ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
Title of each class: |
Trading Symbol(s) |
Name of each exchange on which registered: | ||
N/A |
N/A |
N/A |
☒ | Accelerated filer | ☐ | ||||
Non-accelerated filer | ☐ | Smaller reporting company | ||||
Emerging growth company |
• | the extreme volatility of trading prices that many digital assets, including Bitcoin, have experienced in recent periods and may continue to experience, which could have a material adverse effect on the value of the Shares; |
• | the recentness of the development of digital assets and the uncertain medium-to-long |
• | the value of the Shares depending on the acceptance of Bitcoin, a new and rapidly evolving industry; |
• | the value of the Shares relating directly to the value of Bitcoin then held by the Trust, the value of which may be highly volatile and subject to fluctuations due to a number of factors; |
• | the unregulated nature and lack of transparency surrounding the operations of Digital Asset Exchanges, which may adversely affect the value of digital assets and, consequently, the value of the Shares; |
• | the limited history of the Index; |
• | risks related to the COVID-19 outbreak, which could negatively impact the value of the Trust’s holdings and significantly disrupt its operations; |
• | the lack of an ongoing redemption program due to the holding period under Rule 144, and the Trust’s ability to halt creations from time to time, resulting in the lack of an arbitrage mechanism to keep the value of the Shares closely linked to the Index Price; |
• | the possibility that the Shares may trade at a price that is at, above or below the Trust’s Digital Asset Holdings per Share as a result of the non-current trading hours between OTCQX and the Digital Asset Exchange Market; |
• | regulatory changes or actions by the U.S. Congress or any U.S. federal or state agencies that may affect the value of the Shares or restrict the use of one or more digital assets, mining activity or the operation of their networks or the Digital Asset Exchange Market in a manner that adversely affects the value of the Shares; |
• | changes in the policies of the U.S. Securities and Exchange Commission (the “SEC”) that could adversely impact the value of the Shares; |
• | regulatory changes or actions in foreign jurisdictions that may affect the value of the Shares or restrict the use of one or more digital assets, mining activity or the operation of their networks or the Digital Asset Exchange Market in a manner that adversely affects the value of the Shares; |
• | the possibility that an Authorized Participant, the Trust or the Sponsor could be subject to regulation as a money service business or money transmitter, which could result in extraordinary expenses to the Authorized Participant, the Trust or the Sponsor and also result in decreased liquidity for the Shares; |
• | regulatory changes or interpretations that could obligate the Trust or the Sponsor to register and comply with new regulations, resulting in potentially extraordinary, nonrecurring expenses to the Trust; |
• | potential delays in mail reaching the Sponsor when sent to the Trust at its registered office; |
• | possible requirements for the Trust to disclose information, including information relating to investors, to regulators; |
• | potential conflicts of interest that may arise among the Sponsor or its affiliates and the Trust; |
• | the potential discontinuance of the Sponsor’s continued services, which could be detrimental to the Trust; |
• | the Custodian’s possible resignation or removal by the Sponsor, which would trigger early termination of the Trust; and; |
• | additional risk factors discussed in Part I, Item 1A “Risk Factors” and Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K, as well as those described from time to time in our future reports filed with the SEC. |
• | Easily Accessible and Relatively Cost Efficient |
• | Market-Traded and Transparent |
• | Minimal Credit Risk |
• | Safekeeping System |
• | Custodian |
• | Cold Storage of Private Keys |
• | Location of Private Vaults |
• | Enhanced Security 2-step verification. Multiple private key shards held by the Custodian must be combined to reconstitute the private key to sign any transaction in order to transfer the Trust’s Bitcoins. Private key shards are distributed geographically in secure vaults around the world, including in the United States. As a result, if any one secure vault is ever compromised, this event will have no impact on the ability of the Trust to access its assets, other than a possible delay in operations, while one or more of the other secure vaults is used instead. These security procedures are intended to remove single points of failure in the protection of the Trust’s Bitcoins. |
• | Custodian Audits |
• | Directly Held Bitcoins |
• | Sponsor’s Fee |
• | the Custodian’s agreement to provide access to the IR Virtual Currency; |
• | the availability of a safe and practical way to custody the IR Virtual Currency; |
• | the costs of taking possession and/or maintaining ownership of the IR Virtual Currency and whether such costs exceed the benefits of owning such IR Virtual Currency; |
• | whether there are any legal restrictions on, or tax implications with respect to, the ownership, sale or disposition of the Incidental Right or IR Virtual Currency, regardless of whether there is a safe and practical way to custody and secure such Incidental Right or IR Virtual Currency; |
• | the existence of a suitable market into which the Incidental Right or IR Virtual Currency may be sold; and |
• | whether the Incidental Right or IR Virtual Currency is, or may be, a security under federal securities laws. |
Digital Asset Exchanges included in the Index as of December 31, 2021(1) |
Volume (BTC) |
Market Share (2) |
||||||
Coinbase Pro |
32,019,298 | 20.76 | % | |||||
Bitstamp |
22,030,291 | 14.28 | % | |||||
Kraken |
11,009,299 | 7.14 | % | |||||
LMAX Digital |
6,329,133 | 4.10 | % | |||||
Total BTC-U.S. Dollar trading pair |
71,388,021 | 46.28 | % | |||||
(1) | On January 19, 2020, the Index Provider removed Bittrex due to a lack of trading volume and added LMAX Digital due to the exchange meeting the liquidity thresholds. On April 6, 2020, the Index Provider removed itBit due to a lack of trading volume and did not add any constituents as part of its scheduled quarterly review. |
(2) | Market share is calculated using trading volume data (in Bitcoins) provided by the Index Provider for certain Digital Asset Exchanges, including Coinbase Pro, Bitstamp, Kraken, and LMAX Digital, as well as certain other large U.S.-dollar denominated Digital Asset Exchanges that are not currently included in the Index, including Binance.US (data included from April 1, 2020), Bitfinex, Bitflyer (data included from December 24, 2018), Bittrex (data included from July 31, 2018), ErisX (data included from October 1, 2020), Gemini, itBit, LakeBTC (data included from May 1, 2015 to June 1, 2018 and from January 27, 2019), HitBTC (data included from April 1, 2019 to March 31, 2020) and OKCoin. |
• | Compliance with applicable U.S. federal and state licensing requirements and practices regarding anti-money laundering (“AML”) and know-your-customer (“KYC”) regulations (i.e., a U.S.-Compliant Exchange), based on a review of the exchanges’ publicly disclosed policies and guidelines |
• | Publicly known ownership |
• | No restrictions on deposits and/or withdrawals of Bitcoin |
• | No restrictions on deposits and/or withdrawals of U.S. dollars |
• | Reliably displays new trade prices and volumes on a real-time basis through APIs |
• | Programmatic trading of the indexed asset’s spot price |
• | Liquid market in the indexed asset |
• | Trading volume must represent a minimum of total eligible trading volumes (5% for U.S. exchanges and 10% non-U.S. exchanges) |
• | Discretion of the Index Provider’s analysts, which applies to both the inclusion and exclusion of such exchanges. The Index Provider would only use this discretion to include or exclude an exchange in order to ensure the integrity of the Index; to date, the Index Provider has not exercised such discretion. |
• | Volume Weighting: Constituent Exchanges with greater liquidity receive a higher weighting in the Index, increasing the ability to execute against (i.e., replicate) the Index in the underlying spot markets. |
• | Price-Variance Weighting: The Index Price reflects data points that are discretely weighted in proportion to their variance from the rest of the Constituent Exchanges. As the price at a particular exchange diverges from the prices at the rest of the Constituent Exchanges, its weight in the Index Price consequently decreases. |
• | Inactivity Adjustment: The Index Price algorithm penalizes stale activity from any given Constituent Exchange. When a Constituent Exchange does not have recent trading data, its weighting in the Index Price is gradually reduced until it is de- weighted entirely. Similarly, once trading activity at a Constituent Exchange resumes, the corresponding weighting for that Constituent Exchange is gradually increased until it reaches the appropriate level. |
