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Is the Grayscale Bitcoin Trust ETF a maker of millions?
Exchange-traded funds (ETFs), or groups of individual stocks trading under a single stock symbol, are intended to simplify investing. A few ETFs can diversify your investments in minutes, instead of spending huge amounts of time filtering and selecting dozens of individual companies to entrust your money to.
In cryptocurrency, the Grayscale Bitcoin Trust ETF (NYSEMKT: GBTC) can simplify much of the work of owning Bitcoin (CRYPTO:BTC).
But what’s the point of owning a Bitcoin ETF instead of just Bitcoin? Cryptocurrency has proven that it can make investors millionaires. Can this ETF do the same thing?
Here’s what you need to know.
What is the Grayscale Bitcoin Trust ETF?
On the surface, it’s a simple investment. The Grayscale Bitcoin Trust is a ETFs who owns Bitcoin. Buying stocks gives investors indirect exposure to crypto price movements.
Why wouldn’t someone directly hold Bitcoin instead? Well, doing that can be trickier. For example, the responsibility for safety lies with the owner. You can hold crypto on exchanges or in physical (cold) storage, but each has pros and cons.
Let’s say you lose access to your wallet or the exchange you’re using is facing issues, like FTX, cryptocurrency exchange in disgrace. The Grayscale ETF uses cold storage (it’s kept on offline servers through a company called Coinbase Custody Trust) to secure the Bitcoin represented by its shares. This makes it a safe and convenient way to benefit from investing in cryptocurrency without having to own and manage it yourself.
Several factors affect the value of the Grayscale Bitcoin Trust. The fund charges a 1.5% annual fee for managing crypto, which you wouldn’t have to pay if you managed your own. The ETF may also trade at a premium or discount to the underlying value of its Bitcoin at any time.
Investors should consider how the ETF trades in relation to the price of Bitcoin when deciding whether to purchase shares. You can do this by comparing the ETF’s share price to its net asset value per share.
Bitcoin’s Staggering Investment Returns
A quick look at Bitcoin’s success over the years makes it clear why investors would consider adding the Grayscale ETF to their portfolios. As an asset, the digital coin has significantly outperformed the broader stock market over the past decade:
Bitcoin Price Chart
The thesis for investing in Bitcoin is simple: the supply of fiat currency is constantly expanding, much faster than that of Bitcoins. As the US dollar loses value (due to inflation), the price of crypto has increased over time. Supply increases more slowly over time, as it is halved approximately every four years, further limiting supply in the face of growing demand from people wanting to invest and use Bitcoin.
The story continues
The price of the token therefore comes down to supply versus demand. The hope among investors is that demand will increase indefinitely as supply increases at an ever-slower pace.
Can ETF make you a millionaire?
The million-dollar question is whether investors will pay for the convenience offered by this ETF. What is the cost ? A little, actually.
You can see below that the ETF has significantly underperformed Bitcoin itself over time. These management fees turn out to be quite expensive in the long term.
GBTC Chart
But that said, the fund has still significantly outperformed the stock market as a whole, making the Grayscale Bitcoin Trust ETF an obvious long-term, high-potential investment that can absolutely still produce millionaires if the crypto investment thesis -currency continues to materialize over the next few years. years.
Should you invest $1,000 in Grayscale Bitcoin Trust (BTC) right now?
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Justin Pope has no position in any of the stocks mentioned. The Motley Fool posts and recommends Bitcoin. The Motley Fool has a disclosure policy.
Is the Grayscale Bitcoin Trust ETF a maker of millions? was originally published by The Motley Fool