Bitcoin prices are priced notoriously different from one exchange to another. But why are they different? Here's everything you need to know. 

Global Bitcoin price differences exist across exchanges because there is no standard pricing protocol for digital assets. Different transaction fees that crypto exchanges charge investors, fluctuations in trading volumes, and different depths of liquidity affect the various exchange prices.

Have you ever been browsing crypto exchanges and noticed that different exchanges list their Bitcoin at different prices? It can definitely be a little odd to realize that the same token varies in price from 1–5% on certain exchanges. However, once you understand how crypto exchanges work, the reason for this difference becomes apparent. Explore this guide to learn more about crypto price differences between exchanges — and to see how you can use the arbitrage trading strategy to profit from these differences.

Why Does a Single Digital Asset Trade at Different Prices?

Let’s take Bitcoin as an example. Its prices vary entirely based on the market. A token is worth as much as users are currently willing to pay for it. As you might guess, there are varying prices at which investors and traders are willing to buy. But how do exchanges find a definitive price for their tokens? When you look at the price of BTC on an exchange, you're simply seeing an average estimate of what everyone currently buying BTC is willing to pay. 

However, there are a lot of different ways for exchanges to formulate an average estimate pricing on different assets. Some exchanges use different data sets, and others may prioritize different details when making their calculations. Even small differences can mean that 1 BTC that costs $25,350 on Coinbase might be $25,340 on Bybit.

How to Spot Different Bitcoin Prices on Different Exchanges

If you usually stick to one exchange, you might not notice the discrepancy right away. At a glance, Bitcoin prices can look quite similar. Especially when prices are constantly fluctuating, it may seem normal to see a slightly different price when you open a different exchange. However, these small discrepancies can indicate that one exchange consistently charges more for Bitcoin. To actually spot different prices, you'll need to simultaneously look at multiple exchanges.

Fortunately, modern technology makes this easy. There are a lot of sites, like Cryptoradar that provide a side-by-side comparison of Bitcoin prices on different exchanges. By doing a little research, you can quickly find the exchanges with the best Bitcoin prices. It's definitely worthwhile to take the time to do so, especially when making large orders — because you can save from the price difference or profit from arbitrage trading.

Why Do So Many Exchanges List Different Prices?

Why are Bitcoin prices different on different exchanges? There are a variety of factors that go into calculating Bitcoin prices, so there are several reasons you’ll see different prices on different exchanges.

Ultimately, the main reason for crypto price differences between exchanges is the lack of standard pricing. 

 is carefully regulated and backed by The Federal Reserve. Meanwhile, cryptocurrency is decentralized. Its value is based solely on what the market determines. 

In the case of Bitcoin, the same coin that was once worth pennies came to be valued at tens of thousands of dollars. Therefore, there is no set guideline that all exchanges can use when they make their prices. This lack of guidelines also means that, technically, no exchange has to follow the rest of their competitors. If their calculations lead them to believe a 

 is worth a different amount, they don't have to sell it at the same rate as other exchanges. Some may offer higher or lower prices, as it’s all based on market logic and sentiment.

Another big factor in price differences is the trading platforms' liquidity. If a crypto exchange is smaller, it usually doesn't have as many assets on hand to sell or convert to cash. This lack of liquidity affects pricing because every time a sale is made on an exchange, it can influence other traders to buy or sell their crypto. The more liquid an exchange is, the less likely it is to have sudden price fluctuations.

The concept of supply and demand is one of the biggest factors in determining crypto prices. However, most crypto exchanges don't just look at the market as a whole. Instead, they also consider what's happening on their specific exchange. If one crypto exchange's users are demanding more Bitcoin than some others’, prices can be higher on that exchange. This effect is often more visible on large crypto exchanges. Since many users rush to popular exchanges during a period of high demand, prices on these exchanges might be a little higher than prices on smaller exchanges with less user interest.

Don't forget that crypto marketplaces are all individual businesses, with their own unique goals and strategies. In order for them to profit from facilitating users’ transactions, trading on exchanges incurs transaction fees for these services. Typically, crypto exchange fees can range from around 0.02% to 3.0%, which has an impact on the total cost that you pay for the cryptocurrency. 