• | Manipulation Resistance: In order to mitigate the effects of wash trading and order book spoofing, the Index only includes executed trades in its calculation. Additionally, the Index only includes Constituent Exchanges that charge trading fees to its users in order to attach a real, quantifiable cost to any manipulation attempts. |
• | Volume Weighting: Each Constituent Exchange will be weighted to appropriately reflect the trading volume share of the Constituent Exchange relative to all the Constituent Exchanges during this same period. For example, an average hourly weighting of 67.07%, 11.88%, 14.57% and 6.49% for Coinbase Pro, Kraken, LMAX Digital and Bitstamp, respectively, would represent each Constituent Exchange’s share of trading volume during the same period. |
• | Inactivity Adjustment: Assume that a Constituent Exchange represented a 14% weighting on the Index Price of Bitcoin, which is based on the per-second calculations of its trading volume and price-variance relative to the cohort of Constituent Exchanges included in such Index, and then went offline for approximately two hours. The index algorithm would automatically recognize inactivity and start de-weighting the Constituent Exchange at the 3-minute mark and continue to do so over a 7-minute period until its influence was effectively zero, 10-minutes after becoming inactive. As soon as trading activity resumed at the Constituent Exchange, the index algorithm would re-weight it to the appropriate weighting based on trading volume and price-variance relative to the cohort of Constituent Exchanges included in the Index. Due to the period of inactivity, it would re-weight the Constituent Exchange activity to a weight lower than its original weighting --for example, to 12%. |
• | Price-Variance Weighting: The price-variance weighting adjustment is a relative measure of each exchange versus the cohort of exchanges. The further the price at a constituent exchange is from the mean price of the cohort, the less influence that exchange’s price will have on the algorithm that produces the Index Price, as the exchange data is discretely weighted in proportion to their variance from the rest of the exchanges on a per-second basis and there is no minimum threshold the variance must meet for this adjustment to take place. For example, assume that for a one-hour period, Bitcoin’s execution prices on one Constituent Exchange were trading more than 7% higher than the average execution prices on another Constituent Exchange. The algorithm will automatically detect the anomaly (price variance) and reduce that specific Constituent Exchange’s weighting during that one-hour period, ensuring a reliable spot reference price that is unaffected by the localized event and that is reflective of broader market activity. |
1. | Index Price = The price set by the Index as of 4:00 p.m., New York time, on the valuation date. If the Index becomes unavailable, or if the Sponsor determines in good faith that the Index does not reflect an accurate price, then the Sponsor will, on a best efforts basis, contact the Index Provider to obtain the Index Price directly from the Index Provider. If after such contact the Index remains unavailable or the Sponsor continues to believe in good faith that the Index does not reflect an accurate price, then the Sponsor will employ the next rule to determine the Index Price. There are no predefined criteria to make a good faith assessment and it will be made by the Sponsor in its sole discretion. |
2. | Index Price = The price set by Coin Metrics Real-Time Rate (the “Secondary Index”) as of 4:00 p.m., New York time, on the valuation date (the “Secondary Index Price”). The Secondary Index Price is a real-time reference rate price, calculated using trade data from constituent markets selected by Coin Metrics (the “Secondary Index Provider”). The Secondary Index Price is calculated by applying weighted-median techniques to such trade data where half the weight is derived from the trading volume on each constituent market and half is derived from inverse price variance, where a constituent market with high price variance as a result of outliers or market anomalies compared to other constituent markets is assigned a smaller weight. If the Secondary Index becomes unavailable, or if the Sponsor determines in good faith that the Secondary Index does not reflect an accurate price, then the Sponsor will, on a best efforts basis, contact the Secondary Index Provider to obtain the Secondary Index Price directly from the Secondary Index Provider. If after such contact the Secondary Index remains unavailable or the Sponsor continues to believe in good faith that the Secondary Index does not reflect an accurate price, then the Sponsor will employ the next rule to determine the Index Price. There are no predefined criteria to make a good faith assessment and it will be made by the Sponsor in its sole discretion. |
3. | Index Price = The price set by the Trust’s principal market (the “Tertiary Pricing Option”) as of 4:00 p.m., New York time, on the valuation date. The Tertiary Pricing Option is a spot price derived from the principal market’s public data feed that is believed to be consistently publishing pricing information as of 4:00 p.m., New York time, and is provided to the Sponsor via an application programming interface. If the Tertiary Pricing Option becomes unavailable, or if the Sponsor determines in good faith that the Tertiary Pricing Option does not reflect an accurate price, then the Sponsor will, on a best efforts basis, contact the Tertiary Pricing Provider to obtain the Tertiary Pricing Option directly from the Tertiary Pricing Provider. If after such contact the Tertiary Pricing Option remains unavailable after such contact or the Sponsor continues to believe in good faith that the Tertiary Pricing Option does not reflect an accurate price, then the Sponsor will employ the next rule to determine the Index Price. There are no predefined criteria to make a good faith assessment and it will be made by the Sponsor in its sole discretion. |
4. | Index Price = The Sponsor will use its best judgment to determine a good faith estimate of the Index Price. There are no predefined criteria to make a good faith assessment and it will be made by the Sponsor in its sole discretion. |
• | China has made transacting in cryptocurrencies illegal for Chinese citizens in mainland China, and additional restrictions may follow. China has banned initial coin offerings and there have been reports that Chinese regulators have taken action to shut down a number of China-based Digital Asset Exchanges. In May 2021, the Chinese government announced renewed efforts to restrict cryptocurrency trading and mining activities, citing concerns about high energy consumption and its desire to promote financial |
stability. Regulators in the Inner Mongolia and other regions of China have proposed regulations that would create penalties for companies engaged in cryptocurrency mining activities and introduce heightened energy saving requirements on industrial parks, data centers and power plants providing electricity to cryptocurrency miners. In January 2018, a Chinese news organization reported that the People’s Bank of China had ordered financial institutions to stop providing banking or funding to “any activity related to cryptocurrencies.” |
• | South Korea determined to amend its Financial Information Act in March 2020 to require virtual asset service providers to register and comply with its AML and counter-terrorism funding framework. These measures also provide the government with the authority to close Digital Asset Exchanges that do not comply with specified processes. South Korea has also banned initial coin offerings. |
• | The Reserve Bank of India in April 2018 banned the entities it regulates from providing services to any individuals or business entities dealing with or settling digital assets. In March 2020, this ban was overturned in the Indian Supreme Court, although the Reserve Bank of India is currently challenging this ruling. |
• | The United Kingdom’s Financial Conduct Authority published final rules in October 2020 banning the sale of derivatives and exchange traded notes that reference certain types of digital assets, contending that they are “ill-suited” to retail investors citing extreme volatility, valuation challenges and association with financial crime. |
• | the Shares subject to each sale have been held for the requisite holding period under Rule 144 by the selling shareholder; |
• | the shareholder is the sole beneficial owner of the Shares; |
• | the Sponsor is aware of no circumstances in which the shareholder would be considered an underwriter or engaged in the distribution of securities for the Trust; |
• | none of the Shares are subject to any agreement granting any pledge, lien, mortgage, hypothecation, security interest, charge, option or encumbrance; |
• | none of the identified selling shareholders is an affiliate of the Sponsor; |
• | the Sponsor consents to the transfer of the Shares; and |
