Bitcoin's September Entry Point and the GBTC Advantage: Going Long on Cryptocurrency
In our previous discussion on Bitcoin, we highlighted an upcoming entry point in the world of cryptocurrency. With September on the horizon, it's crucial to consider the historical trends in Bitcoin trading. Historically, September has exhibited a negative bias in BTC trading. However, beyond this seasonal pattern, a significant event is looming that could impact the cryptocurrency market.
Roughly every four years, Bitcoin undergoes a process known as "halving." During this event, the rewards paid to miners for securing the Bitcoin network are halved. This reduction in mining rewards directly affects the supply of new Bitcoins, making it inherently deflationary. As we approach the next halving, expected in about 8 to 9 months, it's vital to recognize the historical patterns that follow.
Source: Pantera Capital
Historically, after each halving event, Bitcoin's price has experienced exponential growth. This pattern is fueled by a combination of reduced inflation and increased demand, leading to what some call a "parabolic" price surge. Therefore, if you're considering an investment in Bitcoin, the upcoming month might offer an excellent entry point for the next phase of growth.
Furthermore, recent developments in the cryptocurrency market paint an even brighter future. Major financial giants like Blackstone, the world's largest asset manager overseeing nearly $10 Trillion in assets, and Fidelity have filed for Bitcoin spot ETFs (Exchange-Traded Funds). This move reflects a growing institutional interest in cryptocurrency. Notably, the world's largest Bitcoin trust, Grayscale Bitcoin Trust (GBTC), has been seeking SEC approval to convert into an ETF for nearly a decade. A recent court ruling in favor of the trust suggests that regulatory hurdles are gradually diminishing.
For investors aiming to get ahead of the curve, GBTC presents an enticing opportunity. Despite managing billions in assets, GBTC trades at a significant discount, ranging from 20% to 25% below the spot price of Bitcoin's assets under management. This discount is likely to narrow as the ETF approval process progresses and could vanish immediately upon approval. Hence, acquiring GBTC offers potential protection against temporary market pullbacks while positioning for substantial upward potential.
While the Grayscale Trust currently has a 2% management fee, this fee is expected to drop to less than 1% after its conversion to an ETF. If you're not seeking self-custody of your BTC, you might consider holding onto this ETF post-conversion. However, if you believe in the adage "not your keys, not your crypto," you can sell during rallies and reallocate into a pure-play BTC purchase through your preferred exchange. Just ensure to transfer your BTC into a secure cold wallet post-exchange.
In conclusion, the convergence of Bitcoin's historical price patterns, the upcoming halving, and the imminent ETF approval wave makes this an exciting time to contemplate entry into the cryptocurrency market. GBTC, with its unique advantages, emerges as a strategic choice for investors looking to gain exposure to the cryptocurrency space.
We hope you find this information valuable and anticipate keeping you updated on the ever-evolving world of cryptocurrency.
Hummingbird Capital Inc.
Gilles A. Trahan
President and CIO
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