When Bitcoin Sells Down – Worst for Grayscale?

Bitcoin is on the rise again today—but almost every cryptocurrency is near the top of the decline. Crypto tokens started the day with bright candlesticks dipped in bright optimism.

Apart from the Maker (MKR) and the regular stable coin band, which are designed to avoid such volatility, all symbols in the 100 enjoy a floating high. This wave of optimism was in stark contrast to yesterday's bearish spreads, which saw many tokens' market capitalization hit record highs.

Bitcoin, the original cryptocurrency often considered a market bellwether, has made a significant rally. The currency opened the trading day at $39,929 and at the time of publication, the highest traded value rose to $42,159.

The candlestick is still forming and does not have a large shadow at the top – meaning that the actual price is the high of the day. This rise not only broke the day's lows, but also sent a strong signal that investors are regaining confidence after the previous day's decline.

This spike cancels a major dive that began four days ago, which took the coin below $40,000 psychological support, unnerving investors and adding to the possibility of a major bearish correction. Now, the gap between the average prices of the last 10 and 55 days is closing, which is good for those who are still waiting to watch Bitcoin go to the moon.

Why is Bitcoin falling?

Bitcoin's price movement is often swayed by a complex interaction of market instruments and investor behavior. JPMorgan's Nicolas Panigirtzoglou recently shed light on the situation, suggesting that the worst may be over, as Grayscale's BTC sell-off is slowing after Bitcoin Trust's switch to a real-time ETF.

“Previously taking profits on GBTC investments, the NAV made a discount last year, it was likely the main driver behind the Bitcoin correction; $ 4.3 billion has gone out of GBTC since the conversion to the ETF so far,” he said.

Panigirtzoglou argued that this outflow may have caused a temporary disruption in the behavior of the markets as some investors rushed to take profits. “We believe most of this $4.3 billion in GBTC outflows reflected profit taking rather than a shift to cheaper spot Bitcoin ETFs (which, needless to say, had little market impact),” he added.

Fluctuations in Bitcoin's price discovery mechanisms play an important role in its price, JPMorgan says. The company has seen a “big change” in the structure of the market.

“The emergence of spot ETFs is introducing another dimension to Bitcoin's price discovery process, echoing the price discovery taking place in the traditional financial system alongside offshore exchanges and offshore futures,” Panigirtzoglou explained.

This evolution, far from disrupting the market, is expected to enhance the effectiveness of price discovery as it aligns with patterns observed in other established financial assets such as stocks. It's important to remember that every dollar of Bitcoin traded in an ETF is backed by the same amount in the asset (thus satoshis, the smallest denomination of BTC).

Additionally, the introduction of novel ETF products by Greyscale may introduce additional liquidity into the market. JPMorgan explains. And this is a positive thing for traders, both legacy and crypto-native. Such financial instruments, which are common in equity markets, can provide investors with greater exposure to Bitcoin while reducing exposure.

This means that once the markets find a balance between the normal way of trading and the new financial instruments introduced, the price trend may become normal and the price increase will make it difficult to control the price. Some analysts may be factoring that into their strategy.

Altcoins follow the path of Bitcoin

Ethereum, the second largest by market cap and the backbone of many decentralized applications, has mirrored the rise of Bitcoin.

The digital asset, which is gearing up for a significant network upgrade to boost transaction speed and cost-effectiveness, rose to $2,266 from an opening price of $2,217. The day's high touched $2,281, suggesting that anticipation around future technological developments could fuel investor interest.

Ethereum still seems to be bullish on the long trend – it's just that the trend is not as strong as it was a few weeks ago. Indicators show that even though the coin is slightly oversold, given how weak the Average Directional Index (or ADX, an indicator of how strong a trend is) looks, traders should be cautious and perhaps wait for Bitcoin to chart a course similar to that of most altcoins. It follows.

On a lighter note, Solana-based meme coin BONK, which has been making waves lately, is bound by impressive margins. It opened the day at $0.00001126, reached a high of $0.00001249, and is now at $0.00001217, an impressive 7.8% gain.

And at least today, the disciple beats the master: Dogecoin has grown only 2% at the same time, but still the dog-faced coin remains the undeniable king of the top 10 cryptocurrencies by market capitalization and by far the funniest symbol.

Edited by Andrew Hayward.