Why GBTC Is Better Than Bitcoin
Aug. 21, 2018 11:28 AM • gbtc
Grayscale Bitcoin Investment Trust has indicated that the normal premium overheen investing directly te Bitcoin is 42%.
The current premium of GBTC overheen Bitcoin is even higher right now at about 85%.
Albeit the premium is very high there are reasons that GBTC might be a logical investment for a set of investors.
I’ve written three articles about the Grayscale Bitcoin Investment Trust (OTCQX:GBTC)
Spil a result, I’ve bot asked several times why anyone would invest ter GBTC. Te case you didn’t know, the average premium overheen buying Bitcoin directly versus buying GBTC has bot about 42%. And the premium right now?
Well, let’s do the math:
- For every share of GBTC you get 0.09258535 Bitcoin.
- One share of GBTC today would cost you $703.50
- The market value of 0.09258535 Bitcoin is $380.90 today
- Therefore, the premium is about 84-85% above the underlying Bitcoin
Obviously this will fluctuate overheen time spil Bitcoin rises and falls but also because GBTC doesn’t ideally track with the Bitcoin it holds. Ter fact, that emerges to be the insanity.
Why would anyone pay an 85% premium overheen Bitcoin? You can just buy Bitcoin directly by joining Coinbase (COIN) for example.
Again, you are reading all of this correctly.
You can buy Bitcoin directly if you want to own Bitcoin. There’s no requirement that you have to invest te GBTC ter order to love the surge ter Bitcoin.
Spil I’ve already explained, the average premium according Grayscale is 42% but right now it’s about 85% overheen Bitcoin.
Does It Everzwijn Make Sense to Invest te GBTC?
The response is “Yes!” it can certainly make sense. I will explain that now.
- Titled, auditable ownership through a traditional investment voertuig – The Bitcoin Investment Trust is a traditional investment voertuig with shares titled te the investors name, providing a familiar structure for financial and tax advisors and effortless transferability to beneficiaries under estate laws.
- Eligible for tax-advantaged accounts – Shares of the Bitcoin Investment Trust are eligible to be held te certain IRA, Roth IRA, and other brokerage and investor accounts.
- Publicly Quoted – Shares of the Bitcoin Investment Trust are eligible to be held ter certain IRA, Roth IRA, and other brokerage and investor accounts.
- Supported by a network of trusted service providers – Davis Polk &, Wardwell LLP serves spil legal counsel to the Sponsor of the Bitcoin Investment Trust. Financial statements for the Bitcoin Investment Trust are audited annually by Friedman LLP.
- Sturdy security and storage – The Bitcoin Investment Trust’s assets are stored with Xapo, Inc., spil Custodian, ter deep cold storage vaults. Bitcoin stored ter the Xapo Vaults reside on multisignature addresses, the private keys for which are protected by intense cryptographic, physical and process security.
Boiling all this down the main reason is that investing te GBTC is investing ter something that feels familiar. That also means you can buy it lightly through the normal channels and you can waterput it te the normal places. It takes away the fear, uncertainty and doubt of Bitcoin very rapidly. It seems less mysterious, less dirty. And yet? You still get to play the Bitcoin “investing” spel.
I am not telling this is bad, or inappropriate, or stupid. Te fact, fairly the opposite. If someone is attempting to rail the Bitcoin trend, I can see how it could make sense to go with a low-resistance option. Ter this case, consider how much lighter it would be to talk to your registeraccountant about gains and losses of GBTC vs. Bitcoin. Albeit I have no rente te GBTC it wouldn’t be totally illogical or irrational for some people to invest for this reason.
What About the “Insane Premium” Right Now?
The GBTC premium is rich. The average is overheen 40% and right now the premium is overheen 80%. That’s not a theoretical premium but instead a very real premium of GBTC overheen Bitcoin.
Are there other reasons that make sense? One possible response is that the premium would be washed away overheen time, much like a growth stock can overcome a high P/E ratio through growth.
“I’ve determined to go with GBTC spil a way of securely getting exposure to Bitcoin via my brokerage account, because I’m VERY long on it, and I can lightly liquidate high dollar amounts (overheen $10K) at any time I want. And it’s all on the up-and-up, lightly trackable for tax purposes, which I care about. My thesis is that the current premium is less significant to mij than the exposure because it’s 41% (or whatever the current percentage is) of a puny fraction of what the ultimate price of bitcoin will be Ten years from now. It’s not volmaakt, I acknowledge that, but it strikes mij spil my best option, especially if I’m viewing this spil one of my high-risk, high-reward investments.”
The argument is that te Ten years, the GBTC premium will be irrelevant. Of course, this leaves out he problem of P/E compression, or the potential catastrophic failure of Bitcoin ter general. But, this line of thinking is congruent with the thinking of a Bitcoin bull. This isn’t “vensterluik” investing or totally ignorant. I can respect part of this.
I also suggest that you look at thesis three long comments from Ethereum Doll:
I can summarize by telling that buying Bitcoin directly isn’t effortless or instant. There is some time and effort, there might be blood, sweat and tears. However, with GBTC it can be very swift. And to emphasize:
“Te a matter of a few seconds or minutes you own a Bitcoin derivative, right or wrong. You can hold it te any type of securities account (regular, Roth, IRA) with varying tax implications.”
I would like to add that the premium inbetween GBTC and Bitcoin will almost certainly collapse once lighter Bitcoin investing is te place. Te a word, it will collapse with competition. I don’t know by how much, or how far. I have no crystal ball. But, GBTC is truly the only spel ter town. Indeed, spil I’ve said before ter a previous article, GBTC is the.
. only publicly-quoted investment voertuig that seeks to provide passive exposure to bitcoin.
Conclusion: On the surface it’s insanity due to the enormous premium of GBTC to Bitcoin. However there are real, true, logical reasons to invest. Every investor is different. Every investor has different goals. Every investor has a different risk tolerance and risk profile. Albeit I have absolutely no plans to invest te GBTC, it might be right for you. If you do invest, just keep your eyes open for the risks discussed above such spil GBTC’s competition or perhaps the known risk of Bitcoin regulation, Bitcoin collapse, and so on. Te other words, if when you see risks with Bitcoin, those risks often apply to GBTC spil well.
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