What is Bitcoin Trust? Is it the same as investing in Bitcoin?

Dec 23,2022
What is Bitcoin Trust? Is it the same as investing in Bitcoin?

The popularity of Bitcoin was triggered by the bull market stage, which had a great impact on the price of Bitcoin. Bitcoin is a completely virtual digital currency, which is used as a decentralized medium for exchanging funds based on the point-to-point blockchain network. Its value is based on market supply and demand. Therefore, with the increase of global demand, the price is also rising. The operation mode of Bitcoin Investment Trust Fund is the same as that of other investment trusts. Generally speaking, Crypto Trust Fund is a publicly listed financial enterprise that invests in financial assets on behalf of its investors. So, what exactly is Bitcoin Trust Fund? Is it the same as investing in Bitcoin? Next, let's have a look.

What is Bitcoin Trust?

In September 2013, Grayscale set up the first Bitcoin Trust Fund, which was approved to be listed by the US Financial Industry Regulatory Authority in 2015, referred to as GBTC.

Gray scale investment company is set up by Digital Currency Group. DCG is the most powerful currency market investment institution in the world. Most top exchanges and projects in currency markets have its shadow.

Gray Bitcoin Trust is a financial tool that allows investors to trade individual shares in trust funds with a large number of Bitcoin. The stock price of the fund will track the price of Bitcoin, but it is not completely consistent. In addition, grayscale also provides some other field trading goods, and the price also tracks digital currencies such as Ether, Bitcoin cash and Lite coin.

The profit model of gray scale is to deduct the management fee (2%) every year. There is no problem in the economic system, but there is no redemption plan for gray scale so far, which is also questioned by many people, who think that gray scale is a white wolf with nothing.

With the increase of positions, more and more people are worried about the exchange tide of GBTC in the secondary market during the bear market, which forces the grayscale to be unable to carry out fund discount sales, thus affecting the trend of BTC spot.

However, the opening of GBTC has more advantages than disadvantages for BTC to be seen by the public.

Is Bitcoin Trust the same as investing in Bitcoin?

In theory, Bitcoin investment trusts should generally increase in value when Bitcoin rises and fall when the price of Bitcoin falls. In fact, about one-third of the trading days, Bitcoin and Bitcoin investment trust funds actually develop in the opposite direction.

The popularity of trusts is due to their unpredictable performance. It is certain that when investors rush in, the performance of Bitcoin Investment Trust Fund may exceed that of Bitcoin, but when investors escape from their individual stocks, its performance may be inferior to that of Bitcoin. It usually fluctuates from side to side. When the value of virtual currency soars, its rise exceeds that of Bitcoin, but when its value declines, its decline rate exceeds that of Bitcoin.

Since its listing, the closing price of the Bitcoin Investment Trust Fund has reached 2.32 times the meaning of its basic Bitcoin. At the low point, the trust closed at a price 0.1% lower than the current value of its Bitcoin. On any day, the closing price of the trust will exceed the value of its data currency. After all, on the median day, its closing price is 42% higher than the value of its Bitcoin.

If you can buy and sell stocks at a small premium, it may be worth paying based on the security of bitcoin in the tools you can trade according to your general brokerage account. But it is better to cross check its price with its net asset value or the value of Bitcoin per share. It will be an unfortunate thing to pay such a high price that you end up losing money on the Bitcoin Investment Trust Fund during the Bitcoin appreciation period.

Another problem with Bitcoin Investment Trust is that it conducts transactions in the over-the-counter (OTC) market. The over-the-counter market is characterized by low liquidity, which means that there are no certain participants or assets in the market, resulting in greater price adjustment. Companies trading on the over-the-counter market are also not subject to the strict disclosure required by listed enterprises. Therefore, traders cannot access important information to plan their trading countermeasures. Finally, compared with other markets, Bitcoin trusts that are publicly traded deduct huge management fees. The high cost ratio of Bitcoin Trust is a function of the emerging digital currency custody market.

Speaking of this, I believe you have a certain understanding of what Bitcoin Trust Fund is and how it is different from investing in Bitcoin. In general, I also remind you that no matter whether you invest in Bitcoin Trust Fund or Bitcoin, any investment is accompanied by a certain risk. You must have a comprehensive understanding before entering the site, and do not invest blindly.