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Bitcoin Price Tumbles Once Again... Why It's Bad News for Grayscale

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Published on:
February 26, 2021

The latest plunge — to lows of $44,500 — suggests that bearish momentum is beginning to seep into the market.

Bitcoin Price Tumbles Once Again... Why It's Bad News for Grayscale

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Bitcoin’s recovery to $52,000 has proven short lived, with the world’s biggest cryptocurrency tumbling once again.

 

The latest plunge — of more than 11% to lows of $44,500 — suggests that bearish momentum is beginning to seep into the market, and brings the “healthy correction” narrative into doubt.

 

BTC is now on track for its worst weekly slide in almost a year. It’s down 20% compared with the all-time highs of $58,000 seen last Sunday.

 

All of this comes against a backdrop of a strengthening dollar, and a decline in the value of other risky assets. The Nasdaq has been on a losing streak in recent trading sessions too, with Tesla a notable casualty.

 

Grayscale Bitcoin Trust Tumbles 

In another alarming development, the premium seen in the Grayscale Bitcoin Trust has all but evaporated over the past few days — with data suggesting that it’s now trading at a discount for the first since 2017. Bloomberg Intelligence’s senior ETF analyst Eric Balchunas was quoted as saying:

“This is panic or profit-taking selling. It’s almost like the price of GBTC is an amplified version of Bitcoin price.”

Indeed, the current state of GBTC is a stark contrast to the box office performance seen in December, when investors couldn’t get enough of the trust. Demand heightened to such an extent that some institutions paid 40% more for indirect exposure to the cryptocurrency than Bitcoin was actually worth.

 

In other developments, JPMorgan has suggested that investors should allocate up to 1% of their portfolios in Bitcoin — arguing that this would serve as an effective hedge against fluctuations in the value of commodities, stocks and bonds.

 

Crucially, such a small percentage wouldn’t wreak havoc in the event that BTC crashes back down to $20,000 — a level that proved elusive even in November.

 

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