What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-02 compared with 2024-11-01 · 50 added, 52 removed, 93 unchanged (52% of the section changed)

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Factors that could cause or contribute to these differences include, but are not limited to, those set forth under “Part II, Item 1A.

Risk Factors” in this Quarterly Report or in “Risk Factors” and “Forward-Looking Statements” or other sections of our Registration Statement.

Risk Factors” in this Quarterly Report or in “Part I.

Risk Factors” and “Forward-Looking Statements” or other sections of our Annual Report.

Trust Overview

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333-277837), the Sponsor authorized the commencement of a redemption program.

Shares of the Trust began trading on NYSE Arca on July 31, 2024, following the effectiveness of the Registration Statement.

Shares of the Trust began trading on NYSE Arca on July 31, 2024, following the effectiveness of the Trust’s registration statement on Form S-1, as amended.

The Trust issues Shares only in one or more blocks of 10,000 Shares (a block of 10,000 Shares is called a “Basket”) to certain Authorized Participants from time to time.

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Through its redemption program, the Trust redeems Shares from Authorized Participants on an ongoing basis.

As a passive investment vehicle, the Trust’s investment objective is for the value of the Shares (based on Bitcoin per Share) to reflect the value of Bitcoin held by the Trust, determined by reference to the Index Price, less the Trust’s expenses and other liabilities.

As a passive investment vehicle, the Trust’s investment objective is for the value of the Shares (based on Bitcoin per Share) to reflect the value of the Bitcoin held by the Trust, determined by reference to the Index Price, less the Trust’s expenses and other liabilities.

While an investment in the Shares is not a direct investment in Bitcoin, the Shares are designed to provide investors with a cost-effective and convenient way to gain investment exposure to Bitcoin.

The Trust will not utilize leverage, derivatives or any similar arrangements in seeking to meet its investment objective.

The Trust is not managed like a business corporation or an active investment vehicle.

The Initial Distribution

On July 31, 2024, the Grayscale Bitcoin Trust (BTC) (“GBTC”) completed its previously announced pro rata distribution of 303,690,100 Shares of the Trust to shareholders of GBTC as of July 30, 2024 (the “Record Date”), as described in GBTC ’ s definitive information statement on Schedule 14C, filed with the SEC on July 30, 2024 (referred to as the “Initial Distribution”).

In connection therewith, on July 31, 2024, GBTC contributed to the Trust an amount of Bitcoin equal to 10% of the total Bitcoin held by GBTC as of the Record Date, equal to 26,935.83753443 Bitcoin, as consideration and in exchange for the issuance of Shares of the Trust.

Subject to the limitations and qualifications set forth in GBTC’s definitive information statement on Schedule 14C, filed with the SEC on July 30, 2024 (including with respect to the qualification of both GBTC and the Trust as grantor trusts for U.S.

federal income tax purposes and the proper allocation of existing tax basis between GBTC shares and Shares of the Trust), it is expected that neither GBTC nor any beneficial owner of GBTC shares will recognize any gain or loss for U.S.

federal income tax purposes as a result of the Initial Distribution.

Accordingly, it is expected that neither GBTC’s contribution of Bitcoin to the Trust nor GBTC’s distribution of Shares in the Trust to shareholders as of 4:00 PM ET on the Record Date will be reported to any beneficial owner of GBTC shares (or to any intermediary holding GBTC shares) as giving rise to income, gain, loss, deduction, credit or proceeds.

Any beneficial owner of GBTC shares who received Shares of the Trust in the Initial Distribution, and any intermediary holding GBTC shares or Shares of the Trust, should consult their own tax advisor regarding the U.S.

federal income tax consequences of the Initial Distribution, including the proper allocation of existing tax basis between GBTC shares and Shares of the Trust.

Please refer to GBTC’s definitive information statement on Schedule 14C, filed with the SEC on July 30, 2024, for more information, including other U.S.

federal income tax considerations relating to the Initial Distribution and ownership of Shares of the Trust.

On January 1, 2025, GSI consummated an internal corporate reorganization (the “Reorganization”), pursuant to which GSI, the Sponsor of the Trust prior to the Reorganization, merged with and into GSO, a Delaware limited liability company and a wholly owned indirect subsidiary of DCG, with GSO continuing as the surviving company (the “Merger”).

