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When it comes to buying Bitcoin (CRYPTO: BTC), there aren’t many indirect ways to own it, like mutual funds or ETFs. However, there is an investment vehicle called the Bitcoin Trust in Grayscale (OTC: GBTC) which allows investors to gain exposure to Bitcoin through the stock market. In this Fool live Video clip, recorded on March 18, Senior Analyst John Rotonti and Motley Fool Deutschland Senior Analyst Bernd Schmid discuss how the Greyscale Bitcoin Trust works.
John Rotonti: What is the Grayscale Bitcoin Trust, and how is it different from buying real Bitcoin through Coinbase or another exchange?
Bernd Schmid: Grayscale is essentially a trust or fund that buys Bitcoin, and the shares of this fund are traded on an exchange. I think it’s the New York Stock Exchange. You can go to your broker and buy shares of this trust, essentially shares of this trust. In this way, you are exposed to Bitcoin because you know that this trust is supported by Bitcoin. What’s different is that you only trade the shares of that trust, and the shares can trade above the value of the Bitcoin that actually belongs to that trust, and I think currently they even trade below value. This is called the net asset value. You actually get pretty good exposure to the Bitcoin price movement. Not exact, but if you just want to expose yourself to Bitcoin, see what you feel, the price swings you encounter, you can do that, but you don’t own Bitcoin yourself. You can’t call Grayscale and say, “Can you send me my Bitcoin please?” If you want to use Bitcoin, you can’t. You will basically have to sell the shares of that trust, get your money back, and then use your money for whatever you want to do. This is the main difference. If you have Bitcoin in your wallet, there is something you can do with Bitcoin.
Rotonti: Fantastic. If I were to buy Bitcoin Trust shares today and in 10 years, Bitcoin was much, much, higher, if that happened I would profit by owning the Bitcoin Trust shares?
Schmid: Yes. Exactly.
Rotonti: If I hold the stocks throughout this time frame and Bitcoin is much higher in the future, then I have had good exposure.
Schmid: Yes.
Rotonti: OKAY.
Schmid: That’s right.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.
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