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Grayscale Bitcoin Trust – 5 things Should know before Investing
While there are thousands of cryptocurrencies in existence, Bitcoin is not only the first cryptocurrency, it is also by far the most popular and highly valued cryptocurrency and the market tends to follow its trends. Â
Grayscale, one of the largest digital currency asset managers, with $40 billion assets under management (AUM), helps investors access the ever-evolving digital asset space. The Grayscale Bitcoin Trust (GBTC) is one of the products Grayscale offers. In this blog, we will look at five things you need to know about the Grayscale Bitcoin Trust (GBTC).Â
1. GBTC is a tax-efficient way of investing in Bitcoin
GBTC is a tax-efficient way of investing in Bitcoin. This is because, since April 1 2022, there is a 30% tax on crypto profits (non-adjustable against losses) and an additional 1% TDS on each transaction from July 1, 2022. However, if you invest indirectly in Bitcoin through GBTC, you will be taxed on short-term capital gains as per your income tax slab. In the case of long-term capital gains, if your investments are held for 36 months or more, you will pay a tax of 20% with indexation benefits.Â
2. GBTC tracks the price of Bitcoin
As a result, it enables investors to gain exposure to Bitcoin (BTC) in the form of equity (rather than direct ownership of BTC). GBTC shares track the price of Bitcoin, enabling investors to invest in Bitcoin through the OTC market. The shares of GBTC are intended to reflect the price of Bitcoin based on Bitcoin per share, less GBTC’s expenses. With over $18 billion billion in assets under management, GBTC is one of the world’s largest Bitcoin funds.
3. It is traded on the OTCQX
GBTC shares are traded publicly on the OTCQX, an over-the-counter (OTC) market. Investors can buy and sell shares through brokerage accounts like Vested, at prices dictated by the market.
4. It provides a safe and hassle-free way of investing in Bitcoin
Investing in GBTC is a way to invest in BTC without the hassle and the stress. When buying Bitcoin directly, one needs to open an account with a crypto exchange and transfer funds to it. The process is not smooth, as most of the top banks (such as ICICI Bank) do not allow the transfer of funds to crypto exchanges.
Further, safety is a concern as there have been instances of crypto exchanges getting hacked. One can use a cold storage for additional safety, but it is a hassle for retail investors. However, GBTC’s assets are stored offline, i.e in a cold storage with Coinbase Custody Trust Company. Therefore, the Bitcoins underlying each share are safeguarded by a registered institution.Â
5. It is the first digital currency financial product to become a SEC reporting company
On January 21, 2020, GBTC became a SEC reporting company, the first digital currency financial product to become so; the trust files its quarterly and annual reports as well as audited financial statements 10-K and 10-Q with the SEC. It also complies with all the obligations under the exchange act. This provides more transparency and information to investors.Â
The good news is that if you are a Vested premium subscriber, you can invest in GBTC from the Vested platform! However, you should note that investing in GBTCÂ is a high-risk endeavor. The volatility of the underlying digital asset is high. Further, there are significant tracking errors between the share price and the value of the underlying digital asset. You should do proper due diligence and invest, keeping your risk appetite in mind. It is also important to be aware of the associated fees before you invest.
