Is Bitcoin Investment Trust Driving the Price of Bitcoin?

Leading blockchain firm Digital Currency Group’s trusted digital currency investment authority Grayscale launched the highly anticipated Bitcoin Investment Trust (GBTC) in March, allowing investors in the public markets to trade bitcoin publicly.

Operating under the ticker GBTC, each share of Bitcoin Investment Trust represents one tenth of a bitcoin, guaranteeing a certain amount of bitcoin per share owned by an investor. Upon its launch, the shares of GBTC surged to US$32 per share, marking a 10.92% increase in just a few days, as the daily volume increased by 10 times.

Due to an increasing number of incident reports of hacking attacks and data breaches on bitcoin exchanges such as Bitstamp, more vestors and high-profile traders begun to purchase bitcoins through Bitcoin Investment Trust as it provides a certain level of insurance bitcoin exchanges fail to provide.

Since March of 2015, the share price of Bitcoin Investment Trust has doubled and is currently valued at US$63 per share, suggesting that traders and institutional investors in public markets are trading bitcoin at around US$630 per coin.

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Recognizing the substantial growth of Bitcoin Investment Trust and its rising popularity within active investors, financial experts recently began to speculate the correlation in the ever-increasing share price of GBTC and the price of bitcoin.

“On Nov. 3, more than 71,000 shares valued at about $3.5 million changed hands—20 times the average. The price of bitcoin, meanwhile, surged 53% between Oct. 21 and Nov. 4, and volume on many bitcoin exchanges took off,” stated the Wall Street Journal.

According to market data provided by Bitcoinity, the trading volume of GBTC is larger than most established bitcoin exchanges such as Bit-x, Quadriga CX, Local Bitcoins, Cex.io and Gemini. As more traders look for alternative methods of cashing out large sums of bitcoins, active traders gear toward regulated and insured exchanges such as Gemini or Bitcoin Investment Trust.

“The additional liquidity and easier access to investors is helping create a more fluid market for bitcoin,” says Wedbush Securities analyst Gil Luria.

The price of bitcoin could potentially be affected by many factors. Thus, it is not possible to establish a solid connection between the price of bitcoin and the share price of GBTC. However, based on public market data, Bitcoin investment Trust is definitely becoming the go-to platform for institutional investors to purchase and sell bitcoin.

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