A lot investors like the idea of adding bitcoin, ethereum or other cryptocurrencies to their portfolio for diversification purposes or for pure speculation.
Most probably assume that you need to create a cryptocurrency wallet in order to store your bitcoin. We've heard stories about people getting locked out of their wallet with no way to recover access or entire exchanges getting hacked.
For many, the idea of buying bitcoin is either confusing, intimidating or both. But there's a way to add bitcoin exposure to your portfolio without needing to work with a cryptocurrency exchange or establish a bitcoin wallet.
That way is the Grayscale Bitcoin Trust (GBTC).
It provides a secure structure to gain access to bitcoin and is available through most brokerage accounts.
GBTC's assets are stored in offline or "cold" storage with Coinbase Custody Trust Company. It is traded on an exchange just like other securities making it available for buying and trading throughout the day.
The trust is split into shares with each share representing approximately .001 bitcoin.
But there is a catching to owning shares of GBTC. Because they are traded on the open market, they can (and usually do) trade at a premium to their underlying price.
Take today, for instance.
GBTC is trading at a 20% premium to the price of bitcoin. That sounds like a lot to pay for bitcoin exposure, but it's also below average compared to the trust's history.
In the past, GBTC has traded at a premium of more than 100% and premiums of above 40% are fairly common. GBTC is also approximately 20% more volatile than actual bitcoin due to the fluctuating premiums.
Owning GBTC isn't quite the same as owning bitcoin directly, but it's a nice option for those looking to simply add cryptocurrency exposure to their portfolios.
Note: Grayscale also runs trust products based on bitcoin cash, ethereum, ethereum classic, litecoin, horizen, stellar lumens, XRP and zcash.
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