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Nervous About Bitcoin?

Try a BTC Investment Trust The idea of cryptocurrency as an investment asset is still quite new, and fear of the unknown is unfortunately keeping some investors from putting their money into Bitcoin (BTC) despite a strong interest in this new asset class. One investment firm is trying to assuage investors’ apprehensions by creating a Bitcoin Investment Trust, which allows people to speculate on the changing values of BTC without actually owning any Bitcoins themselves.

Grayscale’s Bitcoin Investment Trust

The company behind this new investment product, first created in 2015, is Grayscale Investments,

and the trust (GBTC) currently has just under 1.5 million outstanding shares with a market capitalization of $62.6 million USD. The minimum investment to purchase shares of the trust is $25,000. This investment represents the first ever publicly quoted security which derives its value solely from the value of BTC.

The value of the investment trust tracks the price of Bitcoin, and as such is subject to the same volatility and large potential gains (and losses), but without the hassle of buying the actual digital currency and storing it securely. This may also be an appealing alternative to some investors who are concerned about liquidity and the long time it may take to open and close a position in BTC in some cases.

A Surprising Method of Calculating Bitcoin’s True Value Using Gold

News broke on March 29 of a major investment bank and asset management firm publishing a report stating that the current trading prices for Bitcoin (BTC) are roughly $200 below its actual value. Needham & Company’s report used method for approximating the true value of Bitcoins that might come as a surprise to many who are interested in cryptocurrencies: using gold prices.

One of the paradigm-shifting features of Bitcoin (and more or less all cryptocurrencies, for that matter) is that they have no underlying assets to give them inherent value. So the idea of using gold to determine a true market value for BTC is a very creative approach to a complicated, ethereal problem.

Bitcoin’s actual market value estimated at $655

The reasoning goes like this: around 75% of the total market capitalization for BTC is treated as an investment. Comparing that percentage to the amount of capital invested in gold ETFs (exchange-traded funds), the investment market cap of Bitcoin is equal to about 6% of the $74 billion worth of gold in ETFs. Thus, the authors of the report conclude that the actual market value based on speculative market interest is $655. Based on today’s prices of just over $400, BTC is currently being undervalued by 58%!

The authors of Needham & Co.’s report also mention an investment trust for Bitcoins, which allows investors treat BTC as a speculative investment without actually holding the asset.

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