Unlocking of 18K worth of GBTC shares takes place on July 18
Unlike predictions, prices of Bitcoin remain largly unaffected
GBTC Stock prices contine to dive nose-down
YEREVAN (CoinChapter.com) — For weeks, speculations over Grayscale Bitcoin Trust’s mega unlock of over 18,000 BTC worth of GBTC shares on 18 July were the talk of the town. With both bearish and bullish predictions, investors and market players were curious to see what impact the unlocking will have on BTC.
But now, with the unlocking done and dusted with, it seems BTC managed to swat it away like an annoying fly, coming out of it unharmed. Well, at least for now.
Disappointing all those that predicted any significant price drop, BTC managed to stay afloat, hovering above $31,000 at the time of writing.
At the time of the unlocking yesterday, the prices were around the same ballpark. A quick look at the chart reveals that some holders have started selling their BTC holdings to make a quick buck after the market slightly recovered. BTC was showing negative trends the past two days.
Thanks to the insignificant drop, we cannot see an alarming change.
After prices drop to the vicinity of $30,000, investors cash in on the low prices and sell their assets again after a few days when the market recovers. So while BTC prices may not go back to the $65,000 mark that it hit in April right away, it can soon regain the $40,000 mark that it was on last month. Of late, Bitcoin has been pretty consistent at $30,000.
The Grayscale Bitcoin Trust (GBTC) is the world’s largest Bitcoin fund that allows investors to own BTC without directly buying the coveted digital currency.
It also allows investors to buy BTC without worrying about storing it in a digital wallet. In addition, GBTC is the first fund of its kind to report financials regularly to the U.S. Securities and Exchange Commission (SEC). Finally, investors owning shares in the trust can sell their stakes in the secondary market under the ticker GBTC. However, to do this, they have to wait for a minimum lock period of 6 months.
Starting 13th July, the Grayscale Bitcoin Trust (GBTC) began unlocking around 41,000 BTC in GBTC shares, which completed their six-month lock-up period. With the biggest unlocking that happened on July 18, speculations over what will happen to BTC prices were the trendiest topic in the crypto space.
Some predictions spelled disaster for Bitcoin.
J.P Morgan, for example, predicted that Bitcoin will drop below the $25,000 mark as a result of the unlocking. The Bank’s Managing Director Nikolaos Panigirtzoglou predicted heavy losses.
“Selling of GBTC shares exiting the six-month lockup period during June and July has emerged as an additional headwind for bitcoin,” he said.
While the bank’s analysts stated that they believe that Bitcoin’s “fair value” is between a range of $23,000 and $35,000, they considered the drop inevitable.
“It would still take price declines to the $25,000 level before longer-term momentum would signal capitulation,” they said.
Willy Woo, a Bitcoin analyst and statistician with a mass following, also spelled trouble for Bitcoin. He had argued that BTC prices would be affected by the unlocking of locked GBTC shares. As a result, according to him, people will shift from buying BTC to buying GBTC shares, thus dropping the buying pressure on the GBTC market.
“Investors now have more incentive to by GBTC shares rather than BTC, it diverts some of the buying pressure on BTC spot markets. This is bearish.”
Despite the negative speculations, some were quick to debunk the idea that GBTC unlocking would be disastrous.
Analyst TheCryptoLark, for example, argued that spot markets would remain largely unaffected because the unlocking will release GBTC locked shares and not actual Bitcoin.
A similar prediction came from the Amber Group.
Crypto services provider Amber Group was optimistic, claiming that spot buying will discount the large sell-offs.
A positive message also came from Singapore-based QCPCapital, who shun away all fears of a BTC meltdown. In the market update released on their website, the company knocked the bottom out of the negative hype doing the rounds.
“To state clearly — We don’t expect these unlocks on [their] own to have a significant impact on the overall market outside of GBTC itself. This is because most of the large institutional positions who had subscribed in-kind before have already been unlocked earlier, and they have held off selling at the current discounted price,”
the report reads.
Grayscale FUD debunked
With many negative predictions doing the rounds, the FUD (Fear, uncertainty, and doubt) among investors rose. However, now that the dust has settled, they can relax. It seems the pundits at JP Morgan had it all wrong. No significant changes to the extent that they predicted are seen so far.
According to the company website, Grayscale Bitcoin Trust currently holds $20.7b worth of assets under management. This number was 22.5b on July 8th. Since then, GBTC has offloaded around $2bn worth of assets.
The price of GBTC stock also continues to dive nose-down since May. It currently stands at 26.20, over a 54% drop since it hit the high note of 57.15 in February. The Grayscale Investments BTC Premium was below -12% when the stock markets closed for the weekend.
Grayscale currently holds 654,000 BTC with a cumulative value of $20,641,106,880. This makes 3.117% of the total BTC released in the market.
Having dodged the major price fall so far, we will have to wait to see if BTC can stand to benefit from the unlocking of GBTC shares on July 18.
Researchers from Kraken Intelligence predicted that the unlock could potentially provide upside pressure on GBTC prices and on Bitcoin. According to their experts, institutional investors will not be getting the profits they hoped to get while cashing in on GBTC.
The premium on GBTC is meager at the moment, selling GBTC shares will not be profitable. Hence, they could decide to unwind their positions by buying more Bitcoin. As a result, Bitcoin prices could get a boost.
However, what impact Grayscale’s 18K mega unlocking event will have in the long term, remains to be seen.
Yerevan-based Editor and writer focusing on topics about cryptocurrencies, NFTs, politics, and international relations. Having completed his Bachelor's and Master's degrees from Delhi's Jawaharlal Nehru University, he currently works as a reporter at CoinChapter.