An Important Fact To Know: What Is The Grayscale Bitcoin Trust?
The grayscale Bitcoin trust is one important actor in the crypto use case. Know more about this giant.
Why The Grayscale Investments?
As of now, the Grayscale Bitcoin Trust comes as a digital currency investment product that individual investors are enabled to buy and sell their brokerage accounts. Thereby on January 21, 2020, it has become an SEC company registering its shares with the Commission and designating the Trust as the first digital currency investment vehicle attaining the status that is of a reporting company thereby from the SEC. while this will allow accredited investors who purchased shares in the Trust’s private placement to have an earlier liquidity opportunity, as the statutory holding period of private placement shares reduced from 12 months to 6 months according to SEC rules.
More About the Grayscale Bitcoin Trust
Debuted as the Bitcoin Investment Trust, the Grayscale Investment Trust came into existence on Sept. 25, 2013, as a private placement to accredited investors and later on received FINRA approval for eligible shares to trade publicly. This is what means that investors have access to buy and sell public shares of the Trust under the symbol GBTC. Therefore Grayscale Investments calls it a traditional investment vehicle with shares titled in the investor’s name. This is although the Trust is not an ETF itself, Grayscale says it’s modeled on popular commodity investment products like SPDR Gold Trust a physically-backed ETF.
When the GBTC traded publicly on the OTCQX, there was an over-the-counter market under the Alternative Reporting Standard for companies not required to register with the Securities and Exchange Commission with success mirroring that of Bitcoin because its value is derived solely from that cryptocurrency.
Whereas by September 11, 2019, GBTC had approximately $ 2.16 billion in assets under management and 2.4 million shares outstanding. Thereby the trust requires a minimum investment of $ 50,000 and charges an annual fee of 2.0 percent accruing daily for accredited investors who wish to subscribe to the trust as a private placement. Whereas it is found that on the other hand, investors are eligible to purchase as little as one share of the GBTC public quotation.
Whereas Grayscale now suggests that its management of the fund is worth more than the annual fee as well as one of its major selling points is its security. Thereby it is storing cryptocurrency safely notoriously challenging and the company assures investors that the Grayscale Bitcoin Trust’s assets are safeguarded by a robust security system using industry-leading security standards.
Regarded as an investment vehicle that trades over-the-counter, GBTC is available for investors to buy and sell the same way as virtually any US security. This comes as an example where GBTC can be traded through a brokerage firm with it being available within tax-advantaged accounts like IRAs or 401(k)s.
Disadvantages of GBTC
It is known that Andrew Left of Citron Research has been publicly criticizing the Grayscale Investment Trust as the Citron has tweeted that GBTC is the most dangerous way to own Bitcoin with possible disadvantages of investing in the Trust including paying high premiums along with the annual fee that comes along with the risk factors associated with the overall volatility in the cryptocurrency market as well as with investment vehicles that aren’t required to register with the SEC.
It is because of this that the trust is currently the only fund of its kind specifically for Bitcoin, investors have been paying a high premium. Thereby in Sept. 2018, these shares of GBTC traded a high of $7.95 which came to be around 20% higher than the value of the Bitcoin within the trust that each share represented at that time. Therefore although that premium is significant it is also lower than it has been in the past- GBTC closing at prices more than two times the value of its underlying bitcoins. Thereby Grayscale offers that prices are dictated by the market and not by the Grayscale itself so price fluctuations may be a result of supply and demand.
When taking a look, as of Oct.2018, there is each share representing less than 0.0001 bitcoins meaning it would take more than 1000 shares of GBTC to own one Bitcoin. Thereby GBTC saw a steady increase in 2017 and peaked at the end of the year. Its performance in 2018, however, has fluctuated and overall GBTC has trended downward with nearly 65 % year-to-date decline as of Oct. 2018.
The Concluding Words To Wrap Up The Discussion
There were steeper declines that could mean that shares could lose most or all of their value whereas in 2019 as the price of Bitcoin has generally trended upward, GBTC has followed.