Some exchanges also pass on transaction costs — such as gas fees — to their clients, so prices might fluctuate even more. During times of high demand, gas fees can increase, so exchanges that bundle this cost into their transactions will be significantly pricier than exchanges with a simpler fee structure.

When you look at crypto exchange prices, remember that not all trading pairs include USD. Even though prices are often shown in fiat currency, crypto trades usually transpire using two different currencies. For example, one user might buy Bitcoin with ETH, while another buys it with a 

. These different trading sets are called pairings, and they end up impacting the overall value of a Bitcoin. 

For example, Ethereum values often follow Bitcoin values, so if Bitcoin prices spike, ETH prices tend to follow. This leads to more volatility when trading with certain pairings. Meanwhile, prices are more stabilized if you work with more stable pairings, like USDT or USDC. Market volatility leads to different prices on different exchanges. The types of pairings an exchange offers will significantly impact its overall price for Bitcoin.

Since digital assets vary slightly in price, finding crypto markets with lower crypto prices is a great way to save money on your trades. However, that's not the only reason you need to pay attention to Bitcoin prices on different exchanges. Since different crypto exchanges have different prices for Bitcoin, it’s uncommon for investors to employ arbitrage strategies for profit.

 is a trading strategy where traders simultaneously buy or sell Bitcoin in different markets to profit from the value difference. Not only can you make money as an arbitrageur, but this method also encourages crypto markets to resolve their differences and settle at more comparable prices. Here are 

This is the most popular type of arbitrage trading because it's the simplest. You start by finding a crypto exchange that has Bitcoin for sale at a particularly low price. After you purchase tokens on that exchange, you then take them and sell them on another exchange that has Bitcoin listed at a higher price. Once you sell the tokens, you're left with some extra funds you can pocket. For example, if you buy 10 bitcoins at $20,000 each on one exchange, and sell them on another exchange that lists Bitcoin at $20,050, you end up making a $50 profit (before fees) from your trade.

Keep in mind that this type of arbitrage comes with some risks. You need to buy and sell large sums of crypto for the strategy to result in noticeable profit. In addition, trades are time sensitive, so if you delay too long in selling your crypto, prices can change and reduce your profit. Finally, other traders are also participating in cross-exchange arbitrage so that the markets can converge and Bitcoin might end up being worth roughly the same amount on both exchanges.

Triangular arbitrage is somewhat more complex. It involves performing several trades on the same crypto exchange or across multiple platforms. Instead of simply taking advantage of different prices for Bitcoin on different exchanges, triangular arbitrage also looks at pricing inconsistencies between crypto pairs. You start by buying a crypto that's undervalued on one platform. Next, you use this crypto to buy an overvalued crypto. Then, you sell the overvalued crypto to buy back the initially undervalued crypto.

Instead of just providing you with a net profit, triangular arbitrage lets you do things like convert a small amount of Bitcoin into a larger amount of Bitcoin. It can be performed alongside cross-exchange arbitrage to create unique trading opportunities. However, triangular arbitrage involves multiple trades, so there are even greater risks of poor timing and slippage cutting into your profit. You also need to make sure you’re carefully calculating all your fees before you start, because multiple transaction fees can reduce your chance of a profit.

The price of a Bitcoin or crypto generally depends on macroeconomic and microeconomic influences. Crypto exchanges may have different supply and demand levels, liquidity, and transaction fees that may affect the overall asset’s price. Of course, these differences open up arbitrage opportunities for an avid trader who knows how to capitalize on them.

Intermediate

2301-T483_Risk-on_vs._Risk-off_What_Do_They_Mean_3200x1800.png

Why Bitcoin Prices Differ Across Exchanges & How to Profit via Arbitrage

Will I make a loss or profit if I dollar-cost-average (DCA) in Bitcoin over the years? Here's everything you need to know. 

 is a digital currency that has gained significant popularity over the past decade and has almost become synonymous with cryptocurrency. It is often seen as a good store of value and remains one of the most valuable cryptocurrencies in the market. 

