CryptoQuant: GBTC Selling Pressure Could Last Until April

The bitcoin market has been experiencing a significant shift in dynamics since the launch of eleven (11) bitcoin spot ETFs in the US earlier this month. According to CryptoQuant, a leading provider of on-chain data and analysis, the ETFs have triggered a sell-the-news effect that has dragged down the price of bitcoin by -14 percent from its mid-January high of $52,000.

One of the main sources of the selling pressure is the Grayscale Bitcoin Trust (GBTC), the largest and oldest bitcoin fund in the world. GBTC has been seeing massive outflows of bitcoins from its holdings, as investors are opting for the more liquid and efficient ETFs. CryptoQuant estimates that GBTC has been losing 10K bitcoins per day since the ETFs went live, reducing its holdings from 620,9K bitcoins in December 2023 to 551K bitcoins as of January 20th, 2024. This represents a -11 percent decrease in just one month.

If this trend continues, CryptoQuant projects that GBTC could run out of bitcoins by early April 2024, assuming a constant outflow rate of 10K bitcoins per day. However, this is a hypothetical scenario, as the outflow is likely to vary depending on market conditions and investor preferences. Moreover, the outflow may slow down as GBTC’s holdings dwindle, making it less attractive for arbitrageurs and hedgers.

Source: CryptoQuant

GBTC has been a popular vehicle for institutional investors, especially hedge funds, to gain exposure to bitcoin since 2013. The fund used to trade at a significant premium over the spot price of bitcoin, reflecting the high demand and limited supply of its shares. However, the premium turned into a discount in early 2021, as the market anticipated the approval of bitcoin ETFs. This created an opportunity for savvy investors to buy GBTC shares at a discount and sell them later at a higher price or convert them into bitcoins.

Now that the premium has almost disappeared and the ETFs are available, many GBTC investors are taking profits and exiting the fund. CryptoQuant suggests that some of the GBTC outflow is being hedged on perpetual futures contracts, which explains the increase in funding rates and the price weakness of bitcoin. Additionally, there are rumors that some of the GBTC selling pressure is related to the bankruptcy of Sam Bankman-Fried (SBF), the founder of FTX, a leading crypto exchange.

CryptoQuant believes that the GBTC outflow is a temporary phenomenon that will eventually subside as the market adjusts to the new reality of bitcoin ETFs. The firm expects that the ETFs will bring more liquidity, efficiency, and adoption to the bitcoin market in the long run, benefiting both investors and the network. CryptoQuant also advises its clients to monitor the on-chain indicators and the GBTC premium/discount for signs of market sentiment and direction.

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