The “Trust” part is what is in question.
Bitcoin has been falling in price lately with the price hovering around $15,700 as of this writing. This has caused a lot of investors to investigate whether or not it’s a good investment. One way to invest in Bitcoin is through Greyscale Bitcoin Trust (GBTC), which trades on the stock market. In this blog post, we’ll look at GBTC and whether it’s a good investment.
What is GBTC?
Greyscale Bitcoin Trust is a trust that holds Bitcoin and trades on the stock market. The Bitcoin held by the trust is not physical but rather is stored in cold storage, which means it’s not accessible by hackers. The trust was created in 2013 and is managed by Digital Currency Group. As of today, GBTC has about $10 billion in assets under management.
The Benefits of Investing in GBTC
One benefit of investing in GBTC is that it allows investors to gain exposure to Bitcoin without having to worry about storing it securely or dealing with the tax implications since the trust is taxed as an asset. Another benefit is that GBTC trade on regular stock exchanges, which makes buying and selling easier than dealing with cryptocurrency exchanges.
The Risks of Investing in GBTC
However, there are also risks associated with GBTC. For example, because GBTC doesn’t track the price of Bitcoin Perfectly, investors could end up overpaying or underselling when they buy or sell shares. Additionally, GBTC charges a 2% annual management fee, which is higher than most ETFs. So, before you invest in GBTC, make sure you understand both the benefits and risks involved.
The right-hand scale of the chart below shows that GBTC is currently trading at a 45.2% discount to the Net Asset Value (NAV) of the Bitcoin held. Prior to March 2021 (indicated in red on the chart), you can see that GBTC traded at a premium to the underlying asset. Since then, the discount to NAV has steadily increased.
*A recession declaration also usually happens long after the recession has actually started.