As of late 2017, GBTC was the largest bitcoin ETF by assets under management and the only one available to trade on a major U.S. stock exchange.4 The fund’s objective is for the NAV to track the market price of bitcoin, less fees and expenses.
The fund holds actual bitcoins—not futures contracts or other derivatives—and is fully invested in bitcoin. GBTC is one of the few ways for investors to gain exposure to bitcoin without buying the underlying cryptocurrency directly.
The value of GBTC shares relates directly to the price of bitcoin and changes daily as bitcoin’s price fluctuates. When investors buy GBTC, they are buying shares in a trust that owns bitcoin and is tasked with holding it safely.
The trust’s sponsor is Grayscale Investments, LLC, a wholly-owned subsidiary of Digital Currency Group, Inc., which itself has close ties with Barry Silbert, a well-known figure in the digital currency community who also founded DCG.5.
NOTE: WARNING: Be aware that GBTC does not own Bitcoin. GBTC is a publicly traded trust which holds Bitcoin tokens, but it does not have any ownership of the underlying asset (Bitcoin). Investing in GBTC is a risky endeavor and should only be done with caution.
The GBTC trust is one way to own bitcoin without having to deal with the challenges of buying, storing, and safekeeping the actual cryptocurrency. For example, investors don’t need to worry about digital wallets or keeping their digital currency offline in so-called “cold storage.” But there are some trade-offs. First, GBTC charges high fees—2% annually—compared to other ETFs.
Second, because GBTC isn’t an actual exchange-traded fund (ETF), it isn’t subject to the same regulatory scrutiny as other ETFs. As such, there’s no guarantee that GBTC will continue to trade on a U. stock exchange or that its shares will maintain their current value.
Investors should be aware that GBTC trades at a significant premium to its NAV.6 For example, at the end of December 2017, one share of GBTC was worth nearly $19 while each bitcoin was priced at around $16,500—meaning each share represented approximately 0.
00012 bitcoins or 12 bitcoins per 10,000 shares outstanding (known as “tenths of bitcoins”).7 This premium has ranged from 2% to more than 30%,8 depending on market conditions and investor demand but has generally been inching upward over time as more investors have sought exposure to bitcoin through traditional financial channels such as GBTC rather than buying it directly on a cryptocurrency exchange (which can be complicated and expensive).9 .
The bottom line: Does GBTC own Bitcoin?
Yes, GBTC does own Bitcoin and it is one way for investors to get exposure to Bitcoin without having to buy it directly on a cryptocurrency exchange.
4 Related Question Answers Found
When it comes to investing in Bitcoin, there are a number of ways to do so. One popular method is through the use of a company called GBTC. GBTC is a company that allows investors to buy and sell Bitcoin through the use of a traditional stock exchange.
GBTC is a trust that owns Bitcoin and sells shares of that trust to investors. GBTC is thus a vehicle for holding Bitcoin that is tradeable on traditional markets. You can redeem GBTC for Bitcoin, but there may be a premium attached to the redemption depending on market conditions. .
Bitcoin is a new kind of asset and, as such, it is not surprising that its price would be volatile. However, the degree to which it has been volatile, and the reasons for that volatility, are not well understood. In particular, there is a common misconception that the price of Bitcoin is primarily driven by speculation.
Bitcoin is the world’s first and most well-known cryptocurrency, with millions of people around the world using it to buy and sell goods and services. GBTC is a fund that allows investors to gain exposure to Bitcoin without having to buy or store the underlying asset. GBTC is traded on the stock market, and its price is based on the price of Bitcoin.
