Analyst Expects Bitcoin's 'Leadership Status To Fade,' Starts GBTC With Underperform Rating

Bitcoin has rebounded 40 percent over the last three sessions, but Bitcoin Investment Trust (OTC: GBTC) won’t ride the trend, according to Buckingham Research Group.

The Rating

Analyst Chris Brendler initiated coverage with an Underperform rating and $8.35 price target.

The Thesis

The 42-percent downside forecasted for Bitcoin Investment Trust is based in part on expectations for sharp deflation.

“Despite a ~40-percent crash in Bitcoin prices YTD (and ~55 percent from peak), we believe the 4Q17 run-up had all the classic signs of an asset bubble that hasn't fully popped,” Brendler wrote in a Friday note.

Cryptocurrency challenges are seen to be exacerbated by impending regulatory intervention and increasing investor awareness of their lacking utility.

At the same time, Buckingham considers the the trust’s premium, afforded for its distinction as the only bitcoin-based equity on U.S. exchanges, unsustainable as competing cryptocurrency options emerge and bitcoin loses steam.

“At this early stage, it is nearly impossible to pick winners, but key structural disadvantages, we expect Bitcoin's leadership status to fade,” Brendler wrote.

While bearish on bitcoin and the GBTC, the analyst suspects cryptocurrencies, in general, will have long runs and recommends investors attend to the space.

Price Action

At time of publication, GBTC shares were trading up 3 percent at $14.37.

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