• | outside counsel and the Transfer Agent can rely on the representations. |
1. | Determine the Index Price as of such business day. |
2. | Multiply the Index Price by the Trust’s aggregate number of Bitcoins owned by the Trust as of 4:00 p.m., New York time, on the immediately preceding day, less the aggregate number of Bitcoins payable as the accrued and unpaid Sponsor’s Fee as of 4:00 p.m., New York time, on the immediately preceding day. |
3. | Add the U.S. dollar value of Bitcoins, calculated using the Index Price, receivable under pending creation orders, if any, determined by multiplying the number of the Creation Baskets represented by such creation orders by the Basket Amount and then multiplying such product by the Index Price. |
4. | Subtract the U.S. dollar amount of accrued and unpaid Additional Trust Expenses, if any. |
5. | Subtract the U.S. dollar value of the Bitcoins, calculated using the Index Price, to be distributed under pending redemption orders, if any, determined by multiplying the number of Baskets to be redeemed represented by such redemption orders by the Basket Amount and then multiplying such product by the Index Price (the amount derived from steps 1 through 5 above, the “Digital Asset Holdings Fee Basis Amount”). |
6. | Subtract the U.S. dollar amount of the Sponsor’s Fee that accrues for such business day, as calculated based on the Digital Asset Holdings Fee Basis Amount for such business day. |
Year |
||||||||||||
1 |
2 |
3 |
||||||||||
Hypothetical price per Bitcoin |
$ | 100.00 | $ | 100.00 | $ | 100.00 | ||||||
Sponsor’s Fee |
2.00 | % | 2.00 | % | 2.00 | % | ||||||
Shares of Trust, beginning |
100,000.00 | 100,000.00 | 100,000.00 | |||||||||
Bitcoins in Trust, beginning |
10,000.00 | 9,800.00 | 9,604.00 | |||||||||
Hypothetical value of Bitcoins in Trust |
$ | 1,000,000.00 | $ | 980,000.00 | $ | 960,400.00 | ||||||
Beginning Digital Asset Holdings of the Trust |
$ | 1,000,000.00 | $ | 980,000.00 | $ | 960,400.00 | ||||||
Bitcoins to be delivered to cover the Sponsor’s Fee |
200 | 196.00 | 192.08 | |||||||||
Bitcoins in Trust, ending |
9,800.00 | 9,604.00 | 9,411.92 | |||||||||
Ending Digital Asset Holdings of the Trust |
$ | 980,000.00 | $ | 960,400.00 | $ | 941,192.00 | ||||||
Ending Digital Asset Holdings per share |
$ | 9.80 | $ | 9.60 | $ | 9.41 | ||||||
Hypothetical price per Bitcoin |
$ | 100.00 | $ | 100.00 | $ | 100.00 |
• | a U.S. federal or state regulator requires the Trust to shut down or forces the Trust to liquidate its Bitcoins or seizes, impounds or otherwise restricts access to Trust assets; |
• | any ongoing event exists that either prevents the Trust from making or makes impractical the Trust’s reasonable efforts to make a fair determination of the Index Price; |
• | any ongoing event exists that either prevents the Trust from converting or makes impractical the Trust’s reasonable efforts to convert Bitcoins to U.S. dollars; or |
• | a certificate of dissolution or revocation of the Sponsor’s charter is filed (and 90 days have passed since the date of notice to the Sponsor of revocation without a reinstatement of its charter) or the withdrawal, removal, adjudication or admission of bankruptcy or insolvency of the Sponsor has occurred, unless (i) at the time there is at least one remaining Sponsor and that remaining Sponsor carries on the Trust or (ii) within 90 days of any such event shareholders holding at least a majority (over 50%) of Shares, not including Shares held by the Sponsor and its affiliates, agree in writing to continue the activities of the Trust and to select, effective as of the date of such event, one or more successor Sponsors. |
• | the SEC determines that the Trust is an investment company required to be registered under the Investment Company Act of 1940; |
• | the CFTC determines that the Trust is a commodity pool under the CEA; |
• | the Trust is determined to be a “money service business” under the regulations promulgated by FinCEN under the authority of the U.S. Bank Secrecy Act and is required to comply with certain FinCEN regulations thereunder; |
• | the Trust is required to obtain a license or make a registration under any state law regulating money transmitters, money services businesses, providers of prepaid or stored value or similar entities, or virtual currency businesses; |
• | the Trust becomes insolvent or bankrupt; |
• | the Custodian resigns or is removed without replacement; |
• | all of the Trust’s assets are sold; |
• | the Sponsor determines that the aggregate net assets of the Trust in relation to the expenses of the Trust make it unreasonable or imprudent to continue the affairs of the Trust; |
• | the Sponsor receives notice from the IRS or from counsel for the Trust or the Sponsor that the Trust fails to qualify for treatment, or will not be treated, as a grantor trust under the Code; |
• | if the Trustee notifies the Sponsor of the Trustee’s election to resign and the Sponsor does not appoint a successor trustee within 180 days; or |
• | the Sponsor determines, in its sole discretion, that it is desirable or advisable for any reason to discontinue the affairs of the Trust. |
• | financial institutions; |
• | dealers in securities or commodities; |
• | traders in securities or commodities that have elected to apply a mark-to-market |
• | persons holding Shares as part of a hedge, “straddle,” integrated transaction or similar transaction; |
• | Authorized Participants (as defined below); |
• | U.S. Holders (as defined below) whose functional currency is not the U.S. dollar; |
• | entities or arrangements classified as partnerships for U.S. federal income tax purposes; |
• | real estate investment trusts; |
• | regulated investment companies; and |
• | tax-exempt entities, including individual retirement accounts. |
• | an individual who is a citizen or resident of the United States for U.S. federal income tax purposes; |
• | a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or of any political subdivision thereof; or |
• | an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source. |
• | Extreme volatility of trading prices that many digital assets, including Bitcoin, have experienced in recent periods and may continue to experience, could have a material adverse effect on the value of the Shares; |
• | The medium-to-long |
• | The value of the Shares is dependent on the acceptance of Bitcoin, a new and rapidly evolving industry; |
• | The value of the Shares relates directly to the value of Bitcoin held by the Trust, the value of which may be highly volatile and subject to fluctuations; |
• | The unregulated nature and lack of transparency surrounding the operations of Digital Asset Exchanges may adversely affect the value of digital assets and, consequently, the value of the Shares; |
• | Risks related to the COVID-19 outbreak could negatively impact the value of the Trust’s holdings and significantly disrupt its operations; |
• | The lack of an ongoing redemption program due to the holding period under Rule 144, and the Trust’s ability to halt creations from time to time, results in the lack of an arbitrage mechanism to keep the value of the Shares closely linked to the Index Price; |
• | The Shares may trade at a price that is at, above or below the Trust’s Digital Asset Holdings per Share as a result of the non-current trading hours between OTCQX and the Digital Asset Exchange Market; |
• | Regulatory changes or actions by the U.S. Congress or any U.S. federal or state agencies may affect the value of the Shares or restrict the use of one or more digital assets, mining activity or the operation of their networks or the Digital Asset Exchange Market in a manner that adversely affects the value of the Shares; |
• | Changes in the policies of the U.S. Securities and Exchange Commission (the “SEC”) could adversely impact the value of the Shares; |
• | Regulatory changes or actions in foreign jurisdictions may affect the value of the Shares or restrict the use of one or more digital assets, mining activity or the operation of their networks or the Digital Asset Exchange Market in a manner that adversely affects the value of the Shares; |
• | An Authorized Participant, the Trust or the Sponsor could be subject to regulation as a money service business or money transmitter, which could result in extraordinary expenses to the Authorized Participant, the Trust or the Sponsor and also result in decreased liquidity for the Shares; |
• | Regulatory changes or interpretations could obligate the Trust or the Sponsor to register and comply with new regulations, resulting in potentially extraordinary, nonrecurring expenses to the Trust; |
• | The Trust may be required to disclose information, including information relating to investors, to regulators; |
• | Conflicts of interest may arise among the Sponsor or its affiliates and the Trust; |
• | The Sponsor’s services may be discontinued, which could be detrimental to the Trust; and |
• | The Custodian may resign or be removed by the Sponsor, which would trigger early termination of the Trust; and; |
