Investing in bitcoin derivatives has become easier for individual investors after Bitcoin Investment Trust (GBTC) announced a 91-for-1 stock split last week. This means that each investor in the ETF, which tracks the bitcoin price, will receive 91 additional shares for every 1 share that they hold. In turn, it will make GBTC, which has been trading in the high $1,900 range, cheaper and more accessible to individual investors.
As of this writing, GBTC was down by 12.6% to $1,720 and had a market capitalization of $3.68 billion. On a post-split basis, the stock’s price would amount to $18.90 per share.
Bitcoin’s price plunged by approximately 20% this morning on fears of a crackdown by governments in Asian countries, which comprise among the largest trading venues for the cryptocurrency. (See also: Bloodbath In Crypto Markets And Bitcoin Price Over Fears Of Government Crackdown.)
A Premium Over Net Asset Value
The Bitcoin Investment Trust buys and holds bitcoin for investors. Because it was the only bitcoin game in town, investors had bid up its value over and above its holdings. The fund also mirrors its cryptocurrency’s volatile price movements.
As of mid-December, when bitcoin’s price neared the $20,000 mark, each GBTC share represented 0.0919 bitcoin. That figure is expected to go down to 0.00101 bitcoins per share once the split is completed. While that may not necessarily down the price premiums, it will bring more liquidity into bitcoin markets because it makes the ETF accessible to everyday investors. (See also: Why Buy This Expensive Bitcoin Trust Instead Of Actual Bitcoin?)
“It is the only product (of its kind) available to investors for purchase at net asset value,” said Michael Sonnenshein, director of the trust in an interview with CNBC. Speaking about the stock’s volatility and premiums over its holdings, Sonnenshein said his company was working with banks and other firms to educate investors and help them understand the asset class better.
According to Sonnenshein, trading volumes for the product indicated that there was demand for it. That should be good news for other companies, which have submitted applications to start bitcoin ETFs.
Sonnenshein said it was only a matter of time before bitcoin ETFs were allowed in the market. In the meanwhile, his company, which already has funds focused on ethereum and zcash, is preparing to launch a basket product which provides exposure to several cryptocurrencies at the same time. (See also: Bitcoin ETFs Are Next In Line After Futures.)
Investing in cryptocurrencies and other Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns small amounts of bitcoin. It is unclear whether he owns other bitcoin forks.