Bitcoin has pushed through its prior All Time High (ATH) today. You are thinking you have missed out. You have NOT missed out, yet! Bitcoin price is going to accelerate over the next few weeks. Supply is decreasing, Demand is increasing, therefore Price is increasing.
You can, of course, buy spot bitcoin on one of the exchanges (I recommend Gemini or Voyager), but you can also buy a bitcoin proxy in your traditional stock account. Probably the reason we have seen a push in the price today is that there is finally a Bitcoin ETF in the U.S. To be fair, this is a bitcoin futures ETF, and it will be better for everyone when there is an actual spot bitcoin ETF in the United States. It is unclear when that will happen. I clarified U.S. here because the Securities and Exchange Commission (SEC) has been slower to act than other nations. There have already been spot bitcoin ETFs trading in Canada and Europe, so if you have access to those markets, Bitcoin has been available to you for some time. Starting yesterday (Oct 19, 2021), if you have cash/assets on a traditional exchange, you can buy BITO, a fund organized by ProShares that buys futures contracts on the CME. This is good news for institutions that have wanted to invest in bitcoin, but could not buy the currency itself (aka spot bitcoin). This is particularly good news for U.S. based entities and institutions who were limited by their charter to only buy approved equities.
While I think this is great for Bitcoin overall, I do not necessarily think this is where/how the individual investor should buy Bitcoin. Today, you can buy Bitcoin at a discount via GBTC and OBTC. Grayscale Bitcoin Trust and Osprey Bitcoin Trust are traded over-the-counter and are currently priced below the price of spot bitcoin. All of these funds (BITO, GBTC, OBTC) are going to have a carrying cost, which means the fund organizer gets paid for organizing the fund. This is called a 'load' in the mutual fund world. Think of it as your tip to the business for giving you this vehicle to buy Bitcoin. Here is how I would characterize these costs:
GBTC - Grayscale Bitcoin Trust - has the highest carrying cost at 2%. If you buy a share today, at the end of the year, that share will have 2% less bitcoin in it. Today, each share of GBTC holds 0.00093504 Bitcoin. Each day it lowers slightly to cover that 2% over one year. However, GBTC is the elephant of all bitcoin holders with 654,000 total bitcoin in that trust. Grayscale has been in the space a long time, and they would like to convert their trust into an ETF. Grayscale has filed with the SEC for permission to do this. GBTC is trading 17% less than spot bitcoin.
OBTC - Osprey Bitcoin Trust - relative newcomer to the trust space, and they have the lowest carry at 0.5%. If you buy a share today, it will have 0.5% less bitcoin after one year. Today, each share holds 0.000339 Bitcoin. This value decreases slightly daily to the tune of 0.5% loss over 365 days. At this moment, OBTC is also the cheapest way to buy a bitcoin equivalent, trading at 24% LESS than buying spot bitcoin.
BITO - ProShares Bitcoin Futures ETF - the brand new fund that started trading yesterday and traded $500M in value on day 1. The difference here, is that this is not traded OTC, and is available for purchase in all US equities markets (as far as I know). The other two funds rely on the secondary market, where a holder bought into the trust, and subsequently were released shares after a lock-up period of 6 months or more, and then could trade those funds over-the-counter.
BTFD - Valkyrie Bitcoin Strategies ETF - is going to start trading soon, presumably. It has not yet been This will also be a bitcoin futures ETF. It does have a clever name-- Buy The Freaking Dip has been a mantra in the bitcoin community for a long time. I think that having these two futures ETFs will keep the price very competitive with the NAV.
Given that OBTC is trading substantially more on sale than GBTC, I would suggest opening a position with OBTC today. Please double-check prices before you buy, because these discounts and premiums to Net Asset Value change frequently. However, Osprey has not filed to become an ETF (surely they will, at some point in the future). I expect all of these opportunities to eventually trade at the price of spot bitcoin, allowing for a small margin of their expense ratios.
If you have the privilege of short-selling a stock with your brokerage, you could essentially enter an arbitrage opportunity by shorting the fund trading at a premium and buying the fund trading at a discount. I did that earlier this year when OBTC was trading 24% above net asset value (NAV) and GBTC was trading below. I then closed the trade when the gap narrowed. This is, of course, different than buying and holding bitcoin. Also, the trade can go against you before it goes for you, so make sure you have enough margin available in your account if you do this.
I really like the website Bitbo.io for a concise summary of these funds, including their discounts/premiums. There is a LOT of data about Bitcoin on that website. BITO and BTFD are not represented on that website, yet, but surely will be soon.
Good luck, and remember to buy and HODL for the long term! Also, remember that you are buying bitcoin that is held on your behalf at another institution. If it is important to you to have direct control of your bitcoin, you need to hold your own private keys in your own bitcoin wallet. You can also do what I do, and do both!
Comments