GBTC Bitcoin Investment Trust Observer

[ImI]

Definitely a good start!

[1714776509]

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[hodlmybtc]

Exciting times ahead

[Chef Ramsay]

Very positive day for GBTC, kindly and aggressively building upon itself day by day during the first week of active service. I wonder if this is the premonition that Barry was alluding to in his ''promising another bubble'' tweet.. Nutcase sure was active today so I'm puzzled who set that creep in motion on such a day.

[mmortal03]

Interesting that this GBTC thing is all situated and having a year behind the original shareholders when it appears this market may be turning a new leaf. Coincidence?

Is it, though? I keep tabs on the 365-day price difference (with the following chart), and a bitcoin investment held for a year continues to be under water right now. Also, note the red line, which is where it will be if the price stays the same.

[Chef Ramsay]

Interesting that this GBTC thing is all situated and having a year behind the original shareholders when it appears this market may be turning a new leaf. Coincidence?

Is it, though? I keep tabs on the 365-day price difference (with the following chart), and a bitcoin investment held for a year continues to be under water right now. Also, note the red line, which is where it will be if the price stays the same.

I see your point but I believe that I posted here or on another site (RPF) in regards to the shareholders' holdings that I believed them to have bought in the 6-700+ range in full, so this could mean they're slightly under water. Yet, the arb opportunity seems worthwhile or the selling and rebuying to check out the market next year to see some gains. Today was good for PR purposes going forward and the entire market.

[mmortal03]

Interesting that this GBTC thing is all situated and having a year behind the original shareholders when it appears this market may be turning a new leaf. Coincidence?

Is it, though? I keep tabs on the 365-day price difference (with the following chart), and a bitcoin investment held for a year continues to be under water right now. Also, note the red line, which is where it will be if the price stays the same.

I see your point but I believe that I posted here or on another site (RPF) in regards to the shareholders' holdings that I believed them to have bought in the 6-700+ range in full, so this could mean they're slightly under water. Yet, the arb opportunity seems worthwhile or the selling and rebuying to check out the market next year to see some gains. Today was good for PR purposes going forward and the entire market.

Yeah, I like the good PR going forward, and I'm cautiously optimistic. The worst case scenario recently for a buyer who held for a year was if they bought on January 15th, 2014, and sold on January 15th, 2015 (-76.16%), and that doesn't apply here. We're off that low.

Wouldn't it be great to know the percentage of these guys that are selling on GBTC *and* buying back real bitcoins at the lower levels?  I guess we'll be able to infer on this if the price difference closes. Sounds like a new sort of diff chart could be in order.

[phoenix1]

@ David Rahaby  ... as you say you are long-minded  (and I believe you) have you considered just how much the management fees will eat into your BTC over the years? IIRC correctly the annual fee is 2% of NAV and it is taken in BTC not USD, so if you start with 100 BTC ...
After 10 years = 81.7 BTC
After 20 years = 66.8 BTC
After 25 years = 60.3 BTC

I am using these time periods as you talk about 'retirement funds'.

So if you hold BTC in this wrapper for 25 years you will pay away 40% in fees, which seems extortionate for something that pays no dividends or coupons, and requires no rebalancing for duration or weighting. It basically sits there in cold-storage.

Put another way, in 10 years, 10 shares of GBTC will not be approximately 1BTC, it will be approximately 0.82 BTC, and at that time the price of the fund should reflect this (ie be based upon it's NAV).

Just wondering if anyone is even looking at or thinking about this ...



 

[RoadTrain]

Sorry for being ignorant, but how technically these fund fees are paid?

[JorgeStolfi]

Sorry for being ignorant, but how technically these fund fees are paid?

They are discounted when the shares are redeemed, i.e. returned to Grayscale in exchange for the BTC they are supposed to stand for. 

[bclcjunkie]

it's what's designed for: milk the next rich idiot's tits dry... the risk to these so called "bitcoin trust funds", as if we need them, is practically nil, these are the middlemen or parasites who just pass things around and get paid for that, not to mention occasional twitter blabbering...

i for one, would like this silly rally to go on and have more people like cypherdoc around because these are the kind of turn of events that help me stock up more on cheap gold... i can't wait to get rid of my last bitcoin bags and grab as much gold as possible...

@ David Rahaby  ... as you say you are long-minded  (and I believe you) have you considered just how much the management fees will eat into your BTC over the years? IIRC correctly the annual fee is 2% of NAV and it is taken in BTC not USD, so if you start with 100 BTC ...
After 10 years = 81.7 BTC
After 20 years = 66.8 BTC
After 25 years = 60.3 BTC

I am using these time periods as you talk about 'retirement funds'.

