Is Premium Bitcoin Exposure Worth the Cost?
BITCOIN INVESTMENT TRUST (OTCQX:GBTC)
Exposure: Bitcoin
Features
- Each share represents .00101 bitcoin (As of 2/15/2018)
- Potential low price entry to BTC
- Own BTC without the hassles
- No need to purchase from an exchange
- Eliminate storage and security concerns
- Easily purchased for retirement accounts like IRAs through standard brokers (TD Ameritrade, Schwab, Vanguard, etc..) versus going the through the hassles of setting up a self directed IRA to directly custody Bitcoins.
- Risk management vehicle for BTC holdings. Diversifying methods and locations of holdings is an important component of securing digital asset investments.
Blockchain, store of value, currency, decentralization, upside, and the list goes on. People believe in this honey badger for many different reasons. If you choose to invest, and are still researching your reason, start small.
Ensures receipt of forks when they occur versus holding btc on an exchange. Note if you are looking to hold forks long term then this is not the way to do it. Forks are liquidated when the opportunity presents itself and cash distributed to shareholders as a dividend.
Reasons to be bearish
The premium you pay for convenience is high, and there is an additional yearly 2% management fee. At the time of this writing, GBTC is trading at $18.50 per share. One bitcoin is listed at $10,093.02 on Coinbase (another common entry point for investors).
~991 GBTC shares = 1 bitcoin ---------- $18.50 x 991 = $18,333.50
991 GBTC @ 18,333.50 / 1 BTC @ 10,093.02 = 81.6% premium!
Bottom Line
Given its insured GBTC is for investors looking to gain exposure to BTC without the process of purchasing and securing digital assets directly. It can also be an effective vehicle for BTC exposure via traditional retirement accounts, as a hedge for direct BTC holdings, or for investors looking to speculate in BTC versus holding it.
For long term holdings direct BTC exposure should be considered. Given the expected premium you will pay to purchase GBTC currently and the potential for this premium to deteriorate over time. If additional public market vehicles offering exposure to BTC like ETFs begin to trade. Holding GBTC when these vehicles become available could lead to the perverse outcome of losing money while bitcoin continues to rise in value.
Thanks for Reading
Join the MPower365 newsletter to stay up to date on my latest research into cryptoasset investments!