In 2021, Bitcoin is taking strides into the investment industry. What has started off as a whitepaper has evolved into a disruptive force in the financial sector. It’s now even possible to invest in Bitcoin right on the stock market.
That is where the Grayscale Bitcoin Trust comes in. Launching in 2013, they pioneered the model of providing investors exposure to digital assets, whilst also allowing users to buy, store and safekeep their assets.
They were the first company to launch a publicly traded Bitcoin fund in the United States and have shown no signs of slowing down.
Grayscale Bitcoin Trust Explained
To explain the Grayscale Bitcoin Trust is not as complicated as you’d first think. Essentially, it is a financial vehicle that enables investors to trade shares in trusts that hold large shares of Bitcoin.
This trust, otherwise known as GBTC, represent around $37.2 billion of private invested Bitcoin assets. They invite wealthy investors that come in and purchase Bitcoin, allowing Grayscale to list these funds on the public stock exchange, where anyone can trade shares.
Investing in this trust allows you to gain exposure to Bitcoin, without the worry of where you can store it.
Bitcoin wallets are the usual place to store your cryptocurrency, but there are sometimes concerns, such as who to pay to store, losing your key or getting hacked.
That’s the advantage of using the GBTC, they are a publicly traded trust, meaning that they have regulations with US law they have to follow. All of this should reassure you that you’re in safe hands, eliminating some risks and worries in your head. Essentially, GBTC allows investors to hold Bitcoin, without actually having to “hold” Bitcoin.
How It Can Benefit You
With all that said, you should probably have an idea by now on how the Grayscale Bitcoin Trust works in practice.
Using Grayscale, you’ll be provided with exposure to digital currency asset class through the Grayscale family of investment products. Importantly, they can assist financial advisors in understanding all this and help with investments.
Buying GBTC shares has a number of advantages to you personally as an investor. There is clear tax guidance in place, giving the opportunity to hold shares in a number of tax-advantaged accounts like Roth IRAs or 401(k)s.
Grayscale have nothing to hide with their investors, you can view the main investor list on their website, detailing the top 5 shareholders, in both worth and share amounts.
They also offer several other exchange-traded products, such as Ethereum and Litecoin, to name a few.
As they are one of the most trusted purchasers of Bitcoin in the world, they are able to price their shares at near enough the value of Bitcoin. So, you know you’re getting a good price.
Share Price Range
As mentioned, the shares of GBTC are usually purchased at the asset value, otherwise known as the market value of the share.
They can also sometimes be sold at discounts or premiums, depending on the situation of the market at the time.
As with cryptocurrency in general, the value of Bitcoin can change drastically in this economic climate, so do your research before purchasing so you don’t get caught out by changing market trends.
GBTC tends to follow general Bitcoin price and shares, so when they rise, so does the Grayscale Trust. Afterall, it’s all about purchasing shares via the secondary market.
2021 Developments
For Grayscale, there is the possibility that they will be adding to their line-up this year. Already, they have Ethereum, Litecoin and Bitcoin Cash under their trust. Recently, they have been conducting research to find new ways to introduce cryptocurrency to investors.
The trust has also confirmed their intent to change from a trust into an ETF, or an exchange traded fund.
The difference with an ETF is, they are a basket of securities that trade on an exchange just as a stock would. These share prices go up and down all day based on purchases and sold quantities.
They have been wanting to make this change for a number of years, and in fact applied for the change in 2016 with the Securities and Exchange Commission, otherwise known as an SEC.
The aim is to have shares of all their products quoted on a secondary market, but there is still work to be done.
Certain products will be approved for trading, but it’s hard to know which products you should invest in right now as some products may not get approval on the SEC.
So before getting started with the Grayscale Bitcoin Trust, consider the risk of investing and do your research on the current trends and changes when it comes not only to Bitcoin, but to the trust itself.
Alternatives to GBTC
Despite the various advantages mentioned above, Grayscale Bitcoin Trust also has several disadvantages. Investors pay a high premium as GBTC is the only bitcoin stock on the market. And since GBTC is the only one of its kind, there’s a good chance that the price of GBTC shares will drop as soon as there is an alternative.
Another disadvantage is that GBTC shares can only be traded if the stock market is open unlike cryptocurrency exchanges which remain open 24/7.
If you want to make money from Bitcoin, you can do that the usual way of holding Bitcoin yourself. Bitcoin price has skyrocketed over the past few months and will continue to soar in the foreseeable future. Why? Bitcoin adoption is gaining ground rapidly – its use cases vary from investing, remittance, POS, payments, and many more. Plus, more and more institutions (including GBTC) are hoarding Bitcoin driving up demand of the limited supply left.
There are two ways to buy Bitcoin – one is to purchase it from a regular crypto exchange. The other method is through peer-to-peer marketplaces where you buy Bitcoin directly from other people. When it comes to purchasing Bitcoin via P2P marketplaces, use a trusted seller where you can view reviews of sellers instantly. You can buy Bitcoin from Paxful online, searching through different markets and over 300 payment methods.
