Last Updated on November 14, 2023 by Ben
You may be thinking about whether it is better to buy Bitcoin or GBTC. While Grayscale Bitcoin Trust (GBTC) gives investors exposure to bitcoin through a traditional investment vehicle, it is not actually bitcoin. This means that there are several factors to consider when deciding which of these two investments may be better for you. We’ll start by discussing what Grayscale Bitcoin Trust actually is and what you should know about it.
What You Should Know About Grayscale Bitcoin Trust
You can invest in Bitcoin right on the stock market with Grayscale Bitcoin Trust (GBTC). It’s one of several such vehicles enabling investors to trade shares that hold large pools of bitcoin, and each share is priced near enough to the price for a single coin.
By investing in the Grayscale Bitcoin Trust, we’re able to trade shares that are tracking a pool of large amounts of bitcoin. The fund tracks the price change for these bitcoins only roughly, and there is no guarantee it will do well, but at least you get some exposure without actually holding any cryptocurrency yourself.
They also offer several other financial products such as Ethereum, Litecoin Cash which can be traded by buying or selling them just like stocks on an exchange’s website.
Grayscale Bitcoin Trust is one of the largest purchasers of bitcoin in the world. This Trust launched back in September 2013 and currently has $37.2 billion worth of assets under its belt.
To buy GBTC, you need to pay $50,000. Grayscale also charges a 2.0% fee per year. If you hold one share of GBTC, then the company will give you 0.00094825 BTC (about $40).
The Grayscale Bitcoin Trust is a way for investors to buy bitcoin. It saves time and money because they don’t need to buy it themselves, safely store it, and pay for all of the costs associated with that. This is good for people who want bitcoin but don’t know how to get it without investing in the Trust.
Is Owning Grayscale Bitcoin Trust The Same As Owning Bitcoin?
While GBTC is a trust that only holds Bitcoin, the GBTC stock price does not exactly match the underlying Bitcoin price. Depending on investor sentiment, its shares can trade at a premium to its assets, or it will be trading as if there were no more Bitcoins left, and you would have lost all your money.
However, GBTC is the fastest way stock market investors can get cryptocurrency exposure without actually buying their own Bitcoin, as regulators have not approved a Bitcoin ETF. And while you could buy your own Bitcoins directly on an exchange and set up a separate account for trading fees – this process takes time to do that most people would prefer to avoid.
Is GBTC Stock A Good Buy?
The Grayscale Bitcoin Trust is just as risky and volatile, if not more so, as Bitcoin. Institutions are starting to invest in it, which makes this an asset worth watching, but like always, there will be swings with the price of bitcoin that takes over your investment quickly.
GBTC has outperformed the S&P 500’s year-to-date in 2020. It is now exchanging at a lower price, which may be indicative of traders moving away from it. Those looking to invest should wait for it to pass its latest buy point before pulling the trigger on any purchase.
Those who invest now may be left nursing painful losses as the price of Bitcoin continues to fluctuate. It is not currently a good buy.
Most investors are better off studying stocks and setting up a watch list. That way, they can buy the stocks that are profitable and likely to set up in a good place.
Why Would Investors Buy Shares in GBTC than Buying Bitcoin?
First, Investing in a Bitcoin Trust is a way to make money off of Bitcoin. It allows you to buy and sell them without having to worry about storage or anything like that. You would not be able to make as much money, but it’s safer.
You have to manage a lot of things when you buy Bitcoin. You need to store it, make sure someone is looking out for it, and make sure that your Bitcoin wallet is safe. The Grayscale Bitcoin Trust makes this easy by reporting to the SEC (US Securities and Exchange Commission).
Second, publicly traded Bitcoin Trusts come with many tax advantages. Some IRAs and other investment accounts won’t give you tax breaks on investments in Bitcoin, but others will. Grayscale’s Trust is one of these investment trusts that provide investors with exposure to Bitcoin in a tax-friendly way.
Third, Trading Bitcoin is hard because you can only trade against other cryptocurrencies, not with stocks. You have to find a way to invest in Bitcoin that is different than traditional investors.
Buying GBTC vs. Buying Bitcoin
GBTC is, on the whole, an excellent buy for casual investors who don’t want to trade cryptocurrencies. That said, there are three problems with GBTC that can make it worse than buying Bitcoin directly, which are detailed below. Grayscale charges a yearly fee of 2%.
Grayscale Bitcoin Trust falls under the same system like many other traditional financial products. If the system falters, you lose access to your Grayscale Bitcoin Trust holdings. With bitcoin, uptime is continuous, so if there are problems with your infrastructure or cryptocurrency exchange, etc., you won’t experience any kind of interruption in trading.
GBTC exchanges at a higher price than the current BTC price.
Grayscale is a good way to put your money into Bitcoin. It has some tax advantages, but it is better to own the Bitcoin that you bought with dollars or euros. The best way to buy Bitcoin for the first time is with the Cash App or Coinbase.
While GBTC is an excellent investment for casual investors who don’t want to trade cryptocurrency on an exchange, at times, it can trade at a pretty intense premium due to high demand and limited supply.
But still, someone who does not know about technology might want to invest in something. They may be interested in learning about Bitcoin and can do so with Grayscale’s help.