ETFs
How to Buy Grayscale Bitcoin Trust ETF (GBTC)
If you are looking to make yourself known Bitcoin (BTC 0.0%) but prefer the convenience of trading like you would a stock then a Bitcoin exchange-traded fund (ETF)as the Grayscale Bitcoin Trust ETF (GBTC -1.2%) could be the solution you need.
Invest in this ETF offers a more accessible way to gain exposure to Bitcoin without the complexities of direct cryptocurrency transactions. Here’s everything you need to know about the Grayscale Bitcoin Trust ETF and how to start investing in it.
What is this?
What is the Grayscale Bitcoin Trust ETF?
The Grayscale Bitcoin Trust ETF is an investment fund that provides investors with exposure to Bitcoin by tracking the CoinDesk Bitcoin Price Index. When you purchase shares of the Grayscale Bitcoin Trust ETF, you are effectively purchasing exposure to the real-time (spot) price of Bitcoin since the fund directly holds Bitcoin as its underlying asset.
The Grayscale Bitcoin Trust ETF trades much like any stock traded on an exchange, like opposed to mutual funds which only trade once a day at market close. It has a bid price, which is the highest price a buyer is willing to pay for a stock, and an ask price, which is the lowest price a seller is willing to sell a stock at. This makes it easy to buy and sell shares of the fund during market trading hours, the same way you would trade shares of any publicly traded company.
The Grayscale Bitcoin Trust ETF is not only a convenient way to invest in Bitcoin, but also a very important and popular ETF in its niche. As of June 2024, approximately 5.5 million shares were traded daily on average and managed over $19.13 billion in assets under management (AUM).
How to buy
How to Buy a Grayscale Bitcoin Trust ETF
Purchasing a Grayscale Bitcoin Trust ETF involves the same steps as purchasing any other stock or ETF. Here’s a step-by-step example with visual aids to guide you through the process.
Step 1: Open a brokerage account
First, you will need a brokerage account. There are many options available, but for the purposes of this example we will use Interactive Brokers. It’s important to choose a brokerage that suits your investing style and needs, whether you prioritize low fees, in-depth research tools, or customer service.
Step 2: Determine your budget
Before investing in the Grayscale Bitcoin Trust ETF, decide how much you are willing to commit. Remember that this ETF, like Bitcoin itself, is very volatile and carries significant risk of loss. Consider how much of your total investment portfolio you are willing to allocate to the Grayscale Bitcoin ETF, both in dollar terms and as a percentage of your overall investments.
Step 3: Do your research
The Grayscale Bitcoin Trust ETF is just one of several Bitcoin ETF available on the market. Before making a purchase, it is wise to research the fund and compare it to its competitors. Look at factors like expense ratiosfund size, liquidity, and the exact nature of the Bitcoin exposure offered by each fund.
Expense ratio
A percentage of a mutual fund’s or ETF’s assets deducted each year to cover management, operational, and administrative expenses.
Step 4: Place an order
Once you have decided to purchase a Grayscale Bitcoin Trust ETF, you must place an order through your brokerage account. Start by entering its teleprinter in the search bar and then clicking on it.
Image source: Interactive Brokers.
Next, click the Buy button, which will bring up the order pop-up screen. Here you can specify the number of shares you want to buy and the type or order you want to use.
Image source: Interactive Brokers.
If you select a market order, your order will be executed at the current market price, meaning you are purchasing the shares at the best price available at the time of the order. However, if you have a specific price in mind, choose one limited order and specify the price you are willing to pay. With a limit order, your order will only be executed if the stock price reaches or falls below the specified price.
Once you are satisfied, click the Buy Order button at the bottom to complete your purchase. If successful, your account will be debited for the cash cost and will now have Grayscale Bitcoin Trust ETF shares.
Assets
Grayscale Bitcoin Trust ETF Holdings
The Grayscale Bitcoin Trust ETF is classified as a spot Bitcoin ETF, meaning its primary holdings are actual Bitcoin rather than simple futures contracts based on the price of Bitcoin. These Bitcoins are securely stored with Coinbase Custody Trust Company, LLC, which acts as the custodian of the assets.
As of June 2024, the total holdings of the Grayscale Bitcoin Trust ETF stood at 283,965.9955 Bitcoins. This large cache of Bitcoin translates to approximately 0.00088870 Bitcoins per individual share of the ETF. Investors who purchase shares of Grayscale Bitcoin ETF are essentially purchasing a proportionate share of this pooled Bitcoin.
