Bitcoin Forum

Full story: https://forrestvisions.com/blog/difference-between-gbtc-and-btc/


As Grayscale got $700m in funding recently I just wanted to share some details about GBTC that many people might not understand. You can read the full article above, but here are the main takeaways:



   

• When buying shares of GBTC, you’re paying a premium, which is calculated by the value difference of the holdings versus the holdings’ market price. This calculation can be referred to as the Native Asset Value or NAV.
• Grayscale has two investment types: buying shares directly on the open market, and the other is supplying BTC into the fund, and receiving shares. To invest Bitcoin in the fund, you must be accredited.
• Investors can purchase shares through their traditional investment brokerage accounts and may get tax advantages.
• If Bitcoin goes up, you’ll make more money if you buy the premium at a low. If Bitcoin drops, you will have a more significant loss than merely holding the asset directly.

Have any of you purchased GBTC instead of BTC? If so, why?

A lot of people seem to be talking about this now, so I will bring it back up since this is helpful to anyone who doesn't understand GBTC or Grayscale trusts in general.

When the Bitcoin price rises, similar news starts to appear.  I think this kind of news is made consciously.
No relationship between these news and btc price

They are constantly buying.

Based on a future higher price.

Let us hope they never see the price as falling.

They control a big chunk of the price now.

Grayscale does not buy or sell bitcoins. They exchange shares for bitcoins, and investors can buy or sell shares.

Currently, Grayscale does not allow redemption of shares, so there is no immediate danger of an investor redeeming shares for bitcoins and selling those bitcoins.

Yes, for tax-advantaged accounts (401k) it is one of the only ways to get exposure to BTC.

A lot here like to shit on GBTC because it goes against the ethos of what BTC was/is?, but for the vast majority of people it is the easiest and most accessible way to gain exposure to the asset.

It's a good option for people with a lot of money who aren't interested in holding coins and learning about security. To be honest If I were a 60 year old millionaire with no IT experience , I'd also look for a third party to help me manage everything just like when their stock brokers do. These people want to have as little worries as they can but.

At this point I would never try to choose GBTC over BTC because I'm not the type of person who uses such services. I'm not rich, have a lot of time and some knowledge of bitcoin, know how to keep my coins secure,, value my privacy and independence. All the opposites of a typical Grayscale investor ;) I wish them, they did a lot to make bitcoin popular, but I will never be their client.

I am in the UK and have various investments.

I would buy Grayscale if it didn't demand a minimum investment, and would use it in my retirement pension fund (401k in the USA). A pension gives you tax breaks.

The reason is, if I needed to sell Bitcoin for immediate needs, then I could offset it with some Grayscale in my retirement pension fund.

Aren’t there any similar Bitcoin ETP/trusts available that you can trade in any quantity? It seems the EU has been generally more favorable of a BTC index product.

Well the UK has just banned holding cryptocurrency derivatives, usually in the form of Exchange Traded Notes, in pensions.

However, I have started experimenting with a mining company called Argo Blockchain (BLOK) which is up 1300% in 3 months. But yes, I missed that bump... doh!

I have discovered another miner stock today called Online Blockchain PLC (OBC), also up about 500% recently. I will dip my toes in that too.

And actually, I am now starting to think that the volatility of these mining companies, plus the fact they also mine more profitable coins than Bitcoin is at least as worth looking at as Bitcoin as an investment.

Pretty scary, to be honest, they at least have a half a million of bitcoin which means that if investors altogether unanimously decided to sell the coins although that is impossible in reality, they can cause a destructive big wave, which will cause panic among the community. This is just a baseless theory made by me but I think Grayscale might be buying this boat loads of bitcoin to control the prices and then suddenly sell all their shares to cause a big wave.

Some really big investors prever to invest thier money via fund because they believe that funds can manage their money better

I mean if it will go down 20k and they know it they should get out and rebuy.

Its just business. They aren't a charity for bitcoiners.

The more whale they become the risk is more focused in 1 place.

The fund doesn't buy and sell Bitcoin, it is just a representation of Bitcoin. This way investors can purchase as security and don't need to worry about keeping the Bitcoin secure.

Gray Scale might be getting all the funds but I do not understand that why people go for gray Scale bitcoins and not the normal ones. Even though I know some reasons that might compel some of them to purchase it still I do think that they are keen on making bitcoins a part of share market that I do not like.


"Funds can manage money better"

I do not think that for sure since the managers are doing what you yourself are very capable of doing thus I believe you are just paying someone for nothing. Plus they also have a set time period of investment and what if the price shoots up before that ? Wouldn't it be better to manage your bitcoins yourself ?

Plus it's more secure with you ! Honestly who would you trust with your money more than you yourself.

Managing money means more than just keeping it safe. It also means maximizing returns.

An investment trust is essentially a bigger version of your credit card, your wallet and your exchange. It can therefore borrow money from the bank to buy extra Bitcoin during dips. However, because of this ability, people tend to pay more for the shares than its actual assets... and that is where it gets complicated  :o

I strongly advise people to read up about how investment trusts work, as it is useful knowledge for the many Bitcoin maximalists who might want to diversify into more traditional investment vehicles.

