Bitcoin (BTC) is being compared to the end of 2020, but this rally actually has several important differences that make it “not normal”.
According to Pete Humiston, manager of Kraken Intelligence Research, Bitcoin in Q3 2021 is a different beast when compared to Q4 2020.
GBTC keeps its big discount
Despite having gone from $29,000 to $48,000 in just one month, Bitcoin is still not seeing a frenzy of interest and purchase.
Higher price levels have been solidly supported, but there is little evidence of the type of demand that characterized the beginning of this year or the end of the last.
A case in point is the Grayscale Bitcoin Trust (GBTC), which continues to trade at a discount of around 13% from the spot price this week.
Although the price of Bitcoin has risen, demand for GBTC has not fully increased by the same proportion, and even the discounted rate is not being treated as a theft by many institutional investors.
At the height of the BTC price retraction, the GBTC premium was around -20%.
“Although above its 20% discount set in May, the GBTC is still trading at a big discount (-10%),” noted Humiston.
“As demand really starts to pick up, which doesn’t seem to have happened, we’ll likely see this discount weaken as market participants seize the opportunity to have a discounted $BTC exposure.”
Funding rates lag behind price performance
Two other factors that highlight Bitcoin’s current market structure is the low open interest about Bitcoin futures and lower-than-expected funding rates.
Related: BTC targets $50,000 breakout despite biggest ‘greed’ since historic high: 5 things to watch out for in Bitcoin this week
Both contrast with the start of the 2020 bull run and go against the trend given the pace of price increases last month.
“At the time when we saw $BTC go from $30,000 → $48,000, the open interest has fallen and the perpetual bitcoin funding rate is still relatively low (albeit positive),” added Humiston.
“Neither of them really followed the big BTC rally, which is a surprise and not really normal.”
However, the rates of funding are now more positive than at any time since the fall in prices in May.
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