Fraud Highlights Importance of Bitcoin Fund Structure – features GNY

Fraud is still an issue for cryptocurrency investors, but that risk can be mitigated with the index fund structure offered by products such as the Grayscale Bitcoin Trust (GBTC).

GBTC, the largest bitcoin index fund, is relevant at a time when crypto investors are still struggling with some issues that have plagued the asset class since inception. For example, GNY, a blockchain-based machine learning firm, notes that 38% of bitcoin investors suffered from security breaches or bad storage of the digital asset, while another 35% say that they forgot passwords to digital wallets.

“Around two out of five (44%) of those Bitcoin traders who have suffered from one of more of these issues say the value of their lost Bitcoin was less than $1,000. One in five say it was between $1,000 and $3,000, 17% between $3,000 and $5,000 while 19% say it was even higher,” says GNY.

GBTC, which tracks the CoinDesk Bitcoin Price Index (XBX), relieves investors of the aforementioned burdens because like any other fund or stock, shares of GBTC are bought and sold through brokerage accounts.

Making the GBTC structure all the more relevant to bitcoin investors is the fact that the fund offers crypto market participants an avenue for consolidating exposure, which is something that investors may struggle with.

“Perhaps to reduce the chances of being a victim of fraud, 92% of those who trade at least $1,000 a month in Bitcoin use two or more exchanges when trading the cryptocurrency. Some 29% say they use five or more, and one in 20 (5%) use over ten exchanges,” adds GNY.

A spot bitcoin exchange traded fund, which GBTC could eventually convert to with regulatory approval, would offer the same efficiency and security benefits as the current index fund structure. Bottom line: More crypto security is needed, and GBTC can offer investors some protection from fraud.

“Thankfully, the cryptocurrency and digital asset industry is making huge strides in improving infrastructure and security so that traders can focus more on just trying to trade the volatility and price of Bitcoin and other cryptocurrencies,” says GNY CEO Cosmas Wong.

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Originally published: March 01, 2022

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