• | The loss or destruction of a private key required to access a digital asset may be irreversible. If a private key is lost, destroyed or otherwise compromised and no backup of the private key is accessible, the owner would be unable to access the digital asset corresponding to that private key and the private key will not be capable of being restored by the digital asset network. |
• | Digital asset networks are dependent upon the internet. A disruption of the internet or a digital asset network, such as the Bitcoin Network, would affect the ability to transfer digital assets, including Bitcoin, and, consequently, their value. |
• | The acceptance of software patches or upgrades by a significant, but not overwhelming, percentage of the users and miners in a digital asset network, such as the Bitcoin Network, could result in a “fork” in such network’s blockchain, resulting in the operation of multiple separate networks. |
• | Governance of the Bitcoin Network is by voluntary consensus and open competition. As a result, there may be a lack of consensus or clarity on the governance of the Bitcoin Network, which may stymie the Bitcoin Network’s utility and ability to grow and face challenges. In particular, it may be difficult to find solutions or martial sufficient effort to overcome any future problems on the Bitcoin Network, especially long-term problems. |
• | The foregoing notwithstanding, the Bitcoin Network’s protocol is informally managed by a group of core developers that propose amendments to the Bitcoin Network’s source code. The core developers evolve over time, largely based on self- determined participation. To the extent that a significant majority of users and miners adopt amendments to the Bitcoin Network, the Bitcoin Network will be subject to new protocols that may adversely affect the value of Bitcoin. |
• | Over the past several years, digital asset mining operations have evolved from individual users mining with computer processors, graphics processing units and first generation application specific integrated circuit machines to “professionalized” mining operations using proprietary hardware or sophisticated machines. If the profit margins of digital asset mining operations are not sufficiently high, including due to an increase in electricity costs, digital asset miners are more likely to immediately sell tokens earned by mining, resulting in an increase in liquid supply of that digital asset, which would generally tend to reduce that digital asset’s market price. |
• | To the extent that any miners cease to record transactions that do not include the payment of a transaction fee in solved blocks or do not record a transaction because the transaction fee is too low, such transactions will not be recorded on the Blockchain until a block is mined by a miner who does not require the payment of transaction fees or is willing to accept a lower fee. Any widespread delays in the recording of transactions could result in a loss of confidence in a digital asset network. |
• | Digital asset mining operations can consume significant amounts of electricity, which may have a negative environmental impact and give rise to public opinion against allowing, or government regulations restricting, the use of electricity for mining operations. Additionally, miners may be forced to cease operations during an electricity shortage or power outage. |
• | Many digital asset networks face significant scaling challenges and are being upgraded with various features to increase the speed and throughput of digital asset transactions. These attempts to increase the volume of transactions may not be effective. |
• | The open-source structure of many digital asset network protocols, such as the protocol for the Bitcoin Network, means that developers and other contributors are generally not directly compensated for their contributions in maintaining and developing such protocols. As a result, the developers and other contributors of a particular digital asset may lack a financial incentive to maintain or develop the network, or may lack the resources to adequately address emerging issues. Alternatively, some developers may be funded by companies whose interests are at odds with other participants in a particular digital asset network. A failure to properly monitor and upgrade the protocol of the Bitcoin Network could damage that network. |
• | Moreover, in the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. The cryptography underlying Bitcoin could prove to be flawed or ineffective, or developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in such cryptography becoming ineffective. In any of these circumstances, a malicious actor may be able to take the Trust’s Bitcoin, which would adversely affect the value of the Shares. Moreover, functionality of the Bitcoin Network may be negatively affected such that it is no longer attractive to users, thereby dampening demand for Bitcoin. Even if another digital asset other than Bitcoin were affected by similar circumstances, any reduction in confidence in the source code or cryptography underlying digital assets generally could negatively affect the demand for digital assets and therefore adversely affect the value of the Shares. |
• | Bitcoins have only recently become selectively accepted as a means of payment by retail and commercial outlets, and use of Bitcoins by consumers to pay such retail and commercial outlets remains limited. Banks and other established financial institutions may refuse to process funds for Bitcoin transactions; process wire transfers to or from Digital Asset Exchanges, Bitcoin-related companies or service providers; or maintain accounts for persons or entities transacting in Bitcoin. As a result, the prices of Bitcoins are largely determined by speculators and miners, thus contributing to price volatility that makes retailers less likely to accept it as a form of payment in the future. |
• | Banks may not provide banking services, or may cut off banking services, to businesses that provide digital asset-related services or that accept digital assets as payment, which could dampen liquidity in the market and damage the public perception of digital assets generally or any one digital asset in particular, such as Bitcoin, and their or its utility as a payment system, which could decrease the price of digital assets generally or individually. |
• | Certain privacy-preserving features have been or are expected to be introduced to digital asset networks, such as the Bitcoin Network, and exchanges or businesses that facilitate transactions in Bitcoin may be at an increased risk of having banking services cut off if there is a concern that these features interfere with the performance of anti-money laundering duties and economic sanctions checks. |
• | Users, developers and miners may otherwise switch to or adopt certain digital assets at the expense of their engagement with other digital asset networks, which may negatively impact those networks, including the Bitcoin Network. |
• | In August 2017, the Bitcoin Network underwent a hard fork that resulted in the creation of a new digital asset network called Bitcoin Cash. This hard fork was contentious, and as a result some users of the Bitcoin Cash network may harbor ill will toward the Bitcoin Network. These users may attempt to negatively impact the use or adoption of the Bitcoin Network. |
• | Also in August 2017, the Bitcoin Network was upgraded with a technical feature known as “Segregated Witness” that, among other things, potentially doubles the transactions per second that can be handled on-chain and enables so-called second layer solutions, such as the Lightning Network or payment channels, that have the potential to substantially increase transaction throughput (i.e., millions of transactions per second). As of the date of this Annual Report, wallets and intermediaries that support Segregated Witness or Lightning Network-like technologies do not yet have material adoption. This upgrade may fail to work as expected leading to a decline in support and price of Bitcoin. |
• | Over the past several years, digital asset mining operations have evolved from individual users mining with computer processors, graphics processing units and first-generation application specific integrated circuit machines to “professionalized” mining operations using proprietary hardware or sophisticated machines. If the profit margins of digital asset mining operations are not sufficiently high, including due to an increase in electricity costs, digital asset miners are more likely to immediately sell tokens earned by mining, resulting in an increase in liquid supply of that digital asset, which would generally tend to reduce that digital asset’s market price. |
• | A reduction in the processing power expended by miners on the Bitcoin Network could increase the likelihood of a malicious actor or botnet obtaining control. See “If a malicious actor or botnet obtains control of more than 50% of the processing power on the Bitcoin Network, or otherwise obtains control over the Bitcoin Network through its influence over core developers or otherwise, such actor or botnet could manipulate the Blockchain to adversely affect the value of the Shares or the ability of the Trust to operate.” |
