain development platform will continue to have value in the future. (We do.)
  • Download and install MetaMask.
  • Buy ETH and transfer to your MetaMask wallet.
  • Use Curve to swap ETH for stETH (note: watch the fees).
GBTC to BTC price: the lower, the better (courtesy Ycharts)

The GBTC/BTC Arbitrage Play

You can do a similar investment strategy by buying the Grayscale Bitcoin Trust (GBTC), which is like buying bitcoin (BTC) at a significant discount (today around 30%). But as with the previous example, there’s a catch.

  • The SEC will approve bitcoin spot ETFs. Time and again, the SEC has rejected these applications, arguing that bitcoin doesn’t have enough investor protection. But pressure is building for the SEC to approve such an ETF (even the WSJ is calling for it).
  • The SEC will approve Grayscale’s spot ETF. Again, if these ETFs get approved — as they have in Europe and elsewhere — it seems likely that Grayscale, with its long history in this market, would be among those approved. But it’s the SEC: anything could happen. (Note that Grayscale also charges a 2% annual fee, which will eat into profits.)
  • The price of bitcoin will go up. You also have to believe that the world’s #1 digital asset will continue to increase in price. Given that it’s trading at about a third of its value from just last year, this also seems likely. But it’s crypto: anything could happen.
  • GBTC is available via any online brokerage (Fidelity, TD Ameritrade, E*TRADE, etc.).
  • Remember that 1000 GBTC shares = 1 BTC (i.e., multiply GBTC x 1000 to get your discounted BTC price).
  • Wait and see.

Opportunities are Everywhere

The investor mindset means thinking differently from the crowd. Today the crowd is supremely pessimistic on crypto, opening the door to opportunities for optimistic investors.

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Sir John Hargrave

Sir John Hargrave

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CEO of Media Shower. Publisher of Bitcoin Market Journal. Author of Mind Hacking. Making things better.