It has never been easier to buy Bitcoin (CRYPTO: BTC), but most options are limited by most traditional breaks. Your options become even more limited if you want to publish cryptocurrency in an IRA account. There are now two public trading securities that offer investors access to their stash of Bitcoin tokens, but Grayscale Bitcoin Trust (OTC: GBTC) and Osprey Bitcoin Trust (OTC: OBTC) which is the exact opposite of almost all consciousness.
One packs an annual management tax that is four times greater than the other, but the other trades at a prime price to its net assets. Which one is right for you? Let’s take a closer look, including – of course – the option of just buying Bitcoin tokens directly.
Bit and Bitcoin
The Grayscale Bitcoin Trust has been around since 2013. It went public in 2017. It’s huge, looking at over $ 30.7 billion of assets under management. The biggest downside to the Bitcoin Grayscale Trust is that it raises 2% a year in management fees, and as a mutual fund it is phased out over the year. It is a strong cover cost, but we will get to that point soon.
The Osprey Bitcoin Trust is the shiny new toy for Bitcoin bulls and bears looking for a vehicle on a stock exchange list. It hit the market earlier this month. It has just $ 77 million in managed assets, so it’s tiny. The biggest selling point of the Osprey Bitcoin Trust is that it raises just 0.49% in annual fees. All things being equal it would be easy to choose Osprey’s new trust over Grayscale’s innovative platform, but that’s not true. It’s not even close.
When Grayscale Bitcoin Trust hit the stock market it was a real boom. By the end of May 2017 it was trading at a price of 137% with its real Bitcoin bet. We are not talking about a 37% token on a 100% baseline for Bitcoin. We say investors were willing to pay more than twice what it was worth. Cryptocurrency was harder to buy four years ago, and there were horrific rumors about wallet security. The weather is kinder now, so is the price of the Bitcoin Grayscale Trust.
Grayscale branding has gone up between 6% and 38% from 2019 – to last week. The Bitcoin Grayscale Trust started last week getting an 8% base price for the Bitcoin it follows. During the week’s wild trading there were times when it traded at a small discount. By the time the closing bell rang on Friday, Grayscale’s trust at a 1.4% discount was very rare on its corresponding Bitcoin funds.
Osprey is flying too high right now
The Osprey Bitcoin Trust is still at the honey stage with investors, and that’s risky. If Grayscale looked scary at a price of 137% when there were no other options on the stock exchange list why is Osprey ordering a base price of 152%? It closed the week at nearly $ 40 with a net asset value of $ 15.87. The trust moved to the top last week despite Bitcoin itself getting a big hit.
With just $ 77 million of assets under management the trade will be volatile. Lack of this makes bronco bucking. However, with the choice between Grayscale and Osprey right now is there really a choice? Yes, there is a 151 basis point difference in the management fees between the two but it would take about a hundred years of ownership to pay a 152% price justification for Osprey with Grayscale at a small discount.
Price: $ 39.92
NAV: $ 15.87 (152% premium)
Annual Tax: 0.49%
AUM: $ 77 million
If you are looking at the lowest fee and NOT the high price you are doing it wrong. #Bitcoin
– Rick Munarriz (@Market) February 27, 2021
You can also own Bitcoin directly, and a growing number of fintech platforms are making it easier than ever. If you plan to keep Bitcoin for at least a year or two it would make sense to buy in directly. However, if you’re not sure how long you want to be in crypto – and have an itchy promotional arm – keep in mind that the most well-known trading platforms include Coinbase , PayPal, and Cash app cost at least 1.5% to 2% on purchases and also sales. If you think you will be in and out within 18 months that is the kind of profiteering that could cost you more in taxes than it would buy Grayscale at a broker that offer zero commission trading and see 2% per annum gradually erode.
Buying Bitcoin directly is the best approach for long-term investors who have done their research, given the risks that come with buying into crypto. However, if your choice is down to Grayscale or Osprey as the two registered securities the Grayscale Bitcoin Trust stock exchange list is the obvious call.
This article represents the opinion of the writer, who may not agree with the “official” recommendation position of the Motley Fool chief consulting service. We are motley! Questioning an investment dissertation – even one of our own – helps us to think critically about investing and make decisions that will help us become softer, happier and richer.