An analyst has explained that a pattern in Grayscale Bitcoin Trust (GBTC) could indicate that BTC may rise by 50%.
Bitcoin and GBTC have seen a disconnect in recent months
In a new after on X, analyst James V. Straten discussed the correlation between GBTC and BTC that has been present over the years. The Grayscale Bitcoin Trust is an investment vehicle that owns Bitcoin and allows exposure to these holdings through its shares.
The chart below shows the trend in the percentage performance of Bitcoin and GBTC, as well as the correlation coefficient between them, over the past year.
Looks like the two assets have diverged recently | Source: @jimmyvs24 on X
The ‘correlation coefficient’ here refers to a measure that tells us how similar the prices of two assets are. When this measure has a positive value, the given commodities exhibit positive correlations because they replicate each other’s movements. The closer the metric is to 1, the stronger this relationship is.
On the other hand, negative values imply that the assets respond to each other’s movements by moving in the opposite direction. The strongest negative correlation occurs at a value of -1.
If the correlation coefficient is around zero, then there is obviously no correlation whatsoever between the commodities because their prices move independently of each other.
From the chart above, it can be seen that Bitcoin and GBTC often had a correlation coefficient close to 1, implying that there has been a robust positive correlation between the two.
There have been some temporary periods of divergence, mainly during cryptocurrency price drops and other major events such as the SVB collapse. However, the correlation returned to normal shortly afterwards.
Straten says this correlation is especially striking over a five-year time frame, where it reaches 100%. However, the analyst also notes that the two assets have been decoupled since June.
As visible in the chart, GBTC has been on a sharp uptrend lately, while BTC has been largely flat. GBTC’s performance currently stands at +81% over the past year, while Bitcoin is up about 43%.
“GBTC will be the first to be approved for the spot ETF, before Blackrock and others,” says Straten, referring to what British HODL, another analyst said earlier. “Price promotion is in line with this. Regardless of whether it is late Q3 or early Q4, it is a six-month period.”
Based on this, the analyst believes that either Bitcoin should close the gap that has opened between Bitcoin and GBTC since June, which would mean a price increase of around 50%, or GBTC should fall towards BTC. However, Straten considers the latter scenario unlikely.
BTC price
Bitcoin has fallen in recent days as its price has dropped to as low as $27,100.
BTC has been going down during the last few days | Source: BTCUSD on TradingView
Featured image from Shutterstock.com, charts from TradingView.com
