Kraken Casts More Doubt on JPMorgan Call Over Grayscale Bitcoin Trust ‘Unlocks’

Kraken is disputing the premise that a wave of GBTC shares hitting the secondary market will drive the price of bitcoin lower.

AccessTimeIconJul 7, 2021 at 5:33 p.m. UTC
Updated Sep 14, 2021 at 1:22 p.m. UTC
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Cryptocurrency exchange Kraken has joined a growing chorus of analysts suggesting that a wave of new Grayscale Bitcoin Trust (GBTC) shares hitting secondary markets might be good for bitcoin prices.  

The Grayscale Bitcoin Trust, the world’s largest digital-asset fund, allows institutional investors to gain exposure to bitcoin through shares in the trust, which now holds 654,600 BTC. That’s about 3% of the cryptocurrency’s total supply. (Grayscale is a unit of Digital Currency Group, which also owns CoinDesk.) 

The institutional investors can buy into the fund at its net asset value – essentially, the value of the underlying bitcoin – but they are subject to a lockup period of six months. Because so many investors bought into the trust early this year, many of those lockups are now expiring, meaning more GBTC holders will soon be able to sell their shares on the secondary market.  

A widely cited report from the JPMorgan suggested that the GBTC "unlocks" might lead to “downward pressure on GBTC prices and on bitcoin markets more generally.” But cryptocurrency analysts and investors, including Amber Group and Arca Funds, have suggested that the GBTC unlockings might actually be good for bitcoin prices.  

According to a report from Kraken Intelligence, recent data indicates that close to 40,000 BTC worth of GBTC shares will unlock in July. That works out to about $1.36 billion, based on a bitcoin price of $34,000. 

“Despite 40K BTC worth of GBTC shares unlocking in July, market structure suggests that the unlock will not weigh materially on BTC spot markets anytime soon, if at all, like some have claimed,” Kraken Intelligence wrote in the report. 

Unlockings of the Grayscale Bitcoin Trust (GBTC) shares are scheduled to accelerate this month.
Unlockings of the Grayscale Bitcoin Trust (GBTC) shares are scheduled to accelerate this month.

According to regulatory filings, most of the shares that will be unlocked in July are owned by large institutions. Kraken said that those large institutions “presumably bought GBTC shares with BTC to harvest the premium to net asset value (NAV) that the shares were trading at.”

“Whether these buyers of GBTC are market participants who hedge their purchase by selling BTC or are new, natural buyers, will likely determine what impact, if any at all, the sale of GBTC shares could have on the cryptocurrency,” Kraken wrote.

In a note last month, JPMorgan strategists, led by Nikolaos Panigirtzoglou, wrote that the unlocking of the GBTC shares posed a downside risk to bitcoin. 

“Selling of GBTC shares exiting the six-month lockup period during June and July has emerged as an additional headwind for bitcoin,” the strategists wrote.


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