BCGAME - Free 5BTC Daily Bonus!While some observers say bitcoin (BTC, -1,63%) has bottomed out, analysts at JPMorgan remain bearish, identifying the imminent unblocking of shares in the Grayscale Bitcoin Trust (GBTC) bought in January as a source of risk. downfall for the cryptocurrency.
“Despite some improvement, our signals remain bearish overall,” wrote JPMorgan strategists led by Nikolaos Panigirtzoglou in a note on Wednesday. "The sale of GBTC shares coming out of the six-month lock-in period during June and July has emerged as an additional hurdle for bitcoin."
Grayscale Bitcoin Trust, the world's largest digital asset fund manager, allows institutional investors to gain exposure to bitcoin through shares in the fund, which currently holds 654.600 BTC. That's over 3% of the cryptocurrency's stock. Grayscale is a unit of the Digital Currency Group.
Accredited investors can buy GBTC shares directly at net asset value (NAV) in daily private placements by depositing bitcoin or US dollars. Shares can be sold on the secondary market only after a six-month lock-in period.
The trust's popularity soared late last year, when the premium on GBTC shares hit a record 40% on December 17th. As such, investors rushed to trade or buy shares on the NAV in an offer to sell them at a premium six months later. According to JPMorgan, the trust recorded record inflows of $2 billion in December, followed by $1,7 billion in January.
The January tranche is scheduled to unlock next month and is expected to release 140.000 bitcoin in shares, noted Meltem Demirors, director of strategy at CoinShares, on Twitter.
After unlocking, investors have the option to liquidate their shares in the secondary market. Analysts at JPMorgan predict investors will sell at least some of their shares, leading to "downward pressure on GBTC prices and bitcoin markets in general."
What is not clear is whether investors will reinvest the grayscale earnings by repurchasing bitcoin and transferring it to the fund. If that happens, bitcoin will likely have a strong bid.
Until February, shares were consistently trading at a premium. This kept overall demand strong, as investors turned money back into the fund after the unlock. “Most of the capital probably came from investors doing a 'rerun of the rinse',” noted Ben Lilly, a cryptoeconomist at Jarvis Labs, in an April 22 SubStack post.
Now, however, the incentive to reinvest is relatively low. The so-called grayscale carry trade has lost its luster since the GBTC began trading at a discount in February. On Wednesday, the shares traded at a discount of 12,17% on equity, according to data source Skew.
However, some analysts say the discount offers retail investors an opportunity to buy bitcoin on the cheap. “Investors looking for long-term passive exposure to bitcoin are likely better off buying GBTC rather than spot bitcoin, as you are paid to wait for the discount more than the excess fees,” David Grider, a strategist at investment research firm FundStrat, wrote in an email in May.
Bitcoin is currently trading near $33.200, representing a 1,2% drop on the day. Prices dropped below $29.000 earlier this week just to make a quick rebound to the $30.000 to $40.000 multi-week trading range.
