A bitcoin price correction could occur if the flows into Grayscale’s Bitcoin Trust (GBTC) slow down significantly, according to strategists at JPMorgan Chase, led by Nikolaos Panigirtzoglou.
According to Bloomberg, the strategists wrote late last week that GBTC’s assets under management climbed from $2 billion at the start of December 2019 to over $1.1 billion, as the price of BTC surged to a new all-time high above $24,000.
If the inflows into the fund, which are now at about $1 billion per month, were to drop significantly, its price could endure a correction similar to the one seen in the second half of last year, the analysts said.
Describing Bitcoin as “overbought,” they noted that flows into GBTC are “too big to allow any position unwinding by momentum traders to create sustained negative price dynamics.” Last year, the price of bitcoin dropped from a high above $13,000 to little over $7,000 by the end of the year.
While some believe institutional investor demand will keep on pushing the price of the cryptocurrency higher as it’s seen as a hedge against dollar weakness and potential currency debasement and inflation, others say speculation has taken over the market.
Several publicly traded companies, including MicroStrategy and Square, have poured in millions into BTC. Massachusetts Mutual Life Insurance, which has been around for 169 years, also revealed it bought $100 million worth of BTC for its general investment fund, while Ruffer Investment claimed it had BTC exposure of $744 million.
This week the CEO of Tesla, Elon Musk, inquired the CEO of MicroStrategy, Michael Saylor, on whether large transactions to buy bitcoin are possible. The conversation came after Saylor told Musk his firm had so far “purchased over $1.3 billion in BTC” to be used as MicroStrategy’s main treasury reserve asset.
Earlier this year, it’s worth noting, Nikolaos Panigirtzoglou and analysts at JPMorgan pointed out that “bitcoin could compete more intensely with gold as an ‘alternative’ currency over the coming years given that millennials will become over time a more important component of investors’ universe.” Per the analysts, BTC’s potential long-term upside “is considerable.”
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