Will Grayscale GBTC Unlocking Lead to Bitcoin Price Surge?

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  • The next tranche of Grayscale GBTC shares are due to be unlocked today
  • History has shown that the Bitcoin price surges after these Grayscale GBTC unlocking events
  • Will the same hold true after today’s unlocking?

Grayscale is a name that almost everyone in the cryptocurrency space is aware of, although many might not know what they actually do. What they might also not know is that Grayscale share unlocking events have historically coincided with huge rises in the Bitcoin price, something that was discovered by Ben Lilley of analysis firms Jarvis Labs and ChainPulse. According to Lilley, a Grayscale GBTC unlocking event has almost always resulted in a Bitcoin price pump, and with the next one due today, it’s a good time to look at the theory and the data behind it.

Grayscale GBTC Unlocking Typically Precedes Bitcoin Price Jump

We don’t need to go into great depth over what Grayscale is and what they do here, but in short they are a Bitcoin investment vehicle that takes in BTC and USD (with which it buys bitcoin) and distributes an equal value of shares (GBTC) to investors. These GBTC shares are locked up for six months before they can be sold on the market (previously 12 months), with specific unlocking dates known about in advance.

By comparing previous inflows and Grayscale GBTC unlockings, Lilly found a correlation between Grayscale GBTC unlockings and Bitcoin price jumps which he argues can give us clues as to the timing of the next potential leg up for Bitcoin. Lilly’s research showed that over the past two years there have been multiple periods of inflows followed by unlockings:

  • February 16, 2019
  • April 13, 2019
  • June 9, 2019
  • June 16, 2019
  • April 14-28, 2020
  • July 14, 2020
  • July 20-July 27, 2020
  • April 27-June 29, 2020
  • October 27-December 29, 2020

Lilly compared Bitcoin price activity with these inflows and unlockings and found an uncanny correlation – the Bitcoin price tends to stagnate during the lockup period and then rises sharply when the unlocking takes place, with Bitcoin price increased by double figures on almost every Grayscale GBTC unlocking event:

  • February-April 2019: 27.6%
  • April-June 2019: 63%
  • June 2019: 69%
  • April 2020: 47%
  • July 2020: 30%
  • July 2020 (2): 0%
  • April-June 2020: 31%
  • October-December 2020: 87%

What makes the correlation even more striking is the fact that each of the preceding spells tended to be either flat or loss-making periods, illustrating the impact that Grayscale GBTC unlockings may have on the price.

Will Today’s Unlocking Prove the Theory?

This brings us to today and the latest Grayscale GBTC unlocking. The pattern of a lull in between unlockings has already been broken however as the last unlocking occurred at the end of December when Bitcoin was at $24,000. Since then it has almost doubled in value, topping out at $42,000 in January.

Of course this is rather an unfair test given that no one could have expected 2017-style FOMO to hit so hard, but with Bitcoin having spent January in decline, dropping 16% since in the process, will the next Grayscale GBTC unlocking prove to be the catalyst that kick starts the bull run? Given its performance so far this week, it’s looking good:

Bitcoin chart (grayscale)