• | Miners have historically accepted relatively low transaction confirmation fees on most digital asset networks. If miners demand higher transaction fees for recording transactions in the Bitcoin Blockchain or a software upgrade automatically charges fees for all transactions on the Bitcoin Network, the cost of using Bitcoin may increase and the marketplace may be reluctant to accept Bitcoin as a means of payment. Alternatively, miners could collude in an anti-competitive manner to reject low transaction fees on the Bitcoin Network and force users to pay higher fees, thus reducing the attractiveness of the Bitcoin Network. Higher transaction confirmation fees resulting through collusion or otherwise may adversely affect the attractiveness of the Bitcoin Network, the value of Bitcoin and the value of the Shares. |
• | To the extent that any miners cease to record transactions that do not include the payment of a transaction fee in mined blocks or do not record a transaction because the transaction fee is too low, such transactions will not be recorded on the Bitcoin Blockchain until a block is mined by a miner who does not require the payment of transaction fees or is willing to accept a lower fee. Any widespread delays in the recording of transactions could result in a loss of confidence in the digital asset network. |
• | Digital asset mining operations can consume significant amounts of electricity, which may have a negative environmental impact and give rise to public opinion against allowing, or government regulations restricting, the use of electricity for mining operations. Additionally, miners may be forced to cease operations during an electricity shortage or power outage. |
• | An increase in the global Bitcoin supply; |
• | Manipulative trading activity on Digital Asset Exchanges, which, in many cases, are largely unregulated; |
• | The adoption of Bitcoin as a medium of exchange, store-of-value |
• | Forks in the Bitcoin Network; |
• | Investors’ expectations with respect to interest rates, the rates of inflation of fiat currencies or Bitcoin, and digital asset exchange rates; |
• | Consumer preferences and perceptions of Bitcoin specifically and digital assets generally; |
• | Fiat currency withdrawal and deposit policies on Digital Asset Exchanges; |
• | The liquidity of Digital Asset Markets and any increase or decrease in trading volume on Digital Asset Markets; |
• | Investment and trading activities of large investors that invest directly or indirectly in Bitcoin; |
• | A “short squeeze” resulting from speculation on the price of Bitcoin, if aggregate short exposure exceeds the number of Shares available for purchase; |
• | An active derivatives market for Bitcoin or for digital assets generally; |
• | Monetary policies of governments, trade restrictions, currency devaluations and revaluations and regulatory measures or enforcement actions, if any, that restrict the use of Bitcoin as a form of payment or the purchase of Bitcoin on the Digital Asset Markets; |
• | Global or regional political, economic or financial conditions, events and situations, such as the novel coronavirus outbreak; |
• | Fees associated with processing a Bitcoin transaction and the speed at which Bitcoin transactions are settled; |
• | Interruptions in service from or closures or failures of major Digital Asset Exchanges; |
• | Decreased confidence in Digital Asset Exchanges due to the unregulated nature and lack of transparency surrounding the operations of Digital Asset Exchanges; |
• | Increased competition from other forms of digital assets or payment services; and |
• | The Trust’s own acquisitions or dispositions of Bitcoin, since there is no limit on the number of Bitcoin that the Trust may acquire. |
• | Unanticipated problems or issues with respect to the mechanics of the Trust’s operations and the trading of the Shares may arise, in particular due to the fact that the mechanisms and procedures governing the creation and offering of the Shares and storage of Bitcoin have been developed specifically for this product; |
• | The Trust could experience difficulties in operating and maintaining its technical infrastructure, including in connection with expansions or updates to such infrastructure, which are likely to be complex and could lead to unanticipated delays, unforeseen expenses and security vulnerabilities; |
• | The Trust could experience unforeseen issues relating to the performance and effectiveness of the security procedures used to protect the Digital Asset Account, or the security procedures may not protect against all errors, software flaws or other vulnerabilities in the Trust’s technical infrastructure, which could result in theft, loss or damage of its assets; or |
• | Service providers may decide to terminate their relationships with the Trust due to concerns that the introduction of privacy enhancing features to the Bitcoin Network may increase the potential for Bitcoin to be used to facilitate crime, exposing such service providers to potential reputational harm. |
• | The Trust is not actively managed and no attempt will be made to protect against or to take advantage of fluctuations in the prices of Bitcoin, Incidental Rights or IR Virtual Currency. Consequently, if the Trust incurs expenses in U.S. dollars, the Trust’s Bitcoins, Incidental Rights or IR Virtual Currency may be sold at a time when the values of the disposed assets are low, resulting in a negative impact on the value of the Shares. |
• | Because the Trust does not generate any income, every time that the Trust pays expenses, it will deliver Bitcoin, Incidental Rights or IR Virtual Currency to the Sponsor or sell Bitcoin, Incidental Rights or IR Virtual Currency. Any sales of the Trust’s assets in connection with the payment of expenses will decrease the amount of the Trust’s assets represented by each Share each time its assets are sold or transferred to the Sponsor. |
• | Assuming that the Trust is a grantor trust for U.S. federal income tax purposes, each delivery or sale of Bitcoin, Incidental Rights or IR Virtual Currency by the Trust to pay the Sponsor’s Fee and/or Additional Trust Expenses will be a taxable event to beneficial owners of Shares. Thus, the Trust’s payment of expenses could result in beneficial owners of Shares incurring tax liability without an associated distribution from the Trust. Any such tax liability could adversely affect an investment in the Shares. See “Item 1. Business—Certain U.S. Federal Income Tax Consequences.” |
• | The Sponsor has no fiduciary duties to, and is allowed to take into account the interests of parties other than, the Trust and its shareholders in resolving conflicts of interest, provided the Sponsor does not act in bad faith; |
• | The Trust has agreed to indemnify the Sponsor and its affiliates pursuant to the Trust Agreement; |
• | The Sponsor is responsible for allocating its own limited resources among different clients and potential future business ventures, to each of which it owes fiduciary duties; |
• | The Sponsor and its staff also service affiliates of the Sponsor, including several other digital asset investment vehicles, and their respective clients and cannot devote all of its, or their, respective time or resources to the management of the affairs of the Trust; |
• | The Sponsor, its affiliates and their officers and employees are not prohibited from engaging in other businesses or activities, including those that might be in direct competition with the Trust; |
• | Affiliates of the Sponsor have substantial direct investments in Bitcoin that they are permitted to manage taking into account their own interests without regard to the interests of the Trust or its shareholders, and any increases, decreases or other changes in such investments could affect the Index Price and, in turn, the value of the Shares; |
• | There is an absence of arm’s-length negotiation with respect to certain terms of the Trust, and, where applicable, there has been no independent due diligence conducted with respect to the Trust; |
• | Several employees of the Sponsor and the Sponsor’s parent company, Digital Currency Group, Inc. (“DCG”), are FINRA-registered representatives who maintain their licenses through Genesis; |
• | DCG is (i) the sole member and parent company of the Sponsor and Genesis, the only acting Authorized Participant as of the date of this Annual Report, (ii) the indirect parent company of the Index Provider, (iii) a minority interest holder in Coinbase, which operates Coinbase Pro, one of the Digital Asset Exchanges included in the Index, and which is also the parent company of the Custodian, representing less than 1.0% of its equity and (iv) a minority interest holder in Kraken, one of the Digital Asset Exchanges included in the Index, representing less than 1.0% of its equity; |