Since its introduction in 2009, Bitcoin’s price has been a hair-raising rollercoaster. During its introductory stage, Bitcoin's price leaped to 

. After some alternating highs and lows, the next significant price movement for Bitcoin was in 2017, when the price of a Bitcoin reached just below the 

 mark for the first time. This was followed by a crash in December 2017, which sent the price dipping briefly below

Like everything else, the pandemic of 2020 didn't spare Bitcoin, and the BTC price fell below 

in March. Then, making a stirring comeback, Bitcoin's value jumped to an all-time high of 

 in November 2021. However, the 2022 crash set in motion by 

 created a dip in Bitcoin’s price once again. Its price steadily declined, bottoming out at around 

Despite the wild ride, many investors in the crypto market remain interested in Bitcoin investments. Some may have wondered what would have happened if they had invested $100 in a single Bitcoin at different points in its history. 

In this article, we will explore the outcome of such an investment and discuss whether or not 2023 is still a good time to invest in Bitcoin.

Who Invested in Bitcoin During the Crypto Winter? 

As an aftermath of a series of scandals rocked the crypto market in 2022, the industry languished in a drawn-out "crypto winter" — a period marked by dominant bearish sentiments. Despite this, some notable institutions still invest in Bitcoin today. 

 by Coinbase, 62% of institutional investors reported increasing their cryptocurrency holdings. For example, MicroStrategy, a publicly traded business intelligence company, 

 worth of Bitcoin in June 2022 and another 

. The company made headlines when it announced that it had invested $250 million in Bitcoin in 2020, making it the first large corporation to hold Bitcoin as a cash reserve asset. 

What Happens if You Invested $100 in Bitcoin in 2022?

The value of Bitcoin in 2022 saw significant fluctuations, with its all-time high (ATH) reaching 

 in March and dropping to its all-time low (ATL) of 

 by December. If an investor had decided to 

 (DCA) their portfolio by purchasing a fixed amount of Bitcoin at monthly intervals throughout the year, the value of their investment would have varied significantly depending on when they made their purchases.

 that you can use to backtest this strategy based on historical performance. For example, an investor who purchased $100 worth of Bitcoin every month throughout 2022 would have invested a total of $1,200 and ended up with Bitcoin worth $1,187 today. 

While this result may not be remarkable, remember that Bitcoin fell as low as $16,441, which would have eroded a considerable chunk of the investor's profit had they not used the DCA strategy. Also, the DCA investment strategy is better suited for time horizons longer than one year.

Is Investing $100 in Bitcoin Sufficient to Profit in the Long-term? 

It is difficult to predict with certainty whether or not investing $100 in Bitcoin will yield a profit in the long term. Bitcoin has proven notoriously volatile and is not guaranteed to increase in value over time. Potential investors must be aware of the risks associated with investing in Bitcoin and approach it cautiously.

However, using a dollar-cost-averaging investing strategy potentially allows investors to profit from their Bitcoin investment over the long term. 

Is 2023 the Right Time to Invest in Bitcoin?

Whether Bitcoin's price skyrockets is subject to the macro and micro factors in the economy, like market demand and supply, regulatory developments, hype, investor sentiments, and technological advances. It is impossible to predict whether 2023 will be a great year for crypto investments. But some analysts foresee value growth, mainly from the expected deflationary effect of the next 

, which will occur in 2024. Bitcoin halving is a process that slashes the reward for mining a block of Bitcoin in half to control the supply and keep inflation in check. It occurs every four years. 

But not all industry watchers are bullish about Bitcoin. Some predict it may fall as low as $10,000 due to rising energy prices and a possible spike in inflation rates. Inflation applies pressure on the market as investors and institutions sell off their assets.

Regardless, Bitcoin is still a speculative investment. While there are Bitcoin evangelists who strongly believe in the potential of Bitcoin, there are also people who are skeptical of or opposed to Bitcoin and its adoption. Diversifying your investment assets may not be a bad idea if you have excess cash reserves in your bank account overall.

Many factors can influence the price of Bitcoin, as mentioned before. Still, some experts believe that as Bitcoin becomes more widely adopted and its infrastructure improves to fit the criteria of the users, the price of Bitcoin to stabilize is not impossible. Here are some ways that the price of Bitcoin would contribute to price stabilization over time:

If you are considering investing in Bitcoin in 2023, there are a few things you should keep in mind to help increase the return on your initial investment.

