Tag: Gbtc

Beyond Bitcoin ETFs: ‘There Are Other Players Controlling This Market’ – Says Analyst

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Recent observations by Eric Balchunas, a senior ETF analyst at Bloomberg, suggest that the movements in Bitcoin’s price are influenced by factors beyond just the flows of spot Bitcoin Exchange Traded Funds (ETFs).

According to Balchunas, who shared his insights on X, “bigger forces at work” shape the largest cryptocurrency’s valuation. This indicates that the correlation between spot ETF flows and Bitcoin’s price action is less direct than some assume.

The ETF Influence And Market Movements

This analysis emerges amid a period of significant financial activity for Grayscale, which has seen substantial outflows, described by Balchunas as experiencing a “second wind” of departures.

Yesterday, Grayscale reported outflows of $281.57 million, marking a notable decrease in its Bitcoin holdings by more than 40% since the inception of spot Bitcoin ETFs on January 11.

This scenario highlights a broader narrative within the cryptocurrency investment sphere, where the relationship between ETF activities and Bitcoin’s market performance is complex and multifaceted.

Interesting is price of bitcoin still went up yesterday and yet it went down second half of last week when Ten saw net inflows = there are other players controlling this market. ETFs def a factor but bigger forces at work here.

— Eric Balchunas (@EricBalchunas) March 21, 2024

Despite the record outflows from Grayscale’s GBTC, Bitcoin’s market behavior has shown resilience. The cryptocurrency recently exceeded the $67,000 mark before experiencing a slight retracement, currently trading at a price of $66,106.

BTC price is moving sideways on the 30-minute chart. Source: BTC/USD on TradingView.com

This movement coincides with comments from Federal Reserve Chair Jerome Powell, which seemingly spurred a rally across various risk assets, including cryptocurrencies.

Powell’s reassurances regarding the outlook on rate cuts prompted a slight recovery in Bitcoin’s price, demonstrating how external economic factors and sentiments can impact cryptocurrency markets. It is worth noting that Bitcoin traded below $65,000 before the announcement.

On-Chain Insights And Bitcoin Future Prospects

Further deepening the analysis, Charles Edwards, a crypto analyst, recently suggested that pullbacks are common in Bitcoin’s bull runs, with corrections of around 30% within the realm of possibility.

A normal Bitcoin bullrun pullback is 30%. Back in December, we were already in the longest winning streak in Bitcoin’s history. A 20% pullback here takes us to $59K. A 30% pullback would be $51K. These are all levels we should be comfortable expecting as possibilities.

— Charles Edwards (@caprioleio) March 19, 2024

In related news, data from the on-chain analysis platform CryptoQuant has recently indicated a nearly 40% reduction in Bitcoin’s supply on exchanges over the past four years.

This trend points towards a bullish sentiment within the Bitcoin ecosystem, suggesting that investors are inclined to hold onto their assets in anticipation of future value increases.

Moreover, CryptoQuant’s data reveals that Bitcoin’s demand has consistently outstripped its supply since 2020, a trend that supports the asset’s value on the premise that scarcity enhances perceived value.

This dynamic is expected to intensify following the upcoming Bitcoin halving event, which will reduce the miners’ supply by half, potentially leading to further increases in Bitcoin’s price.

Featured image from Unsplash, Chart from TradingView

Disclaimer: The article is provided for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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Samuel Edyme

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March 21, 2024
Bitcoin Price Could Hit New All-Time High Before Halving

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The Bitcoin market is currently experiencing a turning point, largely driven by recent trends in Bitcoin exchange-traded funds (ETFs). Yesterday, Bitcoin’s price rose above $43,000, a movement closely tied to changing dynamics in ETF inflows and outflows, particularly involving the Grayscale Bitcoin Trust (GBTC).