• | DCG has investments in a large number of digital assets and companies involved in the digital asset ecosystem, including exchanges and custodians. DCG’s positions on changes that should be adopted in the Bitcoin Network could be adverse to positions that would benefit the Trust or its shareholders. Additionally, before or after a hard fork on the Bitcoin Network, DCG’s position regarding which fork among a group of incompatible forks of the Bitcoin Network should be considered the “true” Bitcoin Network could be adverse to positions that would most benefit the Trust; |
• | DCG has been vocal in the past about its support for digital assets other than Bitcoin. Any investments in, or public positions taken on, digital assets other than Bitcoin by DCG, could have an adverse impact on the price of Bitcoin; |
• | The Sponsor decides whether to retain separate counsel, accountants or others to perform services for the Trust; |
• | The Sponsor and Genesis, which acts as Authorized Participant and distributor and marketer for the Shares, are affiliated parties that share a common parent company, DCG; |
• | While the Index Provider does not currently utilize data from over-the-counter |
• | The Sponsor may appoint an agent to act on behalf of the shareholders, including in connection with the distribution of any Incidental Rights and/or IR Virtual Currency, which agent may be the Sponsor or an affiliate of the Sponsor. |
Period |
(a) Total Number of Shares of GBTC Purchased |
(b) Average Price Paid per Share of GBTC |
(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 1 |
(d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs |
||||||||||||
(in millions) |
||||||||||||||||
October 1, 2021 – October 31, 2021 |
7,002,075 | $ | 46.69 | 7,002,075 | $ | 461.3 | ||||||||||
November 1, 2021 – November 30, 2021 |
1,600,000 | 50.32 | 1,600,000 | 380.8 | ||||||||||||
December 1, 2021 – December 31, 2021 |
— | — | — | 380.8 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
8,602,075 | $ | 47.37 | 8,602,075 | $ | 380.8 | ||||||||||
|
|
|
|
|
|
|
|
(1) | On March 10, 2021, the Board of the Sponsor (“the Board”) approved the purchase by DCG, the parent company of the Sponsor, of up to $250 million worth of Shares of the Trust. Subsequently, DCG authorized such purchase. On April 30, 2021, the Board approved the purchase by DCG of up to $750 million worth of Shares of the Trust. This increased DCG’s prior authorization to purchase up to $250 million worth of Shares by $500 million. On October 20, 2021, the Board approved the purchase by DCG of up to $1 billion worth of Shares of the Trust. This increased DCG’s prior authorization to purchase up to $750 million worth of Shares by $250 million. The share purchase authorization does not obligate DCG to acquire any specific number of Shares in any period, and may be expanded, extended, modified, or discontinued at any time. From March 10, 2021 through February 22, 2022, DCG has purchased a total of $698 million worth of Shares of the Trust. |
As of December 31, | ||||||
2021 |
2020 |
2019 | ||||
Number of Shares authorized |
Unlimited | Unlimited | Unlimited | |||
Number of Shares outstanding |
692,370,100 | 638,906,600 | 269,445,300 | |||
Number of Shares freely tradable(1) |
645,203,448 | 400,095,116 | 204,546,060 | |||
Number of beneficial holders owning at least 100 Shares(2) |
94 | 415 | 145 | |||
Number of holders of record(2) |
94 | 415 | 145 |
(1) | Includes the total number of Shares that are not restricted securities as such term is defined under Rule 144. |
(2) | Includes Cede & Co. as nominee for DTC for the Shares traded on OTCQX. Therefore, this number does not include the individual holders who have bought/sold Shares on OTCQX or transferred their eligible Shares to their brokerage accounts. |
• | Second, the Trust sorts the remaining Digital Asset Markets from high to low by entity-specific and market-based volume and activity of Bitcoin traded on each Digital Asset Market in the trailing twelve months. |
• | Third, the Trust then reviews intra-day pricing fluctuations and the degree of variances in price on Digital Asset Markets to identify any material notable variances that may impact the volume or price information of a particular Digital Asset Market. |
• | Fourth, the Trust then selects a Digital Asset Market as its principal market based on the highest market volume, activity and price stability in comparison to the other Digital Asset Markets on the list. Based on information reasonably available to the Trust, Exchange Markets have the greatest volume and level of activity for the asset. The Trust therefore looks to accessible Exchange Markets as opposed to the Brokered Market, Dealer Market and Principal-to-Principal |
2021 |
2020 |
2019 |
||||||||||
Net realized and unrealized gain on investment in Bitcoin |
$ | 10,569,768 | $ | 11,196,384 | $ | 686,551 | ||||||
|
|
|
|
|
|
|||||||
Net increase in net assets resulting from operations |
$ | 9,954,348 | $ | 11,102,880 | $ | 651,821 | ||||||
|
|
|
|
|
|
|||||||
Net assets |
$ | 29,576,053 | $ | 17,716,478 | $ | 1,866,218 | ||||||
|
|
|
|
|
|
For the year ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
(All Bitcoin balances are rounded to the nearest whole Bitcoin) |
||||||||||||
Bitcoins: |
||||||||||||
Opening Balance |
607,039 | 261,192 | 204,277 | |||||||||
Creations |
50,739 | 353,646 | 61,556 | |||||||||
Sponsor’s Fee, related party |
(12,968 | ) | (7,799 | ) | (4,641 | ) | ||||||
|
|
|
|
|
|
|||||||
Closing balance |
644,810 | 607,039 | 261,192 | |||||||||
Accrued but unpaid Sponsor’s Fee, related party |
– | – | – | |||||||||
|
|
|
|
|
|
|||||||
Net closing balance |
644,810 | 607,039 | 261,192 | |||||||||
|
|
|
|
|
|
|||||||
Number of Shares: |
||||||||||||
Opening balance |
638,906,600 | 269,445,300 | 206,559,100 | |||||||||
Creations |
53,463,500 | 369,461,300 | 62,886,200 | |||||||||
|
|
|
|
|
|
|||||||
Closing Balance |
692,370,100 | 638,906,600 | 269,445,300 | |||||||||
|
|
|
|
|
|
For the year ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Price of Bitcoin on principal market (1) |
$ | 45,867.86 | $ | 29,185.05 | $ | 7,145.00 | ||||||
|
|
|
|
|
|
|||||||
NAV per Share (2) |
$ | 42.72 | $ | 27.73 | $ | 6.93 | ||||||
|
|
|
|
|
|
|||||||
Old Index Price (3) |
$ | 47,172.21 | $ | 28,788.57 | $ | 7,200.71 | ||||||
|
|
|
|
|
|
|||||||
Digital Asset Holdings per Share using Old Index Price (3) |
$ | 43.93 | $ | 27.35 | $ | 6.98 | ||||||
|
|
|
|
|
|
(1) | The Trust performed an assessment of the principal market at December 31, 2021, 2020 and 2019, respectively, and identified the principal market as Coinbase Pro. |
(2) | As of December 31, 2021, 2020 and 2019, respectively, the NAV per Share was calculated using the fair value of Bitcoin based on the price provided by Coinbase Pro, the Digital Asset Exchange that the Trust currently considers its principal market, as of 4:00 p.m., New York time, on the valuation date. |
(3) | Prior to February 1, 2022, the Trust calculated its Digital Asset Holdings and Digital Asset Holdings per Share by reference to the Old Index Price as of 4:00 p.m., New York time, on the valuation date. The Old Index Price was calculated using non-GAAP methodology and is not used in the Trust’s financial statements. Effective February 1, 2022, the Trust began using the Index Price to calculate its Digital Asset Holdings and Digital Asset Holdings per Share as of 4:00 p.m., New York time, on the valuation date. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Historical Digital Asset Holdings and Bitcoin Prices” for further information on the Trust’s Digital Asset Holdings and Digital Asset Holdings per Share calculated using the Index Price. The Digital Asset Exchanges included in the Index as of December 31, 2021 and 2020 were Coinbase Pro, LMAX Digital, Kraken and Bitstamp. As of December 31, 2019 the Digital Asset Exchanges included in the Index consisted of Coinbase Pro, Bitstamp, Kraken, Bittrex and itBit. |
High |
Low |
|||||||||||||||||||||||||||
Period |
Average |
Old Index Price |
Date |
Old Index Price |
Date |
End of period |
Last business day |
|||||||||||||||||||||
Twelve months ended December 31, 2017 |
$ | 3,942.40 | $ | 18,756.45 | 12/18/2017 | $ | 780.71 | 1/12/2017 | $ | 13,340.23 | $ | 14,517.67 | ||||||||||||||||
Twelve months ended December 31, 2018 |
$ | 7,497.29 | $ | 15,736.96 | 1/5/2018 | $ | 3,228.07 | 12/14/2018 | $ | 3,760.46 | $ | 3,760.46 | ||||||||||||||||
Twelve months ended December 31, 2019 |
$ | 7,319.77 | $ | 12,681.53 | 7/10/2019 | $ | 3,365.98 | 2/7/2019 | $ | 7,200.71 | $ | 7,200.71 | ||||||||||||||||
Twelve months ended December 31, 2020 |
$ | 11,074.72 | $ | 28,788.57 | 12/31/2020 | $ | 5,050.07 | 3/16/2020 | $ | 28,788.57 | $ | 28,788.57 | ||||||||||||||||
Twelve months ended December 31, 2021 |
$ | 47,316.42 | $ | 67,397.98 | 11/9/2021 | $ | 29,235.54 | 1/1/2021 | $ | 47,172.21 | $ | 47,172.21 | ||||||||||||||||
September 25, 2013 (the inception of the Trust’s operations) to December 31, 2021 |
$ | 9,508.58 | $ | 67,397.98 | 11/9/2021 | $ | 117.03 | 10/3/2013 | $ | 47,172.21 | $ | 47,172.21 |
High |
Low |
|||||||||||||||||||||||||||
Period |
Average |
Index Price |
Date |
Index Price |
Date |
End of period |
Last business day |
|||||||||||||||||||||
Twelve months ended December 31, 2017 |
