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Is GBTC really the only Bitcoin stock? To clarify, GBTC is the only stock offered on the public stock exchange that holds bitcoin as its primary asset. In other words, it isn’t the only way to invest in Bitcoin, it is simply the only choice for an investor who wishes to use the stock market to trade cryptocurrency as of November 2017. In other words, the trust holds about 170,000 bitcoins and people can buy shares of that trust, each of which represent the ownership of about . 10th a share of an ounce of gold held in storage. It isn’t public yet, but will work the same way as GBTC.
Is GBTC a Good Buy? The premium can be very off-putting, and paired with the volatility of the bitcoin market, makes GBTC bought at a high premium a risky bet. In other words, you could have bought 2 bitcoins for every 1 bitcoins worth of GBTC. So again, you have to not only look at Bitcoin’s market, but at the premium you are paying for GBTC. That means value is diminished over time.
GBTC is the only bitcoin stock on the market. The second there is an alternative GBTC is likely to see their price drop. GBTC tends to be more emotional than the already volatile bitcoin. 100 in a day while bitcoin stagnated and I’ve seen major drops while bitcoin stagnated. A stable trust would ideally track the price of bitcoin, GBTC tends to over-exaggerate the price of bitcoin some days and not react at all on other days.
GBTC only trades while the market is open, the cryptocurrency market however never closes. If cryptocurrency crashes on the weekend, there is no way out until the opening bell on Monday. The cryptocurrency world is a bit like the wild west, you’ll need a digital wallet and you’ll need to upload personal information to an exchange, then you’ll be able to convert USD to cryptocurrency slowly as exchanges limit your spending and slowly draw your money from your bank. Meanwhile, GBTC is immediate and your spending isn’t limited. You either get GBTC or you don’t. Even with the premium, GBTC has preformed very well at times.
Even though it is inconsistent sometimes, if you time it right, it can really pay off. If they distribute only to those who held the stock in August 2017, then GBTC is less attractive to buy now. If they don’t distribute the Cash in some way, then it is a worst case in general for holders of the fund. What they do with the Bitcoin Cash is probably the most important factor pertaining to this stock.
Recent talk suggest Bitcoin Cash will be benefit to current owners of the fund in some way, but one should assume nothing until we know for sure. GBTC was the only Bitcoin stock that managed to get onto the market. All the rest have been rejected. The liquidity and limited supply is what is driving up GBTC’s price. One could argue that GBTC trades well above its NAV because it is trading based on future value.
While this argument has some weight to it, especially considering it is the only Bitcoin stock on the market here in late 2017, the idea that future value justifies the premium isn’t a very compelling argument in my opinion. Trading Bitcoin’s value today is risky enough, never-mind trading its future value. Trading GBTC means paying a premium for quick no limit trading. Meanwhile, trading actual bitcoin means dealing with all sorts of limits and transactions fees. Do you want to be able to trade quickly and easily? Or do you want way better profit margins with slower trades, transactions fees, a bigger learning curve, and some additional risks?