In brief
- The Arca Accredited Investor Bitcoin Trust is taking minimum investments of $25,000.
- Grayscale Bitcoin Trust is very popular, holding more than 3% of the total supply of BTC.
We do the research, you get the alpha!
Arca, a digital asset management firm, has filed paperwork with the US Securities and Exchange Commission (SEC) to create a Bitcoin Trust.
The Arca Accredited Investor Bitcoin Trust has an immediate challenger in the Grayscale Bitcoin Trust, which is the largest institutional buyer of BTC. Grayscale Bitcoin Trust holds an estimated 3% of the 21 million BTC that will ever be in circulation and held $20 billion in assets under management at the end of 2020. Thus far, Arca has raised $100,000 from investors—it made its first sale on February 16.
The general utility of a trust is that it issues shares that roughly track the price of Bitcoin; investors can add exposure to Bitcoin in their portfolio without actually buying or holding any BTC.
The downside of a trust is that it charges an investment management fee, and shares can trade at a premium compared to the actual asset. Put simply, Bitcoin trust investors can expect to pay more for the convenience of buying a regulated investment product.
Moreover, buying shares of a Bitcoin product still comes with the same type of volatility as the underlying cryptocurrency. However, investors won’t have to worry about their private keys and may have more resources to shield earnings from taxes.
Arca both helps companies manage large amounts of cryptocurrencies and offers hedge funds for investors who want to dabble in crypto. Its latest fund is open only to accredited (i.e., wealthy) investors who can bring a minimum of $25,000 to the table. The securities are “restricted,” meaning the shares can’t easily be re-sold. (Grayscale, meanwhile, mandates a $50,000 minimum investment, with holders unable to sell for at least six months.)
While that lack of flexibility is inconvenient should the price of Bitcoin, currently hovering between $48,000 and $49,000, slide downward, it also helps restrict the available supply of Bitcoin for trading, theoretically helping to stabilize the price.