$ | 3,971.47 | $ | 19,209.14 | 12/16/2017 | $ | 783.38 | 1/11/2017 | $ | 14,131.50 | $ | 14,415.36 | ||||||||||||||||
Twelve months ended December 31, 2018 |
$ | 7,518.87 | $ | 16,847.15 | 1/6/2018 | $ | 3,164.99 | 12/14/2018 | $ | 3,679.42 | $ | 3,679.42 | ||||||||||||||||
Twelve months ended December 31, 2019 |
$ | 7,355.63 | $ | 13,838.57 | 6/26/2019 | $ | 3,358.99 | 2/7/2019 | $ | 7,144.93 | $ | 7,144.93 | ||||||||||||||||
Twelve months ended December 31, 2020 |
$ | 11,103.62 | $ | 29,185.50 | 12/31/2020 | $ | 4,941.00 | 3/16/2020 | $ | 29,185.50 | $ | 29,185.50 | ||||||||||||||||
Twelve months ended December 31, 2021 |
$ | 47,420.39 | $ | 67,352.59 | 11/9/2021 | $ | 29,311.80 | 1/1/2021 | $ | 45,869.35 | $ | 45,869.35 | ||||||||||||||||
September 25, 2013 (the inception of the Trust’s operations) to December 31, 2021 |
$ | 9,535.36 | $ | 67,352.59 | 11/9/2021 | $ | 117.03 | 10/3/2013 | $ | 45,869.35 | $ | 45,869.35 |
High |
Low |
|||||||||||||||||||||||||||
Period |
Average |
Digital Asset Market Price |
Date |
Digital Asset Market Price |
Date |
End of period |
Last business day |
|||||||||||||||||||||
Twelve months ended December 31, 2017 |
$ | 3,987.48 | $ | 19,433.21 | 12/16/2017 | $ | 793.04 | 1/11/2017 | $ | 14,168.54 | $ | 14,440.01 | ||||||||||||||||
Twelve months ended December 31, 2018 |
$ | 7,517.17 | $ | 16,849.50 | 1/6/2018 | $ | 3,164.61 | 12/14/2018 | $ | 3,779.42 | $ | 3,679.42 | ||||||||||||||||
Twelve months ended December 31, 2019 |
$ | 7,356.06 | $ | 13,849.81 | 6/26/2019 | $ | 3,358.79 | 2/7/2019 | $ | 7,145.00 | $ | 7,145.00 | ||||||||||||||||
Twelve months ended December 31, 2020 |
$ | 11,103.80 | $ | 29,185.05 | 12/31/2020 | $ | 4,950.39 | 3/16/2020 | $ | 29,185.05 | $ | 29,185.05 | ||||||||||||||||
Twelve months ended December 31, 2021 |
$ | 47,420.71 | $ | 67,371.70 | 11/9/2021 | $ | 29,295.98 | 1/1/2021 | $ | 45,867.86 | $ | 45,867.86 | ||||||||||||||||
September 25, 2013 (the inception of the Trust’s operations) to December 31, 2021 |
$ | 9,536.92 | $ | 67,371.70 | 11/9/2021 | $ | 110.83 | 10/2/2013 | $ | 45,867.86 | $ | 45,867.86 |
High |
Low |
|||||||||||||||||||||||||||||||
OTCQX |
NAV per Share(1) |
Digital Asset Holdings per Share (2) |
Digital Asset Holdings per Share using Old Index Price (2) |
OTCQX |
NAV per Share (1) |
Digital Asset Holdings per Share (2) |
Digital Asset Holdings per Share using Old Index Price (2) |
|||||||||||||||||||||||||
2019 |
||||||||||||||||||||||||||||||||
First quarter |
$ | 4.99 | $ | 4.08 | $ | 4.08 | $ | 4.02 | $ | 3.84 | $ | 3.31 | $ | 3.31 | $ | 3.32 | ||||||||||||||||
Second quarter |
$ | 17.08 | $ | 13.56 | $ | 13.55 | $ | 12.37 | $ | 4.97 | $ | 4.07 | $ | 4.07 | $ | 4.05 | ||||||||||||||||
Third quarter |
$ | 16.35 | $ | 12.25 | $ | 12.24 | $ | 12.41 | $ | 9.83 | $ | 7.75 | $ | 7.75 | $ | 7.81 | ||||||||||||||||
Fourth quarter |
$ | 11.82 | $ | 9.48 | $ | 9.48 | $ | 9.30 | $ | 8.01 | $ | 6.39 | $ | 6.39 | $ | 6.56 | ||||||||||||||||
2020 |
||||||||||||||||||||||||||||||||
First quarter |
$ | 13.48 | $ | 10.05 | $ | 10.05 | $ | 10.00 | $ | 5.54 | $ | 4.78 | $ | 4.77 | $ | 4.88 | ||||||||||||||||
Second quarter |
$ | 12.30 | $ | 9.59 | $ | 9.59 | $ | 9.55 | $ | 6.50 | $ | 5.99 | $ | 5.99 | $ | 6.07 | ||||||||||||||||
Third quarter |
$ | 14.75 | $ | 11.81 | $ | 11.82 | $ | 11.63 | $ | 9.31 | $ | 8.67 | $ | 8.67 | $ | 8.73 | ||||||||||||||||
Fourth quarter |
$ | 32.90 | $ | 27.73 | $ | 27.73 | $ | 27.35 | $ | 10.85 | $ | 10.04 | $ | 10.05 | $ | 10.04 | ||||||||||||||||
2021 |
||||||||||||||||||||||||||||||||
First quarter |
$ | 56.70 | $ | 58.30 | $ | 58.29 | $ | 57.36 | $ | 31.36 | $ | 27.83 | $ | 27.85 | $ | 27.78 | ||||||||||||||||
Second quarter |
$ | 54.93 | $ | 59.96 | $ | 59.96 | $ | 59.86 | $ | 27.45 | $ | 29.71 | $ | 29.70 | $ | 29.43 | ||||||||||||||||
Third quarter |
$ | 40.73 | $ | 48.50 | $ | 48.50 | $ | 48.39 | $ | 24.02 | $ | 27.99 | $ | 27.99 | $ | 28.08 | ||||||||||||||||
Fourth quarter |
$ | 53.49 | $ | 62.92 | $ | 62.91 | $ | 62.95 | $ | 34.25 | $ | 42.72 | $ | 42.72 | $ | 43.24 |
(1) | The NAV is calculated using the fair value of Bitcoins based on the price provided by the Digital Asset Market that the Trust considers its principal market, which since December 31, 2016 is Coinbase Pro. |
(2) | The Trust calculated its Digital Asset Holdings and Digital Asset Holdings per Share by reference to the Old Index Price as of 4:00 p.m., New York time, on the valuation date. Effective February 1, 2022, the Trust began using the Index Price to calculate its Digital Asset Holdings and Digital Asset Holdings per Share as of 4:00 p.m., New York time, on the valuation date. See “Item 1. Business—Overview of the Bitcoin Industry and Market—Bitcoin Value—The Index and the Index Price—Determination of the Index Price.” The Trust’s Digital Asset Holdings are derived from the Index Price as represented by the Index as of 4:00 p.m., New York time, on the valuation date. Prior to February 1, 2022, the Trust’s Digital Asset Holdings per Share was derived from the Old Index Price. The Index Price is calculated using non-GAAP methodology and is not used in the Trust’s financial statements. See “Item 1. Business —Trust Objective and Key Operating Metrics.” |
Name and Address of Beneficial Owner |
Amount and Nature of Beneficial Ownership |
Percentage of Beneficial Ownership |
||||||
Significant Shareholders: |
||||||||
Digital Currency Group, Inc. (1)(2) |
28,163,302 | 4.07 | % | |||||
Directors & Officers of the Sponsor: (3) |
||||||||
Barry E. Silbert (4) |
* | * | % | |||||
Mark Murphy |
* | * | % | |||||
Michael Sonnenshein |
* | * | % | |||||
Edward McGee |
* | * | % | |||||
Directors & officers of the Sponsor as a group |
* | * | % |
(1) | Includes 28,080,646 Shares held by DCG International Investments Ltd., a wholly owned subsidiary of Digital Currency Group, Inc.; 3,485 Shares held by Genesis Global Trading Inc., the Authorized Participant and a wholly owned subsidiary of Digital Currency Group, Inc.; and 79,171 Shares held by Genesis Global Capital LLC, an affiliate of Genesis Global Trading Inc. and a wholly owned subsidiary of Digital Currency Group Inc. |
(2) | Barry E. Silbert is the Chief Executive Officer of Digital Currency Group, Inc. and in such capacity has voting and dispositive power over the securities held by such entity. |
(3) | The Trust does not have any directors, officers or employees. Under the Trust Agreement, all management functions of the Trust have been delegated to and are conducted by the Sponsor, its agents and its affiliates. |
(4) | Does not include Shares beneficially owned through Digital Currency Group, Inc. |
* | Represents beneficial ownership of less than 1%. |
Years Ended December 31, |
||||||||
2021 |
2020 |
|||||||
Audit fees |
$ | 239,200 | $ | 202,564 | ||||
|
|
|
|
|||||
Total |
$ | 239,200 | $ | 202,564 | ||||
|
|
|
|
1. |
Financial Statements |
2. |
Financial Statement Schedules |
3. |
Exhibits |
* | Filed herewith. |
† | Portions of this exhibit (indicated by asterisks) have been omitted as the Registrant has determined that (i) the omitted information is not material and (ii) the omitted information would likely cause competitive harm to the Registrant if publicly disclosed. |
Grayscale Investments, LLC | ||||
as Sponsor of Grayscale Bitcoin Trust (BTC) | ||||
By: | /s/ Michael Sonnenshein | |||
Name: | Michael Sonnenshein | |||
Member of the Board of Directors | ||||
and Chief Executive Officer | ||||
Title: | (Principal Executive Officer)* | |||
By: | /s/ Edward McGee | |||
Name: | Edward McGee | |||
Chief Financial Officer | ||||
Title: | (Principal Financial Officer and Principal Accounting Officer)* | |||
By: | /s/ Barry E. Silbert | |||
Name: | Barry E. Silbert | |||
Chairman of the Board of Directors | ||||
Title: | (Director)* | |||
By: | /s/ Mark Murphy | |||
Name: | Mark Murphy | |||
Member of the Board of Directors | ||||
Title: | (Director)* |
* | The Registrant is a trust and the persons are signing in their capacities as officers or directors of Grayscale Investments, LLC, the Sponsor of the Registrant. |
Page |
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Grayscale Bitcoin Trust (BTC) Annual Financial Statements |
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F-2 |
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F-5 |
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F-6 |
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F-7 |
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F-8 |
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F-9 |
December 31, 2021 |
December 31, 2020 |
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Assets: |
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Investment in Bitcoin, at fair value (cost $ |
$ | $ | ||||||
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Total assets |
$ | $ | ||||||
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Liabilities: |
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Sponsor’s Fee payable, related party |
$ | $ | ||||||
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Total liabilities |
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Net Assets |
$ | $ | ||||||
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Net Assets consist of: |
