Bitcoin and cryptocurrency prices struggled to find direction in June after moving sharply lower through April and May.
The bitcoin price, down almost 50% from its peak of around $65,000 per bitcoin set in April, has managed to hold above the closely-watched $30,000 level—but has failed to make convincing gains.
Now, with around $1.5 billion worth of shares in the Grayscale Bitcoin Trust (GBTC) hitting the market on July 18—something JPMorgan named as a downside risk for the bitcoin price—researchers at U.S. crypto exchange Kraken have predicted the looming Grayscale unlock could be “positive for the bitcoin price.”
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Grayscale, the world’s largest digital asset fund manager with $24 billion under management, allows institutional investors to gain exposure to bitcoin through shares in its Grayscale Bitcoin Trust (GBTC)—a fund that currently holds just over 650,000 bitcoin tokens, some 3% of bitcoin’s circulating supply. GBTC shares are subject to a six-month lockup after being purchased.
“Despite one being a single-asset fund of the other, bitcoin and GBTC are two distinct assets with different forces influencing their respective prices,” Pete Humiston, manager of Kraken Intelligence, said in emailed comments alongside Kraken’s latest market recap report. “While we don’t anticipate the unlock window to have any major market impact, the trading strategies commonly used by institutional investors leads us to conclude that the event could be mildly positive for the bitcoin price.”
Large institutions make up a sizable proportion of the GBTC owners who’ll have their shares unlocked this month, according to Kraken Intelligence, pointing to recent Securities and Exchange Commission (SEC) filings.
These institutions are thought to have bought GBTC shares with bitcoin to harvest the premium to net asset value that GBTC was trading at and to do so may have shorted—or bet against—bitcoin to avoid being impacted by price volatility. As a result, if these institutions did cash out their GBTC shares they may have to buy bitcoin from the spot market to cover their GBTC hedge.
“The complexity and duration relating to repositioning in the market amidst the GBTC share unlock is not black and white,” the Kraken Intelligence report read. “On its own, it’s not likely significant enough to immediately impact bitcoin’s price like some claim.”
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Last month, JPMorgan analysts predicted the bitcoin price could fall as low as $23,000 per bitcoin before finding a floor, pointing to the GBTC unlock as a potential risk.
“Selling of GBTC shares exiting the six-month lockup period during June and July has emerged as an additional headwind for bitcoin,” JPMorgan analysts wrote in a June note.
The latest bitcoin price rout, sparked by China’s bitcoin and crypto crackdown and exacerbated by Tesla billionaire Elon Musk’s fickle attitude toward crypto, stalled bitcoin’s massive 2021 bull run.
However, Kraken researchers expect the most recent negative news out of China to have only a short-term effect on the bitcoin price—pointing to bitcoin’s previous performance in the aftermath of earlier bitcoin and crypto clampdowns in China.
“When looking as far back as 2013, one will find a myriad of headlines out of China that speak to the country’s distaste for crypto-assets,” Kraken analysts wrote. “While many of these news announcements were followed by bitcoin slumping in the day, week, and month that followed, bitcoin has tended to continue pressing higher in subsequent months.”