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Investing in GBTC (Grayscale Bitcoin Trust) is not the same as investing in BTC

GBTC is currently trading at a ~50% discount to NAV.

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Talal Tabbaa

GBTC is currently trading at a ~50% discount to NAV. That means that if an investor in GBTC wants to exit their position today, the effective price of bitcoin for them is ~$8.5k instead of ~$17k.

Several wealth management companies market their client's exposure to Bitcoin, showing the bitcoin logo in their marketing & advertising content, but obfuscate the fact that they are actually offering exposure to GBTC instead. 

One major difference is that BTC offers direct ownership of the underlying asset, while GBTC is a trust that holds BTC on behalf of its investors (added counter-party risk). This means that if you invest in BTC directly, you have complete control over your assets and can store them in a digital wallet for which you control the private keys. This can give you greater security and peace of mind compared to relying on a third party, like GBTC, to hold and manage your BTC for you.

Another key difference is that GBTC charges a 2% annual management fee, which can eat into your investment returns over time. Anyone that understands compounding knows how detrimental a 2% annual fee is for returns. The 2% is what GBTC charges, let alone what brokerage/asset managers offering it charge on top of that annual 2%. By comparison, if you purchase Bitcoin on CoinMENA, you pay a maximum one-time fee of 0.75% as a trading fee.

I understand that many investors are interested in gaining exposure to Bitcoin but may be uncertain about the best way to do so. While investing in a new asset class like bitcoin is risky, investing in a derivative of that asset is inherently riskier. If anyone wants exposure to bitcoin, the best way to do so is to simply buy some bitcoin.

To understand more about the difference between GBTC and BTC, check out this blog post we wrote earlier in the year.

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