Shares of Bitcoin Investment Trust (OTCMKTS:GBTC) are trading at their highest premiums relative to their underlying Bitcoin value since shortly after their public debut in May 2015.
In a short-term trading on Bitcoin Black Friday the shares closed higher by 11.96% at $47.00, catching up Bitcoin’s huge gains of skyrocketing 16% to $370 on Bitstamp from the day before.
At the moment, each share represents approximately 0.0959 BTC. Bitcoin Black Friday’s closing price implies an underlying bitcoin value of $490, which is a 36% premium to the actual Bitcoin price of $359. Shares hit an intraday peak point of $51.50, their highest level since hitting $57.00 during Bitcoin’s jump to $500 earlier in the month.
Premiums have been growing by implication of that jump, possibly a result of renewed investor appetite for one of the only regulated Bitcoin instruments available to the public.
When the shares became publicly available in May 2015, investors initially paid premiums in excess of 100% to procure them. Afterwards, the shares quickly shed 80% of their premium, which has since typically hovered between 10% and 25%.
When the Bitcoin recovery started to gain momentum in late October, GBTC failed to hold on. At various points, the shares actually traded below par for the first time in their publicly traded history.
Subsequently, premiums reversed higher to well above typical levels, approaching 50% two weeks ago, and holding in the 35% to 40% range.
Some of the notable movements in the GBTC premium value were in fact a result of delayed reactions by the shares to the Bitcoin price. For instance, during the negative premiums one month ago, the shares moved fairly lower even as Bitcoin steadily escalated higher. The recent increases to premium levels may have therefore resulted from investor excitement in response to the big recovery.
In general, the price premium may also result from a ‘higher bitcoin value’ investors bake into the shares than Bitcoin itself. GBTC is a regulated instrument and investors should not anticipate losses arising from hacking-related theft, unlike raw Bitcoin, which inherent risks may be caused by investors into its relative value.
On the other hand, a number of other ways exist that would seemingly also offer peace of mind. For instance, shares of Bitcoin Tracker One are traded on the Stockholm Stock Exchange, and not for a striking premium. Besides, there are Bitcoin wallet offerings that make hacking-related theft practically impossible, and some come with insurance.
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