- Grayscale Bitcoin trust falls by 20% in a week, overshadowing Bitcoin's 13% drop.
- The diminishing premium on Grayscale is a risk factor that might hinder BTC price recovery.
- Bitcoin correlation with the equities market spells doom amid the lagging technical levels.
- The consistent rise in the Purpose Bitcoin ETF holdings suggests that investor interest is intact.
Grayscale gigantic Bitcoin trust is falling at a rate faster than the recent drop in the price of the leading cryptocurrency. Grayscale Bitcoin trust has plunged roughly 20% in less than a week compared to a 13% dip in BTC. On the other hand, the cryptocurrency correlation with the equity market is hitting new levels. With the equities market on a downward spiral, Bitcoin may continue with the dip to $38,000.
Grayscale Bitcoin Trust sinking premium
Grayscale has for a long time maintained a huge premium on the underlying asset but currently sits at 0.7%. As the premium disappears, investors who had a high-risk appetite during the bull ran seem to be disembarking from the boat.
Simultaneously, investors could be selling in panic and may rejoin once stability returns. It is worth keeping in mind that the bellwether cryptocurrency plummeted from $58,000 to $45,000 in less than 48 hours this week. This is a huge drop considering the consistency BTC has had over the last several weeks. According to the CEO of Grayscale Investments, Michael Sonnenshein, the disappearing premium is:
"Certainly a risk, no question about it, but ultimately price discovery in GBTC every day is driven entirely by market forces."
Bitcoin growing correlation with the equities market
The crypto-to-equities market correlation is high at the moment. Additionally, this correlation has been lock-step in the last year, with Bitcoin standing out. The equity market allows investors to trade company shares on either regulated exchanges or over-the-counter markets.
A comprehensive look at these markets reveals losses across the board, especially for the futures market. Most of the leading futures are in the red, led by S&P 500 VIX, Small Cap 2000, Dow Jones and NASDAQ. If Bitcoin follows these stocks, we could see a drop to either $42,000 or $38,000.
The equities market chart
Bitcoin uptrend remains undented
The above critical indicators suggest that the bull run is in jeopardy. However, we must account for the positive counters, such as the perpetual funding rates. A previous article highlighted important data points to keep in mind while looking at the funding rates.
A funding rate of at least 0.1% signifies euphoria, indicating a sell-the-dip position. On the other hand, a rate around 0.01% hints at the market being in the buy-the-dip range. Skew's current data shows that the perpetual funding rate is normalizing, which means that Bitcoin is nearing the buy zone.
Perpetual funding rate
The Purpose Bitcoin exchange-traded fund (ETF) has been in the market for a few weeks. The product became the first approved ETF in North America by a company based in Canada. According to Glassnode data, the Purpose Bitcoin ETF holdings continue to rise consistently and stand at 10,064 BTC at the time of writing. Despite the increase, Bitcoin has been falling, implying that the fund has a minimal effect on the price action.
Purpose Bitcoin ETF
According to a prominent analyst, 'Dave the wave,' the retracement this week has not done any significant damage to Bitcoin's parabola. If Bitcoin confirms support above the 23.6% Fibonacci retracement level, another bull run could be confirmed.
No real damage done to the parabola yet... pic.twitter.com/DF4V5XMLcg
— dave the wave (@davthewave) February 26, 2021
The 4-hour chart shows Bitcoin doddering above $46,000. Support at $45,000 has been tested twice, making it a formidable buyer concentration zone. On the upside, the immediate resistance at $47,500 must come down for gains, leading to the 50 Simple Moving Average (SMA).
BTC/USD 4-hour chart
On the other hand, the Moving Average Convergence Divergence (MACD) illustrates that Bitcoin is not out of the woods yet. As the MACD line (blue) drops further below the signal line, overhead pressure is bound to increase. Therefore, recovery to $50,000 is unlikely to come easy, while sellers may push toward $42,000.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
Bitcoin, crypto market remain in uptrend following 25 bps Fed rate cut
Fed Chair Jerome Powell stated that the FOMC lowered the Fed funds rate by 25 basis points. The rate cut comes after Bitcoin reached a new all-time high price upon Donald Trump's election victory. Ethereum and Solana also retained gains of 7% and 4%, respectively, following the rate cut.
XRP sees bullish momentum following $123 million increase in open interest
XRP exchange reserves in Binance and Upbit have declined by nearly $13 million. In the past three days, investors opened over $123 million worth of XRP positions. XRP needs to overcome key descending trendline resistance to stage a rally to $0.6640.
Coinbase launches wrapped Bitcoin token on Solana network
Crypto exchange Coinbase announced on Thursday that it has launched its synthetic Bitcoin token, cbBTC token, on the Solana network, marking its first token issuance on the Layer-1 platform. The new token will allow users to stake Bitcoin on Solana and use it as lending collateral.
Solana Price Forecast: Investors stake $1.3B SOL amid November winning streak
Buoyed by Donald Trump's victory at the polls, the global crypto market entered its third consecutive day on an uptrend on November 7, 2024. Amid the ongoing rally, Solana emerged one of the biggest gainers on Thursday, as demand for native memecoins further propelled market demand for SOL.
Bitcoin: New all-time high at $78,900 looks feasible
Bitcoin price declines over 2% this week, but the bounce from a key technical level on the weekly chart signals chances of hitting a new all-time high in the short term. US spot Bitcoin ETFs posted $596 million in inflows until Thursday despite the increased profit-taking activity.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.