What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-02 compared with 2024-05-03 · 79 added, 71 removed, 111 unchanged (57% of the section changed)

16 unchanged sentences

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.

There can be no assurance that the Trust will be able to achieve its investment objective.

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

Historically, the Trust has not met its investment objective and, prior to their uplisting to NYSE Arca on January 11, 2024, the Shares quoted on OTCQX have not reflected the value of Bitcoin held by the Trust, less the Trust’s expenses and other liabilities, but instead have traded at both premiums and discounts to such value, which at times have been substantial, although the Sponsor has observed that the Trust has begun to meet its investment objective more closely following the uplisting of the Shares to NYSE Arca.

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The BTC Trust Distribution

On March 12, 2024 the Sponsor announced the formation of Grayscale Bitcoin Mini Trust (the “BTC Trust”) and its intention to effectuate the initial creation of shares of the BTC Trust through the contribution by the Trust of a certain amount of Bitcoin to the BTC Trust as consideration and in exchange for newly created shares of the BTC Trust (“BTC Shares”).

The BTC Trust has filed a registration statement on Form S-1 (Registration No.

333-277837) (as amended, the “BTC Trust Form S-1”) relating to the proposed issuance of baskets of BTC Shares to certain authorized participants on an ongoing basis, commencing following consummation of the BTC Trust Distribution (as defined below).

Prior to effectiveness of the BTC Trust Form S-1, the BTC Trust will file a registration statement on Form 8-A (the “BTC Trust Form 8-A”) to register the BTC Shares under the Exchange Act, which is expected to become effective concurrently with the effectiveness of the BTC Trust Form S-1.

Following the effectiveness of the BTC Trust Form S-1 and the BTC Trust Form 8-A, and approval of the BTC Trust 19b-4 Application (as defined below), the newly created BTC Shares will then be distributed to shareholders of the Trust as of a date to be determined by the Sponsor (the “Record Date”), pro rata based on a 1:1 ratio, such that for each one Share held by each shareholder on the Record Date, such shareholder will be entitled to receive one BTC Share on a subsequent date to be determined by the Sponsor (the “Distribution Date”) (such transactions collectively, the “BTC Trust Distribution”).

In connection with the BTC Trust Distribution, the Sponsor anticipates that NYSE Arca will file an application with the SEC pursuant to Rule 19b-4 under the Exchange Act, to list the Shares of the BTC Trust on NYSE Arca (the “BTC Trust 19b-4 Application”).

In addition, the BTC Trust intends to rely on an exemption or other relief from the SEC under 17 CFR §§ 242.101 and 102 (“Regulation M”) to operate its redemption program.

As of the date of this filing, the BTC Trust 19b-4 Application has not been approved by the SEC and an exemption or other relief from Regulation M is not available for the BTC Trust.

The Sponsor makes no representation as to when or if such approval will be obtained and when such an exemption or relief will be available.

The BTC Trust will not seek effectiveness of its registration statement and no offering of BTC Shares will take place unless and until such approval is obtained and such an exemption or relief is available.

As a result of the contemplated BTC Trust Distribution, following the Distribution Date, the Trust will hold a portion of the Bitcoin that was held by the Trust as of the Record Date and the BTC Trust would hold the remaining portion of the Bitcoin that was held by the Trust as of the Record Date, in each case, reduced by the portion of the sponsor’s fee attributable to such Bitcoin accrued and paid between the Record Date and the Distribution Date.

Neither the number of outstanding Shares nor the exposure of shareholders of the Trust to Bitcoin underlying their aggregate shareholdings (including Shares and BTC Shares) are expected to change as a result of the contemplated BTC Trust Distribution.

No consent, authorization, approval or proxy is being sought from shareholders in connection with the BTC Trust Distribution, and shareholders will not need to pay any consideration, exchange or surrender existing Shares or take any other action to receive BTC Shares on the Distribution Date.

Following the BTC Trust Distribution, the Trust and the BTC Trust will operate as independent NYSE Arca listed exchanged-traded commodity products, and neither will have any share ownership, beneficial or otherwise, in the other.

The Sponsor does not expect the BTC Trust Distribution to be a taxable event for the Trust or its shareholders.

The Trust has filed a preliminary information statement on Schedule 14C (Registration No.

