Bitcoin
Is the Grayscale Bitcoin Trust a Millionaire Maker?
This unique ETF has created transformative wealth for investors. Will it continue?
Cryptocurrency is becoming increasingly common in investment circles and is undoubtedly an asset class worth including in any long-term portfolio. But crypto is still something of a Wild West; there are seemingly endless options, few regulatory protections, and highly public cases of fraud tarnishing crypto’s reputation.
O Grayscale Bitcoin Trust ETF (GBTC 5.18%) is one point Bitcoin exchange traded fund (ETF) which addresses many of these concerns.
It’s also a proven millionaire maker; a $10,000 investment at the fund’s inception in mid-2015 would be worth more than $1.2 million today. Originally traded over the counterThe ETF was listed on the New York Stock Exchange this year.
Can investors still buy and expect substantial returns? Here’s what you need to know.
Bitcoin 101: Understanding the Cryptocurrency Behind the ETF
You need to understand Bitcoin if you’re considering owning shares of the Grayscale Bitcoin Trust ETF. Unlike most ETFs, which typically contain multiple stocks grouped under one ticker symbol, the Grayscale Bitcoin Trust invests exclusively in Bitcoin. The value of the ETF reflects the value of the Bitcoin it holds. In other words, the ETF offers investors a convenient and regulated way to invest in Bitcoin without having to worry about owning or securing it themselves. It’s like the easy button for investing in Bitcoin.
So why invest in Bitcoin?
In addition to its remarkable investment returns over the years, Bitcoin is the world’s first cryptocurrency and addresses a fundamental problem in the US monetary system today: inflation.
The United States backed the dollar with gold until 1971. Since then, the amount of U.S. dollars circulating in the economy has increased dramatically. As more dollars enter the economy, the purchasing power of a single dollar weakens. In other words, it costs more dollars to buy the same goods and services.
US M2 Money Supply data by Y-Graphs
Bitcoin works the opposite way by design. Thanks to halving eventsThe amount of Bitcoin in circulation grows more slowly over time and eventually stops at a maximum supply of 21 million coins. Ideally, more people will hold and use Bitcoin over time, which increases its demand. Increasing demand and a fixed supply should increase the price of Bitcoin over time.
There are signs that Bitcoin is gaining traction in society. More merchants are accepting it as payment; some corporations are even holding it on their balance sheets as an alternative to cash. Do you think these trends will continue? If so, having some Bitcoin or the Grayscale Bitcoin Trust ETF in your portfolio might be for you.
Pros and cons of investing in ETF
So how do you decide whether to own Bitcoin directly or through the Grayscale ETF?
Frankly, it comes down to a few simple choices. Those who want to invest in Bitcoin must choose whether they want the responsibility of owning Bitcoin themselves or pay for the convenience of owning the ETF.
Investors can buy Bitcoin on cryptocurrency exchanges and hold it there, but even the most prominent exchanges have faced issues and even scams. You can buy Bitcoin and store it in physical devices called cold walletsbut you run the risk of losing the device or the unique password needed to access your Bitcoin.
An estimated 7.8 million Bitcoins have been lost, effectively removing them from circulation. The Grayscale Bitcoin Trust is a regulated entity that securely stores all of your Bitcoins in physical storage. Owning shares of the ETF drastically reduces the risks associated with owning Bitcoin. It’s as easy as buying shares, just like any other stock.
Bitcoin Price data by Y-Graphs
Remember, there is no such thing as a free lunch. The ETF charges a 1.5% fee expense ratio for its services, which means it will never perform as well as Bitcoin itself. The money paid in fees depletes the compounding of your investment.
Is the Grayscale Bitcoin Trust ETF a Millionaire Maker?
Despite the fees, the Grayscale Bitcoin Trust ETF could be a millionaire. Some professional investors, like Ark Invest CEO Cathie Wood, believe that the price of Bitcoin could rise from $68,000 to $3.8 million by 2030. That’s one person’s guess, but she points out that no one knows how high Bitcoin can go in the long term.
That said, investors should keep their expectations grounded and err on the conservative side. Bitcoin’s price will ultimately depend on how society adopts it and how much that increases demand for it.
Therefore, investors should consider Bitcoin and Grayscale’s Bitcoin Trust ETF as speculative investments. They can add upside as part of a diversified portfolio. Plus, if Bitcoin’s future resembles anything like its past success, you won’t need much exposure to make a significant impact.