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Bitcoin has been on a wild ride lately and just this weekend we saw the cryptocurrency drop from $13,000 to $10,000.  I bought the last dip near $9,300 two weeks ago and will continue to buy if we see even more downside.

I have been holding out until now because I wanted to see a good crash and shakeout of weak holders.  The drop from $19,700 to $9,000 was a great display of carnage.

I'm expecting the demand of Bitcoin to increase in the coming years but the supply to dry up drastically.  Better technology will help convert this into a real global currency so I'm going to be parking 5-10% of my net worth into Bitcoin and a few others.

Obviously I have no clue where Bitcoin is going but some think it goes to zero, others believe Bitcoin rallies to $1 million in five years.

My research leads me to believe Bitcoin is not going anywhere (or to Zero) and better technology will make it more widely adopted.

I plan to make another purchase if we see a drop between $6,000-$8,000 which to me is the next major support area.  Diversify between actual coins and buying the GBTC shares.

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Can you please explain the difference in the actual coins and GBTC shares?

Oh. I just bought half a coin @ $7000

Sold $8500

GBTC is an ETF that trades at a premium to Bitcoin because investors feel it is safer.  Before the split, GBTC was around $1800 when Bitcoin was $11,000, representing about a 65% premium.  During the first crash from $20,000 to $11,000, GBTC fell from $3600 to $1150 which had it trading around 10% the price of a Bitcoin.  You want to buy GBTC when it trades almost 10% of a Bitcoin because you will get a better return when Bitcoin goes up and the premium comes back into GBTC.

Anyway, GBTC did a 91:1 split so when Bitcoin returns to $11,000, GBTC should be trading back up above $20.  Right now Bitcoin is $8600 and GBTC is trading in the $15's.

Long story short, GBTC is believed to be safer than actually owning Bitcoin.  However, when Bitcoin is surging, a huge premium gets baked back into GBTC.  There are so many ways to Arbitrage between the two, you can really make some serious money.  When GBTC is trading way above 2% of the price a Bitcoin, I'd be selling GBTC and then buying actual Bitcoin through Coinbase or whatever account you decide to set up.

Ultimately, when Bitcoin returns to $20,000, GBTC should be trading around $40 which represents the same premium from December.

Another thing to keep in mind, Bitcoin trades 24/7, 365 days per year, it never stops trading.  However, GBTC stops trading for the day at 4pm EST and then Bitcoin changes trading days at 7pm EST.  You want to compare the price of GBTC and Bitcoin at 4pm EST each day, not the actual percentage gain of bitcoin the following day.  

At 4pm EST,If GBTC closes at $18 and Bitcoin is at 10,000.......but then Bitcoin closes at $11,000 (7pm est) and stays there until 9:30am EST the next day, GBTC should open up 11% but Bitcoin will be unchanged for the trading day.

Some people will ask why GBTC is up 11% if Bitcoin is only unchanged for the day....some will even sell but they didn't factor in the change from 4pm-7pm EST.

Bitcoin rallied from $6,000 to over $10,000 in the last 10 sessions.  GBTC is now up 90% in two weeks!  Tom Lee was on CNBC and said Bitcoin will hit $20,000 by July and $25,000 by year end.  There are a lot of predictions out there, some say its going to zero but they don't tell us why or how something will just magically implode.  Bitcoin has survived 9 years and it getting stronger.

Are you going to buy into GBTC? 

I won't put any new money to work.  I bought GBTC when Bitcoin dropped from $20,000 to $9,300 and then again when Bitcoin was $7900.


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