What is Grayscale's GBTC spot bitcoin ETF?

Grayscale Bitcoin BTC -2.28% Trust (GBTC) is spot bitcoin exchange-traded fund offered by Grayscale Investments, a prominent digital currency asset management firm.

For much of its life, GBTC allowed investors to buy shares of the trust, which represented partial ownership of the underlying bitcoin holdings. GBTC traded on public stock markets, allowing investors to access bitcoin through their brokerage accounts.

However, after a few prior attempts to convert GBTC into a spot bitcoin ETF, the U.S. Securities and Exchange Commission approved Grayscale's application on Jan. 11, 2024. On that day, GBTC joined 10 other spot bitcoin ETFs to gain the green light, and GBTC quickly became the most popular fund among its competitors. 

What is a spot bitcoin ETF?

A spot bitcoin ETF is a financial product that allows investors to gain exposure to bitcoin's price movements without directly owning the cryptocurrency. It is designed to track bitcoin's price closely and is subject to regulatory approval in the jurisdictions where it is offered. Investors can buy and sell shares of the ETF on stock exchanges like traditional stocks.

What is GBTC's issuer Grayscale Investments?

Grayscale Investments is a cryptocurrency asset management firm founded in 2013 by Barry Silbert. It is one of the largest and most well-known cryptocurrency investment firms globally.

Grayscale offers cryptocurrency investment products that allow institutional and individual investors to gain exposure to digital assets like ether and solana through publicly traded trusts. The firm's products cater to a wide range of investors, including institutional investors, hedge funds, family offices and individual investors seeking exposure to the growing cryptocurrency market.

What fees does GBTC charge?

Grayscale charges a 1.50% annual fee, which covers the cost of managing the fund. This fee is subject to change. 

How does Grayscale's ETF differ from other spot bitcoin ETFs?

The most significant difference between GBTC and other spot bitcoin ETFs is that GBTC did not start out as a spot bitcoin ETF.

First launched in September 2013, GBTC operated as a trust that held a certain amount of bitcoin. Investors could buy shares of the trust, representing ownership of a portion of the underlying bitcoin holdings. GBTC was accessible to accredited investors at the time, which typically meant an individual or entity that met certain criteria set by financial regulators, such as income, net worth or professional experience.

In May 2015, GBTC became publicly tradable on the OTCQX market, operated by OTC Markets Group. This market provides over-the-counter trading services for a wide range of securities, including those that may not meet the listing requirements of traditional stock exchanges.

Grayscale's first attempt to convert GBTC into a spot bitcoin ETF occurred in February 2017. After resubmitting the application in October 2021 and a subsequent legal battle with the SEC, the regulator ultimately approved GBTC as a spot bitcoin ETF in January 2024. 

GBTC held the majority market share of spot bitcoin ETF trading volume in the first few weeks after their approval, The Block's Data Dashboard shows. 

How does Grayscale's GBTC custody its bitcoin?

Coinbase Custody Trust Company, LLC is the custodian of the bitcoin in Grayscale's GBTC spot bitcoin ETF. 

Are Grayscale's Bitcoin addresses public?

Grayscale refused to publicize GBTC's addresses, even before its conversion to a spot bitcoin ETF, due to security concerns. However, the blockchain analytics firm Arkham Intelligence found over 1,750 of the fund's addresses in September 2023.