Shares of Grayscale Bitcoin Trust (GBTC Report) have been going crazy since early February. At that time, GBTC stock was considered a penny stock for trading below $5 per share. Investors are finding the stock attractive after the solid surge in the price of Bitcoin. In fact, on May 14, 2019, Grayscale Bitcoin’s stock jumped to highs of $11. This was after the bitcoin price increased to a new 2019 high.
The price of bitcoin price has managed to hit new highs to trade over $8000 on Coinbase crypto exchange. Upward momentum continues to hold steady in recent month. In fact, prices have doubled in just six weeks.
The Growing Institutional Demand for Digital Assets Has Investors Looking At Penny Stocks
Currently, it seems that there is a growing institutional demand for cryptocurrencies leading to increases in Bitcoin price. A recent survey by Fidelity Investments showed that around 22% of institutional investors including university endowments, hedge funds, and pension funds are embracing crypto assets. Furthermore, almost 40% indicate that they are open to investing in digital assets in the coming years.
Digital assets management company, Greyscale Investment manages Bitcoin Trust. The company has indicated that there is a growing institutional demand for digital assets. In a Q1 2019 report, Greyscale Investments stated that the inflow of investors into the company’s crypto-focused investment funds grew by 42%. This was valued at roughly $42.7 million.
Additionally, around 73% of GBTC’s capital came from institutional investors. The most notable area that experienced substantial growth was hedge funds. They ramped from nearly $1 million in Q4 2018 to around $24 million in Q1 2019.
Institutional Adoption Boosting BTC
The increase in institutional and professional investors adopting digital assets has helped bitcoin prices. As a result, the price of GBTC stock has also benefited.
GBTC acts a proxy for bitcoin price. For each of its shares, it has a backing of around 0.001 worth of bitcoin. Basically, the share price of GBTC has to be multiplied by 1000. This gives an approximate equivalent to the price of a bitcoin.
Currently, however, GrayscaleBitcoin Trust has a price of under $11 per share. This technically implies that the price of bitcoin is supposed to be higher than it is right now. GBTC is currently trading for a premium of approximately 30% of the value of Bitcoin assets. Therefore it’s wise for investors who may want exposure to bitcoin to keep this in mind. This is especially important to consider before buying bitcoin penny stocks like GBTC.