Grayscale Bitcoin: Wait For The SEC Bitcoin Spot ETF Decision

Grayscale Bitcoin Trust (OTC:GBTC) is arguably the best way for complete beginners to invest in Bitcoin. The entire cryptocurrency market is worth over 2 trillion dollars and Bitcoin leads the clear leader with a massive $800 billion dollar market cap.

Bitcoin has outperformed the S&P 500 and Gold by a wide margin over the last 10 years so it’s no surprise that investors are looking for ways to invest in 21st-century digital gold.

Many altcoins come and go but Bitcoin remains king and I think most crypto investors should make Bitcoin the foundation of their portfolio.

There are several ways to gain Bitcoin exposure such as:

• Buy BTC on an exchange
• Investing in a crypto-miner: Marathon Digital Holdings (NASDAQ:MARA)
• Invest in a Bitcoin proxy: MicroStrategy (NASDAQ:MSTR)
• Invest in a Bitcoin Futures ETF: Proshares Bitcoin Strategy ETF (NYSE:BITO)
• Invest in a Bitcoin Trust: Grayscale Bitcoin Trust (OTCMKTS:OTC:GBTC)

I published an article on the benefits of holding MicroStrategy stock that generates a lot of questions from readers who didn’t know whether to buy MSTR or GBTC.

In this article, I’ll explain the benefits of owning GBTC and how the SEC spot ETF decision could provide a quick 24% return once approved.

What is Grayscale Bitcoin Trust?

GBTC is an OTC trust that provides simple and easy exposure to Bitcoin with over $28 billion AUM. Founded in 2013, GBTC is up a whopping 29,000% since inception and holds 654,885 BTC as of February 2022.

You can purchase GBTC on any full-service broker such as Fidelity or TD Ameritrade and control an underlying amount of BTC with each trust share.

Each share controls 0.00092922 BTC (approx. 92,000 satoshis) but the downside is you must pay a 2% annum fee to the trust for management and storage expenses.

Unfortunately, you cannot trade GBTC on some stock trading apps like Robinhood or Webull, which is one of the problems Grayscale wants to solve by converting GBTC into a spot ETF.

Buy GBTC at a 24% Discount and Wait for The SEC Spot ETF Verdict

GBTC trades at a 24% discount due to lack of retail & institutional demand despite rising Bitcoin prices.

Many crypto investors despise paying a 2% annum fee and prefer to invest in other alternatives like MicroStrategy (NASDAQ:MSTR), ProShares Strategy Bitcoin ETF (NYSE:BITO), or even crypto miners such as Marathon Digital Holdings (NASDAQ:MARA) and Riot BlockChain (NASDAQ:RIOT).

Grayscale cannot market GBTC to most retail investors because the Bitcoin trust trades on the OTC markets. For example, Robinhood’s 17 million users can only purchase NASDAQ & NYSE equities, which prevents Grayscale from attracting new capital to their fund.

Grayscale filed for a spot ETF on October 19th, 2021 but the SEC continues to delay its decision due to fears of Bitcoin spot ETF manipulation. The SEC worries about the potential manipulation of BTC markets and isn’t sure Grayscale can prevent such malicious attempts.

The SEC already approved 3 Bitcoin futures ETFs but remains cautious on a spot ETF.

The main difference between a spot ETF and a futures ETF is the underlying ownership of Bitcoin.

A futures ETF is a fund where you buy or sell a contract that represents the value of Bitcoin but you don’t actually own any BTC. A spot ETF offers immediate purchases of Bitcoin and is subject to manipulation and wild price swings.

The good news is Grayscale won’t give up and my guess is the SEC eventually approves the spot ETF due to pressure from 3rd party supporters. Bitcoin will have a big part in the future of global finance and the SEC won’t be able to stop investors from purchasing spot ETFs in the future.

If approved, I expect investors to buy up GBTC shares like crazy and quickly pounce on the 24% discount.

Why Invest in GBTC vs Buying Bitcoin on an exchange?

Crypto investors must realize that there are several risk factors to holding Bitcoin.

Hackers and scammers steal Bitcoin using many different methods including stealing private keys, spam e-mails, exchange hacks, phishing scams, and account takeovers.

Bitcoin isn’t regulated by the government, which makes it extremely difficult to recover your Bitcoin if it’s stolen.

The arrest of 2 criminals who stole $4.5 billion in crypto is a step in the right direction but investors should understand that crypto comes with its risk.

I hold Bitcoin in cold storage to deter crypto hackers but also own GBTC in my IRA account for diversification purchases.

GBTC is the perfect solution for investors who want to invest in Bitcoin but don’t understand how to setup a crypto wallet or buy BTC on an exchange.

What’s Better: GBTC or MSTR?

I own both GBTC and MSTR shares because each holding provides different pros and cons.

(Source: CaseBitcoin.com)

MicroStrategy holds over 125k BTC and plans to use future cash flows to acquire more Bitcoin in the future. I own the stock as part of my growth portfolio because I want exposure to Michael Saylor’s growing BTC stash.

On the other hand, I own GBTC in my retirement to provide financial security when I reach the age of 59 1/2. I’m currently 35 and won’t have to access the funds for the next 24 years. Owning GBTC ensures that I retire with dignity.

Conclusion

GBTC is my top recommendation for investors who want exposure to Bitcoin over the long term. If approved, Grayscale will convert the trust into a Spot ETF and the 24% discount opportunity will no longer exist.

That’s why I’m buying up GBTC for my IRA account and waiting patiently for SEC approval.