GBTC is the Best Way to Buy Bitcoin (Yes, I am Spiting ALL of the Haters with this Title!)
A few weeks ago, we put up a video of how you can buy Bitcoin through your IRA by purchasing shares of The Bitcoin Investment Trust (GBTC). At the time, the shares were in the low $600s, right before they surged to over $1000. Since then, however, they have settled to the mid-$700s, or about 20% higher.
In the video, we explore the pros and the cons of the trust. Specifically, we discussed how you can exploit a stock that has actually outperformed Bitcoin over the last year by earning the income tax-free. But we also highlighted the exposure to all the risks of Bitcoin and sold at pretty steep premium (along with a management fee).
This begs the question: why don't you just buy Bitcoin straight from Coinbase or other exchanges?
Well, that question is one that countless financial analysts and strategist love to ponder...actually, more like beat down so aggressively that you forget what the ticker symbol is (it's GBTC...). @jrcornel ;)
I understand the risk-averse and cautious investors being timid about Bitcoin, Cryptocurrency, and GBTC. They very well should be - we all should be! Investing in ANYTHING is never a sure-thing, and any investment without proper research and the willingness to risk your assets is an investment that is bound to disappoint.
However, I don't understand the negativity that surrounds the opportunity that is presented through GBTC. Time and time again, people say it's a terrible investment - going as low as to call those who invest in GBTC "a special kind of stupid."
In fact, a simple Google search reveals more than 50% of the articles written are opinions that do nothing but bash the fund. The other articles are neutral and "fact-driven". I have yet to find an article that sheds a positive light on the fund.
As such, this is one of the few articles that you will read that gives a positive outlook on the fund.
Here are three reasons why GBTC is actually not a "stupid investment":
As mentioned above, the fund has outperformed Bitcoin over the last year
On September 6, 2016, GBTC was trading at $94.50. As I write, it is trading at $760, which is an 705% increase.
On September 6, 2016, Bitcoin was trading at $623. As I write, it is trading at $4422, which is a 610% increase. (Graph below courtesy of Coinbase)
Also important to note is the All Time Highs (ATHs) of each:
Last week, GBTC hit an ATH of $1064 or 30% higher than today's value.
In the same timeframe, Bitcoin hit an ATH of $5000, only 20% higher than today's value.
GBTC is so much easier to buy...and buy much more of!
If you want to buy Bitcoin, you can. But not today. You see, buying through Coinbase or other exchanges means that you have to go through a certain holding period (usually 3-4 days) to validate your funds and banking information. You also have a pre-determined limit of how much you can buy (usually starting around $2000-$2500 depending on the exchange). This limit can only be increased if you provide additional ID verification and validation.
Some may think this isn't a big deal, but with such dramatic fluctuation of the Bitcoin price, it could ruin your investment strategy.
Assuming you have an account with a trading company like Fidelity or E-Trade, you will not run into these issues when purchasing GBTC. Obviously, if you are a brand new investor all around, then the Coinbase route might be more appealing because the delays are the same for a newly-opened Fidelity account. However, if you do already have a funded account, you are not burdened with buying limits or delays to verify your account and you can buy Bitcoin TODAY!
The premium is real...but it's worth it.
Now hear me out on this one. Everyone says GBTC is a terrible investment because there is a 100% premium on the trust (you get .092 Bitcoin for every share of GBTC), along with the 2% management fee. Ironically, most stocks on the stock market are trading for a gross premium (by sound-investment standards) and yet they are heralded as some of the best stocks to hold.
For example, the P/E ratio (stock PRICE to company EARNINGS) is a ratio that is considered by many to be a good basis of the value of the stock. A healthy P/E ratio is around 15 times earnings - any less than 15 and the stock is considered a bargain; any more, and many would argue that it is overvalued.
Here is a list of reputable stocks that are grossly overvalued based on their P/E ratio:
Amazon 240
Netflix 215
Salesforce 800+
Yelp 278
GoDaddy 342
Ironically, all of these stocks are tech stocks, which I would argue Bitcoin would fall under, and all of them are actually trading at a value that is 10x MORE EXPENSIVE than GBTCs premium over Bitcoin.
For more, read this recent article written by Zack's. This article highlights "trailing P/E", but the same concept applies. And if you want a list of stocks in other industries that have high P/E ratios, check out this list.
One last thing to point out is the simple fact that GBTC held over 150,000 Bitcoin prior to the Bitcoin fork on August 1.
Why is this important?
Well, owners of Bitcoin received one Bitcoin Cash for every Bitcoin that was held. This means that GBTC earned at least 150,000 Bitcoin Cash on August 1, and at a current value of about $600 per Bitcoin Cash, the shares of GBTC have about $60 more value than most analyst are giving credit. Hence, the perceived premium is actually much lower.
So you see, there are several reasons why GBTC actually isn't a stupid investment. Risky? Sure. Unnerving? No doubt. And don't invest based on this article. DO YOUR OWN RESEARCH AND MAKE YOUR OWN DECISIONS! But it can be argued that investments in Amazon, Netflix, GoDaddy, Salesforce, and Yelp are much more stupid investments. And if you stay disciplined by taking profits off the table or buying through your ROTH IRA, GBTC can be a very lucrative investment option.
Original article on www.cryptovice.com
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