$GBTC Speculation, Information, and Cogitation

[Sitarow]

Time and Sales for Bitcoin Investment Trust    May 08, 2015
Symbol: (GBTC)          
Time      Price   Volume   Market
14:19:58      54.50   275   OTO
14:14:03      55.00   200   OTO
14:14:00      52.00   400   OTO
14:13:48      50.00   498   OTO
14:08:36      52.00   2   OTO
14:03:01      53.00   50   OTO
13:57:13      53.00   25   OTO
13:29:09      50.00   1000   OTO
13:25:17      50.00   1000   OTO
13:18:15      53.00   10   OTO
13:08:09      50.00   1000   OTO
12:55:05      53.00   300   OTO
12:48:00      52.95   29   OTO
12:47:54      52.95   64   OTO
12:47:52      52.95   5   OTO
12:40:38      52.95   7   OTO
12:24:59      52.95   18   OTO
12:24:42      52.90   75   OTO
12:15:29      52.95   1   OTO
12:14:56      52.95   30   OTO
12:04:00      52.95   1   OTO
11:52:19      52.00   10   OTO
11:47:56      53.00   59   OTO
11:45:12      53.00   172   OTO
11:34:56      50.00   1000   OTO
11:25:02      50.00   500   OTO
11:24:00      50.00   500   OTO
11:23:10      50.00   500   OTO
11:22:38      50.00   500   OTO
11:19:47      50.00   24   OTO

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[Chainsaw]

A posted Bid of $50 and a posted Ask of $51.

I'll be watching how the market reacts to Maxim's presumable 'ever-renewing' Buy at 50.00.
The first few hours it led, then frontrunners got some fills, and now they sit at the top.
Bidders outbidding the leading bid shows demand outpacing supply.
Maxim holding the lead indicates a possible false floor, if sufficient new liquidity does not replace theirs.

[Chainsaw]

This is another one of those pure speculation, here's what's going on in my head posts.
Wanted to share my recent theorization. This is an interesting market dynamic.

There is no guarantee that any actor is correct. But I do feel understanding motives gives insight into how the market may behave down the road.

The million dollar question right now seems to be

"WHY are people paying these 100+% premiums? Who does that?"

I couldn't quite put my finger on it either.
There are lots of pieces, and I'm unfamiliar with most.
OTC. BIT holders converting shares after 12 month holding period. Tax deferred benefits.  Value-add for convenience, safety, etc.

Put a black box around all that, and call it valuation.  WHY are people willing to pay 100% premium?

I nearly liquidated my small existing position when I had the next thought:

As soon as COIN hits the market, GBTC will have a far more liquid, high volume competitor.  The only possible way the premium could remain is if (close to) the same premium exists for COIN.
I thought, surely this means we will rocket down to current-BTC prices.
But we haven't.
Sure I just realized these things, but they have been true of the market all along.

A reasonable explanation was still missing.
IPO enthusiasm was the only possible candidate.

Then it clicked.

Simplifying the sale mechanism - the only way new shares are introduced is when a 12+ month holder sells their coins.

If 100% of the BIT holders sold their shares, no new ones would be available for purchase for 12 months.  Except on the "aftermarket", from GBTC sellers that had originally purchased from these first-sellers.

So this initial supply is limited. It is large, but it is limited.

If we assume the following:
a) COIN will eventually launch.
b) Market prices will eventually drive both COIN and $GBTC to close-to-parity with BTC market prices, with a small, constant premium.

There is one explanation for why people are willing to pay $50/share for GBTC.

The market has indicated its belief that the exhaustion of the first wave of shares, reconciled against the aftermarket seller price, will result in an equilibrium on par with market prices when BTC prices are worth no less than $500.

Said more simply, buyers believe we'll run out of shares for sale before Bitcoin valuates to $500.

I think of it like a metric from a prediction market.

[Chainsaw]

Maxim is testing the market.
They put their Bid at $49 to see if the market will follow them down.
If they are rewarded for their efforts, I would expect them to rinse and repeat the experiment.
I think they're trying to accelerate the price discovery, let someone else soak up some shares, in case the final settled price is lower.

30 minutes left for the day's trading, very interested to see relative volume and price moves.
13,569 shares as of now.

[Keyser Soze]

Interesting analysis... I've been watching these first days very closely and your explanation of the premium sounds reasonable, hadn't thought of that.

[chriswen]

Yup GBTC is like a black box.  There is totally limited supply right now.  And the demand for that limited supply could be huge.

Also no $49 bids got filled.

[Chef Ramsay]

Yep, good thread Chainsaw. It's fun to observe and speculate in a comprehensive fashion when the environment isn't  overflowing w/ troll nonsense.

