Yeah, it's better to buy the bitcoin direct to avoid that premium. You're right.
GBTC is only a good play if you purchase in a tax-free channel like a ROTH IRA. not sure about your point about the entity level of the PC. And yes, there is a management fee; but that's consistent with any mutual fund (albeit a bit higher than most at 2%)
Also, GBTC has actually performed better than BTC over the last year
Thank you for your thoughts.
My point is, we are relying on the tax opinion of the structure of this Over the Counter Legal Entity. We generally take these at face value for larger companies/funds, but I read the tax section of the public filings and just wanted to share that GBTC tells us if the entity was characterized as a C Corporation, all of the earnings in the BTC would be taxed at the corporate level. This is similar RE: Yahoo and Alibaba conundrum. Corporate level tax at GBTC would erode the value of the stock (to a NAV discount instead of a NAV premium!). And it's in their filing that they don't have an IRS ruling on their tax structure (this was as of January 20th, it's possible they now have a ruling but I haven't researched it).
Just so you see where I am coming from, please see below a quote from the GBTC SEC S-1 registration filing:
"In that event, the Trust would be subject to entity-level U.S. federal income tax (currently at a maximum rate of 35%) on its net taxable income and certain distributions made by the Trust to Shareholders would be taxable as dividends to the extent of the Trust’s current and accumulated earnings and profits (which, in the case of Non-U.S. Holders (as defined below), generally would be subject to U.S. federal withholding tax at a 30% rate (or a lower rate provided by an applicable income tax treaty)). "
https://www.sec.gov/Archives/edgar/data/1588489/000119312517013693/d157414ds1.htm#tx157414_24
Interesting...
I am pretty sure if you own it in a ROTH, you are not liable for the tax regardless of their structure. That being said, this doesn't protect you from potential loss in value of the stock as a result of their pending classification (which I don't know either). BUT if you believe bitcoin will rise, the stock will never be below the value of the .092 bitcoin that each share is worth.
So if you buy today at $775, you are basically buying bitcoin at a value of $8k. Regardless of the classification, the stock will never be below $775 as long at the value continues to rise and eventually hits $8k+ (which most believe will happen by next year).
Nonetheless, like anything, it's got a lot of risk and you are right to consider the other options. It's important to research the pros and cons of investing through any means.