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Tens of thousands of discounted GBTC shares to unlock in July! Institutions: Expected to boost Bitcoin spot buying

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Tens of thousands of discounted GBTC shares to unlock in July! Institutions: Expected to boost Bitcoin spot buying

Grayscale's Bitcoin Trust (GBTC) has long been trading at a premium to the spot market price of Bitcoin. However, since March this year, it has been trading at a discount. In July, a significant amount of GBTC shares held by institutions, equivalent to tens of thousands of BTC, will be unlocked, leading to bearish sentiment in the market. Nevertheless, asset management firm Arca and quantitative trading firm Amber Group have both suggested that the unlocking may actually result in Bitcoin spot repurchases.

Tens of Thousands of Discounted GBTC Unlocked in July, JPMorgan: Downward Pressure

According to data from bybt.com, over 30,000 equivalent shares of Bitcoin will be released in July, with up to 16,200 equivalent shares of Bitcoin being unlocked on July 13. JPMorgan analyst Nikolaos Panigirtzoglou had previously stated last month that the selling pressure in June and July would bring pressure to Bitcoin.

Another Argument: Unlocking Discounts Helps Spot Buying Interest

Crypto asset management company Arca's Chief Investment Officer Jeff Dorman stated that the unlocked GBTC will be sold on the open market, but it will not affect Bitcoin itself because the Bitcoin in the trust fund is not traded, only the shares are. Therefore, the price of GBTC may continue to trade at a discount.

Jeff Dorman explained that most buyers of GBTC are arbitrageurs, as there is arbitrage opportunity when it is at a premium, they can sell GBTC at a better price in the secondary market. They do this by:

  1. Borrowing Bitcoin
  2. Providing physical Bitcoin to create GBTC shares
  3. Shorting futures or spot hedging

Arbitrageurs suffer losses due to the discount on GBTC. After unlocking and closing positions, they must buy Bitcoin to make up for the borrowed amount, which in turn may bring buying pressure to the Bitcoin spot market.

Quantitative investment firm Amber Group holds a similar view:

Grayscale Suspends New Investments in GBTC, Seeks ETF

Grayscale announced in March this year that it had stopped accepting new funds into GBTC, and Grayscale's parent company DCG has also indicated multiple times its intention to repurchase GBTC shares. As it becomes easier to purchase Bitcoin and other crypto assets and with no incentive for premium arbitrage, GBTC is becoming less attractive, and Grayscale is seeking to transition to launch an ETF.