001-41906), describing the terms and conditions of the BTC Trust Distribution.

For the avoidance of doubt, the Trust will not execute the BTC Trust Distribution as described herein or therein unless and until (i) the BTC Trust 19b-4 Application has been approved and (ii) the BTC Trust Form S-1 and BTC Trust Form 8-A have become effective.

There can be no assurance as to whether or when such approvals will be obtained or whether or when the BTC Trust Distribution will be effected.

On July 31, 2024, the Trust completed its previously announced pro rata distribution of 303,690,100 shares of Grayscale Bitcoin Mini Trust (BTC) (the “BTC Trust”) to shareholders of the Trust as of July 30, 2024 (the “Record Date”), as described in the Trust’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, the Trust contributed to the BTC Trust an amount of Bitcoin equal to 10% of the total Bitcoin held by the Trust as of the Record Date, equal to approximately 26,935.83753443 Bitcoin, as consideration and in exchange for the issuance of shares of the BTC Trust.

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

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

Any beneficial owner of Shares who receives shares of the BTC Trust in the Initial Distribution, and any intermediary holding Shares of the Trust or shares of the BTC 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 Shares of the Trust and shares of the BTC Trust.

Please refer to the Trust'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 BTC Trust.

Critical Accounting Policies and Estimates

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Review of Financial Results (unaudited)

Financial Highlights for the Three Months Ended March 31, 2024 and 2023

Financial Highlights for the Three and Six Months Ended June 30, 2024 and 2023

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

Three Months Ended March 31,

Net realized and unrealized gain on investment in Bitcoin

Net increase in net assets resulting from operations

Three Months Ended June 30,

Six Months Ended June 30,

Net realized and unrealized (loss) gain on investment in Bitcoin

Net (decrease) increase in net assets resulting from operations

Net assets (1)

(1) Net assets in the above table and subsequent paragraphs are calculated in accordance with U.S.

GAAP based 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 gain on investment in Bitcoin for the three months ended March 31, 2024 was $12,244,904, which includes a realized gain of $73,632 on the transfer of Bitcoins to pay the Sponsor’s Fee, a realized gain of $11,695,719 on the sale of Bitcoins to meet redemptions and net change in unrealized appreciation on investment in Bitcoin of $475,553.

Net realized and unrealized gain on investment in Bitcoin for the period was driven by Bitcoin price appreciation from $42,533.28 per Bitcoin as of December 31, 2023, to $71,026.32 per Bitcoin as of March 31, 2024.

Net increase in net assets resulting from operations was $12,150,026 for the three months ended March 31, 2024, which consisted of the net realized and unrealized gain on investment in Bitcoin, less the Sponsor’s Fee of $94,878.

Net assets decreased to $23,801,818 at March 31, 2024, a (10)% decrease for the three-month period.

The decrease in net assets resulted from the aforementioned Bitcoin price appreciation, offset by the withdrawal of approximately 1,844 Bitcoin to pay the foregoing Sponsor’s Fee and the redemption of approximately 283,124 Bitcoin.

Net realized and unrealized gain on investment in Bitcoin for the three months ended March 31, 2023 was $7,511,132, which includes a realized gain of $35,868 on the transfer of Bitcoins to pay the Sponsor’s Fee and net change in unrealized appreciation on investment in Bitcoin of $7,475,264.

Net realized and unrealized gain on investment in Bitcoin for the period was driven by Bitcoin price appreciation from $16,556.29 per Bitcoin as of December 31, 2022, to $28,467.79 per Bitcoin as of March 31, 2023.

Net increase in net assets resulting from operations was $7,440,047 for the three months ended March 31, 2023, which consisted of the net realized and unrealized gain on investment in Bitcoin, less the Sponsor’s Fee of $71,085.

Net assets increased to $17,904,310 at March 31, 2023, a 71% increase for the three-month period.

The increase in net assets resulted from the aforementioned Bitcoin price appreciation and the withdrawal of approximately 3,110 Bitcoin to pay the foregoing Sponsor’s Fee.

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 three months ended June 30, 2024 was ($2,846,803), which includes a realized gain of $58,371 on the transfer of Bitcoins to pay the Sponsor’s Fee, a realized gain of $3,301,614 on the sale of Bitcoins to meet redemptions and net change in unrealized depreciation on investment in Bitcoin of ($6,206,788).

