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How does the Grayscale Bitcoin Trust work?
How does the Grayscale Bitcoin Trust work?
Blockchain

How does the Grayscale Bitcoin Trust work?

By Marco Cavicchioli - 14 Mar 2020

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The Grayscale Bitcoin Trust (GBTC) is a financial product that allows investing in digital currencies. 

These are publicly traded shares of the Grayscale Bitcoin Trust, invested exclusively in bitcoin reflecting the price. 

The trust is SEC-approved and therefore offers exposure to the BTC market even to investors who cannot invest in unregulated markets or assets. 

GBTC debuted on September 25th, 2013 under the name Bitcoin Investment Trust, as a private placement for accredited investors, subsequently receiving FINRA approval for securities eligible for public trading. 

This Trust is not an ETF, although the company states that it is modelled similarly to commodity investment products such as SPDR Gold Trust, i.e. as if it were an ETF with a physical underlying. 

GBTC is listed on the over-the-counter OTCQX market and has a capitalization of over $2.6 billion. 

In addition, it requires a minimum investment of $50,000 and charges an annual fee of 2.0% that accrues daily. 

One of its main advantages, in addition to the approval of the SEC, is the safe custody of the BTC, because it is the shares and not the bitcoin that are bought, sold and traded. 

These are stored in a secure system that uses high-security standards that is also insured. 

The GBTC is available like any other US security and can also be traded through a brokerage firm. 

However, there has been some criticism regarding the payment of high premiums and commissions, but since it is currently the only fund of its kind on the market, investors who want to take advantage of it are required to pay a high fee.

As early as September 2018, GBTC shares were trading at a value 20% higher than the value of the BTC held within the Trust, as its prices are linked more to the supply/demand ratio of stock markets than to the value of the underlying asset. 

Even in recent weeks, the GBTC has a market price higher than the value of BTC, and this is probably due to the fact that it is the only security of its kind available. 

Trading volumes recently are around $8 million a day, so it is not a particularly large market. CME’s bitcoin futures volumes, for example, are on average much higher, while Bakkt’s futures volumes are only slightly higher. 

Marco Cavicchioli
Marco Cavicchioli

Class 1975, Marco teaches web-technologies and is an online writer specializing in cryptocurrencies. He founded ilBitcoin.news, and his YouTube channel has more than 25 thousand subscribers.

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