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JPMorgan Report Says Profit-Taking Cycle in GBTC is Over

JPMorgan Report Says Profit-Taking Cycle in GBTC is Over

According to a recent report by JPMorgan, the largest cryptocurrency asset manager, Grayscale Investments, has seen a significant decline in its GBTC outflows, which could ease the selling pressure on bitcoin.

Grayscale Bitcoin Trust (GBTC) is a popular investment vehicle that allows investors to gain exposure to Bitcoin without having to deal with the technical aspects of buying and storing the cryptocurrency. GBTC trades at a premium or discount to the net asset value (NAV) of its underlying bitcoin holdings, depending on the supply and demand dynamics.

In late 2020 and early 2021, GBTC experienced a massive inflow of institutional investors, who bought the shares at a high premium and locked them for six months. However, as the lock-up period expired, many of these investors decided to take profits and sell their shares, creating a negative GBTC premium and putting downward pressure on bitcoin’s price.

JPMorgan analysts estimated that the GBTC outflows in January 2024 amounted to 139,000 bitcoins, equivalent to $6.2 billion at current prices. This represented a significant increase from the previous months when the outflows were around 40,000 bitcoins per month.

The Impact of GBTC on Bitcoin’s Supply and Demand Dynamics

JPMorgan Report Says Profit-Taking Cycle in GBTC is Over

However, the report also noted that the GBTC outflows have slowed down considerably in the past few weeks, suggesting that the profit-taking cycle is largely over. The analysts wrote:

“The selling pressure from GBTC outflows appears to have peaked in early January and has declined significantly over the past few weeks, as the amount of bitcoin equivalent to GBTC outflows has dropped from an average of about 15,000 bitcoins per week in December and the first half of January to about 5,000 bitcoins per week since mid-January.”

The report added that this could have a positive impact on Bitcoin’s price, as the reduced selling pressure from GBTC could allow for a recovery of the GBTC premium and a revival of institutional demand. The analysts concluded:

“We believe that a normalization of the GBTC premium, which has been negative since mid-February, is likely to be a positive catalyst for bitcoin as it may signal a renewed interest from institutional investors, who have been largely absent from the bitcoin market since the second half of 2023.”

Following the approval of several Bitcoin ETFs, the cryptocurrency reached a high of over $49,000. However, it has since declined and remained under $40,000 for most of the week. Currently, BTC is trading at nearly $42K, marking a 5.5% increase in the last 24 hours.

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