Bitcoin: Check Your Sanctimony At The Door – Bitcoin Investment Trust (OTCMKTS:GBTC)

While watching CNBC in a hospital waiting room this week, an orderly approached me and said “If you really want to make money, you should look into these things called cryptocurrencies…” When asked why he thought this was a good investment idea, he replied that “people think Bitcoin is a bubble. But it can’t be a bubble because everyone doesn’t own it.” The conversation pretty much ended right there but what the point lacked in economic acumen, it gained in expressing the vital point that perception can sometimes influence markets more than anything else. The reality is that the story of Bitcoin is far from over — and even with the governmental blockages in China markets have managed to absorb the initial losses and resume the dominant trend in the cryptocurrency assets. This is the move we were expecting (and discussed in a prior article), with valuations in the Bitcoin Investment Trust (OTCQX:GBTC) now trading roughly 28% higher relative to the initial lows. We maintain our bullish stance on this asset and expect further upside in GBTC over and above the prior highs.

GBTC Chart Analysis: Dividend Investments.com

Many economists have expressed a clear distaste with this type of bullish outlook. There is a wide variety of reasons that characterize the negative stance as there will never be earnings metrics that can help investors to divine whether markets are undervalued or overvalued. When we are dealing with GBTC in particular, many of these concerns are magnified given the fact that there is a premium to be paid for what many describe as a ‘fictional’ asset. But it should be understood that the GBTC premium exists because there is no other way to trade Bitcoin through the channels of the traditional stock market. Most market ETFs are composed of securities that can be bought and sold through the stock market on an individual basis. But this is something that is not possible when dealing with GBTC and the cryptocurrencies.

Furthermore, GBTC has already weathered the storm in terms of major analyst dismissals (i.e. Jamie Dimon) and large government trading blockages (i.e. China). GBTC bounced off of our key support zone at 470.60, which is significant because it marked the initial breakout point and the 200-period moving average on the medium-term price charts (4H). When we combine this with the bullish Commodity Channel Index, there is clear scope for more gains and we have no problem holding a conservative long position at current levels.

USD Chart Analysis: Dividend Investments.com

One part of the issue that is generally overlooked here is the fact that the U.S. Dollar has seen massive declines over the last several months. These declines have come after a short-lived period of optimism where the pro-growth agendas outlined by the Trump administration initially brought buyers back into the U.S. currency. But the fact that these rallies reversed so quickly is significant — especially given the fact that these moves largely coincided with the intense buying activity that has been seen in the cryptocurrencies. It is clear here that the market is looking for new safe havens, and we expect one of the main beneficiaries to be those that are invested long in assets like GBTC.

Of course, the cryptocurrency issue has become a highly contentious argument. Thus far, bulls have been in control and the naysayers have been thrown to the mat (if shorting these assets). Should things be this way? No individual investor has the authority to make the judgement. In other words, sanctimonious arguments about the ‘true value’ of Bitcoin are worthless for traders looking to capitalize on the momentum. We remain long GBTC and expect further upside in this instrument over and above the prior highs at 1,005.


What is your position on the Bitcoin? We look forward to reading your comments. Stay tuned to Dividend Investors and receive our next alerts by clicking the “Follow” button at the top of the page.

Disclosure: I am/we are long GBTC.

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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