GBTC is the WORST Way to Buy Bitcoin (Unless...)

GBTC makes it easy to hold Bitcoin in traditional brokerage accounts. Here's why it's actually the WORST way to buy & own Bitcoin (and what you should do instead).

00:00 - Intro
1:04 - How Does GBTC Work?
3:21 - GBTC Benefits
4:39 - Why GBTC is the WORST Way to Buy BTC
4:55 - GBTC Fees
6:51 - GBTC Premium
8:38 - GBTC in Retirement Accounts is Overrated
10:51 - What to Buy Instead of GBTC

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First we need to understand the structure of the Grayscale Bitcoin Trust and the convenience that it offers. To put it simply, GBTC gathers money from investors, uses it to purchase Bitcoin, and issues shares to investors that represent a portion of the fund’s Bitcoin holdings. However, a very important characteristic to understand about GBTC is that it operates as a closed-end fund. With this characteristic, Grayscale has full control over the amount of money flowing in and out of the fund, as well as the amount of Bitcoin they own at a given time. And because the number of available shares is often a fixed supply, new investors have to go to the public market to invest in the fund, where prices will be heavily influenced by demand.

Even though it’s not a perfect solution, GBTC does serve its purpose as a vehicle for gaining direct Bitcoin exposure in traditional markets.
• Makes it convenient for investors to add Bitcoin to their current portfolios.
• Simplifies taxes
• Hold Bitcoin in a retirement account

So with these benefits, why is GBTC an awful way to buy Bitcoin? It really comes down to two issues:

• Management fees
2% annually. This is a cut that Grayscale takes for operating and managing the Bitcoin trust. According to their SEC filings, the interest accrues daily and is paid out on a monthly basis for the previous month. Every month, they are selling some of your Bitcoin to collect that 2% annualized fee. Over time, this means that each share represents less and less Bitcoin.

• Premiums
The fund nearly ALWAYS trades at a premium. According to Ycharts, the average premium of GBTC is more than 30%, although there’s many time frames where it’s traded at even higher premiums. So historically, GBTC is an incredibly expensive way to buy Bitcoin, because you’re paying more to own it with GBTC than what it actually costs to buy it outside of traditional markets.

GBTC + Retirement Accounts
Of course, like I said, the one exception MIGHT be if you are using GBTC as a way of holding Bitcoin in a retirement account. However, I want to challenge investors to consider the following problems:
• Doesn't protect against management fees.
• Doesn’t solve the issue of paying a premium for Bitcoin.
• I don’t think the tax benefits are sure to make up for these costs.

What to Buy Instead of GBTC
It just makes more sense in many cases to buy Bitcoin directly. It’s easier, safer and cheaper than ever, and you can even earn interest on it to increase your returns further.

However, I still see the value in the convenience of a retirement-friendly Bitcoin investment. And to be completely honest, I still want to hold one of these investments in my retirement account - but GBTC isn’t it. Fortunately, I think it’s the first of many to hit the markets, and as more of these funds are created, competition should lower management fees and they’ll be able to track Bitcoin’s price more closely.

Let me know how you are buying Bitcoin in the comments, especially if you are using an investment product that I didn’t mention in this video. Thanks for watching, and I’ll see you next week.

#Bitcoin #GBTC #Cryptocurrency

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DISCLAIMER: NOT FINANCIAL ADVICE.
The content in this video should not be used as the basis for any investment decision, as it is for entertainment purposes only. Additionally, some of the links contained in this description are affiliate links. I may earn a commission via Amazon, WeBull, M1 Finance or Robinhood should you choose to purchase or sign up at the links provided.

Видео GBTC is the WORST Way to Buy Bitcoin (Unless...) канала Tyler McMurray