Why I broke down and bought a few GBTC in my IRA
If you are not familiar, GBTC is a Bitcoin Investment Trust that trades on the OTC market place.
The trust owns bitcoins and the trust is designed to flucuate in price based on the value of those holdings.
Except it doesn't really.
In fact it has traded at a significant premium ever since it has been introduced.
Sometimes trading for a 100% premium to it's actual NAV (net asset value).
For that reason, myself and several others have said that GBTC was likely a decent short opportunity when you think the price of bitcoin is ready to trend down.
You have the opportunity of profiting on the downturn as well as some of that premium likely coming out.
Which would likely happen if bitcoin fell sharply or if new exchange traded products like etfs became available and investors had other options to invest in.
Seems like a sure thing to short sellers, at least that is the narrative they want you to believe.
Given, all that information, why in the world would I got out and purchase some?
My plan on purchasing some a few weeks ago was more on the underlying dynamics of the security more so that anything else.
For one, the premium in the security was down around the 40% mark, not great, but better than it has been recently.
Plus bitcoin has pulled back quite a bit itself, so not taking the lower premium into account, this was likely a decent spot to buy bitcoin.
Finally, and most importantly, GBTC announced that they would be undergoing a massive stock split.
(source: https://finance.yahoo.com/quote/GBTC?p=GBTC)
GBTC announced that they would be splitting the shares by 91.
Which means that for every 1 share of GBTC that you own, you would receive 90 extra shares post split.
In finance, stock splits are said to be neither bullish nor bearish. However, if you look at the data, more often than not a split turns out to be bullish.
Especially in the case of something like GBTC which has such a large retail following.
The majority if GBTC investors are retail and my theory was that not as many retail investors like to buy something that costs roughly $1600 per share, not nearly as much as they might like buying something that costs $18 per share.
My thinking was that, not only can you buy bitcoin on a major pull back, right near $11k, but you can also buy GBTC ahead of a massive stock split that will possibly cause more retail investors to pile in, spiking the premium it trades at.
If that turns out to be the case, I could make money on my investment whether bitcoin spikes or not.
If bitcoin does spike, I could make even more money if the premium also inflates than I would have just buying bitcoin outright on a cryptocurrency exchange.
Which means, buying GBTC offered the possibility of me making money whether bitcoin spikes or not, and if it does spike, it offered me the opportunity to juice those returns even more.
For those reasons, I am now long GBTC in my IRA.
Stay informed my friends.
Follow me: @jrcornel
Thx for sharing your forecast in GBTC, something traders must be trying!
okkkk
Agreed. I would like to point out that another key factor is IRA: no tax from capital gain. You can hold days then sell then buy back. This is a huge advantage comparing to trading BTC directly.
Yes, indeed. Another reason I am using that as opposed to a traditional account.
Yes using an IRA is a great point. So much better than trying to deal with filing with the IRS for each buy of Bitcoin if you are in the US!
The other part I am interested in is to see what the actual premium is on GBTC. I just looked it up as of Jan 30 it is 67%. You can actually see the market price compared to the NAV on the Grayscale website:
https://grayscale.co/bitcoin-investment-trust/#market-performance
Good logic! Kinda like betting that Brady will out-perform, even against the NFL’s best defense. Eat Cheesesteaks my friend 🧀 🥩 😜
I'll give you the Eagles and 1 point...
Bet: 1 steem
You in?
Point spread is 4.5. If you give me that; I am in!🏈💰🏈
Gonna have to go to Vegas to get those kind of terms ;)
I've been following and had invested in this stock for a long time (bought in at $200) and my opinion is that it's in limbo right now. Management would have thought that stock split could save the stock price from further sliding but I don't think it would for several reasons at least on a short term basis: (1) It is still overvalued relative to the price of bitcoin core. Its high premium was well justified BEFORE, due to the bitcoin hard forks - other than owning bitcoin core, it also owned BCH, BCG etc. by virtue of hard forks. However, last month, it sold all ts BCH (very and move in my opinion) and distributed the proceeds as dividends; (2)the stock price has a 99% corelation to bitcoin core's price. Since bitcoin has not reach its bottom yet (I understand this is still in debate), GBTC stock could further go down. (3) there are other stocks whose price is highly correlated to bitcoin for IRA investment purposes that would have lesser risk than GBTC. As for a long term investment, I used to be very optimistic of this stock, but when it sold its BCH holdings, and knowing that a "flippining" could happen in the future, I now question it's long term value.
What other investments that are highly correlated with bitcoin's price that carry less risk are you referring to?
good points, cogent
Good points. I wish I could buy a small amount inside my pension but I am based in the UK and it doesn’t seem to be listed by my pension provider.
That's an interesting take I hadn't thought of. I also had no idea there was such thing as a decentralized over the counter market in the first place. You just opened a whole new can of worms for me to explore! Thanks :)
lovely post @jrcornel
Nice article. Would love to hear more about this. Keep up the good work.
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