Cryptocurrencies are hot right now.
Bitcoin traded for more than $55,000 a coin earlier this week.
Its price is rising because more and more people want access to it. Today, companies such as Tesla and Square are adding it to their treasuries.
We’ve come a long way!
So, would it surprise you if I told you there are ways to buy cryptos at a discount?
If You Want to Play, You Have to Pay (Normally)
Take a look at this chart:
(Source: Bloomberg.)
The numbers in this chart are percentages. They’re all greater than zero.
They represent the premium at which the Grayscale Ethereum Trust (OTC: ETHE) traded above the value of the Ethereum it held last year.
On one day in June 2020, the price of the trust was 948% higher than the value of the crypto it held.
Can you believe that?
The price was $26.61, and it only held $2.54 of Ethereum per share.
People still bought it, though. On that day, ETHE traded more than 474,000 shares.
How to Be More Certain
I understand you may not have wanted to buy at such a premium.
In fact, you shouldn’t have. Shares are still below $26 today.
But you may still want to buy some Ethereum. It’s where the world’s heading.
There’s a “fear of missing out” at work here too. You don’t want to lose your chance to buy this at a discount.
And those who bought ETHE last year were happy. It rose 450% from September 30 to December 22. That’s less than three months!
Warren Buffett’s Buybacks
Most of us don’t like to overpay for things.
Warren Buffett is no different.
He only buys back shares of Berkshire Hathaway when they trade below their intrinsic value.
Buffett doesn’t share this number with the public, but he tracks it. He knows what it is.
He has a plan in place to only buy back shares for less than they’re worth. That’s smart.
Be Like Buffett
The great thing is that we can do that today too.
As of Wednesday’s close, ETHE no longer trades at a massive premium to its net asset value.
In fact, it’s trading at a discount:
(Source: Bloomberg.)
On March 4, its price closed 9.5% below the value of the Ethereum it held.
What a deal!
On Wednesday, shares were still trading 7% below the value of the crypto.
You don’t have to overthink this.
If you’re interested in cryptos, this may be the route you want to take to own them.
If you prefer bitcoin, the Grayscale Bitcoin Trust (OTC: GBTC) is also trading below the value of the crypto it holds. The discount was 3.8% as of Wednesday’s close.
As you can see in the year-to-date ETHE premium chart above, these amounts will change. And they can change quickly.
Another perk is the cost. Commissions and fees to trade cryptos on Coinbase and other exchanges can be pricey. But buying these trusts on a stock exchange isn’t.
So, if you’re in the market for some crypto, you should know that these Grayscale trusts are an option. And they’re well-priced right now.
Good Investing,
Editor, Profit Line
P.S. I presented a simple trade above. I believe it’s a good way to make money.
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