Bitcoin: The End Of The Beginning


  • Bitcoin prices continued to plunge this weekend, tumbling below $2,000.
  • Other leading cryptocurrencies have dropped even more; Ethereum has lost more than half its value recently.
  • GBTC remains wildly overvalued, compared with its NAV.
  • However, blockchain is here to stay, even as prices plunge.

I last discussed Bitcoin here at Seeking Alpha on May 25th. My article was a warning headlined Bitcoin Getting Dangerous Up Here.

It was well-timed - the Bitcoin Investment Trust (OTC:GBTC) hit its all time high on May 25th at $565/share. Bitcoin itself hit $2,700, and would eventually touch $3,000 briefly in early June. GBTC would never again reach $565, though, as its premium to net asset value "NAV" started to slide.

Since the top in early June, Bitcoin had largely traded sideways in the $2,500-$2,700 area. However, pressure has been to the downside, with each rally stalling out sooner. Last week, the pressure came to a head and sellers overwhelmed the currency, slamming it below $2,500 and then quickly taking it under $2,000 over the weekend:

On Sunday, prices hit levels not seen since early May before attempting a modest rally as of this writing. Bitcoin, as the biggest and most branded digital currency, held up longest. Other leading cryptocurrencies such as Ethereum cracked much sooner and harder - Ethereum has lost more than half its value since it peaked in early June, and the selling lately has been relentless:

What's Next For The Digital Coins?

The first and most obvious takeaway is that GBTC - the investment trust - remains uninvestable. As of Friday, it closed at $375/share despite having just $211/share in assets. This is a horrendous valuation gap, paying almost $2 for every dollar of assets:

GBTC has tended to trade at a small premium to its NAV. And that makes sense, there is some value in being able to buy Bitcoin on the stock exchange (even if via the bulletin board) as opposed to buying Bitcoin directly. However, a normal premium would be something closer to 10 or 20%, rather than almost 100%.

With Bitcoin

This article was written by

Ian Bezek profile picture
Research and trade alerts from a hedge fund pro with a global outlook.

Ian worked for Kerrisdale, a New York activist hedge fund, for three years, before moving to Latin America to pursue entrepreneurial opportunities there. His Ian's Insider Corner service provides live chat, model portfolios, full access and updates to his "IMF" portfolio, along with a weekly newsletter which expands on these topics.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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