Well GBTC doesn't even make a case to "manage money better", as it literally just gives investors access to bitcoin price movements. It's not a managed fund, it's more of just a custody solution. Though in this case Grayscale actually owns the bitcoin and investors just get shares of stock that follows the bitcoin price, +/- a bit depending on the Grayscale premium.

The reason people buy Grayscale is so they get access to bitcoin price appreciation but don't have to worry about custodying the bitcoin themselves. It is also a regulated Wall St fund which means people can buy it with their tax-advantaged retirement funds which they couldn't do by just buying bitcoin itself.

A managed fund implies rebalancing different assets, whereas GBTC just holds Bitcoin, so that aspect is not as important here.

An investment trust as opposed to ETF or open ended fund *can* use leverage (borrowing) to buy more assets when they are cheap. However, I don't know if they do this, but if not, they *can* and *might* in the future. And anybody who can afford this trust is probably in for the longer term and will bear this ability in mind.

I personally hold straight bitcoin, but in the UK I can't hold it in my retirement pension fund (401k in the USA), and so if I have to sell bitcoin for my immediate needs, I would like to balance it up with something in my retirement fund, and although none available to me now, they would be:

(1) An ETF for immediate bitcoin price action.
(2) An investment trust for 5+ years horizon, as I could capitalize on their leverage capability and buy a little more when it trades at a discount.
(3) (I should mention open ended funds/trackers here, but they are probably out of the question due to the volatility of bitcoin for the moment)
(4) (I should also mention that Exchange Traded Notes based on bitcoin derivatives/futures etc. are now banned in the UK)

Grayscale is probably not functioning as a conventional investment trust in these wild west days of cryptocurrency adoption, but would I like some for the long term to complement my bitcoin holding...?

You betcha  :D

I have heard about grayscale before but I did not read everything carefully. And now, it surprises me that this company does have shares in order to a better future plan. As I observe, their intention is quite clear and if you invest your money in this company, it will not be a false decision. However, instead of buying their shares, I choose to invest my money in bitcoin because I am able to control my asset whenever and wherever I want

I haven't purchased no GBTC, but it is a good thing that Bitcoin funds are created. Established investors who trade & invest in various markets might not want to host BTC by themselves, instead they buyi into the fund. They also don't have to deal with shady exchanges which are not insured.

Probably we'll see an exponential growth of the Grayscale fund similar to what we've seen last year.

And they believe that it's safer to have asset being managed by companies like Grayscale rather than to buy on their own. They just want to have a security knowing that bitcoin is a risky asset and investment.
They are at least having a peace of mind investing through fund managers and companies/brokers that has this asset on their support. The real winner here is still Grayscale, they've been buying for a long time and has accumulated a lot.

Seems that no one from the forum has invested in GBTC yet.
Because I think, most of us are just managing our crypto on our own.
I believe most of these Grayscale investors don't know how to handle their own crypto.
So they just depend on Grayscale manage their money. And hoping that they will do their best to grow their funds.
But it shows that a lot of individuals are now trusting crypto, because if they don't believe in crypto, they won't risk their hard-earned money into this high risk investment.

Why is it more high risk than Bitcoin?

If Bitcoin fails, they can just shunt the whole load into something else and re-name the trust.

You need to understand what these companies are, before you make assumptions.

For a start, I would differentiate between a "fund" and an "investment trust".

Funds are usually an umbrella term for all sorts of vehicles including ETFs, Investment Trusts, Trackers and open ended funds (OEIC) themselves.

Investment trusts are long term investments that have a brand and people buy with a certain amount of conviction. The cryptocurrency market is hardly mature itself, but until there are ETFs, all rich investors (I am not one of those) have is Grayscale.

Ultimately, I'm just trying to raise consciousness that there are different ways to invest in Bitcoin, and that will always be good for the Bitcoin ecosphere.

As long as it doesn't become saturated with derivatives (which is what Blackrock have given the green light to buying) which caused the credit crunch of 2008, then we are good.

Who knows, maybe a gold / bitcoin / derivative / futures narrative could become enough to crash the world again. I digress.

I will leave you with one thought...

Argo Blockchain, a bitcoin miner company made 1300% profit in the last 3 months and trounced Bitcoin.

Actively buying huge chunks of bitcoin to support your own cryptocurrency which basically works like bitcoin except its your own cryptocurrency is basically a good recipe for something bad to happen. Might as well just buy bitcoin traditional and stick with it instead of haggling over this corporate-owned cryptocurrency.

I'm not sure how you can claim to sponsor DeFi when you have a limited understanding of how traditional instruments such as investment trusts function.

This was my point. Should not could.

They must protect the money. and hey a double up or 2 along the way wouldn't hurt.

When will they have "too much to sell" status? is there a point (in time. not to the whole universe lol)