Net realized and unrealized loss on investment in Bitcoin for the period was driven by Bitcoin price depreciation from $71,026.32 per Bitcoin as of March 31, 2024 to $61,929.29 per Bitcoin as of June 30, 2024.

Net decrease in net assets resulting from operations was ($2,918,808) for the three months ended June 30, 2024, which consisted of the net realized and unrealized loss on investment in Bitcoin, plus the Sponsor’s Fee of $72,005.

Net assets decreased to $17,076,072 at June 30, 2024, a (28%) decrease for the period.

The decrease in net assets resulted from the aforementioned Bitcoin price depreciation, the withdrawal of approximately 1,098 Bitcoin to pay the foregoing Sponsor’s Fee, and the redemption of approximately 61,946 Bitcoin.

Net realized and unrealized gain on investment in Bitcoin for the three months ended June 30, 2023 was $1,183,911, which includes a realized gain of $52,169 on the transfer of Bitcoins to pay the Sponsor’s Fee and net change in unrealized appreciation on investment in Bitcoin of $1,131,742.

Net realized and unrealized gain on investment in Bitcoin for the period was driven by Bitcoin price appreciation from $28,467.79 per Bitcoin as of March 31, 2023, to $30,361.94 per Bitcoin as of June 30, 2023.

Net increase in net assets resulting from operations was $1,096,310 for the three months ended June 30, 2023, which consisted of the net realized and unrealized gain on investment in Bitcoin, less the Sponsor’s Fee of $87,601.

Net assets increased to $19,000,620 at June 30, 2023, a 6% increase for the period.

The increase in net assets resulted from the aforementioned Bitcoin price appreciation, partially offset by the withdrawal of approximately 3,128 Bitcoin to pay the foregoing Sponsor’s Fee.

Net realized and unrealized gain on investment in Bitcoin for the six months ended June 30, 2024 was $9,398,101, which includes a realized gain of $132,003 on the transfer of Bitcoins to pay the Sponsor’s Fee, a realized gain of $14,997,333 on the sale of Bitcoins to meet redemptions and net change in unrealized depreciation on investment in Bitcoin of ($5,731,235).

Net realized and unrealized gain on investment in Bitcoin for the period was driven by Bitcoin price appreciation from $42,533.28 per Bitcoin as of December 31, 2023 to $61,929.29 per Bitcoin as of June 30, 2024.

Net increase in net assets resulting from operations was $9,231,218 for the six months ended June 30, 2024, which consisted of the net realized and unrealized gain on investment in Bitcoin, less the Sponsor’s Fee of $166,883.

Net assets decreased to $17,076,072 at June 30, 2024, a (35%) decrease for the period.

The decrease in net assets resulted from the withdrawal of approximately 2,942 Bitcoin to pay the foregoing Sponsor’s Fee and the redemption of approximately 345,890 Bitcoin, partially offset by the aforementioned Bitcoin price appreciation.

Net realized and unrealized gain on investment in Bitcoin for the six months ended June 30, 2023 was $8,695,043, which includes a realized gain of $88,037 on the transfer of Bitcoins to pay the Sponsor’s Fee and net change in unrealized appreciation on investment in Bitcoin of $8,607,006.

Net realized and unrealized gain on investment in Bitcoin for the period was driven by Bitcoin price appreciation from $16,556.29 per Bitcoin as of December 31, 2022, to $30,361.94 per Bitcoin as of June 30, 2023.

Net increase in net assets resulting from operations was $8,536,357 for the six months ended June 30, 2023, which consisted of the net realized and unrealized gain on investment in Bitcoin, less the Sponsor ’ s Fee of $158,686.

Net assets increased to $19,000,620 at June 30, 2023, an 82% increase for the period.

The increase in net assets resulted from the aforementioned Bitcoin price appreciation, partially offset by the withdrawal of approximately 6,238 Bitcoin to pay the foregoing Sponsor ’ s Fee.

Cash Resources and Liquidity

The Trust has not had a cash balance at any time since inception.

