As Bitcoin drops below $34,000 and July draws near, traders believe the flagship cryptocurrency is headed for a bumpy ride, owing in no small part to Grayscale’s substantial BTC unlocking. The largest Bitcoin fund is gearing up to release shares equivalent to 16,000 BTC in the market, fuelling fears of enhanced volatility.
Grayscale BTC Unlocking Could Spike Volatility
The Grayscale Bitcoin Investment Trust was founded in 2013 to enable institutional investors to gain exposure to BTC through its share offering, without caring for the management and storage of these holdings. This means an investor never directly owns a Bitcoin but shares of the fund, each of which represents the ownership of 0.092 BTC.
In exchange for GBTC, investors pay a 2% commission to the fund and agree to its policies, one of which dictates that their investment would be locked up for a minimum of six months. As a result, GBTC holders have to wait for half a year before they can cash out the return on their investments.
The fund’s increasing popularity has drawn many accredited investors to GBTC in the last two years. Subsequently, some of them had their investments unlocked recently. However, the giant unlocking on June 18 will see the fund release more than 16,000 Bitcoins, estimated to be worth $650 million.
It remains unclear whether investors will dump their assets in response to the upcoming BTC release, but the rise in the asset’s liquidity has the potential to trigger price volatility.
Bitcoin Mining Hash Rate Declines To Its Lowest In 180 Days
China’s crackdown on crypto mining operations within its territory is making a dent in the industry. Large-scale bans have resulted in a steep fall in the Bitcoin network’s tera hashes per second(TH/s). In the last 24 hours, the network performed 127.65M TH/s compared to its all-time high of 180.66M TH/s on May 14.
The Chinese authorities have been steadily tightening their grip around mining companies. Several provinces such Xinjiang, Qinghai, and most recently Sichuan have been directed to discontinue power supply to operations associated with mining. The country has also prohibited financial institutions from offering services related to crypto trading.
Mining operations for AntPool, Foundry USA, SlushPool, and OKKONG, were impacted heavily by the recent moves. Meanwhile, the Huobi mining pool managed to attain an exceptional 10.74% growth in its computing power.
With work on the Central Bank Digital Currency(CBDC) underway, China aims to be at the forefront of blockchain technology by 2025. At the moment, China is offering CBDC to its citizens via digital yuan lotteries. A total of 200,000 red packets are up for grabs, with each packet containing 200 yuan. The country has also updated 3,000 ATMs in Beijing to accept digital yuan, along with two banks that are already providing exchange services.