Tips for Choosing a Reliable Crypto Exchange 

One of the most important things to consider when investing in Bitcoin is choosing a reliable crypto exchange. This becomes even more pertinent following the disastrous collapse of 

 and, more recently, FTX. Devastated investors saw their life savings vanish overnight as over 800,000 Bitcoins were stolen from the Mt Gox exchange in the infamous 2014 hack. 

FTX, another major exchange, collapsed in November 2022 after Coindesk reported alleged malpractices, raising doubts over the exchange's solvency. These catastrophic incidents highlight the importance of choosing the right place to invest and store your Bitcoins.

Choosing a reputable exchange involves looking for one with an associated physical address, offers Fort Knox-level security, and complies with relevant regulations. 

Always research extensively and read other users' reviews before choosing an exchange to partner with.

Another critical factor to consider when selecting an exchange for your Bitcoin investment is the transaction fees. These fees can vary significantly from one exchange to another and could be based on transaction size or activity level. Transaction fees add up with time and significantly impact your investment profitability. So it is essential to compare the fees charged by different exchanges and their fee structure before deciding.

Should You Invest in Bitcoin in a CEX or DEX?

) is a type of cryptocurrency exchange that operates with a central authority. It allows users to trade cryptocurrencies within the exchange, which acts as an intermediary between buyers and sellers. On the other hand, a decentralized exchange (DEX) operates without a central authority. It allows users to trade cryptocurrencies directly with each other, securely and trustlessly.

There are pros and cons to CEXs and DEXes.

Ultimately, deciding whether to use a CEX or DEX depends on your individual needs and goals. If you are a beginner or are looking for a more user-friendly platform with advanced trading features, a CEX might be a good choice. A DEX might be a better option if you value control over your assets and privacy and are willing to trade off some convenience and features.

You must safely and securely store your Bitcoin once you have purchased it. Proper storage will protect your investment and give you peace of mind. Each option has pros and cons, so you must consider the tradeoff between security and convenience before carefully deciding which option is best for you.

Regardless of which storage option you choose, it is important to keep your Bitcoin secure and make sure to follow best practices for storing and protecting your Bitcoin.

If you have spare cash in your bank account, consider investing in Bitcoin to diversify your portfolio. Here's how you get started with Bybit: 

Bybit offers an intuitive interface that allows users to buy and sell Bitcoin and other digital assets via their local fiat currencies. Follow these simple steps to 

873_5_Best_Ways_to_Earn_on_Bybit_During_This_Bear_Market_3200x1800.png

How Much Would I've Earned if I Invested $100 in Bitcoin? (2023 Edition)

Litecoin, Bitcoin and Ethereum are three of the most popular crypto, but how are they similar, and how are they different? Find out here.

Interest in cryptocurrencies has fluctuated over the past few years as wealth flows into the cryptocurrency market with every bull cycle, creating millionaires.

What has remained constant despite the surge of new cryptocurrencies is the market dominance of Bitcoin, still the most valuable crypto since its launch. In recent years, Ethereum has become the strongest competitor for market share, grabbing the reins and overtaking Litecoin.

As cryptocurrencies vie for market share, Litecoin has managed to 

 in terms of market capitalization, even after a decade.

To learn more about these three cryptocurrencies, please refer to these following articles:

In this article, we’ll be looking at the differences between these three cryptocurrencies, particularly regarding consensus mechanism, hash algorithm, distribution, transaction speed and use cases.

Bitcoin was founded in 2009. Since then, the cryptocurrency market has arguably gone through three bull markets, specifically in 2013, 2017 and most recently in 2020, a particularly prominent year with various altcoins reaching all-time highs alongside Bitcoin’s ATH of $69,000 in November 2021. Other crypto market catalysts have included the 

. In addition, the periodic emergence of meme coins such as 

 (in 2013 and 2020, respectively) has expanded the crypto market.

The expectation of widespread crypto adoption is also a major factor in the growth of the cryptocurrency market. International firms have incorporated cryptocurrency into their operations in recent years, including payment giant PayPal. With such developments, the market adoption of cryptocurrency has grown, with consumers’ awareness increasing.

