Decreasing Grayscale Bitcoin Trust Inflows Stop BTC Price From ATH Recovery: JPM Analysts

Bitcoin will have a hard time reclaiming $40,000 as the inflows towards the Grayscale Bitcoin Trust (GBTC) have reduced in the past few weeks, argued strategists from the giant US multinational investment bank – JPMorgan Chase & Co.

Inflows Towards GBTC Not Enough To Push BTC Higher

JPMorgan analysts, led by Nikolaos Panigirtzoglou, have highlighted the role of Grayscale in terms of BTC adoption and price development.

Simultaneously, they have reasoned that if the inflows from institutional investors stop or drop beneath a certain threshold, the asset price could suffer. They doubled-down on their narrative in a recent report, cited by Bloomberg.

The graph above demonstrates the high correlation between BTC’s price performance and the total weekly inflows into the Grayscale Bitcoin Trust.

Using this data, the strategists outlined the possible danger of a further bitcoin correction as the GBTC inflows peaked earlier this month and have gradually decreased. Consequently, the lack of substantial allocations could prevent the asset price from reaching and exceeding the $40,000 level.

“At the moment, the institutional flow impulse behind the Grayscale Bitcoin Trust is not strong enough for Bitcoin to break out above $40,000.” – the analysts asserted.

Furthermore, they warned of the opposite as there’s a risk that “momentum traders will continue to unwind Bitcoin futures positions.”

The primary cryptocurrency saw an all-time high in early January at $42,000 but has slumped in value in the following weeks and even dipped beneath $30,000 on a few occasions.

GBTC And Institutional Investors

Since lead strategists from one of the world’s largest investment banks believe that the institutional inflows towards GBTC have a significant impact on BTC’s price, it’s worth exploring the available data to check if the leading digital asset manager has indeed seen a reduction.

2020 turned out to be the company’s most successful year as it managed to increase its AUM by ten-fold from about $2 billion in late 2019 to over $20 billion. Moreover, Grayscale saw more inflows in the last quarter (Q4 2020) than in its first six years of existence combined.

The new year also started with a bang as Grayscale’s CEO, Michael Sonnenshein, revealed that institutional investors had allocated nearly $1.3 billion in GBTC in just a week. For comparison, the average weekly flow throughout the company’s best quarter stood at $217 million – or about six times less.

However, that record week came after Grayscale opened the Trust for new investors following a three-week pause. This could be the reason behind the unexpectedly high numbers and could justify the subsequent reduction in inflows and BTC price.