As the infamous Grayscale Bitcoin Trust reaches much-anticipated six-month lock-up maturity, Grayscale shares (GBTC) equivalent to more than 40,000 Bitcoin (BTC) are due to be unlocked for investors.
The Grayscale Bitcoin Trust has grown to become the world’s largest crypto-asset fund, and is backed by holdings in excess of 650,000 BTC – accounting for around 3% of Bitcoin’s total supply.
The fund is primarily used at an institutional level as a means of investing in BTC without actually holding it, with the shares representing the value of the underlying Bitcoin. GBTC traditionally trades at a premium to the native asset value (NAV) pricing for BTC. However, 2021 has seen a persistent discount relative to its NAV.
The wave of investors that flocked to Grayscale at the beginning of this year were subject to a mandatory six-month lock-in period for their stock. Many that bought GBTC during the January tranche will be keen to finally take profit by selling shares on secondary retail markets later this week.
This has led to near hysterical FUD surrounding the unlocking schedule, with misunderstanding of the complex asset driving rumours and scare stories about an impending BTC dump.
Many analysts are keen to dispel these fears and provide reassurance to the market. Laurin Bylica – the Co-Founder of a decentralised crypto finance project www.TheStandard.io stressed it is shares not Bitcoin that will be unlocked.
“We have to notice that it is not BTC getting unlocked, as it’s just the Grayscale shares (GBTC), and as the trust has no redemption mechanism, GBTC cannot sell its Bitcoin holdings. So the unlocking of GBTC shares should not move the spot price of BTC,” he said.
“However, misleading and complex information lets investors worry and, therefore, can create short-term bearish anxiety.
“Additionally, a sell-off of GBTC could put additional pressure on Grayscale to increase their share buyback strategy to lower the discount to the NAV of the trust and medium-term, create a bullish trend for GBTC shares.”
His thoughts were echoed by Kirill Suslov, CEO of trading app TabTrader.
“Price pressure may actually never realise,” he said.
“It depends on who the investors are. Usually, institutions rebalance their portfolio according to the mandate.
“So if they are underwater, because the Bitcoin price has dropped, they will actually have to buy more to keep the mandated allocation to this asset class” he said.
Needless to say, all eyes will be on Sunday July 18, with that day’s unlocking the equivalent of more than 16,000 BTC ($500m+).
The impending GBTC January tranche release comes amid news of Senator Patrick Toomey’s investment in the Grayscale Bitcoin and Ethereum Trusts.
A Congressional Periodic Transaction Report filed on July 7 revealed the Republican from Pennsylvania had declared two personal cryptocurrency investments.
The first in Grayscale Bitcoin Trust (GBTC) and the other in Grayscale Ethereum Trust (ETHE). Each investment is estimated to be worth between $1,000 and $15,000.
Among the most outspoken congressional figures surrounding crypto regulation, Toomey has recently sent a letter to Janet Yellen (Biden’s Treasury Secretary) urging major revisions to the cryptocurrency regulatory proposals put forward by the Financial Crimes Enforcement Network (FinCEN).
As a staunch libertarian the senator is especially concerned about increased government encroachment on the DeFi world.
“[The proposals] would have a detrimental impact on financial technology, the fundamental privacy of Americans, and efforts to combat illicit activity.” he argued.
Toomey isn’t the first Senator to advocate BTC investing. Recently, Wyoming Senator Cynthia Lummis recommended Americans hold BTC in place of retirement savings, fearing debasement of the USD and climbing inflation.
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As with any investment, it pays to do some homework before you part with your money. The prices of cryptocurrencies are volatile and go up and down quickly. This page is not recommending a particular currency or whether you should invest or not.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice.
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