Time in the Market
               Not Timing the Market

GBTC VS BTC: – TRADER’S PERSPECTIVE

The adage, “Not your keys, not your crypto,” has been ingrained in me since 2017, when I first entered the crypto community. This phrase served as a cautionary mantra, much like “May the Force be with you” among Star Wars enthusiasts. It was a warning code that everyone made sure to share with their fellow crypto traders and investors.

We all held a strong belief that maintaining full control over our money was absolutely essential, especially considering the perceived inefficiencies of traditional financial institutions such as banks and governments. The frequency at which the metaphorical ‘printing machines’ were activated, and the selectiveness of bailouts, which seemed to be reserved only for the powerful few, underscored this belief. The situation could be likened to an assassination, where significance determines the target, while the unimportant are left to face the harsh realities.

As this narrative and awareness spread, it appears that an increasing number of individuals are considering self-governance as a ‘Plan B’ or ‘hedge’ should the predicted financial reset truly occur. Like many people currently, I am preparing for the resurgence of the bull market. This means it’s time to start filling my portfolio with projects that I believe will perform exceptionally well. However, as I navigate this market, maximizing my PnL remains, and will continue to be, my primary focus.

Despite my commitments within this space, I find it impossible to ignore the price of GBTC, even if it contradicts our mantra, ‘Not your keys, not your crypto.’ Perhaps it’s the Mediterranean in me; when I see the word ‘DISCOUNT,’ I’m like a mosquito drawn to a bright light on a dark night.

While I opt to buy and hold Bitcoin directly, embodying my new self, I also find myself drawn to gaining exposure to Bitcoin through investment vehicles like the Grayscale Bitcoin Trust (GBTC), reflecting my old self.

So, what’s the difference between buying Bitcoin directly and investing in GBTC? And why would I challenge my sworn crypto alliance to even consider the other side? The answer is straightforward: when it comes to profit and loss, that should be the sole focus.

However, for those of you reading this and seeking to understand the difference, as well as to weigh the pros and cons, here’s a brief guide to WHY:

Buying Bitcoin directly involves purchasing the cryptocurrency on a cryptocurrency exchange, transferring it to a digital wallet, and managing the private keys associated with that wallet. Sounds simple, right?

Here are my Pros for buying Bitcoin directly:

CONTROL: I have full control over my holdings, which I self-custody via my own private keys.

PRIVACY: If I choose to buy Bitcoin directly, the transaction can be just between me and the seller.

HIGH RATE OF RETURN: Buying Bitcoin directly allows me to capture the full upside potential, offering a high rate of return.

CURRENCY: I can spend it freely, as more and more places now accept it. Take Dubai, for example.

Here are my Cons:

ACCESS: Buying and holding Bitcoin directly can be complex, requiring some technical knowledge and experience. I understand how this could deter some, but if I can do it, so can you.

RISK: Yes, it’s a volatile and speculative asset, which can result in significant price swings and potential losses. But aren’t all the best things in life a bit risky?

SECURITY: Lose your keys and it’s game over. It’s that simple.

Now, let’s consider the Grayscale Bitcoin Trust (GBTC), a publicly traded investment vehicle that holds Bitcoin on behalf of its investors, allowing them to gain exposure to the cryptocurrency without directly managing it themselves. Here are some of the pros and cons of investing in GBTC:

Here are my Pros:

DISCOUNT: You can buy Bitcoin at a 43% discount (well, the paper version of it).

CONVENIENCE: No digital wallet or management of keys is needed, catering more to the traditional (over 40s) investor, especially those with standard online trading accounts.

REGULATION: GBTC is regulated by the U.S. Securities and Exchange Commission (SEC), which doesn’t particularly concern me, but I can see how it could appeal to more traditional ‘Buffett-type’ investors. Although currently, the SEC and Crypto are like ‘water and oil.’

DIVERSIFICATION: Investing in GBTC allows me to diversify my Bitcoin holdings, as Grayscale offers investment trusts that hold other cryptocurrencies.

Here are my Cons:

FEES: Investing in GBTC carries fees that can be higher than buying and holding Bitcoin directly, which can eat into potential returns.

LIMITED TRADING: GBTC is traded over-the-counter (OTC) and has limited trading hours, which can reduce liquidity compared to buying and holding Bitcoin directly.

LESS CONTROL: Investing in GBTC means giving up control of your Bitcoin holdings to the trust, which doesn’t suit me at all, hence I just dip in and out.

For me, nothing beats trading and investing in real Bitcoin. But if I’m here purely to build PnL, then it doesn’t matter whether I trade GBTC or BTC, because my returns on the discounted GBTC are good enough to cover their fees in the long run.

However, the independence that Bitcoin offers is essential for me, especially when travelling, as most places now accept Bitcoin

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