Offering one of the largest Bitcoin products in the market, Grayscale is preparing for record prices. The firm’s BTC products tumbled almost 70%.
Grayscale’s Bitcoin products face tremendous selling pressure
Grayscale’s Bitcoin Trust product GBTC is offering a record discount on the potential bankruptcy of Digital Currency Group. At DCG’s last board meeting, the issue of possible liquidation of the GBTC position was raised. In this way, GBTCs would be counted and Digital Currency Group would be able to repay some of its obligations.
Recently, DCG launched an emergency fundraising effort to cover a $1 billion deficit in their balance sheet caused by Genesis’ bankruptcy. Not surprisingly, all possible funds on the market rejected such a dubious offer. The company now says the only solution is to sell its assets.
What if GBTC sales start?
If large GBTC traders start liquidating their positions, there will be a massive 70% discount in NAV. This will present a great buying opportunity for new investors. But it will be a disaster for long-term shareholders. Even if investors bought GBTC at a 20% discount in late 2021, they still suffered huge losses. Behind this was the constantly falling price of Bitcoin.
Bitcoin at two-year lows
The drop on November 21 surprised most investors, given the recovery phase after the FTX disaster. However, BTC is still struggling to keep up with the selling pressure. Analytical firm Santiment explained the reason for this. According to firm analysts, the first drop to $15,800 in two years was due to FUD due to a lack of trust in centralized exchanges that accelerated in the wake of the FTX crisis. Santiment analysts recently wrote on Twitter:
Bitcoin dropped below $15.8k for the first time in 2 years and address activity hit a 6-month high. FUD from a lack of trust in exchanges has historically benefited the patient, as we see BTC continue to take self-surveillance.
🧘 #Bitcoin dropped below $15.8k for the first time in 2 years, and address activity spiked to its highest level in over 6 months. #FUD due to lack of trust in exchanges historically benefits the patient, as we see $BTC continue moving into self custody. https://t.co/lz5FOkIkRX pic.twitter.com/6PKUA29nDE
— Santiment (@santimentfeed) November 21, 2022
Most investors in derivatives are closing their positions to attract remaining funds and reduce their portfolios. Thus, a huge increase in selling pressure is pulling Bitcoin to levels not seen in years. This thesis is also confirmed by the fact that investors have started to store their funds in cold wallets instead of exchanges. When the opposite happens, investors flock to exchanges to leverage and maximize profits or invest in altcoin projects.
What’s next?
From here, the most likely scenario is the continued stagnation of the market due to lack of liquidity and new entries. According to data from CoinShares, institutional investors are still staying away from cryptocurrencies. According to analysts, the situation is unlikely to change until tight monetary policy in the US takes hold and investors avoid additional exposure to risk. As you follow on Kriptokoin.com, Bitcoin is currently trading at $ 16,000. It briefly dropped below this level around 18:30.
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