On January 29, (Bitcoin ETF Day 12), a notable shift occurred. The Bitcoin spot ETFs witnessed a substantial net inflow of US$255 million, while Grayscale’s GBTC experienced a significant net outflow of $191 million. The other nine ETFs, led by Fidelity and BlackRock, saw a combined net inflow of $446 million, making it the third-highest inflow day for Bitcoin ETFs.

Bitcoin ETF Flow – Day 12 | Source: @BitMEXResearch

New All-Time High Until Bitcoin Halving?

This scenario of high inflows and reduced outflows from Grayscale’s GBTC presents an intriguing change from previous days, where GBTC outflows dominated and weighed heavily on the market sentiment.

Crypto analyst @WhalePanda, who’s part of the “Magical Crypto Friends” YouTube channels (along with Samson Mow, Charlie Lee, and Riccardo Spagni), commented on this development, stating, “Net inflow of $250 million in a day is crazy. That’s 5800 Bitcoin being removed from the market in just one day.”

He highlighted the significance of this volume, especially when compared to the daily Bitcoin mining rate of 900 BTC. MicroStrategy bought $615 million BTC between November 30 and December 26.

While WhalePanda acknowledged that inflows will slow down one day, he expects this to happen later on. “The increased price is driving more exposure, leading to more inflows, which in turn pushes the price even higher. This is a classic example of the bull cycle flywheel mechanics at play, even before the halving,” he remarked.

The renowned crypto expert further elaborated that “the amount of Bitcoin float will significantly drop over the next couple of days and once the price starts moving with limited supply left… Things can go crazy. No, not $1 million crazy. Crazy for me is breaking ATH before halving.”

In a separate post on X, @WhalePanda expressed his outlook for the week, “This is going to be a big week for #Bitcoin. With GBTC outflows decreasing and a strong inflow day last Friday, we might be seeing the beginning of a new trend.” He emphasized the potential of this momentum to become a self-fulfilling prophecy, driving Bitcoin’s price higher.

Spot BTC ETFs Remain The Focus

Thomas Fahrer, co-founder of Apollo Sats, added context to these massive spot BTC figures, noting, “The 9 New ETFs hold more BTC than Tether, Tesla, Block, and all of the Public Miners combined. Soon they will surpass MSTR, and later even GBTC.”

Bitcoin holdings | Source: X @thomas_fahrer

Alex Thorn, head of research at Galaxy, commented on the potential implications for BTC’s price trajectory, especially in relation to ETH: “With Grayscale outflows appearing to slow down and other Bitcoin ETF flows remaining positive, I’m curious about the future direction of the ETHBTC cross. A lower trajectory seems like the path of least resistance in the near term.”

with grayscale outflows seeming to abate and other #bitcoin etf flows now appearing holding positive, i’m again wondering where the ETHBTC cross is headed. lower again feels like the path of least resistance near-term pic.twitter.com/DVPi1pdWP0

— Alex Thorn (@intangiblecoins) January 30, 2024

This confluence of ETF inflows, decreasing outflows from Grayscale, and the anticipation of the upcoming Bitcoin halving are creating a unique bullish market environment. However, at press time, BTC is trading below a key resistance at $43,444.

BTC price hovers below key resistance, 4-hour chart | Source: BTCUSD on TradingView.com

Featured image created with DALL·E, chart from TradingView.com

Disclaimer: The article is provided for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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Jake Simmons

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January 30, 2024
Crypto Rally Fizzles As ETF Euphoria Fades

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Crypto markets have given up some ground after rallying sharply to start the week on optimism that a spot Bitcoin ETF could be approved sooner rather than later.

Bitcoin is down 3% in the past 24 hours, while ETH trades 3.5% lower at $1,800. The consolidation comes after Bitcoin hit a 17-month high of $35,900 on Nov. 1, just a day after the world’s most valuable cryptocurrency turned 15.

BTC Price Action

Meanwhile, the GBTC discount – the difference between the value of a GBTC share and the value of Bitcoin backing it – continues to narrow as investors hope for the conversion of Grayscale’s closed-ended fund into an ETF.

