Discounted Stocks Hodling BTC To Trigger The Next Bitcoin Rally
With the BTC price gaining some solid foundations for the next leg up, the next Bitcoin rally could be triggered by other market products with Bitcoin as their main holding.
And while both products have seen some fantastic gains over the last 12 months, this correction in both products, could attract institutional investors seeking an easier route into Bitcoin, and get the next Bitcoin rally going.
Grayscale Bitcoin Trust (GBTC) On Offer
Trading at almost 12% discount, the Grayscale Bitcoin Trust (GBTC) is likely to attract investors and could trigger a Bitcoin rally pushing the price up to $100,000, says Bloomberg Intelligence senior commodity strategist Mike McGlone.
GBTC has historically traded at a premium, but closed yesterday -11.59%, its biggest discount since launching, and a negative premium has historically signalled a bullish indicator for the Bitcoin price, according to McGlone.
‘Grayscale Bitcoin Trust discount may signal march to $100,000.’ suggests the Bloomberg analyst. ‘Bitcoin’s end of February price disparities on U.S. regulated exchanges portend a firming price foundation, if history is a guide, and are evidence of just how nascent the crypto is.’
GBTC has historically traded at a high premium, meaning the market price of its shares in the over-the-counter (OTC) secondary market has been higher than its net asset value (NAV).
The negative premium indicates GBTC shares are trading below their NAV, which has previously attracted investors and kicked off past major Bitcoin rallies.
The last time GBTC was trading at a negative rate was in March 2017, when the BTC price rallied from just over $1000 to a peak of almost $20,000 just 9 months later.
In March 2020, the Grayscale Bitcoin Trust traded at a discount again, but not negative. This was at the beginning of the Bitcoin price rally from $5,500 to a recent high of $58,000. As the BTC price was peaking, many GBTC investors started selling, and the price has been falling since the start of 2021.
It’s Not Only GBTC That Could Trigger The Next Bitcoin Rally
These discounts have proved a catalyst for previous major Bitcoin rallies, but the market competition is different today. The last time GBTC was trading at a discount there were no Bitcoin ETFs on the market. Now we have two, and investors could be attracted to these more liquid and cheaper trading products.
The Purpose Bitcoin ETF only launched last month and is already a $713 million asset, not bad considering the BTC price has halted during the ETFs inception.
At a 1% management fee the Purpose ETF is much cheaper than GBTC, and being an ETF it is much more liquid, too. This is already attracting significant interest, and could set off the next Bitcoin rally.
Investors could also be attracted to MicroStrategy (MSTR), which is also trading at a discount. After reaching a recent high of $1315 in February, the Nasdaq-listed “proxy Bitcoin ETF” is now over -50% down at $620.
Arguably the biggest catalyst for Bitcoin’s rally from $10,000 to its recent $58,000 ATH, was the MicroStrategy news that it was making Bitcoin its main corporate treasury reserves.
The company has since invested over $2 billion buying Bitcoin, and the stock price has risen significantly from its first announcement, as institutional investors look for a way to gain easy exposure to Bitcoin.
So, with the MSTR now at a big discount from its recent high, it could also attract more investment and possibly help kickstart another Bitcoin rally.
Bitcoin Traded Products On Offer Will Help The BTC Price
The BTC price has been building solid foundations in the high $40,000s after a significant correction from its ATH. And while Bitcoin is on offer, trading products such as GBTC and MSTR have much bigger discounts.
MicroStrategy (MSTR) is still buying more Bitcoin and now holds 91,064 BTC on its balance sheet. It will likely attract more bigger investors who seek an easier route into Bitcoin, especially now its price is significantly lower.
The Grayscale Bitcoin Trust was trading at a 35% premium in December 2020, and although the price fluctuates, an all-time low at a time when Bitcoin ETFs are hitting the market could be a concern.
A concern for Grayscale, but not the BTC price, which will benefit from whichever trading products are holding Bitcoin under management.