Although bitcoin tumbled late last week, the cryptocurrency is still on a torrid pace this year, sitting at over $17,000 on Tuesday. So is the Bitcoin Investment Trust (GBTC). While the Bitcoin Investment Trust does not exactly mirror the performance of bitcoin itself, the trust is still up nearly 1,200% year-to-date.
That stellar performance is not keeping short sellers away. In fact, some bearish traders are keen on GBTC and other bitcoin-related assets, including stocks with exposure to the high-flying digital currency.
“Since the start of October short demand has increased over 60%, compared with GBTC price increasing over 150%,” according to Markit. “Pressing against the trend has caused the value of the short position to increase to over $110 million. Aside from the bet against BTC price the shares of the trust were also trading at a premium to asset value, which has been pointed out as part of the motivation for shorting the vehicle.”
The ARK Web x.0 ETF (NYSEArca: ARKW) is one of this year’s best-performing non-leveraged ETFs due in part to a position in GBTC. ARKW is an actively managed ETF that focuses on disruptive companies that help transform the market and was the first ETF to invest in bitcoins after the portfolio manager acquired publicly traded shares of GBTC.
GBTC, which is quoted on the over-the-counter market, buys and sells bitcoin with a standard brokerage account in the U.S. and is structured as an open-end trust.
Fund provider ARK Invest believes that bitcoin, a form of digital currency that has been growing in popularity as an alternative to traditional paper currencies, could disrupt the $500 billion intermediary payment platform industry, which covers credit cards, electronic payments and remittances.
“While it’s important to distinguish between the value of bitcoin and firms utilizing blockchain technology, the buzz surrounding both has caused some large price increases which short sellers are betting will come back to earth,” said Markit.
Bitcoin is a decentralized digital currency, or cryptocurrency, based on a peer-to-peer network and can be exchanged through computers internationally without a financial intermediary. The system was first introduced by an unidentified programmer or group under the name of Satoshi Nakamoto in 2009.
Bitcoin futures debuted in the U.S. on the CBOE on Sunday. CME Group is expected to launch bitcoin futures on Dec. 18th.
For more information on the cryptocurrency market, visit our Bitcoin category.