Nonetheless, Glassnode Insights, a weekly newsletter published by the on-chain data analysis service Glassnode, anticipates a rally in the price of Bitcoin in the coming sessions, based on a chain indicator that serves as a metric to assess the price of Bitcoin. institutional interest in cryptocurrency.
Enough with the discounts
Dubbed Grayscale Premium, the metric tracks capital flows in the Grayscale Bitcoin Trust (GBTC) – the largest investment vehicle for institutional investors looking to gain exposure to the Bitcoin market.
A rising grayscale premium shows a higher influx of bitcoin into the Bitcoin Trust in grayscale. This prompts GBTC to trade at a premium over the spot price of BTC. Conversely, a drop in Grayscale Premium reflects a falling inflow of BTC, prompting GBTC to trade below the Bitcoin spot price.
The Grayscale Bitcoin Trust attracted over 50,000 BTC to its reserves throughout January 2021 and the first half of February 2021. GBTC traded at a 10-20% premium during said period, showing a growing institutional interest.
Nevertheless, the premium fell below 10% during the first half of February. GBTC began trading with discounts from spot prices. During the same period, the BTC / USD spot rate rose from $ 30,000 to almost $ 65,000 in April. By that time, the GBTC premium had fallen below zero.
On May 13, just before the Bitcoin market crash led by Elon Musk on May 19, the GBTC premium hit a record low of 21.23%. He showed that institutional demand for bitcoin investment products had weakened since the end of February.
But the May 19 price drop improved the Premium grayscale, Glassnode Insights noted. The measure fell back to -3.8%, suggesting that institutional interest, “or the very conviction of the arbitrage trader”, has increased in line with the fall in Bitcoin spot prices.
The Canadian Purpose Bitcoin ETF has seen a similar discount path, with constant capital inflows through late April and early May and outflows later, a sign of weakening institutional demand. Glassnode noted:
“However, like the GBTC, demand flows appear to recover significantly after the price correction, with inflows resuming at the end of May. “
Buy falling Bitcoin prices?
The contrast between falling Bitcoin spot rates and recovering GBTC prices has shown that institutions have not abandoned the crypto market altogether. Instead, it shows that the sale motivated investors to gain exposure to both the Grayscale Bitcoin Trust and the Canadian Purpose Bitcoin ETF. Glassnode wrote:
“The GBTC and Purpose ETF institutional products are showing signs of recovery despite the collapse in prices, which points to renewed institutional interest. “
The analytics portal also referenced metrics that showed the majority of sellers in the latest BTC price drop appeared to be short-term holders. Meanwhile, long-term holders bought the price drop “with conviction.”