As a result of the Merger, GSO succeeded by operation of law to all the rights, powers, privileges and franchises and became subject to all of the obligations, liabilities, restrictions and disabilities of GSI, including with respect to the Sponsor Contracts (as defined below), all as provided under the Delaware Limited Liability Company Act.

The Reorganization is not expected to have any material impact on the operations of the Trust.

In connection with the Reorganization, on January 1, 2025, and promptly following the effectiveness of the Merger, GSO assigned certain contracts pertaining to its role as Sponsor (as such term is defined in the Trust Agreement) of the Trust (such contracts, the “Sponsor Contracts”) to GSIS, a Delaware limited liability company and a wholly owned direct subsidiary of GSO, whereby GSIS assumed all of the rights and obligations of GSO under the Sponsor Contracts.

Other than the assumption of the Sponsor Contracts by GSIS, the Reorganization does not alter the rights or obligations under any of the Sponsor Contracts.

In connection with the Reorganization, on January 1, 2025, and promptly following the effectiveness of the Merger, GSO and GSIS executed a Certificate of Admission, pursuant to which GSIS was admitted as an additional Sponsor of the Trust under the Trust Agreement, by and among GSO (as successor in interest to GSI), the Trustee, and the shareholders from time to time thereunder, as amended from time to time.

GSIS shall be subject to the rights and obligations of a Sponsor under the Trust Agreement.

On January 3, 2025, GSO voluntarily withdrew as a Sponsor of the Trust pursuant to the terms of the Trust Agreement, and, effective May 3, 2025, GSIS shall be the sole remaining Sponsor of the Trust.

Critical Accounting Policies and Estimates

Investment Transactions and Revenue Recognition

The Trust considers investment transactions to be the receipt of Bitcoin for Share creations and the delivery of Bitcoin for Share redemptions or for payment of expenses in Bitcoin.

The Trust considers investment transactions to be the receipt of Bitcoin by the Trust in connection with Share creations and the delivery of Bitcoin by the Trust in connection with Share redemptions or for payment of expenses in Bitcoin.

The Trust records its investment transactions on a trade date basis and changes in fair value are reflected as net change in unrealized appreciation or depreciation on investments.

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The Trust determines its principal market(or in the absence of a principal market the most advantageous market) annually and conducts a quarterly analysis to determine (i) if there have been recent changes to each Digital Asset Market’s trading volume and level of activity in the trailing twelve months, (ii) if any Digital Asset Markets have developed that the Trust has access to, or (iii) if recent changes to each Digital Asset Market’s price stability have occurred that would materially impact the selection of the principal market and necessitate a change in the Trust’s determination of its principal market.

The cost basis of Bitcoin received in connection with a creation order is recorded by the Trust at the fair value of Bitcoin at 4:00 p.m., New York time, on the creation date for financial reporting purposes.

The cost basis of the Bitcoin received by the Trust in connection with a creation order is recorded by the Trust at the fair value of Bitcoin at 4:00 p.m., New York time, on the creation date for financial reporting purposes.

The cost basis recorded by the Trust may differ from proceeds collected by the Authorized Participant from the sale of the corresponding Shares to investors.

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The Trust uses fair value as its method of accounting for Bitcoin in accordance with its classification as an investment company for accounting purposes.

The Trust is not a registered investment company under the Investment Company Act of 1940.

The Trust is not a registered investment company under the Investment Company Act.

GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes.

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Review of Financial Results (unaudited)

Financial Highlights for the Period from July 31, 2024 (the commencement of the Trust’s operations) to September 30, 2024

Financial Highlights for the Three Months Ended March 31, 2025

(All amounts in the following table and the subsequent paragraphs, except Share, per Share, Bitcoin and price of Bitcoin amounts, are in thousands)

July 31, 2024 (the commencement of the Trust’s operations) to September 30, 2024

Three Months Ended March 31, 2025

Net realized and unrealized loss on investment in Bitcoin

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GAAP based on the Digital Asset Market price of Bitcoin on the Digital Asset Trading Platform that the Trust considered its principal market, as of 4:00 p.m., New York time, on the valuation date.

