- The Grayscale Bitcoin Trust (GBTC) is a straightforward way to invest in Bitcoin via the stock market.
- While GBTC removes some of the annoyances and risks associated with investing in Bitcoin directly, it does so at a fee.
Is GBTC an exchange-traded fund (ETF)?
Grayscale Investment’s Bitcoin Trust GBTC, +3.25 percent was listed as Grayscale Bitcoin Trust ETF on FDS, +0.36 percent’s platform, which is used by professional investors and other Wall Street clients, including MarketWatch publisher Dow Jones.
What distinguishes GBTC from an ETF?
The introduction of a Bitcoin futures ETF is being heralded as a watershed event for the cryptocurrency. The Grayscale Bitcoin Trust, the largest Bitcoin fund on the market, is also under pressure to convert to an ETF.
Investors, on the other hand, should not hold their breath. The ProShares Bitcoin Strategy ETF (ticker: BITO), which has received approval from the Securities and Exchange Commission, invests in Bitcoin through futures contracts. The Grayscale Bitcoin Trust (GBTC) is the only owner of the coin.
Is it preferable to purchase Bitcoin or GBTC?
Here’s the distinction. GBTC is a bitcoin trust that operates like a closed-end fund. As a result, it can trade at a significant discount or premium to bitcoin’s fundamental price, enhancing or detracting from an investor’s total return. BITO is an exchange-traded fund that invests in bitcoin futures contracts. Because it is intended to hold front-month futures contracts (however, due to high demand and contract holding constraints, it has recently had to diversify into second-month contracts). It’s intended to track bitcoin values quite closely, but recurring roll expenses will likely make it a slacker in detecting bitcoin over time.
What happens if GBTC is converted into an ETF?
The Grayscale Bitcoin Trust has filed to become an ETF rather than a CEF. If successful, the roughly 16 percent disparity between GBTC’s price and its net asset value will be closed, resulting in a risk premium for investors.
Is there a Bitcoin ETF available?
The first ETF in a category is frequently the one that gains the greatest assets. With Bitcoin ETFs, we’ve seen that the ProShares Bitcoin Strategy ETF (BITO), the first to debut, currently has over a billion dollars in assets. For a new fund, that’s a really quick build up.
However, the VanEck Bitcoin Strategy ETF (XBTF) and the Valkyrie Bitcoin Strategy ETF are now available (BTF). At a high level, they’re all holding Bitcoin futures as a means to watch the price of Bitcoin.
What is the procedure for purchasing GBTC stock?
How can I get GBTC? On the over-the-counter market, the trust is traded. GBTC shares can be purchased through a broker or advisor, or through an online trading platform, much like other stocks and shares. For investors, this opens up a whole new world of possibilities.
Is it possible to exchange my GBTC for Bitcoin?
Grayscale Investments has stated that its flagship product, Grayscale Bitcoin Trust (GBTC), will be converted into a bitcoin ETF (ETF). Grayscale’s communications director, Jennifer Rosenthal, tweeted on Monday:
Today, I’m pleased to confirm that Grayscale will submit for the conversion of GBTC into an ETF as soon as the SEC provides a clear, formal indication.
She explained: “Grayscale’s position has always been clear: “When the SEC has publicly stated their required comfort with the underlying bitcoin market, we are 100 percent dedicated to transforming GBTC and our product family into ETFs.”
The Grayscale communications director stated that the SEC has made encouraging moves, such as the approval of a futures-based bitcoin ETF, which is set to begin trading on Tuesday. Proshares’ bitcoin futures ETF will trade under the ticker symbol BTC “BITO” is a stock that trades on the New York Stock Exchange.
The NYSE Arca will file a document called the 19b-4 to convert GBTC into an ETF once there is official and verifiable evidence of the SEC’s satisfaction with the underlying bitcoin market most likely in the form of a bitcoin futures ETF being certified effective.
As of Oct. 18, the company’s total assets under management (AUM) was at $53.5 billion, with GBTC holding $39.77 billion.
The prospect of authorities eventually permitting bitcoin to trade on a national securities exchange is generating a lot of excitement… There will be an impact on investors if you look at the structure of a bitcoin futures instrument.
