What changed in this filing

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Item 1. Financial Statements

2022-11-04 compared with 2022-08-05 · 51 added, 40 removed, 334 unchanged (21% of the section changed)

3 unchanged sentences

(Amounts in thousands, except Share and per Share amounts)

June 30, 2022

December 31, 2021

Investment in Bitcoin, at fair value (cost $ 7,231,203 and $ 7,303,280 as of June 30, 2022 and December 31, 2021, respectively)

September 30,

Investment in Bitcoin, at fair value (cost $ 7,194,841 and $ 7,303,280 as of September 30, 2022 and December 31, 2021, respectively)

Sponsor’s Fee payable, related party

11 unchanged sentences

(Amounts in thousands, except quantity of Bitcoin and percentages)

June 30, 2022

September 30, 2022

Quantity of Bitcoin

11 unchanged sentences

(Amounts in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Investment income:

11 unchanged sentences

(Amounts in thousands, except change in Shares outstanding)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Increase (decrease) in net assets from operations:

51 unchanged sentences

Genesis Global Trading, Inc.

(“Genesis” or the “Authorized Participant”), a registered broker-dealer and wholly owned subsidiary of DCG, is the only Authorized Participant and is party to a participant agreement with the Sponsor and the Trust.

(“Genesis” or, in such capacity, an “Authorized Participant”), a registered broker-dealer and wholly owned subsidiary of DCG, was the only Authorized Participant as of September 30, 2022, and was party to a participant agreement with the Sponsor and the Trust.

Additional Authorized Participants may be added at any time, subject to the discretion of the Sponsor.

Effective October 3, 2022, Grayscale Securities, LLC (“Grayscale Securities” or, in such capacity, an “Authorized Participant”), a registered broker-dealer and wholly owned subsidiary of the Sponsor, is the only Authorized Participant, and is party to a participant agreement with the Sponsor and the Trust.

See Note 10 for additional information.

The custodian of the Trust is Coinbase Custody Trust Company, LLC (the “Custodian”), a third-party service provider.

9 unchanged sentences

Summary of Significant Accounting Policies

In the opinion of management of the Sponsor of the Trust, all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position as of June 30, 2022 and December 31, 2021 and results of operations for the three and six months ended June 30, 2022 and 2021 have been made.

The results of operations for the periods presented are not necessarily indicative of the results of

operations expected for the full year.

These unaudited financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K.

In the opinion of management of the Sponsor of the Trust, all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position as of September 30, 2022 and December 31, 2021 and results of operations for the three and nine months ended September 30, 2022 and 2021 have been made.

The results of operations for the periods presented are not necessarily indicative of the results of operations expected for the full year.

These unaudited financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2021 included in the Trust’s Annual Report on Form 10-K.

The following is a summary of significant accounting policies followed by the Trust:

14 unchanged sentences

Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact.

The Trust only receives Bitcoin from the Authorized Participant and does not itself transact on any Digital Asset Markets.

The Trust only receives Bitcoin in connection with a creation order from the Authorized Participant and does not itself transact on any Digital Asset Markets.

Therefore, the Trust looks to the Authorized Participant when assessing entity-specific and market-based volume and level of activity for Digital Asset Markets.

The Authorized Participant transacts in a Brokered Market, a Dealer Market, Principal-to-Principal

During the three months ended September 30, 2022, the Authorized Participant may transact in a Brokered Market, a Dealer Market, Principal-to-Principal

Markets and Exchange Markets, each as defined in the FASB ASC Master Glossary (collectively, “Digital Asset Markets”).

3 unchanged sentences

to the Trust and the Authorized Participant.

The Trust or the Authorized Participant does not have access to Digital Asset Exchange Markets that do not have a BitLicense and has access only to non-Digital

Neither the Trust nor the Authorized Participant has access to Digital Asset Exchange Markets that do not have a BitLicense and have access only to non-Digital

Asset Exchange Markets that the Authorized Participant reasonably believes are operating in compliance with applicable law, including federal and state licensing requirements, based upon information and assurances provided to it by each market.

32 unchanged sentences

Amount at Fair

June 30, 2022

September 30, 2022

Investment in Bitcoin

6 unchanged sentences

Bitcoin is held by the Custodian on behalf of the Trust and is carried at fair value.

As of June 30, 2022 and December 31, 2021 the Trust held 638,446.30166100 and 644,809.96863835 Bitcoin, respectively.

The Trust determined the fair value per Bitcoin to be $ 18,895.01 and $ 45,867.86 on June 30, 2022 and December 31, 2021, respectively, using the price provided at 4:00 p.m., New York time, by the Digital Asset Exchange Market considered to be the Trust’s principal market (Coinbase Pro).

As of September 30, 2022 and December 31, 2021 the Trust held 635,235.84358745 and 644,809.96863835 Bitcoin, respectively.

