The Downward Pressure on Bitcoin’s Price Eases as GBTC Profit-Taking Concludes
The downward pressure on bitcoin’s price has been curtailed as profit-taking on the Grayscale Bitcoin Trust (GBTC) has largely concluded, according to JPMorgan. GBTC has witnessed $4.3 billion in outflows since its conversion to a spot bitcoin exchange-traded fund two weeks ago — surpassing JPMorgan’s estimates of around $3 billion. Therefore, GBTC profit-taking has largely happened already, JPMorgan analysts wrote.
Bitcoin’s Price Decline Linked to GBTC Investors Cashing In Profits
Bitcoin’s price dropped more than 20% in the last two weeks following the approval of spot bitcoin ETFs in the U.S. The cashing in of profits by GBTC investors caused the decline in bitcoin’s price, according to the analysts, but the worst appears to be over now. However, they cautioned that if GBTC’s 1.5% fee isn’t reduced soon, the fund could experience ongoing outflows and lose market share to rivals.
Competition from Blackrock and Fidelity
“There appear to be two emerging competitors to Grayscale’s bitcoin ETF: Blackrock and Fidelity, which have so far attracted $1.9 billion and $1.8 billion of inflows respectively. They both have much lower fees of only 25 basis points (without waivers) vs 150 basis points for GBTC,” the analysts said.
Spot Bitcoin ETFs Enhance BTC Price Discovery
The recent introduction of spot bitcoin ETFs in the U.S. adds a new layer to bitcoin price discovery, aligning it with traditional markets, especially in equities where ETFs are common, according to the analysts. They expect that the emergence of spot bitcoin ETFs would make the bitcoin price discovery process more efficient.
GBTC’s Plan to Introduce Covered Call ETF
GBTC’s plan to introduce a covered call ETF, if approved, would be a boost for the fund as well as bitcoin’s derivatives markets, the analysts concluded.
Hot Take: Conclusion
The downward pressure on bitcoin’s price seems to have eased as GBTC profit-taking concludes. However, competition from Blackrock and Fidelity could pose a challenge for GBTC due to their lower fees. The introduction of spot bitcoin ETFs enhances price discovery and makes the process more efficient. Additionally, GBTC’s plan to introduce a covered call ETF could provide a boost for the fund and bitcoin’s derivatives markets. Overall, while there may still be some uncertainties ahead, the worst of the price decline appears to be over for now.
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