Invest in Bitcoin on the Stock Market? ...Sort Of
While some investors choose to directly invest in Bitcoin, others prefer a more traditional approach by way of the stock market. The newness of Bitcoin and other cryptos, which operate on their own 24/7 exchanges, can be unnerving for traditional investors. Currently, only one entity exists on the stock market to allow investing in Bitcoin, that entity is Grayscale (traded as GBTC).
Grayscale is a an investment trust which owns approximately 175,000 Bitcoins, and allows investors to buy shares of this through the NASDAQ. A share in the GBTC trust is equivalent to about .001 Bitcoin. Gold is traded similarly in that, if you buy one share in the gold trust (GLD), it is equivalent to about 1/10 of an ounce of gold held by the trust. Due to the high demand for Bitcoin and the trust's limited supply, you're buying your share of GBTC at a very high premium. Right now, GBTC is trading at $16.92 USD, and the value of Bitcoin sits at about $9,800 USD. These 2 values (GBTC and BTC) do not always directly correlate, so choosing your time to buy involves being aware of both of their current values. Buying a share of GBTC at $16.92 USD, would imply that the value of Bitcoin is currently at $16,920 USD, so investing during this time means paying a nearly 100% premium for your share of GBTC. A fee of 2% is also charged annually, which means the value of the trust diminishes over time.
Some other factors to consider are that GBTC is currently the only option on the stock market in which to invest in Bitcoin. If another entity is granted access, this would presumably reduce the premium for GBTC. Furthermore, GBTC is only traded while the stock market is open, so if the value of Bitcoin crashes during off hours (e.g. the weekend), you can't alter your investment until the bell rings on Monday. Conversely, if you own Bitcoin through a crypto exchange, you can instantly buy or sell at any time or day.
So what is the upside here? One advantage to investing in the trust is that there are no limits on spending or selling (which is often the case with crypto exchanges), allowing your transactions to be more instantaneous. A potential bonus may also exists when there are major changes in Bitcoin and the blockchain, take August's hard fork. Bitcoin experienced a hard fork, splitting assets into Bitcoin (BTC) and Bitcoin Cash (BCH). Those who held the private keys to their BTC at this time, received an equivalent amount of BCH. Those invested into the trust before the date of the split, were paid out their respective value of the BCH, which was liquidated by the trust. As there have been many other potential blockchain forks since this event, it may prove valuable as other forks may likely occur in the future.
Whether or not this is a worthy investment for you will depend on your understanding of the advantages and disadvantages of investing in Bitcoin through the more common method of the crypto markets, or the via GBTC on the stock market. Consider the premium when buying GBTC, while it's high at the time of this article, it has been below 20%, which gives plenty of reason to consider this. Nevertheless, if you're willing to learn how the crypto markets function, and and can manage your own assets, then your margins of profit will be a cut above. The best take-away here is to note that there are now diverse options for moving forward and getting invested in Bitcoin and cryptocurrency, and that is something we support.
If GBTC investing interests you, a user-friendly way to become invested is available at Stockpile.com.