Bitcoin GBTC Unlocked, Analyst Weighs In on What This Means

Bitcoin GBTC Unlocked
  • Grayscale Bitcoin Trust is unlocking its Bitcoin trust on July 18.
  • For the first time in over 6 months investors will be able to sell their GBTC shares.
  • Also, several other analysts including JPMorgan have weighed in on the likely effect of the event.

Popular crypto analyst EllioTrades Crypto weighed in on the ongoing debate about Grayscale’s GBTC share unlock. The event will occur on July 18, however, analysts are yet unsure whether this is bullish or bearish.

Ellio started by explaining that Grayscale trust is an exchange-listed asset. As such, Grayscale lists stocks equivalent in number to the underlying number of the crypto coins they are holding. Notably, the buying and selling of the Grayscale stocks does not affect BTC or any other underlying assets’ price.

Technically, Grayscale share should have the same price as the prevailing market price for the crypto, Bitcoin, for example. However, this is not always the case. In fact, seasoned investors trade Grayscale stocks at an arbitrage taking advantage of the difference between Grayscale stock price and Bitcoin market price. 

Part of that arbitrage is the GBTC premium. This premium refers to the difference between the Grayscale share price and BTC price. This occurs when BTC market price costs less than the stock, hence the premium.

Added to that, accredited traders can buy the premium Grayscale BTC stocks at prevailing BTC market prices in what is called a lock-up.  Meaning that Grayscale locks up the investment for 6 months. As a result, investors cannot sell their shares during that period. In fact, investors normally take the risk of a lock-up hoping that the premium will last until the end of the lock-up.

However, in this case, the lock-up has depleted and the Grayscale BTC shares are currently trading lower than the BTC market rate. This is what has the market and analysts confused.

The looming GBTC unlock is bound to affect the BTC market, but it is yet a mystery as to how and to what extent. Will the unluck drive BTC price deeper into bear territory, or will it spark a rebound?

To answer this question Ellio looked at conflicting analyses by JPMorgan and Kraken. On the one hand, JPMorgan argued that the GBTC unlock will lead to BTC sell pressure. On the other hand, Kraken believes the unlock will lead to the unwinding of BTC shorts which will fuel buy pressure. Notably, Ellio is of the opinion that the unlock will fuel buy pressure.

To justify his reasoning Ellio quoted FTX Exchange CEO Sam Bankman-Fried (SBF). Ellio referenced a tweet by SBF while calling him the number one connection in the world between traditional and crypto markets.

Based on the tweet Ellio explained that arbitrage creates a buy and sell opportunity on both sides. In this case, the unlock is likely to fuel buy pressure as the GBTC shares are currently trading below market value.

Finally, Ellio highlighted that this event is important because the Grayscale BTC Trust currently holds 654,000 BTC. This is about 3% of the BTC max supply of 21 million. 

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