Cryptocurrencies have existed for well over a decade. Yet, through all of the rapid developments in the crypto market, Bitcoin still remains the dominant cryptocurrency. It runs on a 

, a decentralized publicly distributed ledger that contains encrypted records of every transaction that’s ever been made on the network, thus ensuring data security. Bitcoin’s underlying blockchain technology enables 

 transactions and eliminates the need for control by governments or other centralized financial institutions. 

The surge in Bitcoin’s popularity is also attributed to the profits it’s brought about for its investors. With a stunning 69,000% increase in price from $100 in 2013 to $69,000 in 2021, Bitcoin successfully captured the market’s attention. At the same time, 

 (cryptocurrencies other than Bitcoin) have also begun gaining bigger market share, the most prominent one being Ethereum, which has risen in the ranks to claim second place in overall market cap. 

Litecoin, previously ranked second in market cap right behind Bitcoin, has been overtaken by multiple new cryptocurrencies, but has still managed to remain within the top twenty cryptos by market cap. In addition, its token, LTC, has recently gained the market’s attention once again as its price rose by 35% in just one week in the midst of an ongoing bear market.

Bitcoin, Litecoin and Ethereum are all open-source software platforms, and their codes are publicly accessible. Despite all three cryptocurrencies being blockchain-based, there are certain underlying differences between them.

Let’s start off with some specific details pertaining to each of these cryptocurrencies.

Since blockchains are publicly shared ledgers, they require an effective, fair, real-time, dependable and secure mechanism to ensure that all transactions taking place on the network are genuine. The consensus mechanism is essentially a set of guidelines to determine the validity of contributions made by the participants of the blockchain. In a blockchain’s dynamically changing environment, all participants have to agree on a consensus on the ledger’s status before transactions can be confirmed

Using PoW, Bitcoin and Litecoin rely on miners, who solve complex mathematical equations using specialized hardware to add blocks to the networks. On the other hand, the Ethereum blockchain uses PoS, whereby validators stake their currency to validate new blocks on the blockchain. PoS requires significantly less computational power than PoW, which lowers both hardware requirements and energy consumption.

 algorithm, which determines how incoming data is incorporated and verified on a blockchain, differs for the three cryptocurrencies. Bitcoin makes use of the SHA-256 algorithm and Litecoin uses 

, while Ethereum previously relied on Ethash, no longer relevant since the network has switched to PoS as a part of its 

 utilized by Bitcoin uses the computational power of 

, CPUs (central processing units) to verify transactions and blocks. The most common method for 

 (ASICs), a hardware system that can be tailor-made to mine Bitcoins. However, many people prefer not to use ASICs because they’re expensive, challenging to maintain and necessitate specialized knowledge. Bitcoin mining has become more centralized and exclusive, as fewer people have the skills, resources and time to buy, set up and maintain ASICs. This compromises the security and resilience of the network.

Scrypt is a modified version of SHA-256, but is more memory-intensive, which is reputed to lessen its reliance on GPU arithmetic logic units (ALUs) and, consequently, ASIC mining equipment. Scrypt aims to make mining more accessible to individuals, as not all users can afford hardware equipment such as ASICs. This contributes to the decentralization of a network. Nonetheless, ever since Scrypt ASIC mining machines were built in 2021, Litecoin mining has once again fallen under the control of a few dominant players.

Bitcoin (token: BTC) and Litecoin each have a supply cap on their number of tokens, with Bitcoin’s set at 21 million and Litecoin’s at 84 million. Since Litecoin has four times the supply of tokens, its network possesses greater liquidity as compared to Bitcoin. However, the scarcity of Bitcoin makes it more valuable.

Ethereum, on the other hand, doesn’t have any ceiling for its supply of ETH. Nonetheless, its rate of growth is limited to 4.5% per annum.

Miners are rewarded for their efforts in the form of a blockchain’s native currency. 

In 2009, Bitcoin started off with a 50 Bitcoin reward per block mined. After going through three 

, the reward is now set at 6.5 BTC. Similarly, Litecoin began with a reward of 50 LTC per block mined. Following two halvings, the current reward stands at 12.5 LTC per block, with a third halving scheduled for 2023, which will reduce the reward to 6.25 LTC.

