Why Stash has Chosen Grayscale for Crypto in Smart Portfolios

We want to take a moment to explain why Stash has chosen cryptocurrency products from Grayscale Investments for its Smart Portfolios*.

Grayscale is the world’s largest digital asset manager and a long-term leader in cryptocurrency investing. Not only does the company manage more than $44 billion in digital currency assets, it holds approximately 3.5% of all Bitcoin in circulation.** Founded in 2013, Grayscale offers more than a dozen funds that offer investors access to digital currency. 

Smart Portfolio will feature investments in: 

• The Grayscale Bitcoin Trust (GBTC), which offers exposure to Bitcoin.
• The Grayscale Ethereum Trust (ETHE), which offers exposure to Ethereum.

The marketplace for digital currency is large. And Stash’s investment committee has specifically selected Bitcoin and Ethereum for Smart Portfolio, since these assets have the longest histories and are the most mature and liquid cryptocurrencies.

A word about Delaware statutory trusts

Through Smart Portfolio, you’ll be purchasing shares of something called a Delaware statutory trust (DST).  DSTs are regulated investment companies, with structures similar to mutual funds or ETFs.  The trust pools investor cash and streamlines the investment process. It will give you exposure to cryptocurrency while outsourcing the responsibility of trading, storing, or safeguarding individual coins or tokens. Unlike ETFs, these DSTs are not traded on major stock exchanges. However, they trade hundreds of millions of dollars a day on the over-the-counter (OTC) market, which is a market for securities that don’t meet certain price per share or market capitalization requirements.

A special note: Grayscale has filed paperwork with the Securities and Exchange Commission (SEC) to convert Grayscale Bitcoin Trust (GBTC) into an ETF. Pending the approval process, shares of the DST would automatically convert into shares of the ETF. 

If you want to learn more about cryptocurrency as an asset, you can find out more here. 

Risks of crypto and Delaware statutory trusts

Putting money into the market involves risk, and you can always lose money when you invest. Cryptocurrency is a particularly volatile asset, meaning it is subject to short-term price swings (up and down) that are generally much more dramatic than what stocks and bonds experience. 

Additionally, due to the uniqueness of the DST structure, the value of the shares of GBTC and ETHE may change at a different rate than the price changes in Bitcoin and Ethereum. While the value of the actual coins inside the trusts tracks the price of the cryptocurrencies, the share prices of the two DSTs do not exactly track the price movement of the coins. As a result, the DSTs trade at a discount to the value of the underlying coins. The discount could be viewed as a positive, as the underlying value is greater than the price. Plus, the underlying value could increase over time. However, it’s possible that the discount will always exist and the discount could even increase further.  

These funds have higher expense ratios than most ETFs, and those costs are embedded in the price of the security when it is bought or sold.  Stash does not charge additional trading fees for these securities, and only charges a monthly subscription fee. 

*As of 11/17/21