So if you hold BTC in this wrapper for 25 years you will pay away 40% in fees, which seems extortionate for something that pays no dividends or coupons, and requires no rebalancing for duration or weighting. It basically sits there in cold-storage.

Put another way, in 10 years, 10 shares of GBTC will not be approximately 1BTC, it will be approximately 0.82 BTC, and at that time the price of the fund should reflect this (ie be based upon it's NAV).

Just wondering if anyone is even looking at or thinking about this ...



 

[jl2012]

@ David Rahaby  ... as you say you are long-minded  (and I believe you) have you considered just how much the management fees will eat into your BTC over the years? IIRC correctly the annual fee is 2% of NAV and it is taken in BTC not USD, so if you start with 100 BTC ...
After 10 years = 81.7 BTC
After 20 years = 66.8 BTC
After 25 years = 60.3 BTC

I am using these time periods as you talk about 'retirement funds'.

So if you hold BTC in this wrapper for 25 years you will pay away 40% in fees, which seems extortionate for something that pays no dividends or coupons, and requires no rebalancing for duration or weighting. It basically sits there in cold-storage.

Put another way, in 10 years, 10 shares of GBTC will not be approximately 1BTC, it will be approximately 0.82 BTC, and at that time the price of the fund should reflect this (ie be based upon it's NAV).

Just wondering if anyone is even looking at or thinking about this ...



 

The same is true for any retirement fund

[phoenix1]

<GBTC fees>

The same is true for any retirement fund

Yes, but the fees are much lower unless you are going for something actively managed, and even then you would struggle to get anywhere near 2% annually unless you are talking decent hegde funds, where a good manager may take 2% p.a. plus a % of any profits (20% is not unusual).

[JorgeStolfi]

The same is true for any retirement fund

In my 20's, I and many colleagues here in Brazil contributed for a few years to a retirement fund that was supposed to be solid and traditional etc.  But then it goxxed...

[oda.krell]

@ David Rahaby  ... as you say you are long-minded  (and I believe you) have you considered just how much the management fees will eat into your BTC over the years? IIRC correctly the annual fee is 2% of NAV and it is taken in BTC not USD, so if you start with 100 BTC ...
After 10 years = 81.7 BTC
After 20 years = 66.8 BTC
After 25 years = 60.3 BTC
[...]

Meh, I'm out of my element here (retirement fund and in the US), but isn't this a bit of a simplistic comparison?

As I understand it, the relevant point here is that GBTC is compatible with a Roth IRA, which is (intended to be) tax free, so depending on how capital gains for "raw" Bitcoin holdings are (and will be) taxed, and whether you are planning to pay those taxes (or, if not, whether you get away with it), those "2% per year" could either turn out to be a lot, or not that much.

Someone more knowledgeable on the topic, please feel free to correct me if the above is factually wrong.

[ErisDiscordia]

The same is true for any retirement fund

In my 20's, I and many colleagues here in Brazil contributed for a few years to a retirement fund that was supposed to be solid and traditional etc.  But then it goxxed...

let me guess, it was government-run?

In case it wasn't it was of course the failure of not enough government oversight

[phoenix1]

@ David Rahaby  ... as you say you are long-minded  (and I believe you) have you considered just how much the management fees will eat into your BTC over the years? IIRC correctly the annual fee is 2% of NAV and it is taken in BTC not USD, so if you start with 100 BTC ...
After 10 years = 81.7 BTC
After 20 years = 66.8 BTC
After 25 years = 60.3 BTC
[...]

Meh, I'm out of my element here (retirement fund and in the US), but isn't this a bit of a simplistic comparison?

As I understand it, the relevant point here is that GBTC is compatible with a Roth IRA, which is (intended to be) tax free, so depending on how capital gains for "raw" Bitcoin holdings are (and will be) taxed, and whether you are planning to pay those taxes (or, if not, whether you get away with it), those "2% per year" could either turn out to be a lot, or not that much.

Someone more knowledgeable on the topic, please feel free to correct me if the above is factually wrong.

