5 things you need to know about Grayscale Bitcoin Trust (GBTC)

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.  

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). 

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. 

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. 

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. 

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 GBTC  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.

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Our team members at Vested may own investments in some of the aforementioned companies/assets. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for an investor’s portfolio. Note that past performance is not indicative of future returns. Investing in the stock market carries risk; the value of your investment can go up, or down, returning less than your original investment. Tax laws are subject to change and may vary depending on your circumstances.

This article is meant to be informative and not to be taken as an investment advice, and may contain certain “forward-looking statements,” which may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential” and other similar terms. Examples of forward-looking statements include, without limitation, estimates with respect to financial condition, market developments, and the success or lack of success of particular investments (and may include such words as “crash” or “collapse”). All are subject to various factors, including, without limitation, general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors that could cause actual results to differ materially from projected results.

This video is meant to be informative and not to be taken as an investment advice and may contain certain “forward-looking statements” which may be identified by the use of such words as “believe”, “expect”, “anticipate”, “should”, “planned”, “estimated”, “potential” and other similar terms. Examples of forward-looking statements include, without limitation, estimates with respect to financial condition, market developments, and the success of or lack of success of particular investments (and may include such words as “crash” or “collapse”.) All are subject to various factors, including, without limitation, general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors that could cause actual results to differ materially from projected results.

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