Is the Grayscale Bitcoin Trust ETF a Millionaire Maker?

Exchange-traded funds (ETFs), or groups of individual stocks traded under a single stock symbol, aim to simplify investing. Several ETFs can diversify your investments in minutes; instead, you have to spend a lot of time scanning and selecting dozens of individual companies to trust your money with.

In cryptocurrency, Grayscale Bitcoin Trust ETF (NYSEMKT: GBTC) could do most of the work of owning Bitcoin (CRYPTO: BTC).

So 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 Grayscale Bitcoin Trust ETF?

It is a seemingly simple investment. Grayscale Bitcoin Trust is an ETF that holds Bitcoin. Buying shares gives investors indirect exposure to cryptocurrency price movements.

Why doesn’t someone just hold Bitcoin directly instead? This may be more difficult to do. For example, it puts the responsibility of security on the owner. You can hold crypto on exchanges or in physical (cold) storage, but each has its pros and cons.

Let’s say you lost access to your wallet or the exchange you were using ran into problems, like disgraced cryptocurrency exchange FTX. Grayscale ETF uses cold storage (kept offline on servers through a company called Coinbase Custody Trust) to secure the Bitcoin its shares represent. So this is a safe and convenient way to invest in cryptocurrency without the hassle of owning and managing it yourself.

Several factors affect the value of Grayscale Bitcoin Trust. The fund charges a 1.5% annual fee for managing crypto; You wouldn’t have to pay this if you managed your own cryptocurrency instead. The ETF can also trade at a premium or discount to Bitcoin’s underlying value at any time.

Investors should consider how the ETF is trading 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 surprising return on investment

A quick look at Bitcoin’s success over the years makes it clear why investors should consider adding the Grayscale ETF to their portfolio. Digital currency as an asset has easily outperformed the overall stock market over the past decade:

Bitcoin Price Chart

The investment thesis on Bitcoin is simple: The supply of fiat currency is constantly expanding, much faster than the supply of Bitcoin. The price of the cryptocurrency has risen over time as the US dollar has lost value (through inflation). The supply grows more slowly over time as halvings occur every four years, further limiting supply in the face of increasing demand from people looking to invest in and use Bitcoin.

The story continues

That is, the price of the token varies according to supply and demand. Investors’ hope is that demand will increase indefinitely as supply increases at a gradually slowing pace.

Can ETFs make you a millionaire?

The million dollar question is whether investors will pay for the convenience this ETF offers. How much does it cost? Actually quite a lot.

You can see below that the ETF has easily underperformed Bitcoin itself over time. These management fees turn out to be quite expensive in the long run.

GBTC Chart

But that said, the fund still far outperformed the broader stock market, making the Grayscale Bitcoin Trust ETF an obvious high-potential long-term investment that could certainly make millionaires if the cryptocurrency’s investment thesis continues in the coming period. years.

Should you invest $1,000 in Grayscale Bitcoin Trust (BTC) right now?

Before buying shares in Grayscale Bitcoin Trust (BTC), consider:

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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in Bitcoin and recommends it. The Motley Fool has a disclosure policy.

Is Grayscale Bitcoin Trust ETF a Millionaire Maker? originally published by The Motley Fool