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Bitcoin Investment Trust (OTCMKTS:GBTC) Is A Different Sort Of Bitcoin Exposure

Bitcoin Investment Trust (OTCMKTS:GBTC) Is A Different Sort Of Bitcoin Exposure
Written by
Chris Sandburg
Published on
May 25, 2017
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Bitcoin Investment Trust (OTCMKTS:GBTC) currently trades at just shy of 300% premium to its early March lows, having run up close to 95% across the last seven days alone. As many reading will already be aware, the primary driver behind these gains, and the stock's recent rally, is the parallel rally in bitcoin. Overnight last night, the digital currency ran through $2400, $2500 and $2600, to reach fresh all-time highs and register a more than doubling in value on its year open price.Of course, a lot of companies are jumping on the bitcoin bandwagon in an attempt to draw speculative volume from traders and investors seeking exposure to digital currency without having to buy bitcoin itself. Yesterday we covered BITCOIN SERVICES I COM USD0.001 (OTCMKTS:BTSC), which is another bitcoin stock that has run up considerably as bitcoin has done the same. Our conclusion with the latter, however, was that the run was purely speculatively driven, and that – from an operational perspective – there was nothing to really justify an exposure to Bitcoin Services other than by way of a speculative quick turnaround point in anticipation of further gains as bitcoin continues to rise.Bitcoin Investment Trust is a little different.For those not familiar with the stock, it's the publicly traded investment vehicle owned and operated by Grayscale Investments, the investment management subsidiary of the Barry Silbert-led Digital Currency Group. Silbert is known as something of a pioneer in the space and his Digital Currency Group is quickly becoming one of the industry's powerhouse entities.The Trust tracks what's called the TradeBlock XBX Index 24-hour VWAP bitcoin index and charges a 2% annual management fee on an exposure.Right now, it's OTC. Silbert wants to bring it to a major exchange, however, and filed for a NYSE IPO earlier this year. The SEC subsequently turned the filing down based on the fact hat bitcoin itself (which the fund seeks to track) is – for the most part – traded across unregulated exchanges.Early May, Silbert amended the initial filing to allow for an increase in size for its IPO from $500 million to $1 billion. This is still pending, but it was a major source of speculative capital inflow for the stock on filing.Going forward, there's good news and bad. The bad news is that the chances of this one picking up approval as an ETF are slim to none, at least right now. The driver behind an SEC decline in both this and the ETF proposed by the Winklevoss twins remains unchanged, and an increase in IPO size does nothing to address this concern.The good news is, however, that for now at least, it's not too big a deal. Investors can pick up an exposure to the Bitcoin Investment Trust through its over-the-counter listing, and while this listing limits growth somewhat (it prohibits many institutions from taking a position, for example) there's plenty of retail capital looking for allocation and this is one of the most, if not the only, really trustworthy exposures to what's happening in the digital currency space at the moment.Keep in mind that there exists the potential for near-term correction. By nature, this one tracks the price of bitcoin, and there's an almost certain correction on the cards in the underlying asset. Chances are, however, that any correction will be short-lived. Geopolitical advance is driving bitcoin's price gains right now, and while there is no doubt some speculative loading and – by proxy – the potential for profits being pulled off the table near term, the overarching trend we are seeing is a long term and sustainable one.We will be updating our subscribers as soon as we know more. For the latest updates on GBTC, sign up below!Disclosure: We have no position in any of the securities mentioned and have not been compensated for this article.

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