Shares of the popular Bitcoin Investment Trust GBTC gained more than 12% on Friday after the fund’s parent, Grayscale, announced a 91-to-1 stock split geared towards making the holding company more accessible to individual investors.
The Bitcoin Investment Trust has soared more than 1,620% over the past year, lifting shares to the $1,708 level that the stock closed at on Thursday. The fund was originally intended to make it easier for retail investors to gain direct exposure to bitcoin, but with prices moving so high, many have been deterred.
Stock splits do not technically affect the valuation of a company. Theoretically, a firm’s total market cap should be the same one minute before a stock split as it is one minute after the split. But splits are typically considered bullish indicators, as they usually follow an extended period of strong returns and help lift demand for specific stocks.
New demand for a stock can lift share prices if smaller investors coming pouring in. There is also a psychological component at play, especially with massive splits like we are seeing from GBTC. Simply put, a $2,000 per share stock might “seem” expensive, while a $20 stock probably “seems” pretty cheap.
Interestingly, the Bitcoin Investment Trust’s double-digit gains come in the wake of bitcoin’s continued slump. According to CoinMarketCap.com, the world’s most popular cryptocurrency has slipped more than 1% over the past 24 hours, extending a streak that has watched the digital asset lose nearly 20% of its value within the past seven days.
The Bitcoin Investment Trust’s split will impact shareholders on record as of Jan. 22, meaning that we are likely to see at least a couple more weeks of fluctuation here. Market studies have shown that stocks undergoing splits tend to outperform the market after-the-fact, but considering the uniqueness of GBTC, there is no telling what will happen.
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