When categorizing GBTC, Grayscale Bitcoin Trust, from short term capital gains and losses, I can select the choice: "Mutual Fund, Index Fund, or ETF," or a categorize it as stock. Do you know which one I should select?
You should categorize it as Stock, or you can choose ETF. The difference between Mutual Funds and ETF is how they are being managed. Mutual funds usually are actively managed and ETFs are mostly passively managed. Grayscale Bitcoin Trust is solely and passively invested in Bitcoin, so it could be categorized as ETF. Stock is a broad definition and could be used in almost any case.
By purchasing shares of GBTC, the investor gains exposure to Bitcoin. What is then the answer to the question in TT, "did you acquire, sell, or exchange any virtual currency in 2020?"
Technically you are buying shares in a Trust that deals with Bitcoin and not the Bitcoin itself. However, if you check Yes, it won't affect your return and will indicate to the IRS that you are being transparent.