Will the huge dump of GBTC affect the Bitcoin price? This is how BTC is going to react next
The past two weeks have been a nightmare for the entire crypto space as crypto investors were forced to liquidate their huge holdings in FUD after Sam Bankman-Fried’s FTX collapsed.
The FTX meltdown has raised concerns about Bitcoin-linked assets and ETFs as institutional investors continue to dump their positions.
Holdings of Grayscale’s Bitcoin Trust (GBTC) have been significantly liquidated amid the market turmoil, providing a perfect opportunity for other crypto firms to buy the dip and push Bitcoin’s price up.
The crypto market is embroiled in the recent bankruptcy filing by FTX as investors experience less confidence in buying the dip, causing leading assets such as Bitcoin to fall close to their bearish consolidation zone.
Digital Currency Group Increases GBTC Buys!
GBTC, which gives users exposure to Bitcoin without any direct investment, has fallen sharply amid FTX’s collapse. GBTC has given a record 43% discount (worth $10.57 billion) to the price of the underlying asset Bitcoin.
GBTC is significantly linked to the BTC price as the world’s largest Bitcoin ETF controls 3% of the total Bitcoin circulation; therefore, the fluctuations in GBTC’s price move closely with Bitcoin’s price.
However, several investment firms see the decline of GBTC amid the market crash as an excellent opportunity to bring a bullish wave to their portfolios by accumulating GBTC at a discounted rate.
In fact, Digital Currency Group (DCG), a crypto investment firm that is the parent company of Grayscale, is rushing to fill its bags with GBTC as the price experienced a sharp drop following a massive selloff by 3AC and BlockFi.
A prominent market analyst, Joe Consorti, so“3AC dumped 100% of its bags. BlockFi dumped 100% of its bags. DCG is the largest holder of its subsidiary bitcoin trust.”
However, DCG isn’t the only one enjoying the downturn and taking advantage of the lucrative discount to Net Asset Value (NAV) as Cathie Wood’s Ark Investment Management scooped up 588,586 more GBTC shares (~$5.4m) as CEO looks bullish out with that in mind. future price.
Joe further states that the main motive behind this extreme accumulation of GBTC is to minimize the impact of selling pressure at the institutional level and accelerate the NAV to sell at a high price and exit the market at a staggering profit.
GBTC should act as a pain reliever for Bitcoin
Still, the best strategy to overcome the current market situation and cover losses is to accumulate more shares at a discounted price.
Also, a famous strategist, JPMorgan, outlined a deep correlation between GBTC and BTC as massive investment inflows into BTC’s ETFs have significantly pulled Bitcoin’s price from a bearish zone.
Simply put, investors’ interest in GBTC is a catalyst for Bitcoin’s bullish trend.
At the time of writing, Bitcoin is trading at $16,649 with no signs of improvement on the price chart.
However, the recent GBTC purchases may build a small buying pressure for BTC, pushing the price to the immediate resistance level of $17K.
Balance of Power initiated a slight upward retracement to 0.23, but is still trading in a negative region signaling an extended range.
However, the macro conditions are now better and that could make it easier for BTC to pave its way to a bullish path soon.
To overcome the current bottom range, BTC needs to trade above $17K and break the Bollinger band’s upper limit of $18.5K.
However, things could change if GBTC fails to influence the BTC price and a drop below the $16K support region for BTC could lead to a sharp decline to $14.5K.
