Feb. 23, 2022
Dear Sirs, I am writing to comment on the Grayscale Bitcoin Trust application to convert to an ETF. I am a current investor in the Grayscale Bitcoin Trust, and I strongly support the application as being in the best interest of current shareholders of the Trust and cryptocurrency investors in general. The Grayscale Bitcoin Trust, as initially established, included a clause allowing shareholders in the Trust to redeem shares in kind (i.e. for the bitcoin in the trust supporting the shares) under certain quite reasonable circumstances. This provision in the Trust documents was designed to ensure that shareholders could exit the Trust any time at no less than net asset value of their shares. This provision provided important investor protections against the possibility of the Trust trading at a significant discount to net asset value. On October 28, 2014, the SEC wrote to the Trust insisting that it suspend in kind redemptions provided for in the Trust documents. As a direct result of this action by the SEC, Investors in the Trust have been seriously harmed. As of mid-morning today, February 23, 2022, shares of the Trust were trading at $25.76 per share while the net asset value of the Trust was $35.21 per share. This discount results in an economic penalty of over $6.5 Billion to the holders of the 692.37 million Trust shares outstanding. As the SEC is directly responsible for this discount as a result of its ruling to disallow in kind redemptions, I believe the agency has a responsibility to take action that will allow the market to remove this discount to net asset value. The net asset value discount also penalizes investors in another way. The Trust takes its management fees as an in kind payment of a percentage of the assets in the Trust. When the Trust shares are trading at a discount to NAV, The trust management fees are at a premium in percentage terms to the market value of the underlying shares. When the discount to NAV is 25%, the management fee premium is 33%. Today the 2% of assets management fee is 2.73% of the market value of the shares. If today’s prices and discount were to persist for an entire year, this management fee premium would total over $130 million. The SEC should also act to reduce this premium. Conversion of the Trust to an ETF would resolve both of these issues and be a significant benefit to both existing and future investors. Existing investors would receive the immediate accretion in value of the $6.5 Billion existing discount to NAV. Current and future investors would benefit from reduced management fees as the ETF forced management to maintain competitive management fees. The savings to investors as a class could total in the hundreds of millions of dollars, and the benefits would grow over time as total investment in cryptocurrencies grows. Finally, these benefits are not limited to the Grayscale Bitcoin Trust. The Grayscale Ethereum Trust as well as other Grayscale products have the same problems, and would benefit in the same ways from conversion to an ETF. Please approve the application from the Grayscale Bitcoin Trust to convert to an ETF. Sincerely, Thomas C Stephens