The biggest GBTC discount in history – 5 things to keep an eye on in Bitcoin this week

 The biggest GBTC discount in history – 5 things to keep an eye on in Bitcoin this week

Uncertainty across the board implies that Bitcoin's bull market will come to an unusual finish in the fourth quarter this year, but a price floor may be closer than many believe.

Analysts are looking for a bottom in Bitcoin (BTC) as the week begins, but it may not mean a drop to $40,000 or below.

Bitcoin supporters now face a new week of adverse sentiment across the global economy, as risk appetite remains low, after an average weekend.

There appear to be few triggers to help BTC/USD recover higher in time for the new year, given the lack of a "Santa rally" for nearly everyone. On-chain metrics, meanwhile, remain solid, and miners are reluctant to invest.

With Christmas approaching, Cointelegraph examines what to watch for this week in terms of determining where Bitcoin is headed.

For Bitcoin bulls, $50,000 appears to be a long way off.

After failing to make any substantial gains over the weekend, the market's focus is now shifting to a potentially violent "bottoming."

BTC/USD is firmly set in a familiar range at $46,000, with bulls failing to find the momentum needed to launch a new attack on the $50,000 mark.

Although buying is taking place, particularly among smaller retail investors, seasoned market participants are expected to see lower levels.

For popular trader Pentoshi, these could nonetheless avoid a retest of $40,000. In a tweet Sunday, he highlighted major exchange Bitfinex and its large-volume traders as a likely source of support.

“Finex makes the tops and bottom on $BTC. Believe this is a similar situation where they will just absorb selling at these key levels. See Sep post 40.7k bottom,” he wrote, referencing market events from the end of September.

“Now looking for 42-46k bottom imo.”

BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView

Others were more optimistic, with fellow trader Galaxy calling for a “green week” led by altcoins.

With 10 days left of the year, a surprise finish to 2021 is also not being universally ruled out when it comes to crypto markets.

In its latest market update, trading platform Decentrader brought up Bitcoin’s Advanced NVT indicator as a possible springboard to higher price levels.

Still bottoming, the historical cycle metric could yet produce a surprise for traders, having almost hit its lowest “overbought” level ever.

“Will we see the same this time with a bounce and rally into the Christmas break? Or will we see more year-end profit-taking?” the update summarized.

“Right now $BTC is at a key decision point level, so it would certainly be wise to manage one’s risk carefully until a clear trend emerges.”

Bitcoin Advanced NVT signal (light blue) chart. Source: LookIntoBitcoin

Miners keep hodling

One cohort of Bitcoin hodlers in no mood to sell at current prices is miners, whose outflows have reached their lowest in three months.

According to data from Glassnode, miner outflows have almost halved in just over a month, reiterating the turnaround in market dynamics since the all-time highs.

A similar dramatic fall came in September, with spot markets then bottoming two weeks later. This month’s action, therefore, has historical precedent.

Bitcoin miner outflows 1-hour chart (7-day moving average). Source: Glassnode/Twitter

Further data shows that unspent supply is about to hit all-time highs, the culmination of a hodling trend from miners that began in 2020.

In other words, miners are in no hurry to spend their block subsidies once a new block is successfully mined.

Macro swaps 21-month bull run for volatility

According to reports this week, macro volatility is expected to continue through 2022, causing concern among investors.

An unexpected bout of bearishness, similar to Bitcoin, suggests that Q4 this year may conclude on a whimper, denying the market its traditional "Santa rally."

Both the coronavirus and political upheaval in the United States are to blame, with one senator rejecting President Joe Biden's doomed $2-trillion spending bill.

Stocks in Asia dipped on the day, and investors were cautious ahead of the U.S. open.

“Investors should be prepared for Covid to continue to be a main factor in market performance heading into 2022,” Robert Schein, chief investment officer at Blanke Schein Wealth Management, told Bloomberg.

“After the bull run we’ve seen over the past 21 months, investors aren’t as used to prolonged periods of volatility.”

Schein was referring to the global market rebound that began in March 2020, when a cross-market slump sent Bitcoin to $3,600 lows.

In the midst of it all, the US currency is strengthening, which could pose a new headwind for BTC, which is historically inversely associated with the greenback.

The dollar currency index (DXY), which gauges the strength of the dollar against a basket of major trading partners' currencies, was at 96.6 at the time of writing, after nearly reaching 97 late last week.

 

U.S. dollar currency index (DXY) 1-day candle chart. Source: TradingView

GBTC reaches biggest ever discount

Bitcoin under $50,000 should arguably look like a bargain to large-volume investors, but one industry yardstick tells a different story.

The Grayscale Bitcoin Trust (GBTC), the largest institutional BTC vehicle, currently trades with a discount of over 20%, data from on-chain analytics site Coinglass confirms.

GBTC price vs. holdings vs. GBTC premium chart. Source: Coinglass

The market behaviour of GBTC, which expects to convert to a Bitcoin spot price exchange-traded fund (ETF) next year, has changed dramatically in the second half of 2021.

According to Cointelegraph, after trading at a premium for the first few years of its existence, the investment fund now provides institutional buyers "bargain basement" BTC.

The discount has never been higher, at 22.95 percent as of Dec. 18, a strange phenomena that some think leads to an even stranger lack of demand for GBTC shares.

 

Regulatory uncertainty surrounding spot-based ETFs remains a talking point for the United States. As only futures-based products received the green light this year, the industry continues to rally around the issue, arguing for a change in 2022.

Last week, major U.S. exchange Coinbase endorsed plans for GBTC’s conversion.

“GBTC shares can trade at premiums or discounts to its net-asset value (i.e., the value of the Bitcoin it holds). Such premiums and discounts can be dramatic: GBTC has traded over-the-counter at a premium to its net-asset value that has ranged as high as 142% and a discount to its net-asset value of 21%,” a dedicated letter to the U.S. Securities and Exchange Commission reads.

“If Arca’s proposal is approved, GBTC will be able to use the ETP mechanics that 4 minimize the variations between its share trading prices and the net-asset value (‘NAV’) of its Bitcoin holdings, and as a result, U.S. retail investors will be able to gain access to the Bitcoin market through the familiar ETP structure and at trading prices that stay more closely aligned with spot Bitcoin trading prices.”

Spot-based ETFs are already very popular in Canada, as well as Europe and other parts of the world.

Cold feet turn to ice.

While there may not have been much in the way of spot price action over the weekend, it is no consolation for concerned traders.

The Crypto Fear & Greed Index shows that sentiment about cryptocurrency is as low as it has ever been.

The Index is back in the "extreme fear" zone as of Monday, after failing to break even 30/100 throughout December.

For comparison, at the all-time highs of $69,000 on Nov. 9, Fear & Greed measured 84/100 — “extreme greed.”

As popular trader and analyst Rekt Capital often reiterates, however, such extreme fear “precedes financial opportunity.”

“This current BTC downtrending channel reminds me of the downtrending channel BTC formed in May,” he added Sunday, referencing the events after the China mining ban when BTC/USD reversed 50% and Fear & Greed bottomed multiple times at 10/100.

After that bottoming structure and consolidation, it took just a single month for the Index to return to the “extreme greed” zone.

Crypto Fear & Greed Index. Source: Alternative.me
 
kobocrypto comments are now open to all! Please keep discussions civil and on-topic.

DISCLAIMER

The opinions expressed here do not reflect those of kobocrypto.com or any of its employees.

Post a Comment

0 Comments