Thursday, June 8, 2017

Speaking of market tops Bitcoin edition

This is a chart of the Bitcoin Investment Trust (GBTC). Each share of the trust represents 0.09289534 bitcoins. Lets do a quick calculation;

0.09289534 x current Bitcoin value of $2799= net asset value of each share $260

The current share price of GBTC is around $485 so you are paying a whopping $225 more for your .09289534 bitcoin just for the convenience of buying this via your brokerage account.

The above exercise is one reason bitcoin is overvalued. People are just buying because it is going up and for them that is reason enough.

The other more anecdotal reason is that I was getting a cup of coffee at work and overheard co-workers, who I would classify as unsophisticated investors, talking about buying bitcoin.

When the shoeclerks and schlubs are getting in to an investment vehicle it is time for me to get out. I am not sure of the long term viability of crypto currencies or whether they will supplant paper currencies. I do know a top when I see one. Buyer beware.

P.S. It's never different this time

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