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Want To Invest In Bitcoin? Consider An ETF That Holds Grayscale Bitcoin Trust

Published 2021-10-08, 03:48 a/m

Cryptocurrencies, like Bitcoin and Ethereum, have taken center stage in the past year. Digital coins are still a relatively new asset class, but the market's appetite for investing in them has been high.

Recent metrics suggest:

“The global cryptocurrency market size was valued at US$1.49 billion in 2020 and is projected to reach US$4.94 billion by 2030, growing at a CAGR of 12.8% from 2021 to 2030.”

So far in 2021, Bitcoin is up close to 90% and Ethereum returned 385%. By comparison, the S&P 500 increased 17.8% and NASDAQ 100 returned 26.3%.

Market capitalizations of Bitcoin and Ethereum stand at $1.01 trillion and $420.54 billion, respectively, and the two make up well over half of the total crypto market cap of $2.29 trillion.

In August, the Securities and Exchange Commission Chair Gary Gensler highlighted the need for more oversight of crypto assets before an exchange-traded fund (ETF) could become available. Therefore, in the US, the Grayscale Bitcoin Trust (OTC:GBTC) is currently the only choice for investors to buy Bitcoin through their equity brokerage accounts.

GBTC is not an ETF. Rather, it is a trust. Most ETFs are regulated under the Investment Company Act of 1940. However, that structure is not applicable to a trust like GBTC. Instead, it is regulated by the Securities Act of 1933 and the Securities Exchange Act of 1934. Therefore, GBTC discloses regular financial information.

Since its inception in September 2013, assets under management in GBTC have reached $34.2 billion. Investing in the Grayscale Bitcoin Trust represents fractional ownership in Bitcoin.

To be exact, one share of GBTC is equivalent to owning 0.000935707 Bitcoin. This means, an investor would need to buy well over 1,000 shares of Grayscale Bitcoin Trust to own one Bitcoin.

On a final note, Grayscale has several other products that provide exposure to other cryptos, like Ethereum and Litecoin. Those trusts include the Grayscale Ethereum Classic Trust (OTC:ETCG) and Grayscale Litecoin Trust (OTC:LTCN) among others.

Today, we introduce an exchange-traded fund (ETF) that give access to the Grayscale Bitcoin Trust.

ARK Next Generation Internet ETF

Current Price: $144.12
52-Week Range: $109.56 - $191.13
Expense Ratio: 0.79% per year

The ARK Next Generation Internet ETF (NYSE:ARKW) is an actively-managed fund run by Cathie Wood's ARK Invest. We've previously covered several ARK funds (for example, here, here and here). Since its inception in September 2014, net assets in the ETF have reached $5.8 billion.

ARKW Weekly Chart.

ARKW invests in businesses that are part of disruptive shifts and developments in technology. Such companies might focus on artificial intelligence, big data, blockchain, cryptocurrencies, cybersecurity, e-commerce, Internet of Things (IoT), mobile technology or social platforms.

The fund typically has 35-50 holdings. At present, Tesla (NASDAQ:TSLA) has the top spot, with 9.78%. In other words, extended moves in TSLA shares are likely to have an impact on the price of ARKW. Next in line is the Grayscale Bitcoin Trust, with 6.79%, and the crypto exchange platform Coinbase Global (NASDAQ:COIN), with 5.62%. They are followed by Twitter (NYSE:TWTR), Teladoc (NYSE:TDOC), Roku (NASDAQ:ROKU) and Unity Software (NYSE:U). The top 10 holdings comprise around 53% of the fund.

Since the start of 2021, ARKW is relatively flat, down less than 1%. However, over the past 12 months, it is up 26.5% and saw an all-time high in mid-February. Readers interested in having GBTC exposure should research the fund further.

Bottom Line

There are also several other ETFs that provide exposure to moves in Bitcoin indirectly. For instance, these funds might invest in:

  • Bitcoin miners, like Greenidge Generation Holdings (NASDAQ:GREE), Marathon Digital Holdings (NASDAQ:MARA) or Riot Blockchain (NASDAQ:RIOT);
  • Companies that hold Bitcoin or other cryptos on their balance sheets, like Coinbase Global, MicroStrategy (NASDAQ:MSTR) or Square (NYSE:SQ) ;
  • Exchanges of financial technology names that give access to trading in Bitcoin or other alt coins, like CME Group (NASDAQ:CME), Coinbase Global or PayPal (NASDAQ:PYPL)
  • Financial institutions that serve cryptocurrency clients, like Silvergate Capital (NYSE:SI); or
  • Canada-listed Bitcoin ETF USD (TSX:EBITu) or Purpose Bitcoin ETF CAD ETF Non-Currency Hedged Units (TSX:BTCCb).

Examples of other ETFs include:

  • Bitwise Crypto Industry Innovators ETF (NYSE:BITQ)
  • Siren Nasdaq NexGen Economy ETF (NASDAQ:BLCN)
  • Viridi Cleaner Energy Crypto Mining & Semiconductor ETF (NYSE:RIGZ)

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