GBTC Discount chart

Solana’s SOL is down 9% today but remains up 20% in the past week on positive cues from the ongoing Breakpoint developer conference.

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Most of the top 100 digital assets by market capitalization are down over the past day, with the exception of CRO, the token of the Crypto.com exchange; MNT, the network token of an Ethereum Layer 2 backed by ByBit; and Cardano’s ADA token.

$180M In Liquidations

As of 2pm ET, more than $180M of leveraged positions had been liquidated over the previous 24 hours, with traders on both sides of the market being whipsawed by the volatility.

24H Liquidations

Prior to the selloff, elevated funding rates on perpetuals exchanges were indicative of retail traders piling on leverage to chase the rally.

Perpetual Funding Rates As Of 3AM ET on Nov 2

Some market participants warned that sentiment was getting ahead of the price action.

Biggest Losers

Crypto casino Rollbit saw its RLB token dive 14% today, the most of any top 100 digital asset. Decentralized graphics solution RNDR and memecoin PEPE dropped 12%.

Prominent projects Aave, Fantom, Lido, Arbitrum, Optimism, Synthetic and Chainlink all shed between 7% and 10%.

To continue reading this as well as other DeFi and Web3 news, visit us at thedefiant.io

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November 2, 2023
Bitcoin rallies to almost 18-month high on ETF optimism

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Bitcoin surged over 10% on Monday, briefly surpassing $34,500, on continued optimism that an exchange-traded fund investing directly in the cryptocurrency will soon be approved in the U.S.

The largest cryptocurrency
BTCUSD,
+6.59%
by market cap on Monday reached as high as $34,616, the loftiest level since May 2022, according to CoinDesk data, before falling to around $33,021 by Monday evening. Other major cryptocurrencies also rose, with ether up 5.8% over the past 24 hours to $1,763.

The U.S. Securities and Exchange Commission has repeatedly rejected bitcoin ETF applications in the past, citing risks of market manipulation. But crypto-industry participants are expecting that to change soon.

Read more: Bitcoin climbs above $30,000 for first time since August as hopes for ETF approval intensify

A U.S. Appeals court on Monday issued a mandate, putting into effect its ruling in August, which overturned the SEC’s rejection of Grayscale Investments’ application to convert its Bitcoin Trust product
GBTC
into an ETF. The final ruling on Monday confirmed Grayscale’s win in court.

Meanwhile, BlackRock’s proposed bitcoin ETF has been listed on the Depository Trust & Clearing Corporation. While it doesn’t mean that the ETF is guaranteed to be approved, it shows another step closer for BlackRock to bring the fund to the market.

If bitcoin ETFs are approved, the crypto may see “historical price increases,” with a crypto bull market coming, according to Alex Adelman, chief executive and co-founder of Lolli. “Bitcoin ETFs will give institutional and retail investors new ways to gain exposure to bitcoin within established regulations,” Adelman said.

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October 23, 2023
Potential Paths Forward For The Grayscale Bitcoin Trust
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The below is an excerpt from a recent edition of Bitcoin Magazine PRO, Bitcoin Magazine’s premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox, subscribe now.
Although it feels like a lifetime ago, only two months have passed since Genesis announced their need for a $1 billion liquidity injection in the aftermath of the FTX and Alameda fallout. As weeks dragged on without a resolution, details of the story have become more public, building up to fraud allegations against Digital Currency Group (DCG) that were announced by Gemini co-founder and president, Cameron Winklevoss. Gemini is still trying to recover $900 million in assets from Genesis that were used to generate yield for their Earn customers.

Left unresolved and only growing larger, DCG and Genesis problems weigh heavily on the bitcoin market as there are many answers needed and various possible outcomes that have yet to play out.

The biggest question of all is what will happen to the Grayscale Bitcoin Trust (GBTC) and how these issues will potentially impact the bitcoin price. GBTC has been the preferred vehicle for many to obtain regulated bitcoin exposure and it has also been a breeding ground for speculative arbitrage strategies throughout the previous swings going from a premium to a discount to net asset value (NAV). An approved bitcoin spot ETF in the United States would have likely solved these issues, but we’re still far from that happening.

