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Investor says Bitcoin price could drop to $6k based on GBTC premium

According to Timothy Peterson, an investor at Cane Island Alternative Advisors, the Bitcoin price could drop to the $6,000 region due to the gap between BTC and GBTC.

Historically, Peterson said that the bitcoin price has followed the trend of the premium of the Grayscale Bitcoin Investment Trust (GBTC), an investment vehicle used by accredited and institutional investors to invest in BTC.

In the past month, while the premium of GBTC declined, the bitcoin price has remained relatively stable. Peterson stated that the gap between the premium and BTC could trigger the next downside movement for BTC.

Prediction of 30 percent Drop For Bitcoin

If the Bitcoin price drops to the $6,000 level in the upcoming months as predicted by Peterson, it would indicate a 30 percent decline from the current price at $8,300.

GBTC could be considered an indicator of the short to medium term trend of the bitcoin price because it reflects the demand towards the asset from a different market of investors focused around institutions.

bitcoin price
Most major cryptocurrencies including bitcoin down by more than 50 percent from record highs (source: athcoinindex.com)

Based on the analysis of Peterson, GBTC tends to have a premium of around 30 percent to 40 percent, depending on the state of the BTC market. In recent weeks, the premium of GBTC fell to nearly 20 percent, which led Peterson to forecast a decline to the $6,000 region.

He said:

“When bitcoin’s price was well above the GBTC premium, it fell substantially. Now, a gap has opened up again. GBTC’s premium has fallen from $4.00 per share to $2.00 per share. This implies that bitcoin’s price should fall from about $12,000 to $6,000. The relationship between GBTC premium and bitcoin price has not been stable and predictable over time. However, our fundamental models also value BTC at about $6,000. It appears that institutional and long-term US investors in GBTC are expecting this price level for bitcoin as well.”

GBTC has a premium because it allows investors to invest in the dominant cryptocurrency without physically holding the asset and leaving a third party with the burden of security.

It also allows accredited investors that may not be able to access spot cryptocurrency markets to invest in BTC through brokerages.

Technical indicators point towards weakening movement

With the declining daily volume of the cryptocurrency market and the struggle of bitcoin to reclaim minor resistance levels above $9,000, technical analysts have geared towards a bearish short term trend for BTC.

DonAlt, a cryptocurrency trader and technical analyst, said that for BTC to confirm a short term trend reversal, it would need to spike above $9,5000. He said:

“Took out the range high. Even if I take any HTF bias out of the analysis that makes me expect the range low to be hit. The fact that this range developed after a massive breakdown is just a bonus. For me to turn bullish we’d have to trade back above 9.5k,”

Across most major exchanges including Coinbase and margin trading platforms like BitMEX, BTC is showing signs of increasing sell-pressure build-up, decreasing the chances of temporary relief rallies.

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Bitcoin [BTC] Price Crosses $10,200 As There Are More Inflows to Exchanges


There are more inflows than outflows at the top seven leading cryptocurrency exchanges, including Binance, BitMex, and OKEx, according to statistics from Token Analyst.

On average, $47.2 million was deposited and $44.9 million withdrawn on Feb 18, 2020.

Crypto Markets Correction

The revelation is a relief for the crypto market.

From price charts, it appears as if bulls are exhausted following parabolic rallies that saw the value of some digital assets like Ethereum Classic, Ethereum, and Tezos post impressive gains, pushing them to a new valuation.

Ethereum Classic, for instance, nearly tripled, soaring to around $3.5 in Q4 2019 to $11 in Jan 2020.

Similarly, Tezos (XTZ) boosted by new developments and heavy involvement from the French—including a research team with links to the government working on Tenderbake, and French Army and the Information & Public Relations Center (SIRPA), soared to new all-time highs.

Tezos XTZ Market Performance
Tezos XTZ Market Performance | source: Coinstats.app

Other altcoins posted extra-ordinary performances as well thanks in part to a bullish Bitcoin which for the first time in 2020 broke above $10,000. The level is an important resistance level.

Traders are Bullish

The inflow of new cash into the crypto market is definitely a mark of confidence. It also shows that market participants, despite the recent lull, are bullish of what lies ahead.

Specifically, the buzz around Bitcoin halving is creating an aura of expectation. Previous events saw prices rally in subsequent months.

However, compared to leaps made in recent years, this year’s halving could either thrust BTC prices to new highs, or see price flat-line before dropping even if demand is constant, or even higher.

Bitcoin Halving: will Price Drop or Rally after May 2020

Debate around post-Bitcoin halving price trajectory varies.

Bitcoin BTC Halving
Bitcoin BTC Halving

Some analysts and crypto commentators are expectant that more gains are in the pipeline because market forces are yet to price in BTC’s forthcoming rally.

Yet some are adamant that the rally to $10,500 marks the tipping point of BTC prices. Subsequent sessions, they believe, would see prices crumble.

US Plans to Regulate Cryptocurrencies

The optimism also comes when US government officials plan to draft laws that would shield the USD hegemony and discourage the use of cryptocurrencies, especially Bitcoin—partly because of its popularity, and privacy coins like Monero.

