Bitcoin

Does Grayscale’s Bitcoin ETF Still Make Sense for New Crypto Investors?

Published

9 months ago

10 July, 2024

Does Grayscale's Bitcoin ETF Still Make Sense for New Crypto Investors?

Learn why the Grayscale Bitcoin ETF may no longer be the best option — and why you might want to hold on to it anyway.

Once upon a time, the Grayscale Bitcoin Background (GBTC -0.84%) was trading at a consistent premium to its net asset value (NAV). Since the fund’s entry into the public market in May 2015 through the end of 2020, the Grayscale fund has had an average price premium of 37% over its pure asset holdings. Bitcoin (BTC 0.04%).

Early Bitcoin Adherents appreciated the Grayscale fund’s availability in regular exchange accounts. The mutual fund structure also provided some peace of mind for investors unfamiliar with the new cryptocurrency market.

How the Grayscale Bitcoin Trust Lost Its Prize

But times have changed. The Grayscale fund’s price premium began to disappear in 2021 as Bitcoin prices surged in the third halving cycle and financial firms began to think about the most effective exchange-traded fund (ETF) format for their crypto vehicles.

The premium quickly evaporated and turned into a significant discount, peaking at 49% near the end of 2022. I bought some shares of the Grayscale Bitcoin Trust in my individual retirement account (IRA) that summer, locking in an average discount of 25%. But I missed the ideal buying window by several months.

If you invested $1,000 in Bitcoin at the end of 2022, you would have approximately $3,500 in that crypto account today. The same investment in the Grayscale fund would have grown to a $6,200 stake now:

GBTC data by Y-Graphs.

Not bad for a year and a half of market action.

Bitcoin ETFs have changed the game

But you can’t touch the NAV arbitration Grayscale Funds are playing more. The Securities and Exchange Commission approved 11 applications to launch an ETF based on Bitcoin prices updated in January 2024, and Grayscale was on the list. The mutual fund was converted to a proper ETF on January 12, giving fund managers access to a new set of financial tools.

Nowadays, the renowned Grayscale Bitcoin ETF trades within a fraction of a percent of Bitcoin’s actual price. The price remains accurate throughout each market day, that is, from 9:30 a.m. to 4:00 p.m. Eastern Time on non-holiday business days. But Bitcoin continues to trade and change its effective price while Wall Street markets are closed, including on weekends, holidays, and in the middle of the night. Therefore, the ETF price resets every morning, Monday through Friday (excluding market holidays).

There are some exceptions to the Grayscale Bitcoin ETF’s price accuracy, but the discrepancies are usually quite small and don’t last long. In the long run, there is no practical difference between owning a Bitcoin ETF in Spot or build a direct stake in Bitcoin.

Except for the management fees, of course.

Just one more exception to the rule, I promise!

ETFs always come with a annual fee. Some fund managers call this a management fee, others prefer the term “expense ratio,” and some present it as an operating expense — among other names. Either way, the fund deducts a small percentage of your holdings each year to cover administrative costs, management expenses, and other operating fees required to maintain the fund. This is also how the fund can generate profit for its management company.

The industry leader iShares Bitcoin Investment Fund (I BITE -0.88%) currently sets the standard for spot Bitcoin ETFs, charging an annual sponsorship fee of 0.25%. Even this modest fee is partially waived for the first 12 months to attract more early investors. Bitwise Bitcoin ETF (BITB -0.95%) drops further, offering the lowest annual rate of 0.2%. Bitwise’s six-month fee waiver has now expired.

Grayscale stands out from these low-cost ETF options, and not in a good way. Under the mutual fund structure, its total expense ratio was 2% per year, and Grayscale only reduced it to 1.5% in the ETF era. It’s by far the highest expense ratio among the 11 approved options.

The Long-Term Impact of Deceptively Small Fees

How much of a difference can this fee make in the long run? Maybe more than you think.

Let’s say you invest $10,000 in an ETF, like the Grayscale Bitcoin ETF, and the fund matches the S&P 500 Index (SNPINDEX: ^GSPC) indexes long-term average annual return of approximately 10% for the next 30 years. With an expense ratio of 0.25%, you’ll end up with $162,981 in your pocket.

Change the commission rate to 1.5%, and your net return drops to $115,583. That’s 29% below the low-fee option. These seemingly modest fees make a big difference in the long run. It’s easy to overlook this effect amid the noise of Bitcoin’s potentially huge gains, but a nearly 30% difference remains in the 30-year calculation, even for much larger annual returns.

It’s no wonder Vanguard Founder Jack Bogle was considered an investment genius for insisting on microscopic ETF fees.

Finding the Right Bitcoin ETF for You

So I wouldn’t recommend buying Grayscale’s Bitcoin ETF until the company lowers its expense ratio much further. It’s easy enough to go with the lower expense ratios of one of the other 10 spots Bitcoin ETFs on offer today, including the previously mentioned Bitwise and iShares alternatives. Those would be my recommendations today if you’re looking for some Bitcoin exposure in the convenient ETF format.

So why do I still own some shares of the Grayscale Bitcoin ETF? Because I would rather absorb the relatively light expenses until further notice than lock in a large tax bill to convert that position to a lower-fee option. That particular holding sits in a standard brokerage account without the tax-sheltered features of my IRA account. A small management fee hurts less than a large tax bill, at least in the short term. I can only hope that Grayscale eventually comes to its senses and lowers this fee.

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Bitcoin

What to watch for in the markets

Published

9 months ago

21 July, 2024

SatoshiTimes Staff

Photo: Andrew Harnik (Getty Images)

After witnessing one of the largest global IT outages on record, affecting the travel, finance and healthcare sectors worldwideThis week is set to see more political drama, events, and earnings reports from tech giants.

