Looking to invest in Cryptocurrencies? Try Grayscale Bitcoin/Ethereum Trusts (BTC, ETHE)
Updated: Jun 2, 2021
“So you want to invest in Bitcoin and Ethereum cryptocurrencies, but you are not sure how to invest in them without having to buy directly? There is a way through Grayscale Bitcoin Trust and Greyscale Ethereum Trust."
By: Allan R Kirby
Bitcoin Gaining acceptance as an investment
I have watched with amazement as well as confusion over the last few years as Bitcoin has been steadily increasing in value and finally reaching highs of over $40,000. Its adoption is steadily gaining momentum because Bitcoin, which is designed to have a limited supply, is fast become a hedge against inflation and the devaluation of the U.S. dollar. Recently Tesla Inc, (TLSA) has recently purchased $1.5 billion in bitcoin and will allow Tesla to start accepting the cryptocurrency as payments in the near future. This was big news that did not go unnoticed CEO Elon Musk has been credited for raising the prices of cryptocurrencies, including bitcoin, through his messages on Social Media such as Twitter.
Although the Elon Musk decision could be considered a one-off event, it appears this is not the case. The Wall Street Journal reported that BNY Mellon, America’s oldest bank and a major custody provider recently stated that they will begin to start financing bitcoin and other cryptocurrencies, The company will eventually allow crypto assets to pass through the same financial network it currently uses for more traditional holdings like U.S. Treasury bonds and equities.
Then there is Square, Inc. (SQ) which has also announced that it had purchased approximately 4,709 bitcoins at an aggregate purchase price of $50 million. Square explains they believe that cryptocurrency is an instrument of economic empowerment and provides a way for the world to participate in a global monetary system, which aligns with the company’s purpose. The investment represents approximately 1%of Square’s total assets as of the end of the second quarter of 2020. But not to be outdone, they purchased another 3,318 bitcoins worth 170 Million and now Square said Bitcoin now represents about 5% of the company’s total assets as of the end of 2020. Clearly Square is a believer in Bitcoin.
Strategists at JPMorgan recently said that bitcoin could hit $146,000 in the long term, as it competes with gold as an “alternative” currency.
Is Investing In Bitcoin or Ertherium carry risk?
I believe these are still speculative investments but as I had mentioned above both are gaining acceptance. However, we do need to highlight that there are some risks involved which include;
Volatility, both Bitcoin or Ertherium see considerable swings in their values. For many potential investors, this can be nerve-racking seeing how unpredictable their values can swing.
Regulation - Cryptocurrencies have next to no regulation. This is a major concern as we do not know how governments are going to regulate them over the long term. With very little regulation, comes the possibility of fraud, and your cryptocurrencies are not insured by the FDIC.
Adoption - There is no clear way of knowing if cryptocurrencies will be fully adopted in the future, however, the outlook is improving based on the many companies that are beginning to see value with them.
How to Investment in Bitcoin and Ertherium
Although there are risks to owning both Bitcoin and Ertherium we are still seeing its adoption grow and more people wanting to invest in them. However, where do you invest in these cryptocurrencies? If you are like me and want a simple way to invest without the hassle of buying Bitcoin or the second-largest cryptocurrency Ethereum directly there is a way! It's through The Grayscale Bitcoin Trust and Ethereum Trusts.
Both trusts hold Bitcoin and Ethereum in the same way as you would hold an ETF investment but instead of stocks or bonds, the trusts buy and hold large amounts of Bitcoin and Ethereum into two distinct investments. These Trusts are publicly traded statutory trusts in OTC markets with substantial holdings of the cryptocurrency. But although the trusts provide indirect exposure to Bitcoin and Ethereum they come with very high expense ratios.
The following are ways to invest indirectly in Bitcoin and Ethereum:
The Grayscale Bitcoin Trust (GBTC).
The Grayscale Ethereum Trust (ETHE).
Grayscale Bitcoin Trust (GBTC)
Annual Fee: 2.0%
Assets Under Management: $31.1B
Shares Outstanding: 689,769,300
ETH per Share: 0.00094789
Grayscale Bitcoin Trust is solely and passively invested in Bitcoin, enabling investors to gain exposure to BTC in the form of security while avoiding the challenges of buying, storing, and safekeeping BTC directly.
Shares (based on Bitcoin per Share as indicated below) track the Bitcoin market price, fewer fees, and expenses.
Grayscale Bitcoin Trust’s assets are stored in offline or “cold” storage with Coinbase Custody Trust Company, LLC, as Custodian.
Grayscale Ethereum Trust (ETHE)
Annual Fee: 2.5%
Assets Under Management: $5.6B
Shares Outstanding: 304,761,200
ETH per Share: 0.01026568
Grayscale Ethereum Trust is solely and passively invested in Ethereum, enabling investors to gain exposure to ETH in the form of a security while avoiding the challenges of buying, storing, and safekeeping ETH directly.
Shares (based on ETH per Share as indicated below) track the ETH market price, less fees and expenses.
Grayscale Ethereum Trust’s assets are stored in offline or “cold” storage with Coinbase Custody Trust Company, LLC, as Custodian.
The continued adoption and the value of the underlying technology of cryptocurrencies, such as the Etherium blockchain, cannot be denied. But like all investments, there are risks but cryptocurrencies do have a higher risk than most stocks, so these types of investments may or may not be for you. However take the time, do your research and see if invest indirectly in Bitcoin and Ethereum through; The Grayscale Bitcoin Trust (GBTC) and The Grayscale Ethereum Trust (ETHE) are for you.
Stocks to buy is a segment of the MySmallBank.com blog written by Allan R Kirby, who writes and produces investment and personal finance articles and videos.
Disclosure: mysmallbank.com nor the author received any compensation from the mentioned securities for this article. The article is our opinion only and is written to help readers learn more about the stocks mentioned in this article. Consider this as basic information only and utilize professional services and additional sources before making an investment decision.