Market State: Reasons to be Optimistic about Bitcoin’s Price Future
News of the launch of bitcoin-based investment products on the US stock exchange has once again boosted the sense of optimism among cryptocurrency traders. This time, however, the analysis of how these financial products affect the price of Bitcoin is not as simple as before.
To Report CoinDesk, Bitcoin managed to maintain its position near the $21,000 level yesterday. This digital currency is currently trading at a price of around $21,250 and has increased by around 1% in the last 24 hours. Analysts also say that as the end of the week approaches, Bitcoin will face another price test.
Craig Erlam, senior analyst of Oanda, said:
This weekend (Saturday and Sunday) could be considered another test period for Bitcoin despite the particular resilience that the price showed this week in returning above key resistances. Support ahead of the price remains shaky and another breakout could literally challenge investors’ confidence in Bitcoin.
Despite the continuous tremors that have entered the body of the digital currency industry during this period, analysts are monitoring the changes in key market indicators to find the price floor of this downward cycle. One of these important indicators is the discount or the difference in the price of the share of the investment fund in Bitcoin Grayscale (Grayscale Discount), which has reached from 34% to 29% since last week; This means that each share of this fund is currently traded 29% cheaper than the price of Bitcoin in the market.
Apart from the reduction in the price difference between Grayscale fund and Bitcoin, stock market investors have also turned to buying shares of exchange-traded funds (ETF) short (in order to reduce the price) of Bitcoin. While on the face of it the reception of financial products based on the decline in the price of Bitcoin is a bearish sign, some analysts consider this to be another factor that indicates that Bitcoin is approaching the price floor of the recent bear market.
Raghu Yarlagadda, CEO of FalconX trading platform, said:
I imagine that the bullish correction that we have seen in the last 24 hours is mainly coming from small market investors.
After the publication of the new research results of the University of Michigan, it became clear that the expectation of the American people for the increase in inflation in the future has decreased to some extent, the prices in the stock market of this country also jumped. Now, some analysts say that this could be a sign to reduce concerns about the growth of inflation; Because this reduction of expectation may lead to a kind of personal insinuation that the inflation situation is improving.
Why is the stock price status of Grayscale fund a positive sign?
The discount of Grayscale fund shares to Bitcoin is decreasing, and this issue probably shows the optimism of some investors; Because the deadline for the US Stock Exchange Commission to decide on the issuance of a license to convert Grayscale Bitcoin Fund into a tradable fund on the stock exchange of this country is coming to an end.
The Grayscale Institute Bitcoin Fund, known by the symbol “GBTC”, is an investment vehicle that allows US citizens to invest in this digital currency without the need to directly purchase Bitcoin.
Each share of this fund is recently trading at a 29% discount to the market price of Bitcoin, while this rate was around 34% last week. It should be noted that the shares of this fund will be traded at a lower price than Bitcoin from February 2021; That is, before that, the price per share of GBTC was higher than the actual Bitcoin.
All in all, this issue can be a sign for the activity of a part of the investors who, taking into account the current discounts and near the price floors, are investing in the Grayscale fund. Some investors may also think that the Greyscale fund is going to get permission to become an ETF. Another reason for this could be the reduction of investors’ fear of the liquidity crisis prevailing in this market in recent days.