Bitcoin-Only Trusts (OTC)
Publicly traded bitcoin-only trusts provide investment exposure to bitcoin (BTC), the native token of the Bitcoin blockchain.
Investors gain exposure to bitcoin’s price movement in the form of a tradable security while avoiding the hassles (and reducing the cost) of buying, storing and safekeeping bitcoin itself.
Before becoming publicly tradable, shares are created through a private placement offered only to Accredited Investors via an Offering or Private Placement Memorandum. In these cases, investors purchase newly-created shares at the Net Asset Value of the bitcoin held by the trust at the time of purchase.
Trusts approved for trading in the secondary market provide liquidity to those who have held their shares for a required 6 or 12 months period. Following that lock-up period, trust shares can be transferred to a brokerage account for trading on the OTC market, where retail and institutional investors can purchase them. Shares of these trusts are eligible for IRAs and Roth IRAs.
Because bitcoin-only trusts lack the creation and redemption mechanism that keeps ETF share prices close to the underlying NAV, shares trading OTC may trade at a premium or discount.
Unlike other investments that require large investment minimums, bitcoin-only trusts trading OTC can often be acquired with little to no account minimum.
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Osprey Bitcoin Trust (OBTC) is available through a brokerage account or IRA. Its management fee is lower than other bitcoin funds. The Trust is structured as a grantor trust for tax purposes.Assets are custodied with Fidelity Digital Assets Services. Coin Metrics is the fund’s index provider.
Grayscale Bitcoin Trust (GBTC) is a traditional investment vehicle with shares titled in the investor’s name, providing a familiar structure for financial and tax advisors and affording easy transferability to beneficiaries under estate laws. The Trust’s assets are stored offline in cold storage with Coinbase Custody Trust Company.
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