What Is Gbtc Bitcoin? – Are GBTC and BTC the same thing? How are they different? In this article, we will compare GBTC and Bitcoin, why GBTC is useful for institutional investors, and what you should know before buying GBTC and/or BTC.
GBTC is not the same as Bitcoin. GBTC is an investment trust or fund that buys and insures Bitcoin on your behalf. When you buy GBTC, you are buying shares of the trust.
What Is Gbtc Bitcoin?
On the other hand, when you buy Bitcoin, you are directly buying the cryptocurrency Bitcoin (BTC), not shares in a Bitcoin investment fund.
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The Grayscale Bitcoin Trust is important because it is the only way to “buy” Bitcoin within the confines of the traditional financial system. Bitcoin purchased through GBTC can be added to an IRA which can provide investors with certain tax advantages.
Also, GBTC is available through traditional brokerages, not through a crypto exchange. Therefore, Grayscale is a good deal for someone who doesn’t know how to set up a Bitcoin wallet, but who believes in Bitcoin and wants to buy it without the responsibility of providing their own BTC.
Grayscale trust is buying Bitcoin and they have been in the news recently. Reports have surfaced showing that Grayscale is buying more Bitcoin than all the miners have produced since the halving.
Grayscale’s director of investor relations, Ray Sharif-Askary, even announced that GBTC is experiencing record levels of demand.
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That’s good for Grayscale and good for Bitcoin. However, if possible, it is still better to buy and hold your own Bitcoin than buying GBTC. Here’s why.
There are three problems with GBTC. These problems do not mean that GBTC is a scam or some kind of terrible financial product, it is not. However, buying Bitcoin is always a better option than buying a financial product. Here’s why.
So while Grayscale provides some tax advantages, overall it’s better to own basic Bitcoin. One of the best ways to buy Bitcoin for the first time is with the Cash app or Coinbase, two platforms that are widely available for those looking to buy Bitcoin in fiat currencies like dollars or euros.
Once you buy your Bitcoin, the best place to store it is in a Bitcoin wallet. is a favorite user because it has:
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GBTC trades at a premium to the spot price of Bitcoin. At the time of writing, one share of GBTC is trading at $12.82. Since 1,000 shares of GBTC are equal to one Bitcoin, we can see that buying one Bitcoin worth of GBTC will cost $12,820. The current Bitcoin trading price is $11,165. That gives us roughly a 15% premium to buy GBTC over Bitcoin.
While this sounds bad, there is one caveat: GBTC trades at a fairly reliable premium. Buy GBTC at a 15% premium and you can probably sell it later at the same premium. Where the premium starts to diverge is in a bull market (prices keep rising).
Near the peak of the 2017 bull market, GBTC was trading at an almost 100% premium to BTC’s spot price!
Imagine buying GBTC at that valuation. Not only would you experience an 85% drop in the price of Bitcoin, but you would also experience a reduction from a 100% premium to a 20% premium. A huge, huge loss.
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Since the premium changes based on supply and demand, it’s important to consider how this may affect your returns.
If you buy GBTC during record low spot premiums, you may be able to make money by selling later when the premium rises. Conversely, if you buy GBTC when the premium is high, you may lose money if you sell when the premium is lower.
The easiest way to track the price of GBTC is through TradingView. They have a great chart that is easy to use. It should also be noted that GBTC functions as a traditional financial product as it is not traded outside of business hours. This is in contrast to Bitcoin which trades 24/7.
GBTC/USD Chart on TradingView. Note the GBTC premium over the spot price of Bitcoin. Image credit: TradingView
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The biggest difference between GBTC and an eventual Bitcoin ETF (fingers crossed for 2021!) is that a Bitcoin ETF would actually track the price of Bitcoin; The ETF would not trade for a premium to the spot price of Bitcoin. This would take away a lot of the risk associated with trading GBTC.
Another benefit of an ETF is that it would increase competition. Currently, GBTC is the only legally permitted way to trade BTC through the traditional financial market. This is one of the reasons why it trades at such a premium.
Also, the lack of competition allows GBTC to charge high fees. Several Bitcoin ETFs would add competition to the industry which would lower fees.
It would be easy to demonize Grayscale as a weird financial product that costs too much and encourages people not to take custody of their own Bitcoins. However, overall the shades of gray are a net positive for the Bitcoin ecosystem. There are two main reasons why.
Grayscale Bitcoin Trust (otcmkts: Gbtc) Stock Is The Bitcoin Derivative Of Choice
When comparing GBTC to Bitcoin, Bitcoin is ahead in terms of fees, price (no premium) and security (decentralization over centralized financial systems).
However, someone who is not familiar with the technology may still appreciate the monetary benefits of Bitcoin and want some exposure to BTC. For now, Grayscale provides a way to get that exposure in a way that ordinary people can understand and trust.
This content is for informational purposes only and is not investment advice. You should consult with a qualified licensed advisor before engaging in any transaction.
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Looking for insider crypto knowledge? Subscribe to the Newsletter for authoritative crypto content and product updates. Sign me up. Applying to convert GBTC is now the “perfect time,” the company’s head of ETFs claims, but concerns remain about the overall strength of the industry.
Grayscale may launch its Bitcoin (BTC) exchange-traded fund (ETF) as early as July 2022, one of its executives said.
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Speaking at a virtual event hosted by MarketWatch on October 27, global head of grayscale ETFs David LaValle gave a nine-month timeline for approval by United States regulators.
Grayscale, which manages the largest volume Bitcoin investment product globally, Grayscale Bitcoin Trust (GBTC), reiterated this month that it is “committed” to transforming it into an ETF.
“Now that Bitcoin futures products are somewhat out of the SEC’s purview, they would be open to looking at spot product filings.”
ETF applications require a lengthy 240-day review period with the U.S. Securities and Exchange Commission, opening up the potential for a green light by July.
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In October, four ETFs got the go-ahead, all based on Bitcoin futures rather than spot, something Grayscale and others want to change.
GBTC had $38.8 billion in assets under management (AUM) as of Thursday, while the total across all Grayscale funds is now $53.1 billion.
As reported, hopes are high that spot ETFs will be allowed to operate from November amid fresh criticism of futures-based products.
JUST WATCHED a fund manager trader’s ANALYSIS of #bitcoin ETFs first date futures (they move to new first month contract). As many predicted, it’s not pretty—ETF investors are facing a major tracking error. Add to that two rapid declines in the price of #BTC since the inception of the ETF. Phew — Caitlin Long (@CaitlinLong_) October 29, 2021
Grayscale Bitcoin Trust (gbtc): An Alternative For Bitcoin Exposure?
Arthur Hayes, the former head of derivatives trading giant BitMEX, took a sharper view of the entire ecosystem this week.
“There is already a pseudo-ETF with over $40 billion in AUM, Grayscale Bitcoin Trust (GBTC). It’s not technically an ETF, but it’s raised funds nonetheless. So what is needed is not the movement of AUM from one tracking product to another, but fresh capital into the system,” he wrote in a dedicated blog post.
“Once GBTC is added to the US tracking product mix, will there actually be net new demand from retail traders and institutions that have not yet invested in the space? I fear that the narrative of institutional and retail investors pouring AUM into the complex may be misplaced, as those who want to be involved already are.”
Markets have had years to price in the potential ETF launch, which has seen multiple SEC rejections, each moving Bitcoin’s price less and less over time.
Grayscale Bitcoin Trust (gbtc) Digital Asset Investment Firm
The views and opinions expressed here are solely those of the authors and do not necessarily reflect the views of . Every investment and trading move involves risk, you should do your own research when making a decision.GBTC