Bitcoin Soars as Selling Slows—Is the Worst Over for Grayscale?

Bitcoin is rising again today—but so is nearly every cryptocurrency near the top of the pile. Crypto tokens kicked off the day basking in the green glow of optimism with bullish candlesticks all over the place.

Apart from Maker (MKR) and the usual band of stablecoins, which are designed to be immune to such volatility, all of the tokens in the top 100 enjoyed a buoyant uplift. This optimistic tide marked a stark contrast to yesterday's bearish undercurrents that saw the market caps of many tokens take a dip.

Bitcoin, the original cryptocurrency and often regarded as the market's bellwether, has marked a significant rally. The currency opened the trading day at $39,929 and rode a wave of bullish trading to a high of $42,159 at the time of publication.

The candlestick is still forming and has not major shadow in the upper part—meaning that the actual price is the highest of the day. This surge not only eclipsed the day's lows, but also sent a strong signal that investors might be regaining their confidence after the previous day's slump.

This spike cancels a major dip that started four days ago, which took the coin below the psychological support of $40,000, spooking investors and increasing 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 still expecting to watch Bitcoin go to the moon.

Why is Bitcoin bouncing?

The trajectory of Bitcoin's price is often swayed by the complex interplay of market instruments and investor behavior. JPMorgan's Nikolaos Panigirtzoglou sheds light on a recent factor, suggesting that the worst may be over now that Grayscale is reducing the pace of its BTC sales following the conversion of its Bitcoin Trust to a proper spot ETF.

"Profit-taking on previous GBTC investments, made at a discount to NAV last year, has likely been a major driver behind Bitcoin’s correction; $4.3 billion has thus far exited GBTC since its conversion to ETF,” he said.

This outflow, Panigirtzoglou argues, may have caused the temporal disruption in the markets behavior as some investors rushed to cash out gains. “We believe that most of this $4.3 billion GBTC outflow reflects profit taking rather than a shift towards cheaper spot Bitcoin ETFs (needless to say that such a shift would have had little market impact),” he added.

Shifting dynamics in Bitcoin's price discovery mechanisms also play a crucial role in the price, according to JPMorgan. The firm observes a "significant change" in the market structure.

"The emergence of spot ETFs is introducing another dimension in the Bitcoin price discovery process, along with onshore spot exchanges and onshore futures that echoes the price discovery that is taking place in the traditional financial system," Panigirtzoglou notes.

This evolution, far from fragmenting the market, is anticipated to enhance the efficiency of price discovery as it aligns with patterns observed in other established financial assets like equities. It is important to remember that each dollar worth of Bitcoin traded in an ETF is supported by a similar amount in the underlying asset (aka satoshis, the smallest denomination of BTC).

Furthermore, the introduction of novel ETF products by Grayscale could introduce additional liquidity into the market. JPMorgan elucidates. And this is a positive thing for traders, both legacy and crypto-native. Such financial instruments, common in equity markets, could provide investors with a more risk-mitigated approach to gaining Bitcoin exposure.

This means that once markets find that balance between the usual way to trade and the new financial instruments that have been introduced, the price trend may be normalized and the increased liquidity would make it harder to manipulate prices. Some analysts may be taking that into consideration with their strategies.

Altcoins follow Bitcoin’s path

Ethereum, the second-largest cryptocurrency by market cap and the backbone of many decentralized applications, has mirrored Bitcoin's ascent.

The digital asset, which is in the midst of preparing for a significant network upgrade aimed at enhancing transaction speed and cost-efficiency, saw its price climb from an opening of $2,217 to its current price of $2,266. The day's high touched $2,281, suggesting that anticipation around its forthcoming technological advancements could be fueling investor interest.

Ethereum still looks bullish on a longer trend—it’s just that the trend is not as strong as it was a few weeks ago. The indicators show that the coin is slightly oversold, but considering how weak the average directional index (or ADX, an indicator that measures how strong a trend is) looks, traders must be careful and probably wait for Bitcoin to set the course that altcoins usually will follow.

On a lighter note, the Solana-based meme coin BONK, which has been making waves recently, bounded up by an impressive margin. Opening the day at $0.00001126, it reached a peak of $0.00001249, and managed to find its way to its current $0.00001217 for an impressive 7.8% spike.

And, at least today, the disciple beats the master: Dogecoin grew only 2% in the same time, but still remains the undisputed king of the dog-themed coin by market cap and by far the funniest token in the top 10 cryptocurrencies.

Edited by Andrew Hayward