Tariq Ali Asghar
1-Bitcoin Investment Trust: Bitcoin Investment Trust of Grayscale offers investments in Bitcoin. The BIT is structured in a way that it acquires Bitcoin in a trust and then the investors are provided shares representing about one-tenth of prevailing Bitcoin price. The trust does not use any hedging or leveraging of Bitcoin. The arrangement is designed to give exposure to Bitcoin price fluctuations without the purchase of a real underlying asset. This vehicle is eligible for tax-advantaged accounts and is publicly quoted. The management fee of the trust is 2%. This vehicle applies both to the ordinary and accredited investors. Investors can purchase and sell their shares in the OTCCQX market under the symbol GBTC.
2-The ETN Option: Exchange Traded Notes is an interesting variant of ETFs. ETNs are senior unsecured debt instruments that track a market index or benchmark. An ETN provides exposure to the underlying without having to own the underlying assets. Since an ETN is a debt instrument, its rating and quality are dependent on the underlying bank or entity. For example, Barclays has issued its own ETN. ETN is a note whereas ETF is a fund. ETN adds additional risk to the instrument regarding debt structure and dynamics of the underlying entity. If the issuer goes bankrupt then the ETN loses value. The approval process of ETN is also complicated.
3-Exchange Traded Instrument (ETI): ETIs are similar to ETFs in the sense these are asset-backed securities as well, whereas ETN does not need to be backed by the underlying asset. ETIs are less common and are designed mostly to take care of options and futures.
4-Crypto ETFs: These trade on crypto exchanges and are backed by different underlying crypto assets including Bitcoin. An important point to keep in mind is that some of the mainstream jurisdictions like the USA have not approved any Crypto ETF yet. Therefore, these instruments are traded on crypto exchanges. Crypto ETFs are cost-effective, efficient and transparent and also help to overcome the problem of wide fluctuations in the pricing of Bitcoin across different crypto exchanges and geographical areas. ETFs also improve liquidity by giving access to the investors for its trading across different exchanges.