When selling Bitcoins in the Digital Asset Market to pay Additional Trust Expenses on behalf of the Trust, the Sponsor endeavors to sell the exact number of Bitcoins needed to pay expenses in order to minimize the Trust’s holdings of assets other than Bitcoin.

When selling Bitcoins in the Digital Asset Market to pay Additional Trust Expenses on behalf of the Trust, the Sponsor endeavors to sell the exact amount of Bitcoins needed to pay expenses in order to minimize the Trust’s holdings of assets other than Bitcoin.

As a consequence, the Sponsor expects that the Trust will not record any cash flow from its operations and that its cash balance will be zero at the end of each reporting period.

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Selected Operating Data

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

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

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Closing balance

As of March 31,

As of June 30,

Price of Bitcoin on principal market (1)

1 unchanged sentence

NAV per Share (3)

The Trust performed an assessment of the principal market at March 31, 2024 and 2023, and identified the principal market as Coinbase.

As of March 31, 2024 and 2023, 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.

(1) The Trust performed an assessment of the principal market at June 30, 2024 and 2023, and identified the principal market as Coinbase.

(2) As of June 30, 2024 and 2023, 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.

Prior to December 26, 2023, Principal Market NAV was referred to as NAV and Principal Market NAV per Share was referred to as NAV per Share.

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Prior to December 26, 2023, NAV was referred to as Digital Asset Holdings and NAV per Share was referred to as Digital Asset Holdings per Share.

Business—Overview of the Bitcoin Industry and Market—The Index and the Index Price” for a description of the Index and the Index Price.

The Digital Asset Trading Platforms included in the Index as of March 31, 2024 were Coinbase, Bitstamp, Kraken, LMAX Digital, and Crypto.com.

The Digital Asset Trading Platforms included in the Index as of March 31, 2023 were Coinbase, Binance.US, Kraken, and LMAX Digital.

For accounting purposes as of March 31, 2024, the Trust reflects creations and the Bitcoins receivable for proceeds with respect to such creations on the date of receipt of a notification of a creation but does not issue Shares until the requisite number of Bitcoins for proceeds is received.

Business—Overview of the Bitcoin Industry and Market—Bitcoin Value—The Index and the Index Price” in the Trust’s Annual Report on Form 10-K for a description of the Index and the Index Price.

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

The Digital Asset Trading Platforms included in the Index as of June 30, 2023 were Coinbase, Kraken, and LMAX Digital.

Business—Valuation of Bitcoin and Determination of NAV” in the Trust’s Annual Report on Form 10-K for a description of the Trust’s NAV per Share.

For accounting purposes prior to January 10, 2024, the Trust reflected creations and the Bitcoins receivable for proceeds with respect to such creations on the date of receipt of a notification of a creation but did not issue Shares until the requisite amount of Bitcoins for proceeds was received.

On January 10, 2024, in connection with the approval of application under Rule 19b-4 of the Securities Exchange Act of 1934, as amended, the Sponsor authorized the commencement of a redemption program.

1 unchanged sentence

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

As of March 31, 2024, the Trust had a net closing balance of 335,112.6543208 Bitcoins (including the redemptions payable balance) with a value of $23,800,923,871 based on the Index Price of $71,023.65 on March 31, 2024 (non-GAAP methodology).

As of March 31, 2024, the total market value of the Trust’s Bitcoin was $23,801,818,622 based on the price of a Bitcoin in the principal market (Coinbase) of $71,026.32 on March 31, 2024.

As of March 31, 2023, the Trust had a net closing balance of 628,932.20027878 Bitcoins with a value of $17,902,240,615 based on the Index Price of $28,464.50 on March 31, 2023 (non-GAAP methodology).

As of March 31, 2023, the total market value of the Trust’s Bitcoin was $17,904,309,802, based on the price of a Bitcoin in the principal market (Coinbase) of $28,467.79 on March 31, 2023.

As of June 30, 2024, the Trust had a net closing balance of 275,734.98616801 Bitcoins with a value of $17,076,468,980 based on the Index Price of $61,930.73 on June 30, 2024 (non-GAAP methodology).

As of June 30, 2024, the total market value of the Trust’s Bitcoin was $17,076,071,922 based on the price of a Bitcoin in the principal market (Coinbase) of $61,929.29 on June 30, 2024.

