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Is the Grayscale Bitcoin Trust ETF a Millionaire Maker?
Exchange Traded Funds (ETFs), or groups of individual stocks traded under a single symbol, are intended to simplify investing. Some ETFs can diversify your investments in minutes, instead of spending a lot of time screening and selecting dozens of individual companies to trust with your money.
In cryptocurrency, the Grayscale Bitcoin Trust ETF (NYSEMKT:GBTC) can take a lot of the ownership work Bitcoin (CRYPTO: BTC).
But what’s the point of owning a Bitcoin ETF instead of just Bitcoin? Cryptocurrency has proven that it can make investors millionaires. Can this ETF do the same?
Here’s what you need to know.
What is the Grayscale Bitcoin Trust ETF?
On the surface, it’s a simple investment. The Grayscale Bitcoin Trust is a ETFs which holds Bitcoin. Buying shares gives investors indirect exposure to cryptocurrency price movements.
Why shouldn’t someone hold Bitcoin directly instead? Well, doing so can be more complicated. For example, it places responsibility for safety on the owner. You can store cryptocurrency on exchanges or in physical (cold) storage, but each has pros and cons.
Let’s say you lose access to your wallet or the exchange you use faces problems, like FTX, the disgraced cryptocurrency exchange. The Grayscale ETF uses cold storage (it is kept on offline servers via a company called Coinbase Custody Trust) to protect the Bitcoin represented by its shares. So it’s a safe and convenient way to benefit from investing in cryptocurrency without the burden of owning and managing it yourself.
A couple of factors influence the value of the Grayscale Bitcoin Trust. The fund charges a 1.5% annual fee for managing cryptocurrency, which you wouldn’t have to pay if you were managing your own instead. The ETF may also trade at a premium or discount to the underlying value of its Bitcoin at any given time.
Investors should consider how the ETF trades relative to the price of Bitcoin to decide whether they want to purchase shares. You can do this by comparing the ETF’s share price to its net asset value per share.
Bitcoin’s staggering investment returns
A quick look at Bitcoin’s success over the years makes it obvious why investors should consider adding the Grayscale ETF to their portfolios. As an asset, the digital currency has vastly outperformed the broader stock market over the past decade:
Bitcoin price chart
The thesis for investing in Bitcoin is simple: the supply of fiat currency is continually expanding, much faster than that of Bitcoin. As the US dollar loses value (due to inflation), the price of the cryptocurrency has increased over time. Supply grows more slowly over time as halvings occur every four years or so, further limiting supply as demand increases from people looking to invest in and use Bitcoin.
The story continues
So the price of the token comes down to supply versus demand. The hope for investors is that demand increases indefinitely while supply increases at an increasingly slower pace.
Can ETF Make You a Millionaire?
The million-dollar question is whether investors will pay for the convenience this ETF offers. What is the cost? Quite a bit, actually.
You can see below that the ETF has underperformed Bitcoin itself over time. Such management fees prove to be quite expensive in the long run.
GBTC chart
But that said, the fund has still far outpaced the broader stock market, making the Grayscale Bitcoin Trust ETF an obvious high-potential long-term investment that can absolutely still churn out millionaires if the cryptocurrency’s investment thesis continues to develop in the next years. years.
Should you invest $1,000 in Grayscale Bitcoin Trust (BTC) right now?
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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Bitcoin. The Motley Fool has a disclosure policy.
Is the Grayscale Bitcoin Trust ETF a Millionaire Maker? was originally published by The Motley Fool