Why The Bitcoin Investment Trust (GBTC) Is Rising Despite Crypto Losses
Zacks Investment Research | Jan 12, 2018 03:16AM ET
Shares of the popular Bitcoin Investment Trust (OTC:GBTC) gained more than 12% on Friday after the fund’s parent, Grayscale, announced a 91-to-1 stock split geared towards making the holding company more accessible to individual investors.
The Bitcoin Investment Trust has soared more than 1,620% over the past year, lifting shares to the $1,708 level that the stock closed at on Thursday. The fund was originally intended to make it easier for retail investors to gain direct exposure to bitcoin, but with prices moving so high, many have been deterred.
Stock splits do not technically affect the valuation of a company. Theoretically, a firm’s total market cap should be the same one minute before a stock split as it is one minute after the split. But splits are typically considered bullish indicators, as they usually follow an extended period of strong returns and help lift demand for specific stocks.
New demand for a stock can lift share prices if smaller investors coming pouring in. There is also a psychological component at play, especially with massive splits like we are seeing from GBTC. Simply put, a $2,000 per share stock might “seem” expensive, while a $20 stock probably “seems” pretty cheap.
Interestingly, the Bitcoin Investment Trust’s double-digit gains come in the wake of bitcoin’s continued slump. According to CoinMarketCap.com , the world’s most popular cryptocurrency has slipped more than 1% over the past 24 hours, extending a streak that has watched the digital asset lose nearly 20% of its value within the past seven days.
The Bitcoin Investment Trust’s split will impact shareholders on record as of Jan. 22, meaning that we are likely to see at least a couple more weeks of fluctuation here. Market studies have shown that stocks undergoing splits tend to outperform the market after-the-fact, but considering the uniqueness of GBTC, there is no telling what will happen.
Want more analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
Zacks Editor-in-Chief Goes "All In" on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.
Zacks Investment Research
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.