As of June 30, 2023, the Trust had a net closing balance of 625,803.87494694 Bitcoins with a value of $19,023,499,093 based on the Index Price of $30,398.50 on June 30, 2023 (non-GAAP methodology).

As of June 30, 2023, the total market value of the Trust’s Bitcoin was $19,000,619,703, based on the price of a Bitcoin in the principal market (Coinbase) of $30,361.94 on June 30, 2023.

Historical NAV and Bitcoin Prices

6 unchanged sentences

Hence, the Trust’s performance for periods prior to January 11, 2024 is not directly comparable to, and should not be used to make conclusions in conjunction with, the Trust’s performance for periods subsequent to January 11, 2024.

The following chart illustrates the movement in the Trust’s NAV per Share (as adjusted for the Share Split for periods prior to January 26, 2018) versus the Index Price and the Trust’s Principal Market NAV per Share (as adjusted for the Share Split for periods prior to January 26, 2018) from September 25, 2013 (date of the first Creation Basket of the Trust) to March 31, 2024.

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 the Trust’s Annual Report on Form 10-K.

The following table illustrates the movements in the Index Price from April 1, 2019 to March 31, 2024.

During such period, the Index Price has ranged from $4,132.14 to $73,462.59, with the straight average being $27,042.91 through March 31, 2024.

The following table illustrates the movements in the Index Price from July 1, 2019 to June 30, 2024.

During such period, the Index Price has ranged from $4,941.00 to $73,462.59, with the straight average being $29,946.07 through June 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.

Twelve months ended March 31, 2020

Twelve months ended March 31, 2021

Twelve months ended March 31, 2022

Twelve months ended March 31, 2023

Twelve months ended March 31, 2024

April 1, 2019 to March 31, 2024

The following table illustrates the movements in the Digital Asset Market price of Bitcoin, as reported on the Trust’s principal market, from April 1, 2019 to March 31, 2024.

During such period, the price of Bitcoin has ranged from $4,133.74 to $73,517.19, with the straight average being $27,043.19 through March 31, 2024.

Digital Asset

Twelve months ended March 31, 2020

Twelve months ended March 31, 2021

Twelve months ended March 31, 2022

Twelve months ended March 31, 2023

Twelve months ended March 31, 2024

April 1, 2019 to March 31, 2024

End of period

Last business day

Twelve months ended June 30, 2020

Twelve months ended June 30, 2021

Twelve months ended June 30, 2022

Twelve months ended June 30, 2023

Twelve months ended June 30, 2024

July 1, 2019 to June 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 1, 2019 to June 30, 2024.

During such period, the price of Bitcoin has ranged from $4,950.39 to $73,517.19, with the straight average being $29,946.19 through June 30, 2024.

Digital Asset Market Price

End of period

Last business day

Twelve months ended June 30, 2020

Twelve months ended June 30, 2021

Twelve months ended June 30, 2022

Twelve months ended June 30, 2023

Twelve months ended June 30, 2024

July 1, 2019 to June 30, 2024

The Trust’s performance prior to January 11, 2024 is based on market-determined prices on the OTCQX marketplace and on the Trust’s performance without an ongoing share creation and redemption program.

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GBTC Share Price vs.

NAV per Share ($)

The following chart sets out the historical closing prices for the Shares as reported by NYSE Arca from January 11, 2024 to March 31, 2024 and the Trust’s NAV per Share from January 11, 2024 to March 31, 2024.

NAV per Share (Non-GAAP) ($)

The following chart sets out the historical closing prices for the Shares as reported by NYSE Arca from January 11, 2024 to June 30, 2024 and the Trust’s NAV per Share from January 11, 2024 to June 30, 2024.

GBTC Premium/(Discount):

GBTC Share Price vs.

NAV per Share ($)

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 close prices for the Shares as reported by OTCQX and the Trust’s NAV per Share from May 4, 2015 to January 10, 2024.

2 unchanged sentences

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 January 11, 2024 to March 31, 2024 divided by the Trust’s NAV per Share from January 11, 2024 to March 31, 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 January 11, 2024 to June 30, 2024 divided by the Trust’s NAV per Share from January 11, 2024 to June 30, 2024.

GBTC Premium/(Discount):

2 unchanged sentences

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