The Cryptocurrency market would experience a major shakeup in mid-July for unlocking bitcoins on the sale of shares in “Grayscale Bitcoin Trust” GBTC, one of the largest crypto funds-if not the largest- in the world.
Why this happens:
GBTC has some very rich institutional investors who pay a specific commission to buy bitcoins- and other cryptos- through GBTC, but in return they have not to worry about managing their funds and storage of bitcoin, as all of these services are including in the sale. However, there is one specific rule for the investors: their bitcoins-or other cryptos- would be locked for a period of six months, before they can have access to them. So this is an ongoing story. But why is July important: the answer lies in unusual popularity of the GBTC in December 2020 and January 2021. In these two months a very large number of institutional investors purchased bitcoins through GBTC and it is expected that they have been given access to their purchases in June and July 2021. Although some of them had their bitcoins unlocked, but the big day is going to be Sunday 18th of July, in which a considerable amount of bitcoins will be unlocked. That will make Monday 19th July an interesting trading day.
The quantity:
A total of 40k of bitcoins would be unlocked in July, but the big day is July 18th, in which a total number of 16,000 bitcoins will be released. With todays’ rate (?34,736 per bitcoin), this means unlocking of more than $555m assets in one day and almost $1.4b in a month.
How this affect the market:
This could be a highly volatile month for bitcoin, unlocking 40,000 bitcoins can’t be without consequences but maybe the outcome would not be as huge, as some analysts predicts: here are my reasons:
- Some investors would dispose their assets to the market immediately, there is no doubt about that. But is this a significant amount of investors? I very much doubt it.
- Unlocking an asset does not necessarily mean that this asset would be offered in the market immediately. Many investors may decide to keep their bitcoins for longer term.
- Not all the investors purchased their bitcoins with their cash. Some of them entered the trade by locking the borrowed coins and this group need to purchase more bitcoins to repay their loans.
- Psychologically, the market has been prepared for this shake up for months. This is not a sudden shock to the market and traders and investors now what they may expect on Monday 19th
Whatever happens, watch out for mid-July and in particular watch the market on Monday 19th July. Some lessons may be learned for future.
Good luck.
