The decline in the overpayment on the Grayscale bitcoin trust securities relative to the price of the cryptocurrency may indicate the beginning of the next bullish cycle, according to Bloomberg analyst Mike McGlone.
According to the analyst, the 21% correction in the rate and the negative premium that arose along with it indicate a reboot of the market before the next leap upwards with a target at around $ 100,000.
“The discrepancies in the price of bitcoin on regulated US exchanges in late February herald a strengthening of the price fundamentals, based on historical information,” he writes.
Historically, the Grayscale bitcoin trust premium has been positive most of the time, indicative of increased investor demand for a tool that allows them to gain indirect access to cryptocurrency in a regulated environment.
According to McGlone, the largest negative premium in the trust’s lifetime is a sign of «surrender sales.»
He expects arbitrage traders to take advantage of the situation to help balance prices against Bitcoin futures on the Chicago Mercantile Exchange (CME), which trade 20% above the market.
“Normal development and increased market depth will reduce price discrepancies. We regard the extremes at the end of February as just a sign of how much bitcoin is still in the making , ”adds the analyst.
JPMorgan experts previously linked the negative premium to sales by institutional investors. They were able to liquidate highly profitable positions after the expiration of the six-month storage period of the securities from the date of their issue.
As another reason for the fall in secondary demand for Grayscale securities, McGlone points to the increased chances of Bitcoin ETF approval in the United States, after similar instruments were launched in Canada. In addition, he argues, the decline in bitcoin coincided with an outflow of capital from gold, and the continued growth of the exchange rate will help limit the volatility of the cryptocurrency.
“We believe that once the cryptocurrency settles at the new frontiers, potentially around $ 100,000, while the market depth increases, volatility should decrease,” he says.