[uvwvj]

New ask

CSTI   50.00   2000   15:45


* Correction make that 4000

[bitbouillion]

BITCOIN INVT TR (GBTC) -Other OTC
49.00 Up 9.00(22.50%) 3:57PM EDT
Prev Close:   40.00
Open:   50.00
Volume:   14,807

Why would one buy a BTC for $490, when the price on US-regulated exchanges is $244?

[Alley]

BITCOIN INVT TR (GBTC) -Other OTC
49.00 Up 9.00(22.50%) 3:57PM EDT
Prev Close:   40.00
Open:   50.00
Volume:   14,807

Why would one buy a BTC for $490, when the price on US-regulated exchanges is $244?

Why is this same question asked every day?

[hector3115]

I know one thing, if I was a year long holder of GBTC and underwater, I would happily dump my GBTC at a value of $500.00 and then take that profit to the exchange and double you bitcoin exposure.  This is possibly the reason for the spot price rally today.

Could be the reason for future rallies too.

Bottom line, ETF's are going to be great for bitcoin.  

[David Rabahy]

So, I have a Roth IRA account where I could sell Visa https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1431117137729&chddm=127346&chls=IntervalBasedLine&q=NYSE:V&ntsp=0 which has done very well for me since 1/21/2014 (time to take profits; nothing goes up forever) and use the proceeds to purchase GBTC right away (avoiding the headache/delay of purchasing BIT shares at NAV).  In my mind Visa was a hedge against my Bitcoin investments and it isn't clear to me yet that it is time to go all in (or rather just more in) for Bitcoin.

*If only* I could purchase BTC (as opposed to GBTC) within my Roth IRA account.  Perhaps I should renew my efforts to figure out one of those "checkbook IRA" deals, e.g. http://www.broadfinancial.com/self-directed/self-directed-ira-16.

Btw, I felt it was wrong to use Western Union https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1431117318203&chddm=496179&chls=IntervalBasedLine&q=NYSE:WU&ntsp=0 as a hedge.

[derpinheimer]

4k ASK at 50

[Chainsaw]

New ask

CSTI   50.00   4000   15:45
make that 4000

I first worried about this as a looming negative over the weekend. I think that was a nervous over-reaction.  CSTI's bid shows an intent to buy at least 4k more at the same 50.00 rate that 4,000 new shares entered the market at today.
My read - "Don't worry Maxim - we'll be here buying again at Monday. At $50. Not $49."

Why would one buy a BTC for $490, when the price on US-regulated exchanges is $244?

I posted the only logical theories I can think above a few posts above.
Simplified, I postulate we will find GBTC equilibrium at the same price that COIN becomes available.

*If only* I could purchase BTC (as opposed to GBTC) within my Roth IRA account.  Perhaps I should renew my efforts to figure out one of those "checkbook IRA" deals, e.g. http://www.broadfinancial.com/self-directed/self-directed-ira-16.

I think this will be general market sentiment. Once COIN is available, it will be more desirable. At that point, GBTC purchases will track with it, for when it falls below, it will be an arbitrage opportunity.

A nice day of trading. Nice to see real volume, a true middlepoint hit, and a first fight for which side will pull the other.

Remember there are two camps of shares. Once sold, they become more liquid. I expect volume to ramp week to week as this liquid portion increases.

[cypherdoc]

don't you need a wall observer to have a wall observer thread? 

[OgNasty]

Why would one buy a BTC for $490, when the price on US-regulated exchanges is $244?

The answer to this question is simple.  The only advantage in buying this fund over buying BTC straight is the ability to purchase in your tax shielded accounts.  Therefore, the logical explanation is that people are paying a premium to get exposure to tax free BTC gains.  If you believe the price is headed to $10,000, you would much rather purchase at $500 without tax liabilities than to purchase at $250 with tax liabilities.  That is the only logical explanation for the premium we are seeing.

[Chainsaw]

2nd rename suggestion.
The intent was a parallel but specialized speculation/analysis/theorizing/watching thread specific to GBTC, and speculated interactions with the BTC market.

Throw out some suggestions (all).  I'd say I'm all ears but there was a most excellent burn in masterluc's thread the other day that I don't want repeated in my direction :-)

[bitasset]

Maxim Group LLC is asking 200000  per share 

https://i.gyazo.com/763f795870db7d35248736b173a6981a.png

[cypherdoc]

2nd rename suggestion.
The intent was a parallel but specialized speculation/analysis/theorizing/watching thread specific to GBTC, and speculated interactions with the BTC market.

Throw out some suggestions (all).  I'd say I'm all ears but there was a most excellent burn in masterluc's thread the other day that I don't want repeated in my direction :-)

Instead of renaming the thread just construct a wall observer. That would be useful.

[Chainsaw]

Maybe Richy_T would be willing to post a GBTC version of his output to this thread. I don't know if an available data stream for $GBTC is in the same format as what he's currently parsing or receiving from.
Might be worth pursuing. 

I appreciate Sitarow posting the book from time to time.