The Grayscale Bitcoin Trust or GBTC is the closest you can come to investing in Bitcoin through the stock market. Until recently, the pathways for investing in BTC via the https://profit-revolution.com/ were extremely limited.
The Grayscaletrust is the world’s largest Bitcoin fund, holding onto $37 billion in assets. It is by far the largest fund of its kind on the market. The ProShares Bitcoin Strategy or BITO is the second-largest fund and has accumulated only $1.3 billion in assets.
So, what is the Grayscale trust and what are its pros and cons. Find out in this guide.
What is the GBTC?
The Grayscale trust is a relatively newer form of fund that is exploring BTC’s value in new ways. It was first launched in 2013 and was then named the Bitcoin Investment Trust (BIT). Currently, the GBTC allows investors to invest in Bitcoin via a private trust trading on the U.S. stock market. Grayscale is part of the Digital Currency Group.
As per the last recording in April 2021, the trust held 654,885 BTC. That is equal to 46% of all the Bitcoin that is currently being held by publicly traded firms. This easilymakes it the largest BTC fund in the world.
Some of the key aspects of this Bitcoin fund are as follows:
- The Grayscale trust allows investors to trade indirectly in BTC via the stock market.
- It is a closed-end fund.
- Crypto cannot be traded directlythrough stock markets in the U.S.
- In simple terms, the trust is a financial vehicle that lets investors invest in trusts that hold large volumes of BTC.
- With fluctuations in BTC prices, the shares in these trusts roughly follow the crypto’s value.
- Many institutional investors are expected to BTC through the Grayscale trust.
- Ark Invest is its largest holder and has committed $375 million to the trust.
- Almost four dozen mutual funds and separate accounts have stakes in this trust.
A good thing here is that the investments are regulated by the U.S. Securities and Exchange Commission (SEC).
The Proposed GBTC ETF
Last year, in October, Grayscale applied with the SEC to convert its fund into an ETF. If its application gets accepted, the trust will be able to maintain its dominance in the market. This was at the same time the ProSharesBitcoin Strategy ETF was launched. BITO became the first Bitcoin-related ETF on the U.S. markets.
Two more Bitcoin-based ETFshave since been launched that have recorded significant growth.There have been some hurdles preventing the trust’s fund become an ETF.The SEC chairman raised concern about approving an ETF that maintained direct ownership of BTC.
Pros of the Grayscale Trust
There are many factors that work in the favor of Grayscale.
- Determiningthe process of storing BTC securely is still complicated for most investors.
- The tax regime applicable to crypto holdings is much more complicated than filing taxes for gains made from shares. Investing in Grayscale is seen as investing in shares and filing taxes is much simpler.
- Many investors and potential investors are still not fully comfortable making large investments in Bitcoin.
- GBTC still provides lots of exposure to the BTC price. This allows investors aware of the risks to make the most of price shifts.
Cons of the Grayscale Trust
There are also some disadvantages to getting into GBTC when compared to directly buying Bitcoin.
- The shares in the trust trade at a higher value. This increases the upfront cost.
- While this high upfront cost may not be of significancefor investments that last many years, GBTC could have a large competition by that time.
- The Grayscaletrust doesn’t directly track the BTC price. This means that price fluctuations in the cryptocurrency will take some time before being reflected in the price of the Grayscale fund.
Currently, the Grayscale fund is mostly focused on attracting investors that want to get into Bitcoin, but have second thoughts because they are concerned due to a number of reasons. These investors don’t want to trade directly on a Bitcoin Trading Platform. This makes it a reasonablefund and simplifies the process of understanding its value. Any positive move by the SEC in approving Grayscale’s ETF application is expected to give it is a big boost in the near future.
Leave a Reply