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Paid-in-capital |
$ |
$ |
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Accumulated net investment loss |
( |
) | ( |
) | ||||
Accumulated net realized gain on investment in Bitcoin |
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Accumulated net unrealized appreciation on investment in Bitcoin |
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$ | $ | |||||||
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Shares issued and outstanding, no par (unlimited Shares authorized) |
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Net asset value per Share |
$ | $ | ||||||
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December 31, 2021 |
Quantity of Bitcoin |
Cost |
Fair Value |
% of Net Assets |
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Investment in Bitcoin |
$ | $ | % | |||||||||||||
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Net Assets |
$ | $ | % | |||||||||||||
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December 31, 2020 |
Quantity of Bitcoin |
Cost |
Fair Value |
% of Net Assets |
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Investment in Bitcoin |
$ | $ | % | |||||||||||||
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Net Assets |
$ | $ | % | |||||||||||||
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Years Ended December 31, |
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2021 |
2020 |
2019 |
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Investment income: |
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Investment income |
$ | $ | $ | |||||||||
Expenses: |
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Sponsor’s fee, related party |
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Net investment loss |
( |
) | ( |
) | ( |
) | ||||||
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Net realized and unrealized gain from: |
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Net realized gain on investment in Bitcoin |
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Net change in unrealized appreciation on investment in Bitcoin |
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Net realized and unrealized gain on investment |
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Net increase in net assets resulting from operations |
$ | $ | $ | |||||||||
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Years Ended December 31, |
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2021 |
2020 |
2019 |
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Increase in net assets from operations: |
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Net investment loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
Net realized gain on investment in Bitcoin |
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Net change in unrealized appreciation on investment in Bitcoin |
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Net increase in net assets resulting from operations |
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Increase in net assets from capital share transactions: |
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Shares issued |
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Net increase in net assets resulting from capital share transactions |
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Total increase in net assets from operations and capital share transactions |
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Net assets: |
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Beginning of year |
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End of year |
$ | $ | $ | |||||||||
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Changes in Shares outstanding |
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Shares outstanding at beginning of year |
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Shares issued |
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Net increase in Shares |
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Shares outstanding at end of year |
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• | Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Trust has the ability to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, these valuations do not entail a significant degree of judgment. |
• | Level 2 – Valuations based on quoted prices in markets that are not active or for which significant inputs are observable, either directly or indirectly. |
• | Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
Fair Value Measurement Using |
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(Amounts in thousands) | Amount at Fair Value |
Level 1 |
Level 2 |
Level 3 |
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December 31, 2021 |
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Assets |
||||||||||||||||
Investment in Bitcoin |
$ | $ | $ | $ | ||||||||||||
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Fair Value Measurement Using |
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(Amounts in thousands) | Amount at Fair Value |
Level 1 |
Level 2 |
Level 3 |
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December 31, 2020 |
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Assets |
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Investment in Bitcoin |
$ | $ | $ | $ | ||||||||||||
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(Amounts in thousands, except Bitcoin amounts) | Bitcoin |
Fair Value |
||||||
Beginning balance as of December 31, 2018 |
$ | |||||||
|
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|
|||||
Bitcoin contributed |
||||||||
Bitcoin distributed for Sponsor’s Fee, related party |
( |
) | ( |
) | ||||
Net change in unrealized appreciation on investment in Bitcoin |
– | |||||||
Net realized gain on investment in Bitcoin |
– | |||||||
|
|
|
|
|||||
Ending balance as of December 31, 2019 |
$ | |||||||
|
|
|
|
(Amounts in thousands, except Bitcoin amounts) | Bitcoin |
Fair Value |
||||||
Beginning balance as of December 31, 2019 |
$ | |||||||
|
|
|
|
|||||
Bitcoin contributed |
||||||||
Bitcoin distributed for Sponsor’s Fee, related party |
( |
) | ( |
) | ||||
Net change in unrealized appreciation on investment in Bitcoin |
– | |||||||
Net realized gain on investment in Bitcoin |
– | |||||||
|
|
|
|
|||||
Ending balance as of December 31, 2020 |
$ | |||||||
|
|
|
|
(Amounts in thousands, except Bitcoin amounts) | Bitcoin |
Fair Value |
||||||
Beginning balance as of December 31, 2020 |
$ | |||||||
|
|
|
|
|||||
Bitcoin contributed |
||||||||
Bitcoin distributed for Sponsor’s Fee, related party |
( |
) | ( |
) | ||||
Net change in unrealized appreciation on investment in Bitcoin |
– | |||||||
Net realized gain on investment in Bitcoin |
– | |||||||
|
|
|
|
|||||
Ending balance as of December 31, 2021 |
$ | |||||||
|
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|
Three Months Ended (unaudited) |
Year Ended December 31, 2021 |
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Mar-31, 2021 |
Jun-30, 2021 |
Sept-30, 2021 |
Dec-31, 2021 |
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Expenses |
||||||||||||||||||||
Sponsor Fee, related party |
$ | $ | $ | $ | $ | |||||||||||||||
Net investment (loss) |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
Net realized and unrealized gain (loss) from: |
||||||||||||||||||||
Net realized gain in Bitcoin |
||||||||||||||||||||
Net change in unrealized appreciation (depreciation) on investment in Bitcoin |
( |
) | ||||||||||||||||||
Net realized and unrealized gain (loss) on investment |
( |
) | ||||||||||||||||||
Net increase (decrease) in net assets resulting from operations |
$ | $ | ( |
) | $ | $ | $ | |||||||||||||
Three Months Ended (unaudited) |
Year Ended December 31, 2020 |
|||||||||||||||||||
Mar-31, 2020 |
Jun-30, 2020 |
Sept-30, 2020 |
Dec-3 20201 , |
|||||||||||||||||
Expenses |
||||||||||||||||||||
Sponsor Fee, related party |
$ | $ | $ | $ | $ | |||||||||||||||
Net investment income (loss) |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
Net realized and unrealized gain (loss) from: |
||||||||||||||||||||
Net realized gain in Bitcoin |
||||||||||||||||||||
Net change in unrealized appreciation (depreciation) on investment in Bitcoin |
( |
) | ||||||||||||||||||
Net realized and unrealized gain (loss) on investment |
( |
) | ||||||||||||||||||
Net increase (decrease) in net assets resulting from operations |
$ | ( |
) | $ | $ | $ | $ | |||||||||||||
Years Ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Per Share Data |
||||||||||||
Net asset value, beginning of year |
$ | $ | $ | |||||||||
Net increase (decrease) in net assets from investment operations: |
||||||||||||
Net investment loss |
( |
) | ( |
) | ( |
) | ||||||
Net realized and unrealized gain |
||||||||||||
Net increase in net assets resulting from operations |
||||||||||||
Net asset value, end of year |
$ | $ | $ | |||||||||
Total return |
% | % | % | |||||||||
Ratios to average net assets: |
||||||||||||
Net investment loss |
( |
)% | ( |
)% | ( |
)% | ||||||
Expenses |
( |
)% | ( |
)% | ( |
)% |