Bitcoin is widely becoming a popular investment vehicle for both institutional and retail investors who want exposure to a decentralized cryptocurrency with unlimited long term potential.
The problem is that Bitcoin is an extremely volatile asset with little to no government regulations or protections at the moment. Many investors are curious about buying Bitcoin but don’t want to take on extra risk.
The Voyager & Celsius bankruptcy crisis showed just how risky cryptocurrency can be so and that’s one of the big reasons why crypto investors turn to the Grayscale Bitcoin Trust (GBTC) as a default way to gain safe exposure to Bitcoin.
What is the Grayscale Bitcoin Trust?
The Grayscale Bitcoin Trust is a closed end fund managed by Grayscale, the world’s largest institutional crypto investor, that allows investors to hold BTC through a third party via the OTC Markets.
GBTC charges a 2% annual fee to manage the fund but Grayscale is desperately attempting to convert GBTC into a Bitcoin spot ETF to gain more exposure and decrease the hefty 2% fee.
You can purchase GBTC shares through any full service brokerage that enables OTC stock trading.
Why Invest in GBTC?
I personally invest in GBTC through my SEP IRA because I want to gain exposure to Bitcoin during my retirement years. Here are several key reasons to invest in GBTC:
- Invest your savings in a decentralized asset class to diversify your money if you are investing in stocks.
- GBTC allows you to control Bitcoin without storing your crypto on an exchange or worrying about remembering your private keys.
- You can easily buy and sell GBTC through any full service brokerage that accepts OTC trades. This makes it super easy to accumulate and liquidiate your GBTC whenever necessary.
Read this article comparing GBTC vs BTC for a more in-depth analysis of the both assets.
How does the GBTC Premium/Discount Work?
The GBTC discount or premium to NAV is a percentage that calculates the amount GBTC is trading above or below its net asset value.
This is an important metric for closed end funds such as GBTC because they do not issue any additional shares after the initial launch.
GBTC may trade at a premium or discount depending on the difference between GBTC’s market price and the total BTC holdings value per share.
There is currently a 28% GBTC discount to its net asset value.