GBTC (Grayscale Bitcoin Trust) price is at a 2022 low.
Before the explosion of the Terra/Luna ecosystem in May, its price was $25, but after that event it first fell from $20 and then to $12 in June.
At the beginning of November, with the failure of FTX, it first fell to $8, and then even to $7.7 at the end of November. Now it’s close to $9.
Compared to the price at the beginning of May, the current value is 65% lower, while BTC has lost “only” 55% in the same period.
Grayscale Bitcoin Trust and Bitcoin
Grayscale Bitcoin Trust, symbol GBTC, is a fund fully invested in Bitcoin (BTC). So, in theory, the market value trend of its shares should be in line with Bitcoin, but instead in 2022, GBTC lost significantly more than BTC.
Right nowGBTC is 42% less than BTC proportionally, although it fell to -45% in mid-November.
This means that the market demand for GBTC is significantly lower than for BTC, while the selling pressure is higher.
This relationship started at the end of February last year and started to strengthen at the end of March in 2021.
It is possible that this is due to the presence of financial derivatives in the market, which are preferred by investors when taking a position on the price of Bitcoin without having to directly buy and hold BTC.
So there would be net competition from financial products with better features. Bitcoinon the other hand, there are no real competitors.
In other words, the significant decline in GBTC lasting more than a year and a half cannot be taken as a benchmark for evaluating the price performance of Bitcoin.
However, Grayscale continues to analyze Bitcoin’s price trend. They recently discovered an interesting value for a parameter that appears to be related to BTC cycles.
This is the MVRV (Market Value to Realized Value ratio) parameter, which is the ratio of current market capitalization to realized capitalization.
“Realized capitalization” means the total value of all available BTC by referring to the individual purchase prices of all individual Satoshis, not the current price. One Satoshi is the smallest unit of measurement that Bitcoin can be divided into and corresponds to one hundred millionth of a BTC.
When MVRV is greater than one, it means that the current price is higher than the average purchase price, if it is less than one, it means that the current price is lower than the average purchase price, which means that most BTC is currently a loss.
Interestingly, as Grayscale points out, Bitcoin’s MVRV is rarely less than 1.
From our newsletter: #Bitcoin‘s Market Value to Realized Value ratio (MVRV) recently hit its lowest point in more than 3 years. In a report earlier this year, we explored how MVRV can be used to analyze historical periods of the cryptocurrency market: https://t.co/52UuC0vbvJ pic.twitter.com/60WTQRWxAp
— Grayscale (@Grayscale) November 28, 2022
Indeed, historically, several times its value has fallen below 1, then created it will make a profit of 300% over the next three years.
Since 2012, the year of the first halving, Bitcoin’s MVRV has only been negative three times. In 2012, 2015 and at the junction of 2018 and 2019, with a very short increase in March 2020, when global financial markets collapsed due to the onset of the pandemic.
In other words, so far BTC’s MVRV has followed Bitcoin’s halving-driven four-year cycle.
Grayscale notes that Bitcoin’s MVRV recently hit a 3-year low, indicating that the current phase may be the bottom of the current cycle.
Bitcoin has a predictable and scheduled cycle of approximately 3 years and 10 months, with blocks being mined and added to the blockchain every 210,000 blocks. splitting in half from the miner’s reward. The latter is Bitcoin’s only monetary policy measure, given that all existing BTC was created and will be created as a reward for miners in the future.
It is therefore not surprising that the price of Bitcoin follows a trend that is heavily influenced by the halving.
The first halving happened in 2012 and the following year triggered the first huge speculative bubble in the price of BTC, which caused it to rise from $13 to $1100 in less than twelve months.
The second halving happened in 2016 and the following year was the second major bubble that took the price up to $20,000.
A third halving in 2020 was followed by a new bubble the following year, but this time on a smaller scale.
The next halving will take place in the spring of 2024.
BTC’s MVRV chart gives a good idea of this period. It also gives a good idea of how the 2013 bubble was bigger than the 2017 bubble, which in turn was bigger than the 2020 bubble. It also becomes clear that these were indeed speculative bubbles and not organic growth.
The question now is: Will BTC’s MVRV rise again in the coming years as it has in the past? Will there be a new speculative bubble in 2025?
It’s still unclear, but at least this chart makes it clear that we’re now in a position that’s quite comparable to the bottoms of the previous two periods.