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Grayscale Bitcoin Trust to increase market boost

By
Redakcja
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5 min reading

The Bitcoin market might receive a little uplift this month due to the termination of investor restrictions on the sale of shares in the Grayscale Bitcoin Trust (GBTC) which happens to be the worlds largest cryptocurrency fund.

The Bitcoin market might receive a little uplift this month due to the termination of investor restrictions on the sale of shares in the Grayscale Bitcoin Trust (GBTC) which happens to be the worlds largest cryptocurrency fund. According to some of the digital-asset analysts and investors there is a chance for some investors to enter the market to buy bitcoin which could also act as an opportunity to repay cryptocurrency loans which could be used to finance their original purchases of the GBTC shares. According to Crypto services “Lots of bearish chatter around GBTC unlocks whilst conveniently ignoring that in-kind subscriptions funded into spot buying,” 

This point of view is an opinion formed after a forecast was published last month by analysts at JPMorgan which is the largest U.S bank and they argued that the end of the lockup period would weigh on the GBTC shares and Bitcoin. “Selling of GBTC shares exiting the six-month lockup period during June and July has emerged as an additional headwind for Bitcoin,” says the JPMorgan strategists, led by Nikolaos Panigirtzoglou. He believes the whole situation would be guided into a “downward pressure on GBTC prices and on Bitcoin markets more generally.”  

As the unlocking’s happen in a rapid pace the crypto-native analysts are pushing back against the narrative. All this while the sale of GBTC shares could lead to a much more complex discount and it could force out fresh capital as the negative aftermath will most probably be mitigated by the repurchases of Bitcoin in the spot market. One crucial fact that we should be aware of is grayscale is a unit of Digital Currency Group, of which CoinDesk is an independent subsidiary. “The biggest unlocks are happening over the next two months, which could lead to heavy selling of GBTC on the open market,” says Jeff Dorman, chief investment officer at the cryptocurrency-focused asset manager Arca.

“As funds unwind this trade,” he wrote, “it could actually put BUY pressure on bitcoin, not sell pressure, as those who sell GBTC will have to buy bitcoin to cover the short leg of the trade.” This unwind could be really prominent mainly due to the huge popularity of the trade itself as it has been known around during the recent years also into the early 2021. JPMorgan believes this trust record inflows of $2 billion in December was backed up by a $1.7 billion in January. The accredited investors who are mainly institutions and wealthy traders are able to subscribe to GBTC shares directly at the fund’s net asset value (NAV) which is closely related to the absolute spot price of bitcoin. How they did this was by daily private placements by depositing owned or borrowed bitcoin or U.S dollars. There have been many reasons as to why, the GBTC shares were traded at a premium of 40% to spot bitcoin price as this seemed like a method which could help gain some profit especially when the market sentiment seems quite bullish. There has been worries regarding the premium decreasing aggressively or even changing to a discount which could reduce the net yield on the carry trade. 

It’s been at least six months since the popularity of the trade diminished which led to the unlocks being active. Investors who got into the trade by locking in borrowed coins will now have to repurchase them in order to repay the loan. Also, people who deposit their bitcoin holdings will most probably need to buy back coins to get back to their base portfolio. So, since the supply-side factors remain steady, the repurchases connected with grayscale unlocking’s will most probably end up putting upward pressure on bitcoin prices. The January share percentage of GBTC share unlocks is set to be released with at least 40,000 GBTC shares based on the data released by ByBt.com. According to a report the largest single-day unlock will most likely happen on July 18, with the release of shares worth 16,000 BTC. During the unlocking stage the carry traders could release bitcoin from the spot market to repay loans or return them to the original position by lifting the bitcoin slightly higher. 

Grayscale investments have added ADA (1.14%) and this is the native token of Cardano blockchain. This digital-asset manager has managed to sell some existing constituents of the fund and the proceeds were later used to purchase ADA. This comes as a part of grayscale’s quarterly rebalancing of the fund. Cardano happens to be a proof of blockchain which aims to get head the extensibility and productivity of Ethereum. ADA has risen up to 600% this year and is currently at $1.36, uo by 1.81% during the last 24 hours at press time. Grayscale is owned by digital currency group which is the parent company of CoinDesk.

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