It’s getting harder by the day for traditional investors to ignore bitcoin. Today, The Wall Street Journal reports that the Bitcoin Investment Trust (BIT - which began trading on the OTCQX market May 4 under the ticker symbol GBTC) could bring bitcoin broader acceptance by investors. Some analysts think the fund could prompt speculative interest in bitcoin like the launch of gold exchange traded funds (ETFs) in precious metals a decade ago.
The Securities and Exchange Commission is currently reviewing an application for what would be the first official bitcoin ETF, the Winklevoss Bitcoin Trust, the article noted.
Gil Luria, an analyst with brokerage firm Wedbush Securities, sees BIT as part of bitcoin’s move toward the mainstream of finance. Other recent signs of acceptance on Wall Street include the decision of the New York State Department of Financial Services to regulate itBit Trust Co., a bitcoin exchange, and Goldman Sachs Group Inc. claiming a place for bitcoin in “the future of finance.”
Luria called the OTCQX BIT listing a “very big step forward” since it has made at least a proxy ownership stake in bitcoin available to practically every institutional and retail investor.
He expects nearly all of the original trust investors to sell their shares publicly by September. This selling will result in a “critical mass” of shares on the market, which is enough to bring the price of the fund’s shares more into line with prices on the bitcoin market.
Cameron Winklevoss, one of the founders of Winklevoss Bitcoin Trust, compares a bitcoin exchange-traded product to the launching of the SPDR Gold Shares ETF in November 2004. The popularity of the gold fund was part of a gold craze that saw prices quintuple over the next seven years.
We believe some investors will behave the same with regards to bitcoin and a bitcoin [exchange-traded product] - Winklevoss said.
The article noted there are reasons to believe bitcoin usage could increase. A recent Goldman Sachs survey of 752 millennials found 44 percent said they have used, do use or will use bitcoin. And more than 100,000 merchants world-wide accept bitcoin for at least some payments.
The article also noted there are challenges for BIT. Bitcoin remains a highly speculative investment. Bitcoin is more volatile than gold in its speculative heyday, and even trickier to buy and sell directly.