Wall Street strategist Tom Lee predicts that the Bitcoin Investment Trust (OTC: GBTC) could triple in value by 2022 if his bitcoin price predictions prove to be correct.
Lee, who co-founded market strategy firm FundStrat Global Advisors, has earned a reputation both as a stock market bear and bitcoin bull. He has famously set a “conservative” 2022 bitcoin price target of $25,000, and he maintained that price target even during the severe market correction that was initiated by China’s ban on initial coin offerings and bitcoin exchanges.
Now, Bloomberg reports that Lee is advising FundStrat clients that the share price of the publicly-traded Bitcoin Investment Trust has the potential to triple if his bitcoin forecast is accurate. At present, the Bitcoin Investment Trust — the flagship product of Barry Silbert’s Grayscale Investments — is the only publicly-quoted bitcoin investment vehicle in the U.S. market available to institutional investors. Unlike most of the firms that have applied for bitcoin ETFs (none have been approved so far), GBTC holds the underlying assets directly instead of trading in derivatives contracts.
The trust’s value to investors has been subject to debate in recent months, as its shares have traded at a significant premium over the net asset value (NAV) of the underlying asset. At one point during August, GBTC shares leaped to double the NAV, although the spread has settled down to about 20% in October.
Despite the premium price, Lee wrote in a report that “GBTC at $688 and with 20% NAV premium is an attractive way to gain exposure to bitcoin,” stating that the NAV spread is inaccurate because it does not factor in the value of the airdropped coins from bitcoin cash and bitcoin gold, altcoins that were created from bitcoin forks. When Lee wrote his report, those assets added a combined $53 to the NAV of GBTC shares.
However, Lee advises investors to be aware that GBTC could face liquidity problems if there is a market panic.
“What could go wrong?” Lee wrote. “The biggest risk, in our view, is the GBTC, as an ETN [exchange-traded note], could face a liquidity problem -— if there is an all out panic. But given the highly audited custody of GBTC and its underlying bitcoin holdings, we see this as a short-term issue.”
At the time of writing, GBTC shares were trading at $704, while bitcoin was priced at a global average of $5,953 following a single-day increase of 8%.
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Last modified: May 21, 2020 9:10 AM UTC