Should I invest?
Should I invest in the Grayscale Bitcoin Trust ETF?
Deciding to invest in the Grayscale Bitcoin Trust ETF is a personal decision that depends on your financial goals and risk tolerance. If your primary goal is to gain exposure to Bitcoin through a traditional brokerage account, trading the Grayscale Bitcoin ETF may be an excellent choice.
It offers the convenience of trading like any other stock, bypassing the complexities and technical challenges associated with purchasing Bitcoin directly through a cryptocurrency exchange and managing your own stock. digital wallets. This makes the Grayscale Bitcoin ETF particularly attractive to investors familiar with the stock market but new to cryptocurrencies.
Additionally, if you are comfortable with long-term ETF investments and are looking for aggressive but risky growth potential, the Grayscale Bitcoin Trust ETF could be a suitable option. While it is true that this ETF, like Bitcoin itself, is very volatile and can experience large price swings, it has also seen periods of substantial returns.
Dividends
Does the Grayscale Bitcoin Trust ETF pay a dividend?
The Grayscale Bitcoin Trust ETF does not pay a dividend because its underlying asset, Bitcoin, does not generate a return. Bitcoin is a digital currency and does not offer dividends or interest payments like traditional income-producing investments, such as stocks or bonds.
The Grayscale Bitcoin ETF may not be the right choice for investors whose primary goal is to generate income on their investments. A Dividend ETF perhaps more suitable.
Spending rate
What is the expense ratio of the Grayscale Bitcoin Trust ETF?
The Grayscale Bitcoin Trust ETF charges an expense ratio of 1.5%. This expense ratio represents the annualized percentage deducted from your total investment to cover the ETF’s operational fees and expenses. For example, if you invest $10,000 in a Grayscale Bitcoin ETF, you can expect to pay around $150 per year in fees.
You do not pay these fees directly out of your pocket; rather, it is deducted from the ETF’s returns on an ongoing basis. This means that the net value of your investment reflects all fees paid, so it is crucial to consider the effect of fees on your long-term investment returns.
It’s important to note that higher expense ratios can be undesirable because they compound and can significantly eat into your budget. total returns. The expense ratio of the Grayscale Bitcoin Trust ETF is higher. This is somewhat typical of funds that provide specialized exposure to investments, such as cryptocurrencies.
Historical file
Historical performance of the Grayscale Bitcoin Trust ETF
The Grayscale Bitcoin Trust ETF debuted on January 11, 2024, so it does not have a long enough track record to evaluate its historical performance. A practical approach would be to look at the historical performance data of Bitcoin itself. Since the Grayscale Bitcoin ETF holds Bitcoin, the performance of the ETF is closely tied to that of Bitcoin.
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149.12% |
22.37% |
51.38% |
60.29% |
Related investment topics
The bottom line on the Grayscale Bitcoin Trust ETF
The Grayscale Bitcoin ETF offers investors a simple, traditional way to gain exposure to Bitcoin without the complexity of managing cryptocurrencies directly. It mimics the price movements of Bitcoin by directly holding the digital asset, making it a suitable option for those looking to integrate the cryptocurrency into their investment portfolio through a familiar exchange platform.
Keep in mind, however, that the Grayscale Bitcoin Trust ETF charges a fairly high expense ratio and the potential for high returns comes with higher risk. Treat it like a high volatility product Sector ETF.
FAQs
Investing in Grayscale Bitcoin Trust ETF FAQ
Is Grayscale Bitcoin Trust an ETF?
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Yes, as of January 11, 2024, the Grayscale Bitcoin Trust ETF is an ETF. Before, it was a closed fund (CEF).
How to buy a Grayscale Bitcoin ETF?
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You can purchase shares of the Grayscale Bitcoin Trust ETF through most brokerage accounts by placing an order, just as you would any other stock or ETF.
Can anyone buy Grayscale Bitcoin Trust?
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The Grayscale Bitcoin Trust ETF is available to most U.S. retail investors, although accessibility may vary depending on your brokerage firm’s specific policies and restrictions.
Tony Dong has no position in any of the stocks mentioned. The Motley Fool posts and recommends Bitcoin. The Mad Motley has a disclosure policy.
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