They exchange their bitcoin for shares of GBTC, hold em for 6 months, and then can sell the shares at the market price, which is trading at roughly a 25% to the current net asset value.
They could get the shaft though should the premium come out once selling - profit taking - kicks in. Always risk involved. ;-)
Not in this case. They get the shares at NAV, so if the premium comes out, they are right where they started had they just held the bitcoin. Only way they lose is if the trust traded at a discount instead of a premium, which it has never done it its almost 8 year history. It's averaged like a 17% premium since inception I belive.
Yeah, you're correct, but the guaranteed "premium" is very relative is all I was saying. Essentially, it will trade like any other derivative, just that there's never a "cash", or in this case, "Bitcoin" settlement. So, if too many head for the exit at the same time, a theoretical discount to NAV is not an impossibility. I don't think it's too awfully likely, but it is a distinct, and very real, possibility. Now, that would be the dip to buy!
Yea I guess it is possible, though it hasn't happened yet, ever. This setup is exactly how Blockfi pays the interest that it does. It uses the bitcoin that clients loan to them, then exchanges them for shares of gbtc and sells the shares after 6 months and locks the premium. It's not a perfect plan as bitcoin moves around quite a bit during those 6 months though.