It’s easiest to start with the GBTC shares on DCG’s balance sheet which are estimated to be around 9.67% of the entire supply. In the event that DCG needs to raise cash or goes down the path of Chapter 11 bankruptcy, selling these shares is potentially an option. Selling into an already illiquid market puts more pressure on the historically low GBTC discount. DCG holds approximately 67 million shares in a market that trades less than 4 million shares a day. However, a more important factor is that by law, DCG can sell no more than 1% of shares outstanding every quarter. It would take them around 2.5 years of constant selling to sell their entire stake.

Another path — the most likely one — is that the GBTC, along with Grayscale’s other trusts, find their way into the hands of a new sponsor and manager. Valkyrie has already proposed to do exactly this:

Give an option for investors to redeem shares at NAV through a Regulation M filing request (although it’s not clear a Regulation M request would get approved by the SEC).

Lower fees from 200 basis points to 75.

Attempt to offer investors redemptions in both cash and spot bitcoin.

The option for a new manager gives investors an opportunity to get out of investments at NAV.

The GBTC product is still a cash cow for Grayscale and DCG, raking in 2% management fees — in perpetuity. Across all major trust products, Grayscale is collecting over $300 million this year from management fees alone. Rather than liquidate the entire trust in the worst case scenario, there will be many willing buyers to take on management of the vehicle without a U.S. spot bitcoin ETF available in the market.

However, liquidation is not a non-zero possibility. In the event of a Grayscale insolvency or bankruptcy, voluntarily liquidation could be pursued unless 50% of shares vote to transfer to a new sponsor. There is upside to DCG liquidating the trust as there’s money to be made from their shares closing to NAV, but that likely results in selling bitcoin on the open market. No one wants to see 632,000 bitcoin — approximately 3.3% of current supply — become selling pressure in the market. In the unlikely scenario where complete liquidation of the trust is undertaken with USD cash being returned to shareholders, one could presume that much of the selling would be absorbed through OTC deals with interested investors. At this point, this is purely hypothetical.

New information is coming to light that has the potential to change the superstructure in regard to the dynamic between Grayscale and the shareholders of Grayscale products. We will continue to write about developments in the coming weeks.

Like this content? Subscribe now to receive PRO articles directly in your inbox.

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Dylan LeClair And Sam Rule

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January 13, 2023
Valkyrie Wants To Take Up The Reins Of Grayscale’s Bitcoin Trust

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Valkyrie Investments has laid out a proposal to take up the reins of troubled bitcoin trust GBTC.

“We understand that Grayscale has played an important role in the development and growth of the bitcoin ecosystem with the launch of GBTC, and we respect the team and the work that they have done,” Valkyrie’s co-founder and CIO, Steven McClurg, said in a statement posted to the company’s website. “However, in light of recent events involving Grayscale and its family of affiliated companies, it is time for a change. Valkyrie is the best company to manage GBTC to ensure its investors are treated fairly.”

McClurg told Bitcoin Magazine that the proposal would be for current GBTC shareholders to vote on via proxy. If chosen by the shareholders, Valkyrie would become the sponsor.

The process isn’t as straightforward as it seems, however. As highlighted on a Bloomberg report, “Grayscale filings state that shareholders take no part in the management or control of the trust, and have limited voting rights. In addition, no amendments to the trust agreement that could materially affect the interests of shareholders can be made with a vote of at least a majority — meaning 50% — of the shares.”

McClurg explained to Bitcoin Magazine that Valkyrie is aware of those issues, and has planned ahead. He declined to comment on any specifics of what that plan might entail, but hinted that this wouldn’t be their first time achieving such a goal. When it comes to the plans for after an eventual takeover, McClurg has it laid out.

