With Bitcoin (BTC) struggling at around $32,700 after the July 8 price drop, another major cryptocurrency event awaits in July, the Grayscale Bitcoin Trust (GBTC) to open.

In July, approximately 40,000 BTC will be opened for approximately $1.5 billion in face value. The largest of these closings will occur on July 18, when 16,240 BTC will be available due to the announcement of a six-month closing period for GBTC shares.

The stock consists of deals closed in the first quarter of 2021 with a face value of about $530 million, making this the largest GBTC lock-out event to date.

Grayscale Investments is one of the largest institutional cryptocurrency fund managers that allows institutional investors to access Bitcoin price movements with GBTC shares.

At the time of writing, the GBTC Foundation owns 656,600 BTC tokens, worth over $21.56 billion. This represents 3.11% of Bitcoin’s maximum supply of 21 million tokens, making the fund a better target for institutional investors who can access BTC through a traditional exchange product. GBTC shares are available on the OTCQX OTC platform owned by the OTC Markets Group.

GBTC is currently trading in the $27 chain, which is down 52% from its high of $58.22 on February 19. The stock tracks the market price of Bitcoin without considering any fees or costs. With a minimum investment capital requirement of $50,000, stocks are more suitable for institutional investors who have access to such large sums.

Is JPMorgan’s estimate wrong?
According to JPMorgan analysts, the opening event could pose a “downside risk” to the spot BTC market in the ongoing bearish era that BTC is currently experiencing. They went on to say, “Selling GBTC shares after exiting the six-month shutdown period in June and July was an additional hurdle for bitcoin.”

However, a recent report from cryptocurrency exchange Kraken stated that “the market structure indicates that the lockdown will not have a significant impact on the BTC spot markets at any point, if any, as some have argued.” Citing filings with the US Securities and Exchange Commission, Kraken claims that most of the shares to be opened belong to large organizations that have bought GBTC shares with BTC in order to use the NAV premium the shares are trading in. … time.

In addition, these investors are likely to have closed off Bitcoin in the futures markets to minimize any impact due to negative price volatility in the spot BTC markets. Cointelegraph discussed the ban with Shin Ai, who is responsible for product research and development of crypto derivatives at Bybit, a crypto derivatives exchange. It is to explain:

“The upcoming GBTC unblocks are the result of special placements made six months ago when place prizes were close to 30%. Perhaps these merchants were accompanied by a similar short stretch for BTC, and if anything, the termination of BTC short selling would lead to Buying pressure. What’s also different today is the lack of new private placements, which reduces the likelihood of BTC spot selling lately.”
The GBTC premium is the difference between the value of the assets, i.e. bitcoins held by the fund, and the market price of those assets. This premium exists due to institutional demand driven by GBTC, which provides a regulated, exchange-based way to access bitcoins.

Kraken goes on to say that institutional investors who have attempted arbitrage in GBTC installments can even hold their shares in GBTC rather than sell them on the secondary market, as well as keep their own short positions. This means that there is no net sale of the token.

Investors can also sell their GBTC shares to cover their short positions, resulting in a net purchase of the token. However, the effect on spot prices could not be achieved immediately, as the market expected.

Pete Hemmingston, head of research at Kraken Intelligence, downplayed the relationship between the two assets and said, “Although one is a single-asset fund, BTC and GBTC are two different assets that have different strengths and prices for each other.” He went on to say that “trading strategies frequently used by institutional investors lead us to conclude that the event may be, to put it mildly, positive for the price of bitcoin.”

GBTC discount can be a premium
Until February 23 of this year, the difference in price between the net worth of GBTC and the net worth of BTC was always a positive value, i.e. a premium. This premium peaked at a permanent high of 122.27% on June 6, 2017.

Source: CoinTelegraph