Due to bitcoin’s epic rise in price, just about everyone is trying to get in on the action. With that said, there are several ways to purchase bitcoin, but what is the best way to buy bitcoin in the us?
Quick n’ Dirty Summary:
- Best way for US residents to buy bitcoin is GBTC
- GBTC is an investment trust that holds 170,000 bitcoins and can be bought/sold just like a stock
- Ally Invest is one of the few brokers that let clients buy/sell GBTC
- GBTC trades at a premium to actual bitcoin, which can be a huge bonus for owners as demand increases
What is the Best Way to Buy Bitcoin in the US?
Currently, the best way to buy bitcoin in the US is by using GBTC, also known as the Grayscale Bitcoin Investment Trust.
GBTC is owned and managed by Grayscale, a professional cryptocurrency investment trust company.
To put it simply, GBTC aims to track the price of Bitcoin. To do this, GBTC owns about 170,000 Bitcoins in its portfolio. Investors can then buy shares of GBTC, thereby synthetically buying bitcoin.
In theory, as the Price of Bitcoin Rises, so Does GBTC
However, just like bitcoin, there are a fixed number of GBTC shares. There are 1,868,700 to be exact. Because the investment trust holds 170,000 bitcoins, and there are 1,868,700 shares, each share represents roughly 0.092 bitcoins.
Therefore, 10 shares of GBTC = roughly 1 bitcoin.
Because the demand for owning the Bitcoin Investment Trust is so high, GBTC trades at a significant premium to bitcoin. This can be huge boon or a huge bane depending on your cryptocurrency investment thesis.
To get straight to the point, the easiest way to get in on the bitcoin action is by buying/selling GBTC. It’s cheap, easy, and doesn’t require depositing money with an unregulated broker to trade on an unregulated exchange. Regardless of whether you’re familiar with buying or selling stocks, trading GBTC is the fastest and easiest method of buying bitcoin in the US.
Best Broker for Buying GBTC (Bitcoin) in the US
So now that we’ve established that GBTC is the best way for US traders to buy bitcoin, what are the steps to buy GBTC? The first step is to open an online brokerage account with Ally Invest.
Ally Invest is the best online broker for buying and selling GBTC – period.
Why Ally Invest Rules for GBTC Trading
Ally Invest is one of the fastest growing ant most popular online brokerages, especially for cryptocurrency derivative traders. They’re FINRA regulated, FDIC insured up to $250,000, well-respected, and highly reputable.
Ally charges $3.95 for stock and ETF trades, but is offering a special promotional period of 90 days of free trades for new accounts.
It doesn’t matter if you’re trading 1 share of GBTC or 100, it will be free with Ally with qualifying depsoits.
Other brokers like TD Ameritrade and Charles Schwab charge $6.95 and up for ETF trades. Trading GBTC with TD Ameritrade would cost a total of $13.90 roundtrip. Ally Invest is simply unbeatable because it’s free.
Opening Your Ally Invest Account
Once you open your Ally Invest account, which takes about 4 minutes, you’ll have to navigate to the web trading platform. You can also use their mobile trading app.
- Click the green “TRADE” button in the upper right-hand corner.
- Once clicked, a ticket window will open where you will enter the ticker symbol “GBTC” into the “SYMBOL” box.
- Enter the number of shares you wish to purchase. In this example, we entered 10 shares.
- Select your order type. The most common order types are market and limit. Market means at any executable price. Limit means at a specific price that you set.
- Click “Buy” and you’re a bitcoin owner!
Understanding Why GBTC is More Expensive than Bitcoin
If 10 shares of GBTC equate to 1 bitcoin, why is GBTC more expensive than BTC/USD?
Well, it’s significantly easier, quicker, and more efficient to buy/sell GBTC than it is to buy/sell bitcoin. Dealing with unregulated cryptocurrency exchanges is not easy, so investors are willing to pay a premium to quickly and easily buy bitcoin via GBTC. There’s a steep learning curve, it’s expensive, and it’s simply not the best way to buy bitcoin.
More Info on GBTC
The Bitcoin Investment Trust makes it easy to trade bitcoin, and that’s one of the key reasons it trades at a 120% premium to its NAV (net asset value). This large premium to NAV ratio has drawn sharp criticism from notable short seller Andrew Left, who claims that GBTC is overvalued. However, as long as the price of bitcoin continues to rise, GBTC will theoretically continue to rise as well, so it’s a fantastic instrument to gain exposure to bitcoin.
GBTC is the first publicly quoted investment product that derives its value from the price of bitcoin. Grayscale launched the bitcoin fund in 2013.
A mere $1,000 investment in GBTC in 2013 would be word a whopping $84,600 today.