TL;DR Breakdown
- Bitcoin has been falling and is trading at around $36,000.
- Bitcoin price sentiment indicator GBTC Premium is still negative.
- Before February, GBTC had kept its value positive but has now been negative for 3 months.
Bitcoin gained momentum this year until Elon Musk’s borderline negative tweets commenced. After the China ban, Bitcoin fell further. From a high of $60,000 plus, Bitcoin has dropped to half of its price. To predict the movement of the price of Bitcoin, there are various indicators that exist in the market and one of them is referred to as GBTC Premium.
The Greyscale Bitcoin Trust or GBTC is a BTC or Bitcoin trust that is a part of Greyscale Investments, one of the world’s largest managers that deal in the matters of digital currencies. The trust works pretty well by allowing the investors to grasp an experience of trading in Bitcoin without direct investment and holding the cryptocurrency. This feat is achieved with the help of a regulated investment tool.
The negative value of GBTC Premium
The GBTC Premium as of now trades a low price of $30 while is a significant low from its high of $58.22. This drop of 40 percent in the trading price of GBTC Premium has represented the fall in Bitcoin. Currently, GBTC is trading live on OTCQX which is operational under OTC Markets. Each share of this represents a value of 0.00094716 Bitcoin. Thus, it helps in share tracking of the price of Bitcoin.
GBTC is regulated in such a manner that investors are able to gain an insight into the Bitcoin market and this is why it can be a very accurate representation of the sentiment of Bitcoin’s price. Greyscale products usually at a value that is premium to the NAV or Net Asset Value of the holdings. Therefore, the difference in the value of these holdings and the market price indicates the value for the GBTC Premium.
Before the 23rd of February, this value was always positive and as a result, represented the growth of Bitcoin. The GBTC Premium transitioned from 122.27 percent to a negative value of -17.89 in the middle of May. This means that currently, the inflow of Bitcoin is low, and therefore, GBTC is trading at a discount to the traders. This goes further to prove the relativity of the price of GBTC and Bitcoin.
The future of Bitcoin is still not known whereas several factors are indicating different scenarios. The investors have to trade in a six-monthly period using GBTC Premium. It is also to be noted that to trade, one needs to invest at least a value of $50,000. In all, GBTC Premium might not predict the future value at which Bitcoin will trade but it surely gives an insight into the sentiment of its price. Hence, the valuation is definitely reliable.
