Grayscale XRP Trust has emerged as an alternative for investors looking to buy XRP, as it provides exposure to the cryptocurrency. However, the question remains whether the closed-end fund is a better choice than purchasing spot XRP on crypto exchanges and enjoying the self-custody of one's coins.
Investors looking to buy XRP now have an alternative option, thanks to the Grayscale XRP Trust, which offers exposure to the cryptocurrency. But is the closed-end fund a better choice than buying XRP spot on crypto exchanges and enjoying the self-custody of one’s coins?
Several benefits come with buying XRP through Grayscale’s closed-end fund rather than spot trading on crypto exchanges. The asset manager outlined how the fund saves investors the trouble of “buying, storing, and safekeeping XRP directly.” A major benefit of such a fund is its ease, especially for non-crypto natives.
Traditional investors can buy the Grayscale XRP Trust instead of having to set up a crypto wallet and account on crypto exchanges. Furthermore, buying shares in the fund is arguably safer than buying XRP on crypto platforms. Security remains a major issue in the crypto space, with hacks still occurring frequently. Recently, hackers stole $43 million in crypto from the BingX exchange.
Meanwhile, institutional funds are less susceptible to these attacks and exploits. Moreover, they are also under regulatory supervision, making them a better investment option than buying crypto independently through exchanges. The collapses of exchanges like Mt. Gox and FTX have shown that customers’ recovery of their assets can take a long time if their funds are mismanaged.
Why The Fund Might Not Be The Better Choice
It is important to note that the Grayscale XRP trust is not easily accessible. The asset manager stated that the fund is only available to accredited investors, which are typically brokerage firms. Furthermore, investors will purchase these shares through a private placement, which has a one-year holding period.
This means that investors cannot trade their shares on the secondary market until after one year. Grayscale also noted that redemptions of the shares are not currently authorized, suggesting that investors may have to hold onto their shares for longer than they intend.
The Trust also has a management fee of 2.50%, which Grayscale will earn from investors for overseeing the investment fund. Thus, buying XRP through crypto exchanges is arguably more cost-effective than gaining exposure through Grayscale’s fund.
The Grayscale XRP Trust currently has a net asset value (NAV) of $11.65 per share. Each share is equivalent to nearly 20 XRP, indicating that the Trust is not trading at a premium to the XRP price. Hence, investing in the fund is not exactly an arbitrage opportunity for traders who usually seek to capitalize on price discrepancies.
At the last check, Grayscale already has $707,080 in assets under management (AuM) for the fund, suggesting that investors are already showing significant interest in the Trust.
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