Do GBTC Unlocks spell doom for the Bitcoin? Expert doesn’t think so
While the rest of the crypto market, particularly Ethereum and the DeFi sector, has been showing momentum, Bitcoin has been going sideways. According to recent estimates, the first cryptocurrency by market size has to make a dramatic move to break out of its current range, although it may risk short-term decline.
JP Morgan strategist Nikolaos Panigirtzoglou published a paper on the claimed bearish signals triggered by the upcoming Grayscale Bitcoin Trust (GBTC) shares unlocking. This occurrence, according to the expert, will be a headwind for Bitcoin in July.
After a 6-month lockout period, investors of this investment instrument can sell their GBTC shares. Panigirtzoglou estimates that investors will liquidate their shares valued roughly 140,000 BTC. As a result, they will increase selling pressure on a BTC price that is already falling.
This bearish notion has been gaining traction, causing investors and traders to be concerned. Alex Mashinsky, the CEO of Celsius Network, shares this outlook and expects the price of bitcoin to fall in the next weeks.
According to Mashinsky, this will be the third and last capitulation incident before Bitcoin begins its rise above $100,000 by the end of 2021. By mid-July, the code will be unlocked. The GBTC discount will rise to 25% during this time, according to Mashinsky.
Later, he expects certain hedge funds to take advantage of the arbitrage opportunity between Bitcoin’s spot market price and the GBTC discount. As a result, they could sell BTC and buy GBTC at a lower price.
The most interesting Bitcoin scenario: road to $100 000
Willy Woo, an on-chain expert, believes there are two possible outcomes. Their interactions will have an impact on the cryptocurrency market. In the medium term, he expects the GBTC unlocking to be primarily positive.
The GBTC is set up in such a way that BTC never leaves the trust. As a result, according to Woo, the only option for this product to lower its holding is through Grayscale’s 2% fee. Investors might acquire BTC in the spot market to purchase GBTC while having a short position in the futures sector.
They can hedge their position while receiving money from their short by doing so. Investors can sell their GBTC shares and settle their short position after the unlocking period ends. This is a bullish scenario since investors must purchase BTC on the moment in order to obtain the shares.
For this investment to be lucrative, Bitcoin must rise beyond its annual open, which is now about $29,000, by the time the unlocking occurs if investors purchased the shares in January. Hedge funds and other large investors in the GBTC have a strong interest in keeping that crucial support.
The second effect may manifest itself in the spot market. The unlocking would lower the GBTC premium, perhaps encouraging investors to buy shares rather than Bitcoin on the spot. Woo added:
(Impact 1) is sudden and directly impactful than while (Impact 2 2) acts very slowly. Thus it’s a bullish. The over all impact over the long term is neutral as it’s all arbitrage which balances out in time. What we are analysing is the short term demand/supply imbalances which may impact price.
Other analysts couldn’t see the link between the unlocking and the price of BTC. In any event, July appeared to be shaping up to be a pivotal month for the whole market. The bulls may finally get the push they need to get back into price discovery mode.