Institutional investment product Grayscale Bitcoin Trust (GBTC) has exploded by more than 300% since its recent low on February 6, 2019, in spite of taking a big hit today.
The over-the-counter security backed by bitcoin at the Grayscale investment firm is trading at about $14 a share, up from about $3.84 in February, according to Stock Charts numbers.
Over the same period, the price of the underlying bitcoin asset has increased from about $3,366 to about $10,900 today, or about 223%. The higher rate of growth for the GBTC than BTC is in part a result of increased premiums charged to institutional and accredited investors, who are prevented from holding the high-risk asset directly.
For some context, John Dobosz, the editor of Forbes Dividend Investor newsletter, ran a comparison of the performance of GBTC versus other assets over the same period, including gold, oil, the U.S. dollar, the S&P 500, an ETF for tech companies including Microsoft (MSFT), Apple (AAPL), and Facebook (FB), and an ETF for emerging markets. The Grayscale Bitcoin Trust destroyed them all, in spite of dropping about 15% today.
“The total gain since that time for the GBTC, which tracks bitcoin pretty accurately, is up 341%,” Dobosz says. “What comes in second best? You would have been okay with oil, even though oil has eaten dust and other particles in the last few weeks. Oil is up 12.8%.” Over the same period, the S&P 500 is up 8.5%, gold is up 7.7%, the iShares MSCI Emerging Markets ETF, is up 1.4%, the Invesco QQQ for tech companies is up 1.7%, and the US dollar is up 1%. Part of the reason for this disparity could be that the GBTC is the only publicly quoted U.S.-based bitcoin investment product and holds more than 1.2% of the total bitcoin currently in existence. As June 26, the total assets under management was $3.0 billion, from assets also including bitcoin cash, ether, litecoin, lumens, XRP and zcash.
The origin of the explosive GBTC growth goes back to before Christmas, according to Dobosz, who has been with Forbes for 18 years. In mid-December, GBTC was below $4, and then it rallied a bit, before fizzling through January. By early February the price “was probing new lows,” he says. “So the stock formed what you would call a double bottom in technical analysis. The belief is that the market had a chance to take the stock lower but it didn’t.”
Volume that same day spiked about 12.5%.
“After the double-bottom, the thing took off,” Dobosz says. Where shorter moving averages are typically seen as better investment opportunities than longer moving averages, the 10-day moving average over the following weeks crossed over the 50-day average.
At around this time Grayscale, a subsidiary of Barry Silbert’s Digital Currency Group started a massive marketing campaign called “Drop Gold,” designed to get investors in the multi-trillion-dollar gold market to buy into the relatively measly $189 billion bitcoin market. As a result of the marketing campaign, which ran on websites, social media platforms and traditional television, Grayscale is currently in a quite period and was unable to provide comment for this report.
However, just a few weeks later, on May 20, the 50-day moving average crossed over the 200 day moving average, “And this thing was off to the races,” says Dobosz.
Since then growth has followed what is called the Elliot Wave pattern, named after naturalist and economist Ralph Nelson Elliot, who observed that everything from human emotional growth to market growth follows a five-wave pattern of growth: retreat, new growth, then retreat again before what Dobosz calls a “natural pause.” The calm before the storm.
“The third period of the pattern is often the most exaggerated of growth,” he added. “Since then it’s been manic.”