Hey, I'm open to being corrected to too  
But as I see it, this is not a simplistic comparison - simplistic compared to what ? This is one 'predetermined' side of the coin that any 'investor' needs to consider before putting funds in. I am no expert on retirement funds either, but what is crystal clear is that 40% of your BTC will have been paid away in fees if you hold for 25 years. Period. You might as well call it 'tax' (meet the new gubinment - same as the old gubinment )

The tax implications of holding it for less than x years or trading in and out of, I have no idea about, other than I would assume that holding it for less time will give less tax relief, if any. Just pointing out that if the motivation is solely 'reduced taxes' and holding period is 'until retirement', you are paying a very high 'tax' for the privelege, one that can only be weighed up against individual circumstances. That's the other side of the coin ... ok ... yeah, that side is not so simple  

EDIT: If you are unlucky enough to buy at a price that gives you NO capital gains, you will have an extra 40% loss that you would not have incurred otherwise (in the 25 yr scenario)

[bobabouey2]

@ David Rahaby  ... as you say you are long-minded  (and I believe you) have you considered just how much the management fees will eat into your BTC over the years? IIRC correctly the annual fee is 2% of NAV and it is taken in BTC not USD, so if you start with 100 BTC ...
After 10 years = 81.7 BTC
After 20 years = 66.8 BTC
After 25 years = 60.3 BTC

I am using these time periods as you talk about 'retirement funds'.

So if you hold BTC in this wrapper for 25 years you will pay away 40% in fees, which seems extortionate for something that pays no dividends or coupons, and requires no rebalancing for duration or weighting. It basically sits there in cold-storage.

Put another way, in 10 years, 10 shares of GBTC will not be approximately 1BTC, it will be approximately 0.82 BTC, and at that time the price of the fund should reflect this (ie be based upon it's NAV).

Just wondering if anyone is even looking at or thinking about this ...

 

In the short term, since it was easier to get the BIT into a tax deferred retirement account, the fees are probably worth it.

Long term, if bitcoin takes off, there will no doubt be competition, and COIN / other investment vehicles will pop up with lower fees.  And since it is in a tax-deferred account, David will be able to roll into one of those investments without taking a capital gain hit.

[phoenix1]

In the short term, since it was easier to get the BIT into a tax deferred retirement account, the fees are probably worth it.

Long term, if bitcoin takes off, there will no doubt be competition, and COIN / other investment vehicles will pop up with lower fees.  And since it is in a tax-deferred account, David will be able to roll into one of those investments without taking a capital gain hit.

I hear you. Over time if more of these vehicles are created, fees will drop. I read somewhere that fees on some ETF's are as low as 0.04%. Makes this one seem even more extortionate. And I would imagine COIN will not be in a hurry to undercut GBIT by very much, if at all, given they will be a genuine ETF.
We will need a lot more competition than that to see fees drop significantly IMO.

Interesting to hear that he could 'roll' between them without penalties. I have no knowledge of any of these rules.
How does the tax deferral of a retirement account work? If it is just a deferral, is any CGT paid at the same rate at the end of the day? Or is there some tax relief too?

[JorgeStolfi]

let me guess, it was government-run?

In case it wasn't it was of course the failure of not enough government oversight

No, it was a private plan (sorry to disappoint you).  Government pensions have been "adjusted" at times,  but they have been surprisingly dependable over half a century or more, even through bouts of hyperinflation and currency changes, military dictatorships, neocon governments, keynesian-socialist governments, just plain corrupt governments...

Of course, that collapse was indeed a failure of government oversight.  (The military were in power at the time, so the only license that a business really needed was the support of some general, and the only finacial reports that had to be filed were those printed on 2" x 5" pieces of paper.  Not that things have improved much since then.)

[bobabouey2]

In the short term, since it was easier to get the BIT into a tax deferred retirement account, the fees are probably worth it.

Long term, if bitcoin takes off, there will no doubt be competition, and COIN / other investment vehicles will pop up with lower fees.  And since it is in a tax-deferred account, David will be able to roll into one of those investments without taking a capital gain hit.

I hear you. Over time if more of these vehicles are created, fees will drop. I read somewhere that fees on some ETF's are as low as 0.04%. Makes this one seem even more extortionate. And I would imagine COIN will not be in a hurry to undercut GBIT by very much, if at all, given they will be a genuine ETF.
We will need a lot more competition than that to see fees drop significantly IMO.

Interesting to hear that he could 'roll' between them without penalties. I have no knowledge of any of these rules.
How does the tax deferral of a retirement account work? If it is just a deferral, is any CGT paid at the same rate at the end of the day? Or is there some tax relief too?

There are two general types.  One a 401k or simple IRA, allows you to invest a certain amount of income, and that investment is not considered earnings or otherwise taxed (meaning you can invest more upfront).  The investment then grows without taxes, capital gains or dividends.  When you reach the qualifying age and withdraw the money, it is taxed as ordinary income.  But, ideally you are in a lower tax bracket as you are retired.

Roth IRAs let you invest after tax income, but then distributions are not taxed.

Lots of other details.