Net realized and unrealized loss on investment in Bitcoin for the period from July 31, 2024 (the commencement of the Trust’s operations) to September 30, 2024 was ($34,633), which includes a realized loss of ($35) on the transfer of Bitcoins to pay the Sponsor’s Fee, a realized loss of ($3,289) on the sale of Bitcoins to meet redemptions, and net change in unrealized depreciation on investment in Bitcoin of ($31,309).

Net realized and unrealized loss on investment in Bitcoin for the period was driven by Bitcoin price depreciation from $65,222.44 per Bitcoin as of July 31, 2024 (the commencement of the Trust’s operations), to $63,464.76 per Bitcoin as of September 30, 2024.

Net decrease in net assets resulting from operations was ($35,124) for the period from July 31, 2024 (the commencement of the Trust’s operations) to September 30, 2024, which consisted of the net realized and unrealized loss on investment in Bitcoin, plus the Sponsor’s Fee of $491.

Net assets increased to $2,142,086 at September 30, 2024.

The increase in net assets resulted from the contribution of approximately 7,236 Bitcoin with a value of $443,672 to the Trust in connection with Share creations during the period and the contribution of approximately 26,936 Bitcoin with a value of $1,756,821 to the Trust in connection with the Initial Distribution from Grayscale Bitcoin Trust (BTC), partially offset by the aforementioned Bitcoin price depreciation, the redemption of approximately 412 Bitcoin with a value of $23,283 from the Trust, and the withdrawal of approximately 8 Bitcoin to pay the foregoing Sponsor’s Fee.

Net realized and unrealized loss on investment in Bitcoin for the three months ended March 31, 2025 was ($490,714), which includes a realized gain of $302 on the transfer of Bitcoin to pay the Sponsor’s Fee, a realized gain of $33,734 on the sale of Bitcoin to meet redemptions, and net change in unrealized appreciation on investment in Bitcoin of ($524,750).

Net realized and unrealized loss on investment in Bitcoin for the period was driven by Bitcoin price depreciation from $93,390.22 per Bitcoin as of December 31, 2024, to $82,443.85 per Bitcoin as of March 31, 2025.

Net decrease in net assets resulting from operations was ($492,112) for the three months ended March 31, 2025, which consisted of the net realized and unrealized loss on investment in Bitcoin, plus the Sponsor’s Fee of $1,398.

Net assets decreased to $3,346,810 at March 31, 2025, a 6% decrease for the three-month period.

The decrease in net assets resulted from the aforementioned Bitcoin price depreciation, the redemption of approximately 2,437 Bitcoin with a value of $212,091 from the Trust, and the withdrawal of approximately 15 Bitcoin to pay the foregoing Sponsor’s Fee, partially offset by the contribution of approximately 5,034 Bitcoin with a value of $500,979 to the Trust in connection with Share creations during the period.

Cash Resources and Liquidity

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Furthermore, the Trust is not a party to any off-balance sheet arrangements.

Generally, the Trust does not intend to hold cash, except in connection with Cash Orders for creations or redemptions of Baskets.

Cash includes non-interest bearing non-restricted cash with one institution.

Cash in a bank deposit account, at times, may exceed U.S.

federally insured limits.

The Trust has not experienced any losses in such accounts and does not believe it is exposed to any significant credit risk on such bank deposits.

In exchange for the Sponsor’s Fee, the Sponsor has agreed to assume most of the expenses incurred by the Trust.

As a result, the only ordinary expense of the Trust expected to be incurred is the Sponsor’s Fee and, if applicable, any Additional Trust Expenses.

As a result, the only ordinary expense of the Trust during the period covered by this Quarterly Report was the Sponsor’s Fee.

The Trust is not aware of any trends, demands, conditions or events that are reasonably likely to result in material changes to its liquidity needs.

