This Giant Bank Is Wary of Bitcoin Selloff, Impact of Grayscale Liquidation

JPMorgan analyst Nikolaos Panigirtzoglou warned of a potential strong sell-off in Bitcoin (BTC) amid the recent sluggish market.

In a post on LinkedIn on Friday (1/19/2024), Panigirtzoglou discussed the impact of the approval of the conversion of Grayscale's Bitcoin Trust (GBTC) into a spot Bitcoin ETF by the US Securities and Exchange Commission (SEC) on January 10.

This approval, along with 10 other approvals, marks an important milestone for the crypto market.

Bitcoin Price Decline and Profit-Taking Dynamics
Since the launch of the spot Bitcoin ETF, Panigirtzoglou recorded a drop of over 10 percent in the price of Bitcoin. He attributed it to profit-taking activities triggered by the dynamics of buy the rumour, sell the fact.

Bitcoin's price surged to over $47,000 in anticipation of spot Bitcoin ETF approval, but declined after confirmation. At the time of writing, Bitcoin is trading at $41,697.

Outflows of US$1.5 billion from Grayscale's GBTC funds have played a crucial role in this decline.

"Investors who had previously purchased GBTC at a significant discount to Net Asset Value (NAV) over the past year, anticipating conversion to an ETF, chose to exit the Bitcoin space entirely rather than switch to a cheaper spot Bitcoin ETF," Panigirtzoglou said.
It also previously estimated that there would be up to $3 billion invested in GBTC in the secondary market during 2023 to take advantage of discounts to NAV, expressing concerns about potential additional outflows.

With $1.5 billion already withdrawn, he speculated that there could be an additional $1.5 billion waiting to exit the Bitcoin space through profiteering at GBTC.

This scenario could put additional selling pressure on Bitcoin in the coming weeks.

Since Jan. 12, Grayscale's Bitcoin ETF has witnessed cumulative outlays of 50,106.59 BTC, worth over $2 billion. This large drawdown further emphasizes the impact of converting GBTC into a spot Bitcoin ETF.

Panigirtzoglou also analyzed the performance of other spot Bitcoin ETFs launched on Jan. 11, specifically mentioning Blackrock's Ishares Bitcoin Trust (IBIT) and Fidelity's Wise Origin Bitcoin Fund (FBTC).

In addition to GBTC, the ETF experienced significant inflows of US$3 billion in the four days since its launch.

JPMorgan analysts observed that these inflows were comparable to previous Bitcoin product launches, such as the CME's introduction of Bitcoin futures or futures-based Bitcoin ETFs.

According to Panigirtzoglou, most of the incoming US $ 3 billion reflects the rotation of existing Bitcoin vehicles, including Bitcoin futures ETFs, which have experienced expenditures of around US $ 300 million since the previous Thursday (18/1/2024).

Additionally, retail investors appear to be switching from digital wallets held by retail exchanges/brokers to cheaper spot bitcoin ETFs.

Article originally appeared on Blockchainmedia
Source : Investing.com
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