JPMorgan analysts say the upcoming ‘unlock’ of a popular Bitcoin fund could cause further selling of spot BTC, driving the prices of the world’s largest cryptocurrency by market cap to as low as $25,000.

“While weak flows and price dynamics resulting from last month’s selloff fueled Bitcoin’s recent declines, possible sales of shares in the Grayscale Bitcoin Trust upon the expiry of a six-month lockup period could be an additional headwind,” wrote analyst Nikolaos Panigirtzoglou in a client, as per a report on Bloomberg.

Bitcoin has fallen nearly 50% over the past few months from a mid-April high of $64,800. It trades at $34,000 at press time, with technicals suggesting an overall bearish market for now.

How Grayscale affects Bitcoin

Grayscale’s products are a crucial part of the broader crypto market. These are publicly traded financial instruments that hold a small amount of spot crypto, such as Bitcoin or Ethereum, in a custodial account for each share they offer on the open market.

The product is largely aimed at high-networth individuals and institutional investors who may not want to interact with a shady crypto exchange (which may shut down overnight), or deal with custody their own crypto (imagine relying on yourself to safeguard millions of dollars worth of crypto holdings).

Products like Grayscale Bitcoin Trust (GBTC) are hence one of the only ways for regulated investors in the US to gain exposure to the crypto market. But therein lies a peculiarity: GBTC holdings are locked for six months—in case of a subscription, not a purchase on the open market—and trade at a premium.

This creates an arbitrage opportunity and changes market dynamics. And it’s no small amount either: The GBTC, as the below tweet shows, holds over $21 billion of Bitcoin as of today.

The big dump?

When GBTC ‘unlocks’, investors sitting on a mountain of profits compared to six months ago are incentivized to sell (rather than hold). This creates downward pressure, as tens of millions of dollars worth of Bitcoin are being sold.

Such price action is what JPMorgan refers to. “We are reluctant to abandon our negative outlook for Bitcoin and crypto markets more generally,” the bank said, adding its signals remain “overall bearish.”

The bank added:

“It would still take price declines to the $25,000 level before longer-term momentum would signal capitulation.”

Elsewhere, Jeffrey Gundlach of DoubleLine Capital tweeted it would be game over for Bitcoin if prices were to fall below $30,000. “If XBT closes below $30K it’s a big deal,” he said.

Safe to say a lot of the crypto market would like to avoid seeing that.

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