06 out GBTC ETF: 7 Things to Know as Grayscale’s Bitcoin ETF Starts Trading Today
Refer to the Characteristics and Risks of Standardized Options before considering any options transaction. Supporting documentation for any claims, if applicable, will be furnished upon request. Tax considerations with options transactions are unique and investors considering options should consult their tax advisor as to how taxes affect the outcome of each options strategy. We’ve included a list of spot bitcoin and bitcoin futures ETFs.
Do I need to own crypto to buy $GBTC?
Investors should be aware that Bitcoin creates some unique risk factors. Government regulation and market manipulation are two issues that have yet to be ironed out given the newness of the asset class. With that said, the GBTC has returned an astounding amount to investors over the years. A $10,000 investment 10 years ago would be worth over $1M today. Each investor must decide if cryptocurrency belongs in his or her portfolio.
What Is the Grayscale Bitcoin Trust?
Thanks to the friction of levered funds—that is, the combined direct and indirect costs of trading them—you are unlikely to ever get a performance that is exactly twice bitcoin’s performance. But with a gain of about 51% since its June 2023 inception date, it’s hard to argue there isn’t a use for this admittedly aggressive bitcoin ETF. ProShares Bitcoin Strategy ETF (BITO) is the first Bitcoin ETF to be approved by the Securities https://forexbitcoin.info/ and Exchange Commission (SEC) after years of waiting by investors. Many, including ProShares CEO Michael Sapir believe this will spur investment in cryptocurrency from new investors who may have been hesitant before. The additional checks and balances of this structure come at a cost, and the Grayscale firm charges an annual management fee of 2%. The amount of Bitcoin under the trust’s management is not fixed.
- The ProShares Short Bitcoin ETF has been around since June 2022.
- To invest, click here to be redirected to your brokerage platform or simply search for GBTC on your platform of choice.
- GBTC trades in OTC markets and is available through many brokerages and tax-advantaged accounts like individual retirement accounts (IRAs) and 401(k)s.
- Those financial products derive their value from the potential future prices of an asset—not the current or “spot” price.
Who should own Grayscale Bitcoin Trust shares?
GBTC is known for its high management fees (1.5%) compared with other pooled investment vehicles. The fee structure could erode returns, especially in a bear market, making it a less cost-effective option for investors looking to gain exposure to bitcoin. The high fees are frequently cited as one of the main problems with GBTC when compared with other traditional investment vehicles or even other bitcoin ETFs. Starting in 2017, Grayscale began seeking regulatory approval to operate GBTC as an exchange-traded fund that would be more accessible to retail investors.
About GBTC ETF
Rather, fund managers had to own companies and other ETFs that were related to bitcoin or cryptocurrency in general or they owned bitcoin futures contracts. Futures are complex derivatives instruments that should only be traded by experienced investors. One thing each of these investment vehicles do is offer investors a convenient way to gain exposure to Bitcoin in their portfolios. Both are easily accessible in brokerage and retirement accounts.
In January 2024, Grayscale was finally approved to operate GBTC as a spot bitcoin ETF, along with ten other funds. Of course, if you don’t want to invest in the actual asset, you can invest in Grayscale and combine those investments with other publicly-traded companies and trusts. No matter if you trade directly on an exchange, use Grayscale or a brokerage account, all your profits are tax-advantaged. Investment Plans essentials of health care finance (“Plans”) shown in our marketplace are for informational purposes only and are meant as helpful starting points as you discover, research and create a Plan that meets your specific investing needs. Plans are self-directed purchases of individually-selected assets, which may include stocks, ETFs and cryptocurrency. Plans are not recommendations of a Plan overall or its individual holdings or default allocations.
This streamlined access can appeal to those seeking exposure to bitcoin’s price movements without learning the intricacies of cryptocurrency transactions. Similar to how investors use ETFs to hold other commodities, like gold or silver, they can now invest in Bitcoin through GBTC.GBTC owns and passively holds actual Bitcoins through our Custodian, Coinbase Custody. GBTC does not trade, buy, sell or hold Bitcoin derivatives, including Bitcoin futures contracts. Alternative Assets.Brokerage services for alternative assets available on Public are offered by Dalmore Group, LLC (“Dalmore”), member of FINRA & SIPC.
The fund is actively managed and has a 0.95% expense ratio as a result. Positively, investors will be able to purchase directly from their existing brokerage accounts just like any other security. This ETF offers a low cost way to invest in the underlying price of Bitcoin. It also is a signal by the SEC that cryptocurrency will be allowed to trade as other assets are, without significant regulation headwinds. One of the primary advantages of GBTC is its ability to provide simplified access to bitcoin, especially for individuals unfamiliar with the ins and outs of cryptocurrency trading and digital wallets. Unlike direct investments in bitcoin, which require a good understanding of blockchain technology and cryptocurrency exchanges, GBTC allows investors to trade shares in traditional brokerage accounts.
All are currently futures based products, which is interesting to me when considering how crummy futures based commodity ETFs have treated investors over the years. So, why did demand fall for the Grayscale Bitcoin Trust in the first place? Closed-end fund firm Nuveen explains that closed-end funds trade at discounts frequently, especially during volatile times.
And then there is the fact that many people still feel uncomfortable putting large sums into BTC, especially given the recent revelations that 95% of BTC trading is fake. Though the idea behind the GBTC is to open up crypto investment to as many people as possible, in practice it’s not possible to just buy into the fund at market prices. GBTC has not only provided an avenue for investors to gain exposure to Bitcoin without directly owning it but has also eliminated the need for them to worry about buying and holding BTC. In addition, it has also helped reduce the slippage suffered by most investors when they purchase large BTC buy orders. GBTC provides institutional crypto investors with a means to purchase large buy orders with nominal slippage compared to centralized exchanges (CEXs) that often lack ample liquidity.
Investing in GBTC has different tax implications compared with holding bitcoin directly. Typically, the trust structure may provide certain tax advantages or considerations that individual investors should review with a tax advisor. The taxation of cryptocurrency and crypto-related investments is complex, and the tax treatment of GBTC shares may vary based on individual circumstances and tax laws. Second, publicly-traded Bitcoin trusts come with various tax advantages.
This creates an issue for the ETF that may, ironically, be solved by competition. Another similar fund, The Valkyrie Bitcoin Strategy ETF (BTF) came online Friday. This should create more supply in the market and reduce the demand for BITO in turn.
ValueWalk.com is a highly regarded, non-partisan site – the website provides unique coverage on hedge funds, large asset managers, and value investing. You can buy $GBTC by participating in the ongoing presale on the project’s official website. You will need a MetaMask or other ERC20-compatible crypto wallet to participate.
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