Editor’s Note (9:50 p.m., Oct. 19, 2021): NYSE Arca has filed a Form 19b-4 with the Securities and Exchange Commission (SEC) to convert GBTC into a bitcoin spot ETF.
Will a Bitcoin ETF be detrimental to GBTC?
According to SEC Chairman Gary Gensler’s recent requirements for Bitcoin ETF approval, GBTC has no chance of becoming an ETF anytime soon. A successful filing must be futures-based and governed by the 1940 Act, which GBTC is not. It’s set up as a grantor trust, similar to gold exchange-traded funds like SPDR Gold Shares (GLD). The inability to convert for an extended period, combined with potential competition from futures-based Bitcoin ETFs in the United States, could further erode demand for GTBC and increase its discount. If the new ETFs’ fees are half of GTBC’s 2%, risks may be increased.
GBTC was founded in September 2013 and has a market capitalization of $32.3 billion. The rise of alternative Bitcoin products around the world has already stifled demand for GBTC shares in 2021, resulting in a long-term discount.
Is GBTC listed on the Pink Sheet?
GBTC is similar to an exchange-traded fund in that it is passively managed and aims to imitate bitcoin’s performance. It’s been around since May 2015 and trades in the “pink sheets” or over-the-counter market rather than on a major exchange. The trust gives investors a once-in-a-lifetime opportunity to invest in digital money without having to buy bitcoins.
The failure to duplicate the price in the same way that the SPDR Gold Shares ETF does, for example, is a problem that became particularly apparent earlier this year. Grayscale attempted to turn the trust into a full-fledged ETF in January, but was barred from issuing new shares.
“Why would someone pay a higher price for something like this? Clearly, the product does not perform exceptionally well “Spencer Bogart, the head of research at Blockchain Capital and a former sell-side analyst who covered GBTC when it was first released, agreed.
Bogart feels the answer to his query is partly due to the fact that there are few, if any, other ways to invest in bitcoin without having to go through the process of purchasing the digital currency.
Cameron and Tyler Winklevoss, twin brothers, have so far been unsuccessful in bringing a bitcoin ETF to market. The Securities and Exchange Commission rejected an application for a fund with the ticker COIN earlier this year. The commission, on the other hand, has chosen to revisit that judgment.
“Many investment managers are required to invest in registered securities by their clients. Bitcoin isn’t a registered security, thus it can’t be traded “Bogart remarked. “It’s the best we can do with what we have. This gave an otherwise esoteric item a standard wrapper. It was something that folks could get their hands on. They were desperate for attention, and this was the only way to get it.”
If the GBTC attempt or the Winklevoss filing are to succeed, they will have to show that they can track bitcoin’s price more accurately. ETFs, whether they are a basic stock index, a bond class, or a currency, use a number of strategies to ensure that the price accurately reflects the value of the underlying securities.
GBTC is an open-end investment trust, which means it can sell as many shares as it wants, unlike a closed-end fund. Since petitioning to convert the fund into an ETF so it can resume normal operations, the fund is no longer issuing new shares or permitting redemptions.
“The SEC can either aid investors by allowing a regulated ETF to come to market that trades close to NAV, or it may stand in the way and see those same investors lose money when they buy bitcoin directly from untested exchanges or through the defective GBTC,” he wrote.
Investors interested in entering the bitcoin world should be aware that while purchasing the money is dangerous, trust appears to be more worse.
“Clearly, there is a danger. Someone could be correct about bitcoin’s fundamental trend yet still lose money “Bogart went on to say. “How important are the aspects (of the trust) to you? It’s a really personal question to address.”
Is GBTC a good investment right now?
Grayscale Bitcoin Trust, like Bitcoin itself, is subject to extreme price volatility. In the end, it’s a bet on Bitcoin, which is more of a speculative asset than a legitimate currency. Increased institutional involvement makes it a worthwhile asset to monitor, but dramatic price swings highlight its erratic character.
The stock of GBTC went from outperforming the S&P 500 to lagging behind the benchmark index. Bitcoin bulls may find some attraction, but enduring the huge volatility requires a lot of guts. Given the asset’s history of steep drops, individuals who invest today risk suffering even greater losses.
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