Bitcoin BTC-USD , the largest cryptocurrency in the world by market cap, has delivered dismal returns for investors over the past year or so.
However, there's still a valid long-term investment case to be made. There are still experts who believe that bitcoin will be adopted as a currency on a wide-scale, and others say that it could become a widely used store of value, similar to gold. As I wrote in a article , bitcoin could rise dramatically in price even if its value eventually became equal to just a few percent of the world's money supply.
While I don't think it's particularly likely, it's entirely possible for bitcoin to rise to a six-figure value at some point.
Image source: Getty Images. Obviously, this is a simplified version of the bitcoin investment case. However, whatever your reasoning for wanting to buy it, bitcoin is a highly speculative investment. I wouldn't suggest using any money to buy bitcoin or any bitcoin-based investments like the Bitcoin Investment Trust that I'm about to discuss, unless you're prepared to lose it.
That said, there are a couple of main ways you can add bitcoin to your investment portfolio. So, people who want to own bitcoin, but don't want to directly purchase the cryptocurrency, are rather limited in their options. It's a company not an ETF that owns bitcoins, and shares of the company are traded on the public market. In other words, the shareholders of the Bitcoin Investment Trust effectively own the company's bitcoins, as they make up virtually all of its assets.
There are two main downsides to investing in the Bitcoin Investment Trust as opposed to simply buying bitcoin directly. First is the ongoing management fee. This is high by anyone's mutual fund or ETF standards and means that investors will slowly "own" fewer bitcoins over time.
Second, and even more significantly, shares of the Bitcoin Investment Trust trade at a huge premium to the value of the bitcoins they represent. As of the latest available information, each share of the company represents ownership of 0. To be clear, I'm not a big fan of cryptocurrencies as an investment vehicle. The industry is simply too young, and I'd compare investing in a particular cryptocurrency to investing in a tech start-up in the late s -- sure, there's a chance that some of them will make it, but the vast majority of cryptocurrencies on the market are likely heading to zero.
And don't think that bitcoin will automatically come out on top because of its first-mover advantage and the fact that it's the largest one.
It certainly has a better chance of success than most, but it's far from a sure thing. Cryptocurrencies and blockchain technology certainly have lots of potential to transform industries not just the way we use money , so my preferred way to invest is to own stocks of companies with rock-solid businesses that also stand to benefit from the long-term evolution of these technologies. Having said that, if you're determined to buy one of these, I'd say that owning bitcoin directly is the better idea.
Purchasing bitcoin on an exchange, such as Coinbase, has become far more user-friendly and secure in recent years, so you might as well save yourself the premium and fees of the Bitcoin Investment Trust. More From The Motley Fool. Matthew Frankel, CFP has no position in any of the stocks or cryptocurrencies mentioned. The Motley Fool has no position in any of the stocks or cryptocurrencies mentioned. The Motley Fool has a disclosure policy.
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Bitcoin is starting to dominate headlines and as it powers higher, investors want to know what exactly does this mean for portfolios. The exploding price of bitcoin has ushered in a new cryptocurrency ecosystem. Investors can draw parallels to the Apple ecosystem, which includes suppliers of parts, retailers that sell hardware, telecom providers of bandwidth, and application developers that create useful utilities. The point is if AAPL did well so did the whole ecosystem of interrelated companies. If it did poorly the results tricked down and they were correlated. The same thing is happening with bitcoin. There is an ecosystem that surrounds bitcoin and drives innovation and productivity forward.
1. What is the Bitcoin Investment Trust (GBTC)?
Georgi Georgiev Oct 03, Reportedly, GBTC charges 2 percent on the invested amount as an expense fee, where the average equity mutual fund expense ratio was roughly around 0. Expense ratios are insane for these funds and the current Bitcoin price is creating more problems.
Bitcoin BTC 0 0 is currently trading roughly around 60 percent below its all-time what is bitcoin investment trust value. In its Digital Asset Investment Reportthe company outlined:. According to the study from Crypto fund Research, will see a total of new cryptocurrency funds. Could you be next big winner?
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Hardest to Borrow: A look at Bitcoin Investment Trust (GBTC)
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I cover enterprise adoption of blockchain and cryptocurrency. What is the Bitcoin Investment Trust? What is bitcoin investment trust you would like to see how the Bitcoin Holdings is calculated, please refer to the disclosure language on OTC Markets. Image source: Getty Images. It certainly has a better chance of success than most, but it's far from a sure thing. It tends to overshoot both up and down, rising more than bitcoin when the digital currency soars in value, and falling faster than bitcoin when it declines in value. New York, Nov. Its success mirrors that of Bitcoin because its value is derived solely from that cryptocurrency. Stacks of gold coins with bitcoin symbol. Who Are You? Having said that, if you're determined to buy one of these, I'd say that owning bitcoin directly is the better idea.