Bitcoin (BTC) Continues to Trade Under Pressure As Grayscale’s GBTC Unlock Casts Shadow

16. Jul 2021 Posted by Akolkar B on News

On Friday, July 16, the world’s largest cryptocurrency Bitcoin (BTC) continued to trade under pressure. At press time, BTC is trading at $31,862 with its market cap slipping under $600 billion.

Bitcoin slipped under its crucial support of $33,000 heading south. The next crucial support for BTC is $30,000. If the price slips under these levels, it can go all the way to $24,000 and lower.

The recent pressure on Bitcoin over the last few weeks comes as shares of the Grayscale Bitcoin Trust (GBTC) shall be unlocked ahead on July 18. Many experts think that the unlocking of the shares will triggering another selling in the market.

This is because the unlocking of the GBTC shares is happening 6 months later. The shares of GBTC usually trade at a premium to the native asset value (NAV) for BTC. But since March 2021, the GBTC premium has turned negative causing worry and FUD among investors. 

The negative sentiment surrounding this unlocking is supposedly putting further pressure on the price of Bitcoin (BTC) going ahead.

Now the thing with GBTC is that large institutions hold a sizeable portion of the GBTC shares and whose holdings shall be unlocked ahead on Sunday. The question is that six months back institutions purchased this shares at a premium, thus, it remains to be seen if they will sell it at the current discount and book a loss.

Last month, banking giant JPMorgan said that the share sale will create major “headwind” for Bitcoin. It noted: "As a reminder to our readers, last December and last January had seen the highest monthly inflows into GBTC, of $2bn and $1.7bn, respectively, reflecting to a significant extent GBTC premium monetization trades by hedge funds and other investors. As the six-month lock up period expires in June and July these investors are likely to sell at least some of their GBTC shares, exerting downward pressure on GBTC prices and on bitcoin markets more generally”.

With the unlock, GBTC shares will be available in the market at a discounted rate to the spot price of the BTC. The unlock of these shares is still bearish in the short term since the premium on GBTC tends to go negative around the selling period, thus investors have more incentive in buying GBTC shares than Bitcoin at its spot price.