Bitcoin Starts to Retrace Grayscale-Fueled Gain; SOL, XRP, DOT Lead Majors Slide
Profit-taking and a general risk-off environment probably weighed on crypto prices on Thursday, with bitcoin (BTC) and major tokens tapering gains made in the two days since a U.S. court ruling.
The bitcoin price rose as much as 7% earlier this week after a federal appeals court ordered the U.S. Securities and Exchange Commission (SEC) to “vacate” its rejection of the trust issuer’s bid to convert the Grayscale Bitcoin Trust (GBTC) into an exchange-traded fund, fueling optimism among traders.
The move could potentially open the door for a spot bitcoin ETF in the U.S. even though the SEC has refused every application it’s reviewed to date. The decision helped lift prices of major tokens such as solana (SOL) and bitcoin cash (BCH), which jumped as much as 15% on Wednesday.
The euphoria hasn’t lasted. Data shows some major tokens, such as SOL and polkadot (DOT) have retraced more than 5% from their Tuesday highs, with bitcoin falling from $27,900 to $27,250 as of Thursday afternoon in Asia.
The CoinDesk Market Index, a weighted index of over 100 tokens, lost 0.71% over the past 24 hours, suggesting profit-taking across the board.
Some traders have cautioned against the optimism, which may have contributed to declining prices.
“The Grayscale discount to market has declined significantly since the ruling,” John Glover, chief investment officer at crypto lender Ledn, wrote in an email. “But it may be too early to remove the discount completely, as there is no guarantee that this ruling results in Grayscale being able to offer an exchange-listed ETF product based on spot, as opposed to futures prices.”
Glover referred to the mismatch of prices between Grayscale Bitcoin Trust’s publicly traded product, which holds bitcoin, and the price of spot bitcoin on the open market.
In December last year, GBTC hit a record discount of almost 50% relative to the price of bitcoin (BTC), bearish sentiment among professional traders. The discount had narrowed to just 19% as of Wednesday’s close, suggesting an increasingly bullish outlook.