The recent surge in demand for Bitcoin has not only garnered the interest of cryptocurrency traders, but it has transcended to conventional traders as well, who usually only stick to stocks and more conservative modes of investment.
It also works the other way around; where cryptocurrency traders are now turning towards any conventional methods of trading that involve cryptocurrency, this phenomenon is evident with the debut of Bitcoin futures and other measures such as the recent rise in demands for Bitcoin exchange-traded funds (ETFs).
Before there were Bitcoin futures, that purpose of additional modes of investment associated with Bitcoin was served by the Bitcoin Investment Trust (GBTC), a fund by Grayscale that grew in demand after the unprecedented rise of Bitcoin in the last quarter of 2017.
The Bitcoin Investment Trust essentially functions as an ETF which holds Bitcoins on behalf of its investors. The pricing for each share is then represented according to the value of Bitcoin.
Recently, the Bitcoin Investment Trust announced that it would be splitting its stock by 91-1, which means that for each share owned by the investors, they would receive 90 more shares.
The shareholders as of the market close of January 22 will be re entitled to the split. The split is reported to occur on January 26.
Why is this being done?
Usually, a stock split occurs whenever the demand for the stock rises beyond the level that it is currently being traded on or when it needs to make the shares more accessible to more investors, raising the stock’s liquidity. In an ideal situation, the share prices drop immediately after a split, allowing more buyers to invest in them.
For instance, at the time of the stock split announcement, each share of the Bitcoin Investment Fund had been trading around $1800, making it out of reach for a regular investor. However, the split would have ideally caused the price to drop to an initial $21, after which the price would have increased again since more people had bought it.
A similar trend will be seen once the stock splits on the planned date.
At this time, every share in the stock represents around .092 bitcoin. Once the split is completed, each share will represent around 0.00101 bitcoin.
However, this does not mean that the current investors will lose anything. Since the value of their current shares will be equally divided within their newly acquired shares, if anything, they are only going to gain from this decision once the price correction is adjusted after a few days of trading and when the share prices go up again.
All in all, it is excellent news for the current investors of the fund as well as anyone who had been looking forward to obtaining some of this stock, as it will be far more accessible in price after the split.
That being said, anyone who is looking to invest in the fund should first perform their due diligence and invest only after vetting all their options thoroughly.