The Trust determined the fair value per Bitcoin to be $ 19,480.51 and $ 45,867.86 on September 30, 2022 and December 31, 2021, respectively, using the price provided at 4:00 p.m., New York time, by the Digital Asset Exchange Market considered to be the Trust’s principal market (Coinbase Pro).

The following represents the changes in quantity of Bitcoin and the respective fair value:

18 unchanged sentences

Net realized gain on investment in Bitcoin

Ending balance as of June 30, 2022

Ending balance as of September 30, 2022

635,235.84358745

Creations and Redemptions of Shares

At June 30, 2022 and December 31, 2021, there were an unlimited number of Shares authorized by the Trust.

At September 30, 2022 and December 31, 2021, there were an unlimited number of Shares authorized by the Trust.

The Trust creates (and, should the Trust commence a redemption program, redeems) Shares from time to time, but only in one or more Baskets.

2 unchanged sentences

dollar value of accrued but unpaid fees and expenses of the Trust, by (y) the number of Shares outstanding at such time and multiplying the quotient obtained by 100.

Each Share represented approximately 0.0009 of one Bitcoin at both June 30, 2022 and December 31, 2021.

Each Share represented approximately 0.0009 of one Bitcoin at both September 30, 2022 and December 31, 2021.

The decrease in the number of Bitcoin represented by each Share is primarily a result of the periodic withdrawal of Bitcoin to pay the Sponsor’s Fee.

37 unchanged sentences

threshold are recorded as a tax benefit or expense in the current period.

As of, and during the periods ended June 30, 2022 and December 31, 2021, the Trust did not have a liability for any unrecognized tax amounts.

As of, and during the periods ended September 30, 2022 and December 31, 2021, the Trust did not have a liability for any unrecognized tax amounts.

However, the Sponsor’s conclusions concerning its determination of “more-likely-than-not”

1 unchanged sentence

analyses of and changes to tax laws, regulations and interpretations thereof.

The Sponsor of the Trust has evaluated whether or not there are uncertain tax positions that require financial statement recognition and has determined that no reserves for uncertain tax positions related to federal, state and local income taxes existed as of June 30, 2022 or December 31, 2021.

Related Parties

1 unchanged sentence

DCG, Genesis, Grayscale and CoinDesk Indices, Inc.

As of June 30, 2022 and December 31, 2021, 66,977,631 and 25,327,433 Shares of the Trust were held by related parties of the Trust, respectively.

As of September 30, 2022 and December 31, 2021, 66,972,899 and 25,327,433 Shares of the Trust were held by related parties of the Trust, respectively.

The Sponsor’s parent, an affiliate of the Trust, holds a minority interest in Coinbase, Inc., the parent company of the Custodian, that represents less than 1.0 % of Coinbase Inc.’s ownership.

7 unchanged sentences

dollar value of Bitcoin is determined by reference to the Digital Asset Exchange Market that the Trust considers its principal market as of 4:00 p.m., New York time, on each valuation date.

The Trust held no Incidental Rights or IR Virtual Currency as of June 30, 2022 and December 31, 2021.

No Incidental Rights or IR Virtual Currencies have been distributed in payment of the Sponsor’s Fee during the three and six months ended June 30, 2022 and 2021.

The Trust held no Incidental Rights or IR Virtual Currency as of September 30, 2022 and December 31, 2021.

No Incidental Rights or IR Virtual Currencies have been distributed in payment of the Sponsor’s Fee during the three and nine months ended September 30, 2022 and 2021.

As partial consideration for receipt of the Sponsor’s Fee, the Sponsor is obligated under the Trust Agreement to assume and pay all fees and other expenses incurred by the Trust in the ordinary course of its affairs, excluding taxes, but including marketing fees;

11 unchanged sentences

In such circumstances, the Sponsor or its delegate (i) will instruct the Custodian to withdraw from the Digital Asset Account Bitcoins, Incidental Rights and/or IR Virtual Currency in such quantity as may be necessary to permit payment of such Additional Trust Expenses and (ii) may either (x) cause the Trust (or its delegate) to convert such Bitcoins, Incidental Rights and/or IR Virtual Currency into U.S.

dollars or other fiat currencies at the Actual Exchange Rate or (y) cause the Trust (or its delegate) to deliver such Bitcoins, Incidental Rights and/or IR Virtual Currency in kind in satisfaction of such Additional Trust Expenses.

For the three months ended June 30, 2022 and June 30, 2021, the Trust incurred Sponsor’s Fees of $ 103,668,521 and $ 151,473,648 , respectively.

For the six months ended June 30, 2022 and 2021, the Trust incurred Sponsor’s Fees of $ 234,693,141 and $ 295,773,443 , respectively.

