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Bitcoin Investment Trust (OTCMKTS:GBTC): Buy The Dip

Bitcoin Investment Trust (OTCMKTS:GBTC): Buy The Dip
Written by
Chris Sandburg
Published on
August 15, 2017
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Back at the start of July, CNBC took a swipe at Bitcoin Investment Trust (OTCMKTS:GBTC) with this report. The report outlined the net asset value (NAV) concept associated with exchange traded funds (ETF's) and used this concept to present an argument as to why Bitcoin Investment Trust was overvalued at its then-current price. Bitcoin Investment Trust took a hit on the back of the report and we saw this as an opportunity to pick up an exposure to what was essentially a misunderstanding by those who put together the CNBC report as to what Bitcoin Investment Trust is and, by proxy, an unjustifiable selloff. GBTCAt the time, Bitcoin Investment Trust went for $404, which represented somewhere in the region of a 61% premium to the ETFs NAV. Our argument was that there exists a far higher barrier to ownership with an asset like bitcoin than exists with something like gold or silver and that investors in Bitcoin Investment Trust were paying a premium to avoid this barrier. Further, we argued that the near-term upside potential in bitcoin was far higher than it was in a more traditional commodity type asset and that, as a result, a degree of speculative bullishness was priced in and, by proxy, was contributing to the NAV premium.As we said, Bitcoin Investment Trust was trading at $404 at that point.Fast-forward to the middle of August, about five weeks after we put forward arguments that suggested that Bitcoin Investment Trust was undervalued at its then-current price as opposed to overvalued (CNBC's conclusion), and the ETF currently trades for $639, off highs of $740 recorded on August 14. Anybody that picked up an exposure to this one out of the $404 price point at which we argued it was undervalued has turned a just shy of 60% profit across the period.So why are we highlighting this one now?Well, as noted, the ETF is currently around $100 off yesterday's highs. As regular readers will know, and especially if they have caught our coverage of GAHC today, we are looking at any dip in the price of publicly traded bitcoin companies as a potential entry point for a quick turnaround trade. That is the case here, but unlike as is the case with many of our other examples, we are looking at any dip in Bitcoin Investment Trust as an opportunity to buy shares in what amounts to the best available bitcoin exposure on the market today.This isn't just a company claiming certain ties to the bitcoin space. It's not even an established technology company seeking to capitalize on the rise in the price of bitcoin with an additional operational focus on the sector. It is an ETF that was set up by some of the most respected names in the industry (who were around way before this price rise brought bitcoin into the mainstream) and that are fighting to gain the regulatory recognition that would almost certainly have a dramatic impact on the price of bitcoin if and when it is received. In other words, this allocation is not only directly affected by the rise in the price of bitcoin, it has the potential to directly affect the price of bitcoin with its own operational focus – something that very few, if any, other entities in this sector are able to say right now.As we always say, the risk here is rooted in a correction in the price of bitcoin. Some degree of correction is almost inevitable and Bitcoin Investment Trust is going to respond negatively to any correction in line with the wider industry. Longer term, however, and especially if bought at a discount on a dip, there's plenty going for this one from a reward perspective.Catch up with our previous coverage of this one here!We will be updating our subscribers as soon as we know more. For the latest updates on GBTC, sign up below!Image courtesy of BTC Keychain via FlickrDisclosure: We have no position in GBTC and have not been compensated for this article.

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