How much did GBTC help in the Bitcoin bull run?
And what does that mean for the impact of a spot BTC ETF on the price action?
Do you really need a spot Bitcoin ETF if you already have the Grayscale Bitcoin Trust GBTC?
Of course the answer is yes. An actual ETF would be a much more liquid product than GBTC. And GBTC is actually trying to convert this product to a bonafide ETF.
But still, in its current form GBTC share something in common with a potential ETF. When there are inflows, the trust turns around to buy more Bitcoins with cash. And that’s creating some buying pressure in the market.
Which means we can use GBTC to try to answer one question: what would be the effect of a spot Bitcoin ETF on BTC?
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How much did GBTC help in the Bitcoin bull run?
The takeaway
The Grayscale Bitcoin Trust is one of the largest institutional entity holding Bitcoins. They control 625k BTC which is like 3% of the terminal supply of coins.
And a lot of this growth happened in a few months in 2020/2021.
However despite that GBTC purchases don't seem to be enough to move the market over very short time windows.
That translates into some lessons for the potential impact of a spot Bitcoin ETF:
We don’t expect the introduction of a spot Bitcoin ETF to introduce more volatility in the market.
The inflows would have to be really large to move Bitcoin’s price on a daily basis.
Most likely such an ETF would help absorb liquidity but wouldn’t single handedly drive Bitcoin’s price higher.
Or at least for (3) we would need to come up with some way of modelling how much liquidity must be sucked out of the market for the impact of the ETF to be noticeable. Not an easy task.
Read the rest of the article to see how we came up with that.
Why GBTC?
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