Budget 2022 was a double win for Indian crypto investors. A 30% tax has been added to your crypto profits since April 1st. This cannot be used for losses due to other crypto transactions. A TDS of 1% will also be added to every transaction starting July 1.
Did you know you can invest in crypto indirectly through the US markets in a tax-efficient manner? Grayscale allows investors to gain exposure to digital currencies through traditional equities while saving on taxes.
What is Grayscale?
Grayscale is one of the most prominent digital currency asset managers with $40 billion under management (AUM). This allows investors to access the rapidly-evolving digital market. You can access digital currencies such as Bitcoin, Ethereum Cash, Litecoin and Ethereum Classic through a variety of products. Grayscale products can be purchased over-the-counter (OTC). They are therefore not listed on any stock exchange, but are listed on OTCQX. This is a marketplace that allows OTC stocks to be traded.
Zebpay is a partnership with Vested that allows you to invest in crypto indirectly through Grayscale securities. You must be a Vested Premium Subscriber to invest in these. Let’s take a look at the various Grayscale products available.
Grayscale Bitcoin Trust (GBTC
It is the largest publicly traded Bitcoin fund. It invests solely in Bitcoin (BTC), and derives its value from the BTC price. Based on Bitcoin per share, the shares track the BTC market prices less any fees or expenses. Grayscale securities are most fond of the GBTC. It had assets under management (AUM), of $24.9 billion on April 27, 2022.
Grayscale Ethereum Trust (ETHE)
This security passively and solely invests in Ethereum (ETH). It derives its value only from the price of ETH. These shares, which are based on Ethereum per share, track the ETH market prices with fewer fees or expenses. It had an AUM of $8.8 billion on April 27, 2022.
Grayscale Litecoin Trust (LTCN
This security passively and solely invests in Litecoin, (LTC), and derives its value from the price LTC. Based on LTC per share, the shares track the LTC market prices less any fees or expenses. As of April 27, 2022, the AUM was $154.6 million.
Grayscale Ethereum Trust (ETCG)
The ETCG passively and solely invests in Ethereum Classic. It derives its value only from the price ETC. Based on ETC per share, the shares track the ETC market prices less any fees or expenses. It had an AUM totaling $371.2 million as of April 27, 2022.
Grayscale Bitcoin Cash Trust (BCHG
The BCGH is passively and solely invested in Bitcoin Cash, (BCH), and derives its value by the price of BCH. Based on BCH per share, the shares track the market price for BCH less any fees or expenses. As of 27 April 2022, it had assets under management totalling $95.4 million.
The figure below shows how Grayscale trusts performed relative to crypto it tracks.
Source: Yahoo! Source: Yahoo! Finance
Grayscale Digital Large Cap Fund: (GDLC
While you can invest in Bitcoin, Ethereum, and other cryptos individually via the trusts mentioned above, the Grayscale Digital Large Cap Fund might be a better option if you are looking to invest in large-cap digital assets as security. It is dominated by Bitcoin and Ethereum, accounting for 61.43% and 28.57% respectively, as of April 27, 2022. There are also minor amounts of Litecoin and Solana, Cardano (Avalanche), and other coins. As of April 28, 2022, the GDLC’s AUM was $396.1 million.
Grayscale Crypto products: The benefits
Grayscale products can help you make tax-efficient investments into cryptocurrency. We’ve already discussed this. This isn’t the only benefit.
It will help you save tax
Grayscale securities does not charge a flat 30% tax for crypto investments. You don’t have to pay any TDS.
The type of gains you have will affect your tax. Your investments held for less than 36 month will be considered short-term capital gain and will be subject to tax according to your income bracket. Your investments that have been held for over 36 months will be considered long-term capital gain and subject to 20% tax with indexation. You can save substantial tax if you invest for the long-term.
It’s safe and hassle-free
You must open an account on a crypto exchange before you can invest directly in cryptocurrency. The process can be cumbersome as many of the best banks, such as ICICI Bank, do not allow funds to be transferred to crypto exchanges. There have been cases of hacking on crypto exchanges. Grayscale securities makes investing in crypto easy. It is similar to investing in stocks or ETFs. You don’t have to worry about your investments being safe.
Keep this in mind
These securities are high-risk investments. There is high volatility in the underlying assets and significant tracking errors between share prices and the actual value of those assets. It is also important to know the fees associated with any investment. You can also invest in these securities under the Liberalized Remittance Scheme guidelines. This allows you to invest up $250,000 per person per year.
To sum up
We have shown that the hassles involved in buying crypto and the tax implications of your transactions with crypto can not be a deterrent to investing in your favorite cryptocurrency. Grayscale securities make it easier to invest in crypto and can help you save taxes. These investments are considered high-risk and you should do your research to ensure that you invest in the right way for your risk tolerance.
How to invest
Vested makes it simple to invest in Grayscale products in just three steps.
Get a Vested Premium account. Fund your account. Start investing!
What are you waiting? Register for Vested to become a global investment.
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