Is Bitcoin Investment Trust Safe?
Bitcoin trust is a bitcoin investment vehicle instead of the ETF that accommodates Bitcoin investment with the basics of holdings. An alternative way to own Bitcoin that’s gaining popularity is through Bitcoin investment trust. It works differently from buying Bitcoin from exchanges or bitcoin sellers and holding it in your digital wallets. Bitcoin trust does not require you to purchase and store Bitcoin directly.
As it has grown in popularity and interest among Bitcoin investors, the question has arisen whether Bitcoin investment trust is safe. It’s a legit question as despite the support and growing interests, investors continue to criticise Bitcoin investment trust.
The main goal of bitcoin investment is holding Bitcoins. Holding is a casual way to develop a crypto asset portfolio and to earn from your investment. You can purchase cryptocurrency and keep it for a spike, then sell in when the price market is high. Bitcoin investment trust is accommodating this holding process as it works as an investment vehicle.
How does Bitcoin Investment Trust Work?
Bitcoin investment trust works with traditional share implementation. Instead of offering an actual Bitcoin, the trust provides Bitcoin shares of the Bitcoin holdings owned by the investment trust providers like gbtc stock or similar shares. The trust provider holds the coins and offers the shares as investment instruments for clients who are typically retail investors. Bitcoin index price, providers’ expenses, and other fees would determine the price of shares. Today, exchanges may offer baskets that transfer your actual Bitcoin to this Bitcoin trust. Since the share of Bitcoin trust represents the true value of Bitcoin, the trends between the two assets are considered linear.
So, where do the holdings come from? The trust issuer firm set up a private Bitcoin pool and invited institutional or large investors to join their funds for purchasing large amounts of Bitcoins. The firm would then issue the trust on the public stock exchange, where retail investors can trade shares in the fund.
If you’ve heard about Gold trust, Bitcoin trust design mirrors it. While Gold backs Gold trust gold and Bitcoin back Bitcoin trust, which the providers hold. As an investor or a shareholder, you’d have access to buying and selling shares of the trust. You can follow the Bitcoin price movement in the form of shares. In other words, by investing in Bitcoin trust, you’re storing and holding Bitcoin in the form of shares.
Bitcoin trust has no minimum limit as shareholders can buy one share of Bitcoin trust. It offers an innovative way to store cryptocurrency that has been a significant challenge for most crypto investors. Providers give assurance to their clients for cryptocurrency holdings held in the trust. Indeed, security is the key feature when it comes to digital coin holdings.
Is Bitcoin Investment Trust a Good Investment?
The outcome of this question will depend on what you expect from this trust. As previously mentioned, Bitcoin’s trust value is linear with the underlying Bitcoin. Well, it’s still below the actual Bitcoin value. Bitcoin itself is a speculative asset with volatile nature that’s “vulnerable” to price swings. Just like typical Bitcoin holding, finding a new buying point is essential to its holders. So, the good and bad of Bitcoin investment depend on when you’d buy the share. Investing in Bitcoin at a bad buying point is undoubtedly a bad investment.
At this point, investors of the trust would need to comprehend Bitcoin price movements. The price swings can make you lose all of your investment in the trust. A good buying point is a good start in Bitcoin trust investment.
Bitcoin trust providers use price indexes like TradeBlock XBX Index to track the actual Bitcoin price. The mirroring performance of Bitcoin trust to real Bitcoin is still influenced by investors’ sentiment that affects the end price of the trust stock.
What Should Be Noted
Bitcoin investment trust’s stocks aren’t actual stocks since it doesn’t hold any physical commodities. On the other hand, it’s not the same as buying Bitcoin from cryptocurrency investing exchange platforms. Bitcoin isn’t gold as it’s a virtual asset created with blockchain technology through a decentralised process. Unlike Gold that has been a store of value for a long time, Bitcoin investment trust has underlying value on a volatile asset. On the other hand, the value of Bitcoin trust shares would always be below the underlying Bitcoin prices.
So, is it safe?
Generally speaking, Bitcoi trust is safe as long as you find a trusted provider. It’s a more affordable way to get exposure to Bitcoin investment without actually buying it n rom a bitcoin investment site or any exchange platform. The main advantage of this Bitcoin trust is the security for Bitcoin holding. However, investing in a Bitcoin trust doesn’t free you from the volatile nature of Bitcoin markets. Therefore, comprehensive knowledge about the Bitcoin market is required when deciding to invest in a Bitcoin trust.
Where To Invest in Bitcoin Investment?
Grayscale Bitcoin Trust or GBTC is the prominent Bitcoin investment trust firm. This article doesn’t endorse the company, but curious Bitcoin trust investors can start from there. With the growing popularity, there would likely be more Bitcoin investment trust firms that offer shares of Bitcoin you can invest in. Beware of Bitcoin investment trust scams that may come in diverse modes like fake websites, Ponzi schemes, deposit bonus schemes, and so forth. Always use trusted Bitcoin investment trusts that assure your shareholdings.
Bitcoin investment trust is a platform that allows you to trade shares in Bitcoin holding trusts. The shares you invest in are tracking the underlying Bitcoin prices, but it’s always slightly or roughly lower. The Bitcoin trusts are large pools of Bitcoin held through the provider or investment firm that accept privately-invested Bitcoins from more prominent or institutional investors. Bitcoin investment trust shares are generally safe.