Selected Operating Data

July 31, 2024 (the commencement of the Trust’s operations) to September 30, 2024

Three Months Ended March 31, 2025

(All Bitcoin balances are rounded to the nearest whole Bitcoin)

Opening balance

Creation from Initial Distribution (1)

Sponsor’s Fee, related party

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Opening balance

Creation from Initial Distribution (1)

Closing balance

As of September 30, 2024

As of March 31, 2025

Price of Bitcoin on principal market (1)

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NAV per Share (3)

(1) Represents the impact of the Initial Distribution of 26,935.83753443 Bitcoin, with a value of approximately $1,756.8 million from Grayscale Bitcoin Trust (BTC), completed on July 31, 2024, as discussed in Note 4 of the notes to the unaudited financial statements.

(2) The Trust performed an assessment of the principal market at September 30, 2024, and identified the principal market as Coinbase.

(3) As of September 30, 2024, the Principal Market NAV per Share was calculated using the fair value of Bitcoin based on the price provided by Coinbase, the Digital Asset Trading Platform that the Trust considered its principal market, as of 4:00 p.m., New York time, on the valuation date.

The Trust’s NAV per Share is calculated using a non-GAAP methodology where the price is derived from multiple Digital Asset Trading Platforms.

(1) The Trust performed an assessment of the principal market at March 31, 2025, and identified the principal market as Coinbase.

(2) As of March 31, 2025, the Principal Market NAV per Share was calculated using the fair value of Bitcoin based on the price provided by Coinbase, the Digital Asset Trading Platform that the Trust considered its principal market, as of 4:00 p.m., New York time, on the valuation date.

(3) The Trust’s NAV per Share is derived from the Index Price as represented by the Index as of 4:00 p.m., New York time, on the valuation date.

The Trust’s NAV per Share is calculated using a non-GAAP methodology where the price is derived from multiple Digital Asset Trading Platforms.

See “Business—Overview of the Bitcoin Industry and Market—Bitcoin Value—The Index and the Index Price” in the Registration Statement for a description of the Index and the Index Price.

The Digital Asset Trading Platforms included in the Index as of September 30, 2024 were Coinbase, Bitstamp, Kraken, LMAX Digital, and Crypto.com.

On October 27, 2024, the Index Provider added Bullish to the Index due to the trading platform meeting the Index Provider’s minimum liquidity requirement, and did not remove any Constituent Trading Platforms as part of its scheduled quarterly review.

See “Business—Valuation of Bitcoin and Determination of NAV” in the Registration Statement for a description of the Trust’s NAV per Share.

Business—Overview of the Bitcoin Industry and Market—Bitcoin Value—The Index and the Index Price” in our Annual Report for a description of the Index and the Index Price.

The Digital Asset Trading Platforms included in the Index (the “Constituent Trading Platforms”) as of March 31, 2025 were Coinbase, Bitstamp, Kraken, LMAX Digital, Crypto.com, and Bullish.

Business—Valuation of Bitcoin and Determination of NAV” in our Annual Report for a description of the Trust’s NAV per Share.

T he Trust reflects creations and redemptions and the Bitcoin for proceeds receivable or payable with respect to such creations and redemptions, respectively, on the business day following the receipt of a notification of a creation or redemption order by an Authorized Participant.

Creation and redemption orders are settled on T+1 or T+2, as established at the time of order placement, and therefore the Bitcoin for proceeds receivable or payable with respect to such creations and redemptions, respectively, are recorded as a receivable or payable until the Bitcoin are delivered or removed from the Trust for settlement.

As of September 30, 2024, the Trust had a net closing balance of 33,752.36277471 Bitcoin with a value of $2,140,929,585, based on the Index Price of $63,430.51 on September 30, 2024 (non-GAAP methodology).

As of September 30, 2024, the total market value of the Trust’s Bitcoin was $2,142,085,603, based on the price of one Bitcoin in the principal market (Coinbase) of $63,464.76 on September 30, 2024.

As of March 31, 2025, the Trust had a net closing balance of 40,595.02889855 Bitcoin with a value of $3,345,114,413, based on the Index Price of $82,402.07 on March 31, 2025 (non-GAAP methodology).

As of March 31, 2025, the total market value of the Trust’s Bitcoin was $3,346,810,473, based on the price of one Bitcoin in the principal market (Coinbase) of $82,443.85 on March 31, 2025.

Historical NAV and Bitcoin Prices

As movements in the price of Bitcoin will directly affect the price of the Shares, investors should understand recent movements in the price of Bitcoin.