The contention is that privacy coin mixers and obfuscation of transactions are illegal.

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Bitcoin’s golden cross changes everything for the 2020 rally

Bitcoin’s stay under $10,000 was short-lived as it picked up momentum on 17th Feb. The valuation witnessed a 6.07 percent surge, and Bitcoin re-entered the $10,000 range. Over the past 24 hours, BTC registered a 4.02 percent uptick and the current market cap remained at $184 billion.

Source: Coinstats

Bitcoin 1-day chart

BTC/USD on Trading View

The 1-day chart of Bitcoin has been evidently bullish since the turn of the year after the price broke out from a falling wedge pattern. The pattern started taking shape toward the end of November and a bullish breakout surfaced in the 3rd week of December. After the breakout, Bitcoin has periodically risen from $7000 to $10,000.

Until now, the bullish surge of Bitcoin has been expected to exhibit some form of correction, but besides minor dips, nothing has really impacted its rise.

At press time, Bitcoin held consolidation just under the resistance at $10265, with immediate support at $9800. However, Bitcoin may continue to progress upward now, since the highly anticipated golden cross has taken shape.

The last golden cross took place on 23rd April 2019. The positive turnaround after the cross-over was significant, as Bitcoin experienced a 164.43 percent rise, reaching last year’s ATH at $13,880. A repeat of such a trend would easily take Bitcoin above its all-time-high at $20,000.

According to VPVR indicator, trading volume at $10,200 has been strong over the past year which indicated that Bitcoin may consolidate in his range over the next week. RSI also pictured a bullish incline since the start of December.

Bitcoin 4-hour chart

BTC/USD on Trading View

Analyzing the 4-hour chart of Bitcoin may give a clear indication of Bitcoin’s trading range over the next few weeks. Bitcoin’s correction on 15th February can be observed in the 4-hour chart, which transpired after the formation of a rising wedge pattern. As mentioned earlier, Bitcoin managed to recover quickly and it rose back above the $10,000 range.

If Bitcoin manages to trade above $10,265 resistance and consolidate near the $10,700 range, the possibility of a bullish rise to $11,500 could be very much on the cards.

Consolidation below $10,200 may open doors for another correction. With the completion of the golden cross, that situation seems less likely.

Conclusion

The completion of a golden cross is a positive bullish sign, which may take Bitcoin well beyond the $11,000 range over the next few weeks. With the ‘FOMO’ kicking in after the golden cross, the next few days would decide Bitcoin’s long-term price movement until the halving.

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Bitcoin Supply Distribution Increased by 33 Percent in the Past Decade

The supply of Bitcoin has naturally dispersed over time. Thanks to a wide variety of factors, such as increasing demand for BTC. The use of Bitcoin in payments and remittances has also had an effect. As more people have been able to get their hands on the asset, and as supply levels change, volumes do as well. 

However, it would seem that the extent to which this change has occurred is beginning to gain steam. While Bitcoin and other cryptos are often held by whales, their influence is now dwindling.

Less Bitcoin for Larger Exchanges 

Earlier this week, CoinMetrics, a data provider for the crypto space, published its State of the Network report for Bitcoin. The report revealed the volume of Bitcoin held by larger addresses had dropped significantly over the past decade. 

In the report, the firm explained that “larger addresses’’ were taken to mean cryptocurrency wallet addresses that have more than a thousandth of the total supply of Bitcoin. Current data from Blockchain shows that there are 18.22 million BTC (worth about $184 billion at current prices) available in supply. This is out of a possible 21 million Bitcoins. For an address to be considered a “large address” by CoinMetrics’ estimates, it needs to contain 18,220 BTC (worth about $184 million), according to the data provider. 

The report goes on to show that the volume of Bitcoin held by these addresses was 33 percent as of February 2011. Today, that number has dropped to 11 percent. The report also revealed that smaller addresses held more of the Bitcoin in circulation. This means that individuals Bitcoin users have been on the rise, contrary to public opinion.

In part, the report also touched on Tether, the most valuable stablecoin. CoinMetrics explained that Tether had seen a surge in its distribution as well, thus positing that the asset could see increasing use as a medium of exchange. The company also opined that this could be the most significant reason why supply was flowing more to the smaller wallets. 

Ether Still Has a Long Way to Go 

The state of Bitcoin is different from that of its biggest competitor, Ether. Last May, Chainalysis published a blog post titled the Economic Impact of Whales on the Market. At the time, the blockchain analysis firm explained that “whales:” were the top 50 shareholders within the global crypto space- with the exclusion of exchanges, wallet providers, and other asset custodial services. 

The report eventually showed that there were 124 services as part of the top 500 ETH holders, while the remaining 376 were “individual whales.” These whales were also said to be in control of 33 percent of Ether’s entire supply- although the number was markedly lower than the 47 percent reported in 2016. 

The report also explained that these individual Ether whales accounted for just 7 percent of the asset’s economic activity. As Chainalysis explained, most of these whales are hodlers, not traders.

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