These rewards are halved in order to limit the quantity of each cryptocurrency released into the circulating supply, thus creating scarcity. Bitcoin block rewards are halved every 210,000 blocks, while Litecoin block rewards are halved every 840,000 blocks. This difference is due to the different supply cap.

Since Ethereum now utilizes a PoS consensus mechanism, there are no rewards for block mining. Instead, participants are rewarded by staking their Ether on the network to participate in block validation. Depending on the staking program in which users choose to participate, their rewards can fluctuate anywhere from 2% to 20%.

Another significant difference among the three cryptocurrencies lies in their 

processes approximately 5 TPS, and takes about 10 minutes to create a new block. In addition, Bitcoin software limits the size of a new block to 1MB. Not all Bitcoin transactions are processed within ten minutes. This is especially the case when the network is congested, due to a large number of transactions.

 processes 54 TPS, taking approximately 2½ minutes to create a new block. Transactions on Litecoin are roughly four times faster than Bitcoin’s. As a result, Litecoin is often regarded as a currency for day-to-day transactions, while Bitcoin is considered to be more of a store of value.

 network is now able to handle up to 100,000 TPS. 

Ethereum employs a different mechanism, called 

, in place of transaction fees. The amount of computational work necessary to complete a transaction is measured in gas. On the Ethereum network, users must pay gas fees in order to complete a transaction. They’re correspondingly assessed a gas fee for each individual transaction.

One of the biggest issues for the Bitcoin network is scalability. The more users trying to send funds over the network at a given moment, the more congested it becomes. Since transaction fees are defined on the basis of an auction, those who make higher bids get their transactions confirmed first. This leads to high network fees and longer confirmation times. Though Litecoin has much lower fees, its network experiences the same problem.

To speed up transaction time and lower transaction costs, Bitcoin and Litecoin have implemented some improvements. Among these are 

, which increases the block size limit by pulling signature data from transactions, and 

, which keeps transaction data off the blockchain.

Since Ethereum has switched over to PoS, problems with scalability aren’t as prominent. However, scalability has been a major issue for the popular Ethereum network while it was using a PoW consensus. 

 solutions were implemented as a partial remedy for Ethereum’s former transaction rate of 12–15 TPS.

The use cases for each of these three cryptocurrencies differ quite drastically.

Bitcoin was created as a form of technology to allow for decentralized 

 (P2P) payments. However, its slow transaction speed makes it impractical for daily use, and it’s been referred to as 

Litecoin was forked from Bitcoin’s code to tackle issues of cost and scalability. These differences make Litecoin more favorable for merchants, since payments and transactions can be carried out quickly at a cheaper rate.

Ethereum focuses on smart contracts, transfer of asset ownership and 

 (decentralized application) production. Smart contracts are software programs that take action when specific criteria are met. This procedure makes sure that every Ethereum transaction is secure for the user. Additionally, exchanges like the transfer of property or the exchange of money may be included in the contracts. Ethereum’s unique feature is that it allows programmers to directly interact with its underlying network, a capability that Bitcoin and Litecoin do not support.

The cryptocurrency market changes very rapidly, making it difficult for investors to choose the best investment options. With all the hype around the industry, many people are wondering if they should invest in either Bitcoin, Litecoin or Ethereum. New currencies are created in the market every month, and there’s no guarantee they’ll remain popular. Still, the three dominant currencies compared in this article have a strong user base, experienced developing teams and are available on most exchanges.

All three of these currencies have already proven to be profitable for investors, and to have a good chance of growth in the next few years.

The cryptocurrency landscape has changed drastically since its inception. Recently, more attention has been brought to the regulatory environment surrounding crypto. Despite all of this change and uncertainty, Bitcoin and Ethereum have managed to retain their positions as the top two cryptocurrencies by market cap. Litecoin, on the other hand, is no longer within the top three, but still holds its position among the 20 largest cryptocurrencies. 

The crypto market is indeed an exciting one, with great potential despite its volatility and associated risks. If you’d like to take part in the market, 

857_Litecoin_vs._Bitcoin_vs._Ethereum-_What’s_the_Difference_3200x1800.png

Litecoin vs. Bitcoin vs. Ethereum: What’s the Difference?

GBTC is the world's largest Bitcoin fund and the first-ever publicly traded trust that has a digital currency as its underlying value.

