Bitcoin Trust Plunges as Cryptocurrency Slides Below $16,000By
Structured note has drawn scrutiny as price exceeds assets
Three-day slide tops 40 percent; bitcoin down 16 percent
Bitcoin’s worst three-day slide in more than a month is spilling over to the structured note that tracks its price.
Shares in Bitcoin Investment Trust have tumbled 41 percent since Monday, more than double the drop in the cryptocurrency. The publicly traded vehicle’s price exceeded the value of the bitcoin it holds by almost 100 percent three days ago. The gap now stands at 53 percent.
Bitcoin fell 2.6 percent to $15,782 as of 10:29 a.m. in New York. It’s still up 1,600 percent this year. The slide comes as investors bid up the price of other digital coins such as bitcoin cash and ripple. There’s also been intense investor interest in small companies that have rebranded to focus on crypto.
The discrepancy in the price and net asset value at Bitcoin Investment Trust had attracted Citron Research, a short seller run by Andrew Left. He said the dislocation gave any savvy trader a chance to profit by betting that the gap will shrink, adding that it’s caused by investors scrambling to get access to bitcoin without understanding how the structured note works.
John Spallanzani at GFI Securities says the gap exists because retail investors have few chances to get access to bitcoin, increasing demand. Professional traders and larger institutions are more likely to buy newly created derivatives, which have only served to boost optimism that Wall Street is embracing crypto, he said.