To put it simply, GBTC is an investment fund, while Bitcoin is a cryptocurrency whose price is tracked by the shares of the aforementioned fund.
Grayscale Bitcoin Trust, the largest digital asset management fund, debuted back in September 25, 2013. This allows accredited investors to purchase cryptocurrency investment products using traditional market-based means or tools. The Trust Shares are the first securities exclusively invested in Bitcoin. When investors buy GBTC, they buy shares in the trust. While purchasing BTC, they are buying Bitcoins directly.
When Bitcoins are purchased directly, it is the investor’s responsibility to store and safeguard the security keys, and to deal with tax issues. The Grayscale Bitcoin Trust handles these issues for you. By this, the trust especially attracts major crypto players from the United States, especially considering that starting in January 2020, it began reporting to the SEC.
Among other things, BTC and GBTC differ in cost and place of purchase. GBTC is trading at a premium over the current price and is available through traditional brokerages and not on a cryptocurrency exchange. More on this in a later section.
Is GBTC the Same as Bitcoin?
Given the information above, it is safe to conclude that GBTC is not the same as Bitcoin. Moreover, there is a significant difference between them.
When you buy BTC, you buy Bitcoin cryptocurrency, and when you buy GBTC, you receive shares of the Bitcoin investment fund.
Investing in both products can be profitable and quite reliable, because Grayscale is backed by Bitcoin itself. But there is still a difference in both the value of these assets and the benefits of acquiring them.
GBTC chart vs. Bitcoin Chart
As already mentioned, for a successful investment, be it in GBTC or BTC, it is important to constantly monitor the current value of the digital assets of interest. In addition, it is important to analyze price behavior over time, and also (given that the price of GBTC depends on BTC) compare the patterns of several crypto assets.
The easiest way to do this is to use simple and straightforward charts that are now readily available on many sites in the industry.
Buying GBTC vs. Buying Bitcoin
Despite the fact that GBTC is a really cool financial product that allows wealthy investors to play to their fullest, there are at least four arguments in favor of buying Bitcoin over GBTC.
Reasons against buying GBTC
- Storing BTC is free, while Grayscale charges 2% per annum for owning GBTC.
- Bitcoin guarantees constant uptime, whereas Grayscale is built into the traditional financial system, which in the event of a failure will deny you access to its GBTC.
- The Grayscale Bitcoin Trust operates from 6:00 AM to 5:00 PM ET on weekdays, whereas Bitcoin trades 24 hours a day, 7 days a week around the world. And this is a very significant disadvantage, because if the value of Bitcoin falls outside of business hours, GBTC investors may face a liquidity crisis.
- The mismatch between market price and net asset value (NAV) per share results in assets being traded either at a discount or premium to the value of their underlying assets. When the market price is higher than the net asset value (NAV), the difference is called the “premium”. Therefore, NAV + premium = market price. The range of discounts / premiums to NAV is quite wide – over the past five years, the minimum was -21.23%, and the recorded maximum was 132.6%.
The last point is quite curious, so you can stay on it longer. The last point is quite curious, so you can stay on it longer. In general, it can be both an advantage and a disadvantage. It all depends on the skill level of the GBTC investor.
There are two rules to keep in mind when buying GBTC:
- An asset bought with a high premium is a risky deal, because if the value of BTC drops sharply, and this happens quite often, the premium can be reduced and cause you losses.
- Conversely, an asset purchased at a low premium is most likely a potentially profitable trade (even better than buying BTC or other cryptocurrencies). This is because if the cryptocurrency rises sharply, the premium can increase and boost your earnings.
At the time of this writing, some grayscale products are traded at a discount. This means that they are trading under their NAV. Therefore, if an investor knows how everything works, understands the nature of premium and tracks it closely, acquiring GBTC may be more profitable than investing in Bitcoins directly. And to be 100% objective, let’s take a look at the reasons why many people still choose Grayscale for their investments.
Reasons for buying GBTC
- Since Grayscale is a publicly traded company that has recently become SEC reporting, its products also minimize risks associated with security, fraud and hacking.
- GBTC investors do not need to go through the process of converting fiat money into digital assets on the exchange in order to later withdraw them to the wallet. They simply buy a stake in Grayscale’s Bitcoin Trust, which keeps them securely with a custodian partner.
- In addition to making it easier to pay taxes after investing in digital assets, buying shares in a public company can offer certain tax benefits for investors.
- A stock exchange listing allows investors to expand their portfolios with cryptocurrencies in addition to traditional assets.
GBTC vs. Bitcoin: Conclusion
The Grayscale trust has been gaining momentum lately. Since the halving, Grayscale has been buying up more Bitcoins than all miners are producing, according to the latest reports. However, while GBTC is experiencing record levels of demand, there are still strong arguments for buying and storing your own Bitcoins.
Although, sure enough, GBTC investments have their positive odds and advantages especially if you are experienced and want to go big.
Disclaimer: Please keep in mind that the content of this article is not financial or investing advice. The information provided is the author’s opinion only and should not be considered as direct recommendations for trading or investment. Any article reader or website visitor should consider multiple viewpoints and become familiar with all local regulations before cryptocurrency investment. We do not make any warranties about reliability and accuracy of this information.