The first action Valkyrie would take in the event that it becomes GBTC’s sponsor and manager would be to “immediately file for Reg M exemption,” the executive explained. Grayscale CEO Michael Sonnenshein told Yahoo Finance earlier this month that the trust not allowing redemptions is a result of a U.S. Securities and Exchange Commission (SEC) shutdown in 2014, who found GBTC redemptions to be in violation of Reg M. According to FINRA, the SEC’s Regulation M “is designed to prevent manipulation by individuals with an interest in the outcome of an offering, and prohibits activities and conduct that could artificially influence the market for an offered security.”

“If approved by the SEC, [the exemption] would allow us to redeem shares at par value for shareholders who want to redeem,” McClurg told Bitcoin Magazine.

The move would allegedly help alleviate what might currently be GBTC’s most pressing issue: a whopping 47% discount of its shares compared to the value of the underlying assets held.

“Redemptions typically cause a discount to narrow due to ability of market makers to arbitrage,” Valkyrie’s executive added.

McClurg said the firm would also reduce the management fee to 75 basis points, down from the 200 basis points currently levied by Grayscale.

It isn’t clear whether Grayscale has sought Reg M exemption yet, and McClurg told Bitcoin Magazine that “nothing is stopping Grayscale from doing this themselves.” GBTC’s current manager is seeking a conversion of the trust into a spot bitcoin exchange-traded fund –– something it claims would eliminate the discount given the ability of an ETF to create and redeem shares on demand. It has gone as far as to sue the SEC under the basis that the regulator allowed the listing of futures-based products and doesn’t have the grounds to deny similar spot offerings. This could seemingly help explain the firm’s reluctance to apply for Reg M exemption, as an eventual exemption from the SEC could reduce the discount to near zero and kill its leverage for the ETF move. It isn’t clear whether that is the case, however. Valkyrie would still pursue the conversion if turned GBTC’s manager.

“We would still attempt a conversion, but would work with regulators for an orderly conversion on their time,” McClurg said.

Find more details of Valkyrie’s proposal here.

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Namcios

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December 30, 2022
Grayscale Weighing Returning 20% Of GBTC Assets To Investors If ETF Dreams Fail

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Grayscale CEO Michael Sonnenshein stated in a letter to investors that should the Grayscale Bitcoin Trust fail to convert into an exchange-traded fund (ETF), potential moves could include a tender offer of 20% of the $10.7 billion trust.

A tender offer would appeal to shareholders to offload their shares at a specific time, effectively returning the value invested back to them.

Grayscale’s Bitcoin Trust was originally planned to trade like a bitcoin proxy as it sought ETF status, involving a net asset value (NAV) discount or premium. The premium or discount describes the difference in value between shares of the trust and the value of the underlying bitcoin held. When the value of the shares of the trust are higher than the underlying bitcoin, it is considered a premium. When the value of the shares drop below the underlying bitcoin, it is considered a discount.

Investors have recently had to consider their options as the trust faces a continued decline in value, widening the discount to 50%, a record low, stoking fears of already jumpy investors. There is no way to extract bitcoin out of the trust.

Grayscale has been attempting to acquire ETF status for a while, and most recently after being denied, filed a lawsuit against the U.S. Securities and Exchange Commission (SEC). In the lawsuit, Donald B. Verrilli Jr., Grayscale’s senior legal strategist and former U.S. solicitor general, stated that “As Grayscale and the team at Davis Polk & Wardwell have outlined, the SEC is failing to apply consistent treatment to similar investment vehicles, and is therefore acting arbitrarily and capriciously in violation of the Administrative Procedure Act and Securities Exchange Act of 1934.”

Despite the SEC’s repeated denial of a spot ETF, it has approved multiple futures ETFs, starting with the ProShares BITO ETF in October of 2021. The reasoning behind this, according to Chairman Gary Gensler, is that futures have “Bitcoin futures have been overseen by sibling agency CFTC for 4 years. That’s wrapped inside the 1940 Act which brings it inside investor protection.”

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BtcCasey

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December 19, 2022