Categories: Analysis

Unlocked GBTC: The “Boggart” of the crypto market in July?

What is GBTC?

Grayscale Bitcoin Trust (GBTC) is the ticker symbol for Grayscale’s Bitcoin fund.

Some traditional investors who don’t want to invest directly in Bitcoin can buy GBTC – to hold shares in the BTC fund. This is an indirect investment for investors in the stock market.

Currently, 1 GBTC stands for 0.000940643 BTC.

According to information from the Grayscale website, 1 GBTC share is equivalent to approximately 0.00094 BTC holdings

Buying GBTC rather than buying BTC directly means investors don’t have to worry about custody of BTC – Grayscale did it instead. However, there is a provision that the amount of BTC that GBTC represents is unlock after 6 months. Unlocking these terms and conditions is explained in detail later in the article.

What is GBTC Premium?

As explained above, 1 GBTC represents a stock of 0.00094 BTC – however, the price of GBTC does not always correspond to the market price of 0.00094 BTC.

If GBTC price> 0.00094 BTC price – called GBTC Premium, or the phenomenon of GBTC stock trading above the market price of Bitcoin.
Conversely, if the GBTC price GTC discount, The phenomenon of GBTC stock trading below the market price of Bitcoin.

GBTC premium chart. When this GBTC premium is above the 0 line (> 0) it means that the GBTC price is higher than the BTC price. And vice versa, if this GBTC Premium is below the 0 line (

From the graph above, you can see that GBTC has often traded higher than the market price of BTC since its inception. However, currently (July 1, 2021) GBTC is trading lower than the price of BTC.

What is Unlocked GBTC?

As explained above, the BTC amount in GBTC will be unlocked for investors after 6 months.

According to data from bybt, the number of BTC that represents GBTC purchased since January 2021 will be on. unlocked July 18, 2021 come here. Expected 16,240 BTC will be activated for the market.

16,240 BTC will be activated on April 18, 2021. Source: bybt

Why does unlocked GBTC affect the market?

If only GBTC shares are traded in the secondary market, there will be no direct impact on Bitcoin.

However, if the real BTC is unlocked, the investor’s “pocket money”, then the investor actually holds BTC. Thus, every act of selling / buying / holding BTC has a direct impact on the spot Bitcoin price. (Spot market).

JP Morgan predicts that unlocked GBTC for Bitcoin price will “cause problems”

CoinCu once reported that JP Morgan had a negative prediction of the upcoming unlock. JP Morgan believes the price of BTC could drop to $ 25,000 due to the impact of the July 18 unlock event.

This is perfectly understandable as analysts believe that when investors get BTC, they will choose to sell to the market. With over 16,000 BTC sold out, the price of Bitcoin will go down.

However, this is only a prediction and will not 100% occur. It is possible that the investor who received BTC decided to hold on anyway – reducing the selling pressure in the market. At this point, the Bitcoin price is not affected too much.

Jane

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