Those who wanted to buy Bitcoin really showed up in week 4 - as Bitcoin made a significant comeback during the week. Bitcoin started the week by continuing the decline from week 3 and crossed below the magical threshold of $40,000. Nevertheless, the leading digital currency flourished as the week went on and here you will find out why.
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Bitcoin started the week trading around $41,601, and the week's high/low were $42,718/$38,678, respectively. Bitcoin ended the week at $41,990, representing an increase of 0.93%. The volume ranged from $6.7 billion to $31 billion.
As mentioned last week, much of what caused the fall from nearly $50,000 in week 2 to $38,678 in week 4 was profit-taking. However, what came to light last week was that a disproportionately large share of the sellers were professional actors, especially hedge funds. And it was for a good reason.
These hedge funds, and other large financial actors, had been buying shares in the Grayscale Bitcoin Trust (GBTC) for a long time - hoping that the fund's shares would go up if it were converted into a publicly traded fund. This was a calculated risk due to some regulatory intricacies.
Before Grayscale Bitcoin Trust was converted into a spot Bitcoin ETF, it was considered a trust. Although there are many rules and requirements for a trust, there were two specific requirements that applied to GBTC worth noting. Those who bought into the trust - before it was converted into a spot ETF - had to be "accredited investors" and had a lock-up period of 6 months. The term "accredited investors" refers to wealthy individuals, often through companies, of which there are a limited number.
Furthermore, the trust held (and still holds) a large amount of Bitcoin but was traded at a discount to Bitcoin due to the lack of opportunities to exit the trust once you were in. When GBTC was converted into a spot Bitcoin ETF and made available to the "public," many of the shareholders sold out, taking the Bitcoin price with them. It is worth noting that some of these (former) shareholders may opt for one of the other ETFs, as many of the equivalent ETFs have lower costs for buying/selling. For example, FTX sold its entire stake in GBTC, a stake worth about $1 billion, without necessarily buying into other ETFs due to obvious reasons.
When the selling pressure was over, Bitcoin climbed over 10% to just under $43,000, which means the marketcap increased by approximately $80 billion from the week's low to high. This impressive comeback in week 4 symbolizes Bitcoin's strength in a time of strong tailwinds for the leading digital currency. Many investors are probably looking forward to the halving in April and the historic Bitcoin cycle after the rewards are halved.
This is text is meant to inform and is not an investment recommendation.
Best regards,
Adam Jakobsen.
NBX Team.