Donald Trump’s ‘Lovefest’ Sets Jamie Dimon Up for Consideration for Treasury Secretary Job

Let’s take a look at what awaits us:

Major companies will release their earnings reports

Major tech companies and others will release their earnings reports this week, paving the way for what the second half of 2024 will look like.

Monday

Verizon will report earnings before the start of operations.

Tuesday

Coca-Cola, Comcast and UPS are all set to report earnings before the market opens.
Tesla will report earnings in the morning, while General Motors will report earnings in the evening.
Alphabet and Visa will report results after the market closes.

Wednesday

AT&T will release its report before the market opens.
Ford and Chipotle will report earnings after the market closes.

Thursday

Earnings reports from AstraZeneca, American Airlines and Southwest Airlines will be released before the market opens.

Trump to speak at Bitcoin conference

Presumptive Republican presidential nominee Donald Trump will speak at the next Bitcoin Conference in Nashville, Tennesseewhich is scheduled for July 25-27. While this is the first time a presidential candidate will attend the conference, it has sparked a debate over whether the crypto-friendly Trump will receive support from the crypto community in the upcoming election.

In addition to Trump, independent presidential candidate Robert F. Kennedy Jr. will also discuss crypto during the conference. Crypto advocates such as ARK Investment’s Cathie Wood, MicroStrategy’s Michael Saylor, and whistleblower Edward Snowden are among some prominent names who will be participating in the conference.

Ether ETFs are on the way

New Ether Spot ETFs are set to begin trading on Tuesday, July 23. Much like the spot Bitcoin ETFs, these ETFs will allow investors to buy the second most popular cryptocurrency like stocks. BlackRock, Ark Invest/21Shares, VanEck, Grayscale, Fidelity, Bitwise, Franklin Templeton, and Invesco/Galaxy Digital are all set to offer Ether ETFs. Crypto asset manager Bitwise predict that trading in the Ether ETF will drive the price of Ether higher, potentially surpassing $5,000.

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Bitcoin

Cryptocurrency’s Biggest Winners and Losers in a Second Trump Presidency

Published

9 months ago

21 July, 2024

SatoshiTimes Staff

Cryptocurrency’s Biggest Winners and Losers in a Second Trump Presidency

Bitcoin miners and cryptocurrency companies that have been blocked from going public in the U.S. could ultimately be the biggest winners in the digital asset world under a second Donald Trump presidency. Foreign companies at risk of losing market share could end up being the biggest losers.

That’s the view that’s taking hold among market participants and observers in the wake of the former president’s growing embrace of cryptocurrency as his chances of election grow. survey released Thursday by CBS News showed Trump with the majority — 52 percent — of likely voters in his likely November rematch with President Joe Biden.

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Bitcoin

Bitcoin, Ethereum, Solana and Cryptocurrency Markets Look Ready to ‘Send’ as Stars Align, According to Investor Chris Burniske

Published

9 months ago

21 July, 2024

SatoshiTimes Staff

Bitcoin, Ethereum, Solana and Cryptocurrency Markets Look Ready to ‘Send’ as Stars Align, According to Investor Chris Burniske

Cryptocurrency investor Chris Burniske says Bitcoin (BTC), Ethereum (ETH), Solana (SUN) and the cryptocurrency market in general seem poised for a run.

Former Head of Cryptocurrency at ARK Invest account his 292,200 followers on social media platform X that several catalysts are aligning, suggesting that digital asset markets are on the verge of a bull run.

According to Burniske, a partner at venture capital firm Placeholder, the highly anticipated launch of Ethereum-based exchange-traded funds (ETFs), Republican presidential candidate Donald Trump speaking at an upcoming Bitcoin event, and the current state of the BTC, ETH, and SOL charts all suggest significant optimism for the cryptocurrency markets.

“With ETH ETFs set to go live, Trump speaking at The Bitcoin Conference, and BTC, ETH, and SOL charts looking [they do] (while stocks are weak), it’s hard to imagine a world where we don’t ship next week.”

Reuters recently reported that preliminary approval for ETH ETFs has been granted as the Bitcoin Conference is scheduled to take place from July 25-27.

BTC, ETH, and SOL are trading at $67,333, $3,528, and $174 at the time of writing, respectively.

The venture capitalist too provides an update on his prediction that the total crypto market cap will eventually hit $10 trillion. According to his chart, the path to $10 trillion is currently “23%” complete, as it sits around $2.2 trillion.

Source: Chris BurniskeX

Earlier this month, Burniske he said in an interview with Real Vision CEO Raoul Paul that he has his eye on the Move ecosystem, which was originally built by social media giant Meta and then used to develop layer 1 blockchains Sui (IUE) and Apts (APT).

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Bitcoin

Here’s the next target for BTC before bulls can hold out for $70K

Published

9 months ago

21 July, 2024

SatoshiTimes Staff

Here’s the next target for BTC before bulls can hold out for $70K

Bitcoin’s recovery is going well, and the market is seemingly poised to create a new all-time high in the near term.

Technical analysis

Per NegotiationRage

The daily chart

As the daily chart shows, the price of Bitcoin has been rising since it broke above the 200-day moving average.

The market has also reclaimed the $60K and $65K levels and is moving towards the $68K resistance zone, which could be the last hurdle before creating a new all-time high. With the RSI also indicating that the price has clear bullish momentum, it could be just a matter of time.

Source: TradingView

The 4-hour chart

Looking at the 4-hour chart, it is evident that the price has been rising rapidly since breaking the downtrend line to the upside. The market also broke the $65K resistance level with momentum, turning it into a support.

While almost everything points to a new record high in the coming weeks, there is one worrying sign. The RSI is showing a clear bearish divergence between recent price highs, which could indicate a correction or even a reversal in the near term.

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Cryptocurrency Charts by TradingView.

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