Bitcoin investment trust premium is nearly 50%, analysts warn against bubbles

Due to the rapid rise in the price of Bitcoin, some analysts have begun to warn investors to be cautious about Barry Silbert's Bitcoin Investment Trust (GBIT).

Parke Shall, a financial analyst at Orange Peel Investments, said the price of Bitcoin has become a bubble. Shall pointed out that the price of Bitcoin once exceeded $1,800 this week, achieving a 40% increase in a short period of time.

Shall warned that it was the inflow of capital that caused the bubble. He said he hoped he could stop people from buying Bitcoin at a 70% premium. On Wednesday, GBIT's price reached $265, then fell to around $210 to $220, and its price fluctuations were inconsistent with the price trend of Bitcoin.

He said that GBIT’s price fluctuations on the same day cannot be observed on the Bitcoin price chart because the chart only shows the closing price of the day.

As of press time, GBIT price is around $219.

GBIT is worrying

He also mentioned that the price of GBIT reached an 80% premium this week. GBIT is an asset that can only be traded through brokers and is used as a Bitcoin transaction. As the price of the currency rises, the demand for GBIT will also increase.

Ian Bezek, an investment analyst at Kerrisdale Capital Management LLC, said that the Bitcoin Investment Trust is overpriced and irrationally priced, and its growth has even exceeded that of Bitcoin.

Bezek said this situation has negative consequences.

The price of Bitcoin hit a new high at the end of April, and after breaking through technical limitations, the price of the currency began to go crazy. He said that the price of the currency rose by nearly $500 in two weeks.

Abnormal market

Bezek said that the current market development is not normal, and the rise in the price of coins is mostly driven by emotional factors, just like the silver price rose by $50 in a single day in 2011.

He pointed out that the price of Bitcoin will not reach its peak immediately and may face a collapse after a few days of rising.

Given the lack of liquidity in the market, Bezek said it is impossible to short Bitcoin, which moves in the opposite direction to other alternative investments such as silver, gold, and crude oil. Bitcoin's inherent limitations make the price rise persistent.

Bezek said there are even differences between buying bitcoin and a bitcoin trust.

GBIT's price trend has completely deviated from Bitcoin itself. Since April, GBIT's price has doubled, while Bitcoin has only achieved a 50% increase. This means that GBIT has a premium.

GBIT’s price should be one-tenth of a single Bitcoin minus brokerage fees, and the recent price of $255 suggests that the price should be around $2,700, but this price is far higher than the current price.

50% premium

At the close of trading on Tuesday, GBIT shares worth $233 were worth just $158 in bitcoin, Bezek said, meaning GBIT buyers would have to pay an extra 50% premium.

There are advantages to buying publicly listed assets, but Bezek believes that the 50% premium is not worth it. Usually in the gold market, as long as there is a 2% to 3% premium, people will start to complain.

Once the price of the currency stops rising, those investors who hold GBIT must start to think rationally about their position. The current price of GBIT should be $2,700. Once the premium stops, investors will suffer heavy losses.