Investors, however, should also be aware that past movements in the Bitcoin price are not indicators of future

Investors, however, should also be aware that past movements in the Bitcoin price are not indicators of future movements.

Movements may be influenced by various factors, including, but not limited to, government regulation, security breaches experienced by service providers, as well as political and economic uncertainties around the world.

The follow ing chart illustrates the movement in the Trust’s NAV per Share versus the Index Price and the Trust’s Principal Market NAV per Share from July 31, 2024 (the commencement of the Trust’s operations) to September 30, 2024.

For more information on the determination of the Trust’s NAV, see “Business—Valuation of Bitcoin and Determination of NAV” in the Registration Statement.

The following table illustrates the movements in the Index Price from July 31, 2024 (the commencement of the Trust’s operations) to September 30, 2024.

During such period, the Index Price has ranged from $53,461.36 to $65,972.56, with the straight average being $60,218.06 through September 30, 2024.

The Sponsor has not observed a material difference between the Index Price and average prices from the constituent Digital Asset Trading Platforms individually or as a group.

The follow ing chart illustrates the movement in the Trust’s NAV per Share (as adjusted for the Reverse Share Split for periods prior to November 20, 2024) versus the Index Price and the Trust’s Principal Market NAV per Share (as adjusted for the Reverse Share Split for periods prior to November 20, 2024) from July 31, 2024 (the commencement of the Trust’s operations) to March 31, 2025.

For more information on the determination of the Trust’s NAV, see “Item 1.

Business—Overview of the Bitcoin Industry and Market—Bitcoin Value—The Index and the Index Price” in our Annual Report.

The following table illustrates the movements in the Index Price from July 31, 2024 (the commencement of the Trust’s operations) to March 31, 2025.

During such period, the Index Price has ranged from $53,461.36 to $106,734.51, with the straight average being $81,200.68 through March 31, 2025.

The Sponsor has not observed a material difference between the Index Price and average prices from the Constituent Trading Platforms as of March 31, 2025, individually or as a group.

End of period

Last business day

July 31, 2024 (the commencement of the Trust’s operations) to September 30, 2024

The following table illustrates the movements in the Digital Asset Market price of Bitcoin, as reported on the Trust’s principal market, from July 31, 2024 (the commencement of the Trust’s operations) to September 30, 2024.

During such period, the price of Bitcoin has ranged from $53,469.64 to $65,967.93, with the straight average being $60,216.01 through September 30, 2024.

July 31, 2024 (the commencement of the Trust’s operations) to March 31, 2025

During such period, the price of Bitcoin has ranged from $53,469.64 to $106,726.24, with the straight average being $81,202.55 through March 31, 2025.

Digital Asset Market Price

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Last business day

July 31, 2024 (the commencement of the Trust’s operations) to September 30, 2024

The following chart sets out the historical closing prices for the Shares as reported by NYSE Arca from July 31, 2024 (the commencement of the Trust’s operations) to September 30, 2024 and the Trust’s NAV per Share from July 31, 2024 (the commencement of the Trust’s operations) to September 30, 2024.

July 31, 2024 (the commencement of the Trust’s operations) to March 31, 2025

The following chart sets out the historical closing prices for the Shares as reported by NYSE Arca from July 31, 2024 (the commencement of the Trust’s operations) to March 31, 2025 and the Trust’s NAV per Share from July 31, 2024 (the commencement of the Trust’s operations) to March 31, 2025.

BTC Premium/(Discount):

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NAV per Share (Non-GAAP) ($)

The following chart sets out the historical premium and discount for the Shares calculated as a percentage of the historical closing prices for the Shares as reported by NYSE Arca from July 31, 2024 (the commencement of the Trust’s operations) to September 30, 2024 divided by the Trust’s NAV per Share from July 31, 2024 (the commencement of the Trust’s operations) to September 30, 2024.

The following chart sets out the historical premium and discount for the Shares calculated as a percentage of the historical closing prices for the Shares as reported by NYSE Arca from July 31, 2024 (the commencement of the Trust’s operations) to March 31, 2025 divided by the Trust’s NAV per Share from July 31, 2024 (the commencement of the Trust’s operations) to March 31, 2025.

BTC Premium/(Discount):

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis