Being Generous, GBTC should trade at a 10% premium to NAV: $500

For Immediate Release -September 5, 2017

  • Last week, Citron Research put out a tweet about the Grayscale Bitcoin Investment Trust (OTCMKTS:GBTC) that discussed its net asset value/share price.

  • We believe it is important to clarify this point, and at the same time, illustrate more risks in owning this trust.

  • As of the writing of this article, here is what the math behind GBTC looks like:

The 70% premium is 80% higher than the historical NAV premium of 46.8% of the GBTC, which was already ridiculous.

Last Friday, Andrew Left from Citron was on CNBC, as respected CNBC commentator Guy Adami asked, “Can the same argument (against the GBTC) be made with GLD for Gold??

https://www.cnbc.com/video/2017/08/31/short-seller-andrew-left-targets-grayscales-bitcoin-trust.html   (Click to 2:15)

His answer should make every GBTC investor slam the sell button.

While GBTC is trading between 70-90% above the NAV of its holdings, GLD is at .0028%!  Yes, you are reading that correctly.

Here is a list of what other commodity trusts are trading: GBTC:  70-90%
(depending on whether Bitcoin cash is distributed as a dividend or not)

Instrument

Premium to NAV
SPY 0.0015%
GLD 0.0280%
IAU (ishares gold ETF) 0.0360%
SLV 0.0100%
PPLT (Platinum) 0.1340%
Paladium (Paladium) 0.0350%
FXB (British Pound ETF) 0.0190%
FXE (Euro ETF) 0.0250%

The Widow Maker

Unlike the other ETF’s, which are actually a rational way to own the underlying commodity, this should make any GBTC shareholder shit in their pants.

GBTC cannot even get insurance on their holdings, as per their last SEC filing, June 30, 2017.

As stated in the last SEC filing:

“We have been advised that our Custodian did not renew its insurance coverage.  If our Custodian fails to adequately insure the bitcoins in its custody, this may negatively impact our ability to operate and an investment in the shares.”

https://www.otcmarkets.com/financialReportViewer?symbol=GBTC&id=176856

At the time, Bitcoin was trading at $2,200.  If they couldn’t get insurance at $2,200 per coin, they definitely can’t get it at $4,200.

The quarterly filing goes on and states directly:

“There is a risk that some or all of the Trust’s bitcoins could be lost or stolen . bitcoin transactions are irrevocable.  … Stolen or incorrectly transferred bitcoin may be irretrievable.”

https://www.otcmarkets.com/financialReportViewer?symbol=GBTC&id=176856

This whole vehicle can go to ZERO if there is a: Rogue employee, Computer Error, or Successful System Hack. The filing also warns insurance has become “Unavailable for our Custodian.”

If something is so dangerous that it uninsurable, do you want to own it?  Worse, do you want own a fund that owns it, while paying a price 70% higher than what the underlying asset is actually worth?

 Cautious Investing to All