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.
Is Grayscale XRP Trust A Better Choice For Buying XRP
There are several benefits to buying XRP through Grayscale’s closed-end fund instead of through spot trading on crypto exchanges. The asset manager stated how the fund helps investors avoid the challenges of “buying, storing, and safekeeping XRP directly.” A major benefit of such a fund is the ease it provides, especially for non-crypto natives.
Traditional investors can buy the Grayscale XRP Trust instead of having to set up a crypto wallet and account with crypto exchanges. Moreover, buying shares in the fund is arguably more secure than buying XRP on crypto platforms. Security remains a major problem in the crypto space, with hacks still rampant. Recently, hackers stole $43 million worth of crypto from the BingX exchange.
Meanwhile, institutional funds are less prone to these attacks and exploits. Moreover, they are also under regulatory scrutiny, which makes them a better investment option than buying crypto independently through exchanges. The collapse of exchanges like Mt. Gox and FTX has shown that it always takes a while before customers can recover their assets if their funds are mismanaged.
Why The Fund Might Not Be The Better Choice
It is worth mentioning that the Grayscale XRP trust isn’t easily accessible. The asset manager stipulated that the fund is only available to accredited investors, who are believed to be brokerage firms. Moreover, investors will buy these shares through a private placement, with a one-year holding period.
This means that investors cannot trade their shares on the secondary market until after one year. Grayscale also revealed that redemptions of the shares are currently not authorized, meaning that investors might have to hold onto their shares longer than they want to.
The Trust also has a management fee of 2.50%, which Grayscale will earn from investors to oversee the investment fund. Therefore, 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 equals almost 20 XRP, meaning the Trust isn’t trading at a premium to the XRP price. Therefore, investing in the fund isn’t precisely an arbitrage opportunity for traders who usually look to take advantage of price discrepancies.
At the time of writing, Grayscale already has $707,080 in assets under management (AuM) for the fund, indicating that investors are already expressing considerable interest in the Trust.
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