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What Is the Grayscale Bitcoin Trust?

By Motley Fool Staff - Apr 10, 2021 at 9:03AM

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This investment vehicle is an interesting way to get exposure to Bitcoin in your portfolio.

When it comes to buying Bitcoin (BTC -0.82%), there aren't very many indirect ways to own it, such as mutual funds or ETFs. However, there is an investment vehicle called the Grayscale Bitcoin Trust (GBTC 1.57%) that allows investors to get exposure to Bitcoin through the stock market. In this Fool Live video clip, recorded on March 18, senior analyst John Rotonti and Motley Fool Deutschland lead analyst Bernd Schmid discuss how the Greyscale Bitcoin Trust works. 

John Rotonti: What is the Grayscale Bitcoin Trust, and how is that different from buying the actual Bitcoin through Coinbase or another exchange?

Bernd Schmid: Grayscale is essentially a trust or it's a fund which buys Bitcoin, and the shares of this fund are traded in the stock exchange. I think it's New York Stock Exchange. You can go to your broker and buy stocks in this trust, essentially shares in this trust. By this way, you have exposure to Bitcoin because you know that this trust is backed by Bitcoin. What's different is you only trade the shares of this trust, and the shares might trade above the value of the Bitcoin that's actually owned by this trust, and I think currently, they're even trading below the value. It's called net asset value. You get actually quite good exposure to the Bitcoin price movement to it. Not exact, but if you just want to get exposure to Bitcoin, see how it feels, the price swings that you experience, you can do that, but you don't own the Bitcoin yourself. You cannot call Grayscale and say, "Can you please send me my Bitcoin?" If you want to use the Bitcoin, you cannot do it. You essentially would have to sell the shares in this trust, get your money back, and then use your money for whichever you want to do. That's the main difference. If you have the Bitcoin in your wallet, you can do something with the Bitcoin.

Rotonti: Fantastic. If I were to buy shares in the Bitcoin Trust today and in 10 years, Bitcoin was much, much, higher, if that happened, I would benefit from that, from owning the shares in the Bitcoin Trust?

Schmid: Yeah. Exactly.

Rotonti: If I hold the shares throughout that period and Bitcoin is much higher in the future, then I did have good exposure.

Schmid: Yes.

Rotonti: OK.

Schmid: That's right.

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Stocks Mentioned

Grayscale Bitcoin Trust (BTC) Stock Quote
Grayscale Bitcoin Trust (BTC)
$12.25 (1.57%) $0.19
Bitcoin Stock Quote
$19,327.92 (-0.82%) $-159.85

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