As of June 30, 2022 and December 31, 2021, there were no accrued and unpaid Sponsor’s Fees.

dollars or other fiat currencies at the Actual Exchange Rate or (y) when the Sponsor incurs such expenses on behalf of the Trust, cause the Trust (or its delegate) to deliver such Bitcoins, Incidental Rights and/or IR Virtual Currency in kind to the Sponsor in satisfaction of such Additional Trust Expenses.

For the three months ended September 30, 2022 and September 30, 2021 the Trust incurred Sponsor’s Fees of $ 68,251,452 and $ 137,296,546 , respectively.

For the nine months ended September 30, 2022 and 2021, the Trust incurred Sponsor’s Fees of $ 302,944,593 and $ 433,069,989 , respectively.

As of September 30, 2022 and December 31, 2021, there were no accrued and unpaid Sponsor’s Fees.

In addition, the Sponsor may pay Additional Trust Expenses on behalf of the Trust, which are reimbursable by the Trust to the Sponsor.

For the three and six months ended June 30, 2022 and 2021 the Sponsor did no t pay any Additional Trust Expenses on behalf of the Trust.

For the three and nine months ended September 30, 2022 and 2021 the Sponsor did no t pay any Additional Trust Expenses on behalf of the Trust.

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.

12 unchanged sentences

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 June 30, 2022, DCG has purchased a total of $ 771.8 million worth of Shares of the Trust.

During the three months ended June 30, 2022, approximately 35 million Shares were pledged as collateral under a loan agreement for which the counterparty defaulted and were subsequently assumed by Genesis Global Holdco, LLC and subsidiaries, which are wholly owned subsidiaries of DCG.

These amounts do not impact the remaining amount of Shares that can be repurchased under the publicly announced program.

From March 10, 2021 through September 30, 2022, DCG has purchased a total of $ 771.8 million worth of Shares of the Trust.

Risks and Uncertainties

34 unchanged sentences

Financial Highlights Per Share Performance

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Per Share Data:

Net asset value, beginning of period

Net increase (decrease) in net assets from investment operations:

Net increase (decrease) in net assets from investment

Net investment loss

Net realized and unrealized gain (loss)

Net (decrease) increase in net assets resulting from operations

Net increase (decrease) in net assets

resulting from operations

Net asset value, end of period

11 unchanged sentences

Subsequent Events

As of the close of business on August 1, 2022, the fair value of Bitcoin determined in accordance with the Trust’s accounting policy was $ 22,966.37

On October 3, 2022, the Sponsor of the Trust entered into a distribution and marketing agreement (the “Distribution and Marketing Agreement”) with Grayscale Securities to assist the Sponsor in distributing the Shares of the Trust, developing an ongoing marketing plan for the Trust, preparing marketing materials regarding the Shares, including the content on the Trust’s website, and executing the marketing plan for the Trust.

As a result, effective October 3, 2022, Grayscale Securities is the distributor and marketer of the Shares.

Grayscale Securities is a registered broker-dealer with the SEC and is a member of FINRA.

On October 3, 2022, the Sponsor entered into a participant agreement (the “Participant Agreement”) with Grayscale Securities, pursuant to which Grayscale Securities has agreed to act as an Authorized Participant of the Trust.

The Participant Agreement provides the procedures for the creation of Shares of the Trust through the Authorized Participant, which are substantially similar to the procedures for the creation of Shares set forth in the Trust’s existing participant agreement with Genesis except that the Authorized Participant may

engage one or more service providers (any such service provider, a “Liquidity Provider”) to source Bitcoin on behalf of the Authorized Participant in connection with the creation of Shares.

Effective October 3, 2022, Grayscale Securities is the only acting Authorized Participant of the Trust.

Grayscale Securities has engaged Genesis as a Liquidity Provider.

On October 3, 2022, in connection with the entry into the Distribution and Marketing Agreement with Grayscale Securities, the Sponsor and Genesis agreed to terminate the distribution and marketing agreement, dated November 15, 2019, among the Sponsor, the Trust and Genesis, pursuant to which Genesis assisted the Sponsor in distributing the Shares.

As a result, effective October 3, 2022, Genesis is no longer acting as the distributor and marketer of the Shares of the Trust.

On October 3, 2022, the Sponsor and Genesis agreed to terminate the participant agreement, dated January 11, 2019, among the Sponsor, the Trust and Genesis, which provided the procedures for the creation of Shares.

As a result, effective October 3, 2022, Genesis is no longer acting as an Authorized Participant of the Trust but will continue to serve as a Liquidity Provider.

As of the close of business on October 31, 2022, the fair value of Bitcoin determined in accordance with the Trust’s accounting policy was $ 20,367.62 per Bitcoin.

There are no known events that have occurred that require disclosure other than that which has already been disclosed in these notes to the financial statements.

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 1. Financial Statements