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Monday, November 30, 2020

Bitcoin Investment Trust (OTCMKTS:GBTC) Hammers Traders on Premium

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Bitcoin Investment Trust (OTCMKTS:GBTC) is seeing strong volume today as the stock but is flat for the day. In the larger picture, GBTC is down more than 40% in the last three months. GBTC is well known in the investing world and used as a popular bridge from the crypto asset world to the investing community. However, GBTC is offering a share of bitcoin at a heavy premium and it seems investors are having a hard time selling out for GBTC even with the potential upside of reduced tax headaches and ease in supply and demand issues.

The calculation will vary by the day but GBTC can often only give an investor 60% of a bitcoin. This is a decent cash dump for any investor. Some of this premium comes from the fee GBTC charges as an annual fee (a 2% management fee is imposed by Grayscale LLC, who manages GBTC). Investors should understand that this is a speculative value and the boosted price at time from the desire for investors who want access to bitcoin but don’t want to deal with digital wallets or exchanges. One would expect that digital wallets will become more accessible and less nuanced meaning that GBTC could trade at even higher premium.

Bitcoin Investment Trust (OTCMKTS:GBTC) trumpets itself as a private, open-ended trust that is invested exclusively in bitcoin and derives its value solely from the price of bitcoin. It enables investors to gain exposure to the price movement of bitcoin without the challenge of buying, storing, and safekeeping bitcoins.

The BIT’s sponsor is Grayscale Investments, a wholly-owned subsidiary of Digital Currency Group.

Each BIT share represented ownership of 0.1 bitcoins initially. The trust will not generate any income and regularly sells/distributes bitcoins to pay for its ongoing expenses. Therefore, the amount of bitcoin represented by each share gradually declines over time.

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All that said, GBTC has strong volume and was recently named to the OTC’s Top 50 for its sustained growth.

Furthermore, GBTC was in the news recently as the company announced the launch of four new investment products including Bitcoin Cash Investment Trust, Ethereum Investment Trust, Litecoin Investment Trust, and XRP Investment Trust. This is important because Bitcoin, Ethereum, Ripple, Bitcoin Cash and Litecoin are the five largest global cryptocurrencies by market cap and represent the only five digital currencies valued at more than $1 billion each.

The U.S. Securities and Exchange has yet to approve a cryptocurrency fund for listing on a major U.S. exchange leaving GBTC the only game in town and allowing it to trade at the premium aforementioned.

“We are thrilled to expand Grayscale’s offerings to meet rising investor demand,” said Michael Sonnenshein, Managing Director at Grayscale. “Our team is committed to bridging the gap between the global investment community and the digital currency asset class. We remain focused on product creation and will continue to launch more single-asset and diversified products to provide exposure where investors are looking for it.”

Bitcoin Investment Trust (OTCMKTS:GBTC) has a market cap of 2.23B with 10-day volume at 3.58M. GBTC is really about the ride. If you are looking for a bit of fun and happen to be bullish on bitcoin than GBTC is a nice safe option. However, the shares are coming at a premium and do not equal one for one on the coin and every investor should understand that before they jump into the pond.For continuing coverage on shares of $GBTC stock, as well as our other hot stock picks, sign up for our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in $GBTC, either long or short, and we have not been compensated for this article

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