Is the Grayscale Bitcoin Trust ETF a Millionaire Maker?

You don’t need to find the next one Amazon or bet on lottery ticket-type stocks to make a lot of money by investing. Sure, you might get lucky, but there are safer roads by which to travel to financial Valhalla. Believe it or not, exchange-traded funds (ETFs) can be a great way to diversify your investments and make you rich.

Bitcoin has minted millionaires for years, but there are nuances to cryptocurrency that can be difficult to navigate. Enter the Grayscale Bitcoin Trust ETF (NYSEMKT:GBTC). The trust was created in 2013 and initially offered only to institutional and accredited investors before beginning to trade over-the-counter in 2015. In January 2024, it was listed on the NYSE Arca exchange and formally became a spot Bitcoin ETF.

It can be said that it combines the best of both worlds: it is a simple investment option with the potential advantage of Bitcoin.

Can ETF make you a millionaire? Here’s what you need to know.

Own Grayscale Bitcoin Trust vs. Bitcoin

An exchange-traded fund, or ETF, is a basket of assets (most commonly stocks) traded under a single symbol. Instead of buying shares, the Grayscale Bitcoin Trust ETF buys Bitcoin and keeps it safely in cold storage. ETF shares represent the value of the underlying Bitcoin. In other words, it is a way to invest in Bitcoin without owning it.

Why would someone do this instead of buying Bitcoin outright?

The most common reasons are security and convenience. Owning Bitcoin or other cryptocurrencies requires creating an account with a cryptocurrency exchange or wallet. Wallets have unique passwords and you can lock them if you forget them. You may have seen some exchanges facing issues, like the infamous FTX crash.

On the other hand, the Grayscale Bitcoin Trust is an ETF. You can buy or sell directly from your brokerage account. He also takes responsibility for maintaining and protecting the Bitcoin in his hands.

The case for Bitcoin and the Grayscale Bitcoin Trust ETF

Bitcoin’s remarkable returns over the past decade tend to attract people to it, even if they aren’t sure why it’s rising.

Bitcoin’s main investment thesis is that it is an anti-inflationary digital asset. You can think of it as a digital version of gold. You can’t use gold for payment in many stores, but it has value because people want it and consider it a store of value.

It is important to note that there is a fixed supply of Bitcoin. Bitcoin mining constantly increases supply, but there is an eventual limit of 21 million, and supply grows more slowly each time Bitcoin halves. The price of Bitcoin is in US dollars and the number of dollars in the economy is increasing rapidly. It’s a big reason why the country has seen so much inflation in recent years.

US M2 money supply data by YCharts.

The United States government has continually run a deficit, meaning it is spending more than it generates in tax revenue. The country borrows money to fill this gap, which increases the money supply and is a sneaky component of inflation. These economic dynamics and the growing demand for Bitcoin as society adopts it more could continue to drive up the price of Bitcoin.

Is ETF a millionaire maker?

Of course, nothing is free. The Grayscale Bitcoin Trust ETF doesn’t manage your Bitcoin assets for nothing. It charges a 1.5% expense ratio for its services. Additionally, the ETF buys Bitcoin continuously, so its average increases over time as the price of Bitcoin increases. As a result, the ETF does not perform as well as Bitcoin itself.

Bitcoin price data by YCharts.

However, notice how he still defeated the S&P 500 since its shares began to be traded on the over-the-counter market. Yes, an 11,000% return can turn modest sums into big money.

Will this continue? No one can say for sure. The monetary policies that helped Bitcoin prosper are still in place. The US money supply has been growing for decades since the debasement of the gold standard in 1971. I don’t see why Bitcoin can’t continue to appreciate, although it’s anyone’s guess as to the price or when it will get there. Bitcoin is also notoriously volatile.

That said, Bitcoin’s upside makes the Grayscale Bitcoin Trust ETF a potential millionaire maker that offers more convenience and ease than owning the cryptocurrency itself. Consider holding ETF shares as part of a long-term, diversified portfolio.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Amazon and Bitcoin. The Motley Fool has a disclosure policy.