Gold has traditionally been the asset class investors have fled to in times of uncertainty. There was hope among cryptocurrency enthusiasts that Bitcoin would serve as an alternative during the coronavirus crisis. But instead Bitcoin has lagged. One hurdle is that investors have limited options to get exposure to the digital asset via the stock market. One possibility is Grayscale Bitcoin Trust (GBTC) which, as its name implies, owns and tracks Bitcoin.
Bitcoin staged a major rally in the first half 2019, with a major surge coming after Facebook (FB) announced plans to enter the crypto space. While that move ran out of steam, GBTC stock climbed again early in 2020 as Bitcoin staged another rebound. But this was cut short by the coronavirus pandemic, scuppering its attempts to reach its mid-2019 highs. Instead, GBTC stock is near a 52-week low.
Is "GBTC stock" a buy right now? Let's take a look at what Grayscale Bitcoin Trust is and how it's performing technically.
Grayscale Bitcoin Trust tracks the Bitcoin price based on the TradeBlock XBX Index. But while the trust closely mirrors the performance of Bitcoin, the GBTC stock price tends to over- or undershoot performance based on investor sentiment.
GBTC Stock: It's Not A Stock
One key thing to remember when considering buying shares in Grayscale Bitcoin Trust is that it's not a true common stock. Stocks are shares in a company, while GBTC shareholders own part of an open-ended grantor trust.
Grantor trusts are required to hold a fixed portfolio, rather than a variable one. Such trusts often hold physical commodities and currencies. In this case, GBTC is a trust that only holds Bitcoin. Bear in mind that the Investment Company Act of 1940 does not cover grantor trusts, so they provide none of those investor protections. They also do not qualify for regulation by the Commodity Futures Trading Commission.
However grantor trusts are covered by the Securities Act of 1933 and the Securities Exchange Act of 1934, and must disclose regular financial information.
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