With Morgan Stanley stepping in, Bitcoin’s grayscale premium rebounds Christopher | The Capital | July 2021
On-chain data shows that Bitcoin is undervalued
From a technical point of view, hardly any changes Bitcoin/USD Chart since Monday. Bitcoin is wide-ranging, until one side gives way, there is nothing to see.
However, with Bitcoin’s decline, it is worth considering historical charts to contextualize the price.
Puell Multiple is such an important chart. It is calculated by dividing the daily circulation of Bitcoin (in U.S. dollars) by the 365-day moving average of the daily circulation. This indicator was created by David Puell and it has just issued a “buy” signal.
Not to be confused with short-term transactions, Puell Multiple provides insights about weekly or monthly expectations. Based on the above data, it is clear that Bitcoin has experienced one of the largest declines in history-directly into the holding area. In other words, even if Bitcoin is traded at a lower price in the next few weeks (I think this is unlikely), buyers will actively increase their holdings in this situation.
At the same time, Grayscale’s GBTC premium seems to be rising, indicating that traditional institutions are increasing interest in the fund.
The GBTC premium is slightly higher than -7%, giving investors the possibility to take advantage of the negative premium for arbitrage (and price increases) after the 6-month lock-up period.
According to a Record In cooperation with the US Securities and Exchange Commission (SEC), Morgan Stanley’s European Opportunity Fund has purchased a large number of shares from Grayscale, the largest asset management company in the cryptocurrency field.
Grayscale Litecoin holdings surge
Interestingly, the asset management company’s Litecoin In the past 30 days, holdings (stock code “LTCN”) have soared, indicating that investors have increased interest in highly liquid secondary digital assets.
Given the low market capitalization (compared to Bitcoin), Grayscale’s Litecoin Trust plays a significant role in the price fluctuation of the token and may adjust its scale as arbitrageurs drive the market.
Grayscale Litecoin Trust began trading in August 2020, with a spot premium of more than 1,000%. This motivates arbitrageurs to borrow (physical) LTC from lenders (Genesis, BlockFi, Galaxy, Celsius, etc.), use these tokens to subscribe to the trust, and then wait 12 months for the newly issued shares to expire.
As these stocks expire in the next few months (starting in July), these arbitrageurs may sell their LTCN shares and use the proceeds to buy back LTC tokens to repay loans, thereby narrowing the premium and potentially making profits higher than Cost of capital. To make a long story short, this forced purchase pressure may be critical to the future price of the token.
Source: Grayscale, BlockFi
Although BTC and ETH repurchases are also taking place, Litecoin repurchases are more interesting because buying pressure relative to market capitalization may have a greater ripple effect. According to the above chart, Litecoin is facing a potential surge in demand of approximately 2.5% (approximately US$270) of its market value in the next 12 months, mainly driven by grayscale.
It will definitely be worth watching in the coming months.
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