Grayscale® Bitcoin Trust (GBTC), an investment trust that’s traded on the stock market, is a great option for individuals, companies and institutions unfamiliar with the crypto world who want to 

But is it a good investment option for everyone else? Are you missing out if you haven’t invested in it yet? Are there drawbacks that might deter some people from buying Grayscale? 

In this article, we’ll answer these questions and more.

Grayscale Bitcoin Trust (GBTC) is the world's largest Bitcoin fund. It’s also the first-ever publicly traded trust that has a digital currency as its underlying value.

 If you don’t know what that is, here’s a quick rundown. 

Trusts and funds on public stock exchanges have an underlying asset that dictates their value. These assets are mostly stocks in publicly traded companies. The price of the trust or fund fluctuates based on the underlying 

 (NAV), which is affected by the asset’s demand. An investor can buy a portion of the asset by purchasing shares in the fund. 

Since GBTC is a cryptocurrency trust, you can 

 through your brokerage account. In doing so, you indirectly buy Bitcoin — avoiding the hassle of purchasing BTC through a 

. This means that you’re relying on Grayscale to buy and hold Bitcoin for you as a third party.

So the actual BTC is stored in the Grayscale institutional trust, and its retail index is traded on either the open or over-the-counter market. GBTC is similar to a crypto exchange-traded fund (ETF), as it pools investors’ funds to invest in Bitcoin and charges investors a management fee for investing in the fund.

How Does the GBTC Investment Vehicle Compare to a Bitcoin ETF? 

, is a competitor of GBTC. That’s because ETFs track the market data or value of the underlying asset much more closely than a trust. Hence, the market price per Bitcoin ETF share is relatively close to the actual value of BTC. 

But that’s not the case with shares of GTBC, because the trust charges a 

 and sometimes also a premium. That significantly increases the price of a GBTC share as compared to the market price of BTC while spot buying, or while buying shares of a Bitcoin ETF. 

However, there are currently only Bitcoin futures ETFs in the market. GBTC is proposing to be approved as a 

, which may be a better product than Bitcoin futures ETFs — as spot Bitcoin ETFs track the market even more closely than Bitcoin futures ETFs. 

Grayscale Bitcoin Trust gathers money, usually U.S. dollars (USD), from institutional investors and uses that to buy BTC directly. These BTC are stored in the Grayscale fund, which essentially makes the Grayscale institution — rather than its investors — the actual 

. You can then buy shares of GBTC and indirectly own BTC. 

Ever since Grayscale became a publicly traded fund in 2015, various investors have poured a lot of cash into GBTC by buying Grayscale stocks during bull 

. Grayscale has used that capital to buy more and more BTC. Now, it’s accumulated over 643,572 bitcoins, which is 

 as of the time of this writing (November 22, 2022). 

To put that number into perspective, Tesla holds approximately 10,725 bitcoins and Ukraine holds about 46,000 BTC.

What Are Premiums and Discounts on GBTC Shares? 

When you buy or sell GBTC shares, the trust doesn’t immediately buy or sell BTC with your investment. That’s where the concepts of premium and discount come into play, which are essential to learn about if you want to understand how GBTC works. 

Suppose the Grayscale trust has about 500,000 BTC, which are all bought by shareholders. Then five investors come in, and each buys 1,000 BTC worth of GBTC shares. 

Those purchases will raise the overall value of the trust by increasing the number of BTC held by GBTC investors as compared to the number of bitcoins owned by Grayscale as an institution. That’s because GBTC doesn’t immediately use the new investment to buy 5,000 more BTC.

This means that there’s a greater demand for GBTC shares than the supply of BTC. In such a case, the trust will add a premium to BTC’s value. Anyone who wants to buy GBTC shares will then have to pay that premium on top of the share value. 

Similarly, if a bunch of investors sell their GBTC shares, the new investors will get a discount. This fluctuation means that you have to buy BTC at a different price than what you’ll get by buying directly from exchanges. That’s why GBTC share prices aren’t the same as the actual value of BTC. 

Finally, you can only buy or sell GBTC shares during the opening hours of the stock market, unlike 

 buying and selling, which you can do at any time. 

