Grayscale Bitcoin Trust (GBTC) Unlocks Coming to an End, They Aren’t Bearish But Bullish for BTC Price
The price of Bitcoin continues to maintain its $30k-$40k range as it trades above $33,500 following the weekend's uptrend to about $36,000.
Amidst this sideways chop, everyone is focused on Grayscale Bitcoin Trust (GBTC), whose share unlocks is coming to an end.
The second half of July is the only period left with any significant unlocks, with the biggest unlock happening on July 18 at 16.24k BTC.
Given that it has been going on since the beginning of the year, it's “not the immediate dumpers pool so IMO no way near as much of a concern,’ said trader Loomdart about these upcoming unlocks.
“Basically any flow post July 1st (jan 1st + 6 months) is safely assumed to be delta neutral, except its +ve for spot btc and -ve for gbtc (which i would argue is actually marginally beneficial for price as a whole, but at worse delta neutral)”
While some argue that this unlock would be bearish for Bitcoin price, inducing another wave of sell-off, this would rather be bullish for the price of Bitcoin as the holders are forced to buy the cryptocurrency.
“Lots of bearish chatter around GBTC unlocks whilst conveniently ignoring that in-kind subscriptions funded by debt will ultimately translate into spot buying,” said Hong Kong-based cryptocurrency trading startup Amber Group.
Last month, Amber Group raised 100 million in a Series B funding round at a pre-money valuation of $1 billion. The latest valuation is 10x that of the company’s Series A closed in 2019, a $28 million round with Coinbase Ventures as one of its investors.
“BTC-denominated investors subscribe at NAV by sending coins to the trust. Upon unlock -> sell shares into cash. Use cash to buy back BTC to pay back liabilities/return to base portfolio.”
Bears focusing on Tether's impact on bitcoin over the past year would have probably done better to focus on the Grayscale neutral arbitrage trade instead.
When new competition resulted in the market taking away GBTC's premium to NAV, the biggest bitcoin buyer stopped buying. pic.twitter.com/RoAarfw58N
— Lyn Alden (@LynAldenContact) June 28, 2021
Grayscale is the largest digital asset manager, and its closed-ended fund GBTC remains the largest Bitcoin fund in the world, holding an estimated 651.27k BTC, representing 82% of all BTC held by funds.
As unlocks come to an end, the discount on GBTC is also shrinking, currently at 8.84% after going to 21.23% in mid-May.
In its last week’s note, Jeff Dorman, CIO at Arca, also debunked the thesis that Grayscale unlocks are going to crush the market.
Dorman noted that while unlocks could lead to heavy selling of GBTC on the open market, it has no effect on Bitcoin itself as BTC in the trust does not trade but only the shares, which means GBTC will likely trade at a discount to Net Asset Value (NAV).
Additionally, most GBTC buyers were arbing the trade by longing GBTC premium and shorting Bitcoin, which required a hedge fund to borrow BTC, contribute BTC in-kind to create GBTC shares, and short futures or spot to hedge out directional risk.
“As funds unwind this trade (even though it will now be at a massive loss since the arb went from a premium to a discount), it could actually put BUY pressure on Bitcoin, not sell pressure, as those who sell GBTC will have to buy back Bitcoin to cover the short-leg of the trade.”