New Cryptocurrency Investment Vehicles Are On The Way!
In news out yesterday, Grayscale announced that they would be launching a cryptocurrency fund.
If the name Grayscale sounds familiar, it's because they are the ones that created GBTC, the Bitcoin Investment Trust.
It's basically a trust that holds bitcoin and is able to be purchased through most traditional brokerage accounts.
A way for retail and institutional investors to get some exposure to bitcoin without having to go to traditional cryptocurrency markets.
I wrote about it a little here:
https://steemit.com/bitcoin/@jrcornel/why-i-broke-down-and-bought-a-few-gbtc-in-my-ira
This new fund would be similar to GBTC, except that it would expand to offer a basket of cryptocurrencies.
The official release can be seen here:
Basically, Grayscale has created a new fund that will hold the top 5 cryptocurrencies by market cap.
At lauch, the fund will hold Bitcoin, Ether, Bitcoin Cash, Ripple, and Litecoin.
The interesting thing here is that if one of those coins falls by a significant margin, enough to no longer be one of the top 5 coins, it will be replaced within the fund.
The fund will rebalance every quarter to reflect the top 5 cryptocurrencies by market cap.
The current weighting of the fund is as follows:
The downside in all of this?
The fund won't officially launch for another year or so, at least to retail investors.
Right now it is being made available to accredited investors only.
They can buy units in the fund that will be restricted until the fund officially launches in roughly a year's time.
Which means for most people, we are still stuck with the current investment products for the time being.
My thoughts:
I'm not sure about you, but this is something I will definitely be adding to my IRA when the time comes.
I imagine the cryptocurrency landscape will be a lot different a year from now, but if things are roughly the way they are now, owning something like this seems like a no brainer.
Not only will it be able to be owned in tax advantaged accounts like IRAs, but it also will actually be backed by the cryptocurrencies themselves, unlike the current futures products that are cash settled and strictly based on the price.
It also takes the fear or losing your wallet keys or being hacked out of the equation.
You can own a cryptocurrency fund via a traditional brokerage account and have the same exposure that you have currently, without many of the risks.
I don't know about you, but I am much more excited about products like this that are actually backed by the underlying asset than something like these rumored ETF's that will be based on the futures products that are cash settled.
In those cases the assets themselves are never even needed. It's like buying a derivative of a derivative.
Keep banging out these awesome products Grayscale!
Stay informed my friends.
Follow me: @jrcornel
Firstly, I follow your posts and I value your opinions.
However, regarding this issue I do not share your enthusiasm, largely upon philosophical grounds. For some, the elegance of crypto is the ability of an individual to act as their own central banker and controlling their assets outside the 'control' of centralised entities. Too many entities are controlling too much of our lives under the banner of "convenience" and "keeping us safe."
Don't feel rained on though - I also chose not to participate in Ripple when it first emerged because as much as I am able, I refuse to support banking institutions - in spite of the profits Ripple generates. There are just too many other worthwhile crypto vehicles that aren't by nature repulsive to me - Steemit, BTS, HMQ, IOTA and a host of others.
That said, I support people's right to determine whatever floats one's boat - as long as it doesn't negatively impact others.
Good Fortune To All of Us
No worries and I appreciate your well thought out response. For this particular fund it excites me in terms of an IRA. IRAs are tax advantaged accounts and if there is a way I can now use a tax advantaged account to invest in crypto, it gets me excited, even if it is not the best investment vehicle from a philosophical point of view. :)
I am not much of a fan of XRP... and so many coins out there right now... who knows what will be good in the future.
This is good news, especially for the 401k crowd that can't deal with all the technical stuff of cryptos. However, I just wish Ripple wasn't in that list! Ripple is centralized spreadsheet posing as a real cryptocurrency.
Haha well said. I agree, and if that is the market's conclusion as well, over time it will fall out of the top 5 coins and out of this new fund. :)
Interesting, hadn't hear about this at all. I do like this as a more passive investment vehicle. I'm not sure I love rebalancing by market cap but I understand the rationale. Hopefully they'll also come out with an "Emerging AltCoins" portfolio similar to emerging market ETFS, with high risk, high return patterns.
Exactly. From listening to them over the past few months, that is exactly what they plan to do. Offer different kinds of products for different kinds of investor needs. ETFs may be a ways off still so trusts like this are the best we got until then.
nice!
It seems good? but I just don't know if pulling crypto into the 'normal' economy is best, seems like crypto should be revolutionizing how everything works.
Seems like a great product with backing of "real" crypto. The rebalancing will also be helpful because you will be less likely to miss out on the next big thing. I agree if you're going to go this route using an IRA account would be ideal and by the time it is available to the general public Steem might even be in the top 5!
Yes and yes.
I think an actual crypto fund that holds the underlying asset is much better than just a cash backed derivative.
You and me both!
Definitely agree. Unlike futures it puts real buying demand in the market.
Great post, look forward to seeing more ETF's and other investment options as a way to trade with quicker liquidity.
One thing a lot of people may not realize, because it's not obvious when buying it, this "stock" also complicates their tax situation (if bought outside an IRA) as GBTC is a grantor trust for income tax purposes. It is not the same as buying a stock on the stock market, the buying/selling that occurs within the fund is treated as if the owner of the shares actually did the buying/selling. I posted on the subject recently.
Steem on!
Interesting, what are the differences for tax purposes?
So for buying a normal stock in a corporation, when someone buys it, there is generally not a tax consequence until they sell the stock ; other than maybe receiving a dividend. For GBTC, however, even if someone buys and HODL's the shares, there are tax consequences that might need to be reported on the investor's tax return each year, as the trust makes buys/sells. It's treated as if the investor bought/sold Bitcoin directly (based on their percentage ownership in the total trust). I get into a little more in the article below with a link to some resources, the 2017 trust statement wasn't out yet as of when I wrote it:
https://steemit.com/bitcoin/@cryptotax/bitcoin-investment-trust-gbtc-not-as-simple-as-owning-a-stock
Ah yes that does make sense, especially with this new fund coming that states they are going to rebalance every quarter. We desperately need these tax laws changed.
As a holder of GBTC currently, this looks really interesting. I may sell out some of my GBTC to buy some of this new fund when it comes out.
Gotta stay diversified 😎
You and me both. ;)
interesting