Pros and Cons of Grayscale Bitcoin Trust (GBTC)

To help you decide whether or not to invest in the Grayscale Bitcoin Trust, let’s look at its pros and cons.

Some advantages of buying GBTC stocks over owning Bitcoin directly include: 

Crypto exchanges and wallets are vulnerable to 

. GTBC charges a management fee for keeping their BTC secure in cold storage, which is safe from hacks. 

2. Regular Audits of the Bitcoin Investment Trust 

 with the securities and exchange commission (SEC) to prove that it has the BTC that investors have paid for. That’s an advantage over crypto exchanges, which have the potential to scam people. An example of one such scam is the 

Investors can get tax breaks when they buy GBTC shares through 

, such as a 401(k) or an IRA. It’s also easier for investors to file taxes for publicly traded stocks of a trust that’s approved by the SEC. 

Some drawbacks of owning GBTC stock are as follows: 

GBTC charges a 2% annual fee. On top of that, you have to pay a premium to buy shares when demand is high. It’s not a good fit for smaller investors, because you need a minimum investment of $50,000 to buy into Grayscale Bitcoin Trust. 

You can never redeem your shares for actual BTC because the Grayscale trust owns the private keys to the BTC in your shares. 

The value of a GBTC share hasn’t been growing at the same rate as its underlying asset. Even if you don’t have to pay a premium, you still won’t earn as much profit by buying shares as you will by owning Bitcoin directly. From 2020 to 2021, GBTC’s share price 

 in value while BTC surged by nearly 340%. 

 (PoR) with its customers due to security concerns, despite the global panic over the 

. This refusal has sparked public furor over the company's future.

Is Grayscale Bitcoin Trust a Good Investment?

GBTC isn’t a good investment option because the value of GBTC shares doesn’t accurately match the value of Bitcoin. Its shares have been trading at a discount 

, and they’re now trading at a record low 45.08% discount to Bitcoin’s net asset value. 

So if you buy GBTC shares today, you’ll get fewer BTC than what you’ll get through spot buying for the same amount of USD. 

Investing in GBTC doesn’t give you voting rights on protocols, because you don’t own the 

to the BTC in your shares. Also, transactions occurring on the trust are censored by government agencies — which defeats the original purpose of a decentralized digital currency. 

Perhaps in the future, if the shares start trading at a premium again, then Grayscale will be a good option for accredited investors who can purchase GBTC shares at the NAV price. 

Volatility is unavoidable whether you’re buying BTC directly or on the open market through GBTC. Whenever lawmakers release new rules about regulating crypto, or deny a 

Also, since you don’t own the BTC in your GBTC shares, you can’t use it. If you want to actually use Bitcoin and save on management fees, then you’re better off 

GBTC has always been a viable option for only a small group of wealthy investors. Moreover, it not only 

, but has also faced serious criticism over its refusal to share its proof of reserves. Given these risks in investing with GBTC, it may be cheaper and safer for retail investors to own Bitcoin directly, despite the current volatility of the crypto market.

Altcoins

Blockchain

Crypto

DeFi

GameFi

Indicators

Investing

Metaverse

Memes

Options

Stablecoin

Staking

Strategies

Trading

Web 3.0

Bitcoin

Crypto

Why Bitcoin Prices Differ Across Exchanges & How to Profit via Arbitrage

Bitcoin

How Much Would I've Earned if I Invested $100 in Bitcoin? (2023 Edition)

Altcoins

Litecoin vs. Bitcoin vs. Ethereum: What’s the Difference?

Investing

Grayscale Bitcoin Trust (GBTC): All You Need to Know

Investing

Mt. Gox Settlement: How the Payouts Could Impact Bitcoin Prices

Investing

What Is a Bitcoin Mixer – And How Does It Work?

Crypto

Wrapped Bitcoin (WBTC): Why It Matters

Crypto

21 Million Bitcoin Limit: What Happens When All the Bitcoins Are Mined?

Investing

Bitcoin Stock Market Correlation: What Do the Charts Say?

Crypto

What Is Bitcoin (The Definitive Guide)

Altcoins

What Is Zcash (ZEC): Privacy Through zk-SNARK Encryption

Options

Bitcoin Options: How to Own The World No. 1 Crypto For Less