When it comes to investing in bitcoin, you have two basic options. You can buy and hold bitcoin directly, or you can use another type of vehicle that invests in bitcoin on investors' behalf. Since there are no bitcoin mutual funds or ETFs -- at least not yet -- that leaves the Grayscale Bitcoin Trust (GBTC 2.82%) as the primary way investors can put their money to work in bitcoin without having to buy the digital currency themselves.

However, there are some things investors should know before deciding to buy shares. In this Nov. 30 Fool Live video clip, Fool.com contributor Matt Frankel, CFP, and Industry Focus host Jason Moser discuss the major drawbacks of using this alternative bitcoin investment instead of simply buying the cryptocurrency itself. 

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Jason Moser: Let's see. We've got a question from Srinivas, who asks, what are your thoughts on the crypto ETF GBTC? I don't know yet, but I want to.

Matt Frankel: I do and I would love to take that one.

Moser: OK. Well, go for it.

Frankel: That is the Grayscale Bitcoin Trust.

Moser: There you go.

Frankel: Right now, there are no bitcoin mutual funds or ETFs. The Grayscale Bitcoin Trust is intended to fill that gap until the SEC actually approves a bitcoin-based ETF. It's a way for people to get exposure to bitcoin without actually having to buy it. It works like a fund, where they pool investor's money and buy bitcoin. The problem is it trades at a massive premium to the value of the bitcoin it owns, like in the 20%-30% range usually. I haven't checked recently. But historically, it's traded for at least to 20%-30% premium over the value of the underlying bitcoin. So if you want to invest.

Moser: Why do you think that's the case? Why do you think they will do that?

Frankel: At first, I think it was because bitcoin was difficult to buy, and it's still not that as easy to buy as some other assets. It trades at a massive premium, and Grayscale takes a 2% fee per year for storing the bitcoin. That's a two percent management fee. It's a pretty high fee in the ETF and mutual fund world. The costs in the premium make it -- I'd stay away. There are few situations where I would recommend buying actual bitcoin, but that's one of them. If it's between that, I'm buying bitcoin.

Moser: Yeah. I wonder if it has funds due. I mean, funds make investing more accessible for a lot of folks. Maybe the demand for shares of that fund are higher than the value simply because, like you said, people feel like it's an easier way to actually get hold of the underlying asset without having to actually own the asset. Most people can't really necessarily got there and buy bitcoin without knowing a thing or two. All those e-platforms like Square and PayPal are only making a lot easier.

Frankel: Yeah. I mean, if you look at the ETFs that own gold, for example, they have management fees because it costs money to store, secure things like that.

Moser: Yeah.

Frankel: They generally trade at somewhat of a premium to the value of the gold that they own. Not 20%-30 %, but somewhat of a premium. It's just the costs are kind of, in my mind, outrageous for the Grayscale Bitcoin Trust.

Moser: What's the cost for storing? I mean, I understand the cost involved with hunting for bitcoin, the cost involved for mining for bitcoin. But what's the costs for storing it? Isn't that just memory?

Frankel: There's a lot of cybersecurity measures that need to be taken, a lot of equipment that needs to be bought. If you want to keep your bitcoin in cold storage, meaning offline storage, you need somewhere to actually do that. I mean, it's not giant cost, but you need computing equipment. If you're holding billions of dollars in bitcoin, you need some of the best cybersecurity operations in the world helping out with that.

Moser: Yeah, I guess so.

Frankel: Because you don't want that hacked and lost. If you remember in the early days of cryptocurrency, you would hear about a breach of them and exchange almost every other week, where like $100 million of cryptocurrency just vanished and stuff like that. You don't want that to happen. There's security costs. Like storing gold, you have to pay for the vault to keep it in and stuff like that. I mean, there are costs associated with it. It's not two percent, and that's why they make a profit. But there is some cost to actually storing and keeping gold. As more investors put their money and they have to buy bitcoin, which there's fees with that due.

Moser: Yeah. That's a good point.

Frankel: There are costs associated with it.