The global cryptocurrency market has witnessed a positive trend despite the formidable bearish pull. The recent corrections for Bitcoin (BTC), Binance Coin (BNB), and others indicate that gains have slowed down. This comes as the market continues to face turbulence amid the lowered gains. While there have been efforts to revive Bitcoin price value, no change has proven imminent, and the market continues to suffer, as evidenced by fluctuating capital influxes.
Bitcoin price has not managed to recover the gains lost since last week when the flagship crypto ascended above the $18,000 mark. It currently holds below $17,000 after facing rejection at $18,400 last week. At the time of writing, Bitcoin price is $16,542, down by 1.1% in the last 24 hours and 7.2% in the last seven days.
The bear sentiment for the big crypto comes as investors fear another sell-off is coming following news that Grayscale is weighing a tender offer for 20% of shares in its deeply-discounted Bitcoin Trust.
Grayscale Considers Selling $2 billion GBTC
With the Grayscale Bitcoin Trust (GBTC) recording lower discounts day after day, the CEO of the firm has revealed considerations to shore up investors in case the trust fails to be converted into a Bitcoin ETF.
Grayscale Bitcoin Trust, the world’s largest digital asset investment company, is solely and passively invested in BTC and is among the first securities solely invested in and deriving value from BTC price. This exposes investors to Bitcoin as security while avoiding challenges related to buying, storing, and safekeeping BTC directly.
In June, Grayscale filed a lawsuit against the Securities and Exchange Commission (SEC) after the regulator rejected the firm’s Bitcoin ETF application for yet another time. In a year-end letter to investors dated Monday, December 19, Grayscale CEO Michael Sonnenshein wrote:
“If we are not successful in our legal challenge in all applicable courts–and we conclude there is no possibility of legislative or regulatory clarity that would allow for the conversion of GBTC to an ETF within a reasonable timeframe–we would explore other options to return a portion of GBTC’s capital to shareholders.”
The Grayscale CEO also assured that the company is still committed to getting its application approved and converting its ailing Bitcoin trust into a spot ETF.
Noteworthy, the SEC has only approved Bitcoin futures ETFs and is yet to approve any spot Bitcoin ETF in the U.S. Bitcoin futures ETFs are linked to bets on the future price of BTC as opposed to the current price. Commenting on the status, Grayscale said:
“No justification for SEC to deny Bitcoin Trust Conversion into ETF.”
Meanwhile, Grayscale is now considering whether to make a tender offer for 20% (almost $2.08 billion) of the current shares of the Grayscale Bitcoin Trust (GBTC).
GBTC is structured to trade at a premium or discount relative to the price of Bitcoin in the market. However, GBTC has been trading at a considerable discount rate because of the prolonged crypto winter this year. The first time GBTC traded at a discount was in February last year. The eagerness demonstrated by Grayscale CEO in trying to convert GBTC to a spot Bitcoin ETF follows the growing divide between GBTC price and the price of the underlying BTC it is meant to track.
To be able to make an offer of such demeanor, the firm would require the approval of its shareholders to alter the GBTC trust agreement, which, as it stands, is against the repurchasing of GBTC. Additionally, Grayscale would also need the SEC to waive specific requirements relating to the execution of tender offers. Should these approvals pass, Grayscale expects to “continue operating GBTC without an ongoing redemption program until we are successful in converting it to a spot Bitcoin ETF.”
Based on YCharts, shares in GBTC are currently selling at discounted rates of up to 48.57% to actual Bitcoin. The current discount comes in the wake of market volatility and the shareholders’ inability to redeem their shares. Accordingly, there is no way investors can buy discounted shares, redeem the BTC, and sell the flagship crypto for a profit to arbitrage away the difference.
Should Grayscale achieve its Bitcoin ETF dream, then this trade would become readily available. The trust traded at a 49% discount on Friday compared to the Bitcoin price. Currently, Grayscale only allows for the creation of GBTC shares but does not allow the redemption of the shares. Nevertheless, the firm continues to trade at a massive discount despite an unending crypto winter.
Bitcoin Price Rides on Grayscale Options For Its GBTC
BTC price has not yet managed to recover the gains lost since mid-last week after the flagship cryptocurency rallied north to the $18,400 mark. The support at $16,190 played a crucial role in preventing the BTC price from dipping further. The current sentiment is negative as the pionner cryptocurrency trades in a secodn straight bearish session as shown on the daily chart below.
BTC/USD Daily Chart
At press time, was fighting immediate resistance from the $16,850 level. BTC price was also facing resistance from the barrier at the $17, 445 level, embraced by the 50-day simple moving average (SMA) and another around $17, 865.
The moving averages were facing down and the position of the moving average convergence divergence (MACD) below the zero line in the negative region indicated that the Bitcoin price movement was more biased to the downside. The MACD had also send a sell signal on the daily chart when it crossed below the signal line (orange line) earlier on Monday. This is suggested that the path with the least resistance would be to the downside.
A daily candlestick close underneath the support at $ 16, 500 may leave the BTC price in the threat of plunging first toward $16,190 and later to the $15,460 swing low. If the worst happens, the Bitcoin price could go as low as $12K, a point a section of analysts call the ‘ultimate bottom.’
The bearish sentiment could be invalidated by a daily close above the major moving averages (SMAs), such as the 50 and 100-day SMAs at $17, 445 and $18,560 respectively. Such an outcome would support the price resuming its uptrend to breach the $20K level potentially.
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