What changed in this filing

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Item 1. Financial Statements

2023-05-05 compared with 2022-11-04 · 55 added, 74 removed, 311 unchanged (29% of the section changed)

1 unchanged sentence

GRAYSCALE BITCOIN TRUST (BTC)

STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)

STATEMENTS OF ASSETS AND LIABILITIES (U N

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

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)

Investment in Bitcoin, at fair value (cost $ 7,123,444 and $ 7,158,661 as of March 31, 2023 and December 31, 2022, respectively)

Sponsor’s Fee payable, related party

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

September 30, 2022

March 31, 2023

Quantity of Bitcoin

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(Amounts in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Investment income:

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(Amounts in thousands, except change in Shares outstanding)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Increase (decrease) in net assets from operations:

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Increase in net assets from capital share transactions:

Shares issued

Net increase in net assets resulting from capital share transactions

Total increase (decrease) in net assets from operations and capital share transactions

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LTCN), Grayscale Livepeer Trust (LPT) (OTCQB:

GLIV), Grayscale Solana Trust (SOL), Grayscale Stellar Lumens Trust (XLM) (OTCQX:

GLIV), Grayscale Solana Trust (SOL) (OTCQB:

GSOL), Grayscale Stellar Lumens Trust (XLM) (OTCQX:

GXLM), Grayscale Zcash Trust (ZEC) (OTCQX:

ZCSH), Grayscale Decentralized Finance (DeFi) Fund LLC, Grayscale Digital Large Cap Fund LLC (OTCQX:

ZCSH), Grayscale Decentralized Finance (DeFi) Fund LLC (OTCQB:

DEFG), Grayscale Digital Large Cap Fund LLC (OTCQX:

GDLC), and Grayscale Smart Contract Platform Ex Ethereum (ETH) Fund LLC, each of which is an affiliate of the Trust.

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Genesis Global Trading, Inc.

(“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.

(“Genesis” or, in such capacity, an “Authorized Participant”), a registered broker-dealer and wholly owned subsidiary of DCG, was the only Authorized Participant prior to October 3, 2022, and was party to a participant agreement with the Sponsor and the Trust.

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.

As a result, since October 3, 2022, Genesis ceased acting as an Authorized Participant of the Trust, but serves as a Liquidity Provider to Grayscale Securities.

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

The Authorized Participant(s) may engage additional Liquidity Providers at any time.

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

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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 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.

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 March 31, 2023 and December 31, 2022 and results of operations for the three months ended March 31, 2023 and 2022 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.

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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 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.

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

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

Therefore, the Trust looks to market-based volume and level of activity for Digital Asset Markets.

The Authorized Participant(s), or a Liquidity Provider on behalf of the Authorized Participant(s), 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”).

The Authorized Participant, as a related party of the Sponsor, provides information about the Digital Asset Markets on which it transacts to the Trust.

In determining which of the eligible Digital Asset Markets is the Trust’s principal market, the Trust reviews these criteria in the following order:

First, the Trust reviews a list of Digital Asset Markets and excludes any Digital Asset Markets that are non-accessible

to the Trust and the Authorized Participant.

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.

Second, the Trust sorts the remaining Digital Asset Markets from high to low by entity-specific and market-based volume and level of 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.

First, the Trust reviews a list of Digital Asset Markets that maintain practices and policies designed to comply with anti-money laundering (“AML”) and know-your-customer (“KYC”) regulations, and non-Digital

Asset Exchange Markets that the Trust 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.

Second, the Trust sorts these Digital Asset Markets from high to low by market-based volume and level of activity of Bitcoin traded on each Digital Asset Market in the trailing twelve months.

Third, the Trust then reviews 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-based volume, level of activity and price stability in comparison to the other Digital Asset Markets on the list.

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Markets to determine its principal market.

As a result of the analysis, an Exchange Market has been selected as the Trust’s principal market.

As a result of the aforementioned analysis, an Exchange Market has been selected as the Trust’s principal market.

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 the investment in Bitcoin recorded by the Trust for financial reporting purposes is the fair value of Bitcoin at the time of transfer.

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 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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Realized gains and losses are calculated using the specific identification method.

Realized gains and losses are recognized in connection with transactions including settling obligations for the Sponsor’s Fee in Bitcoin.

Realized gains and losses are recognized in connection with

transactions including settling obligations for the Sponsor’s Fee in Bitcoin.

Fair Value Measurement

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Amount at Fair

September 30, 2022

March 31, 2023

Investment in Bitcoin

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

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).

As of March 31, 2023 and December 31, 2022 the Trust held 628,932.20027878 and 632,041.52945742 Bitcoin, respectively.

The Trust determined the fair value per Bitcoin to be $ 28,467.79 and $ 16,556.29 on March 31, 2023 and December 31, 2022, 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:

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Bitcoin contributed

50,738.88950472

Bitcoin distributed for Sponsor’s Fee, related party

( 12,768.43918093

Net change in unrealized appreciation on investment in Bitcoin

Net change in unrealized depreciation on investment in Bitcoin

Net realized gain on investment in Bitcoin

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( 3,109.32917864

Net change in unrealized depreciation on investment in Bitcoin

Net change in unrealized appreciation on investment in Bitcoin

Net realized gain on investment in Bitcoin

Ending balance as of September 30, 2022

Ending balance as of March 31, 2023

628,932.20027878

Creations and Redemptions of Shares

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

At March 31, 2023 and December 31, 2022, 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.

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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 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.

Each Share represented approximately 0.0009 of one Bitcoin at both March 31, 2023 and December 31, 2022.

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

The cost basis of investments in Bitcoin recorded by the Trust is the fair value of Bitcoin, as determined by the Trust, at 4:00 p.m., New York time, on the date of transfer to the Trust by the Authorized Participant based on the creation Baskets.

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application and the Sponsor subsequently petitioned the United States Court of Appeals for the District of Columbia for review of the SEC’s June 29, 2022 final order denying approval to list shares of the Trust on NYSE Arca as an exchange-traded product.

The Sponsor’s petition remains pending.

As of January 1, 2016, an amendment to the Trust Agreement was made to ensure that the Trust Agreement was consistent with the treatment of the Trust as a grantor trust.

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If the Trust were not properly classified as a grantor trust, the Trust might be classified as a partnership for U.S.

federal income tax purposes.

income tax purposes.

However, due to the uncertain treatment of digital assets, including forks, airdrops and similar occurrences for U.S.

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

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.

As of, and during the periods ended March 31, 2023 and December 31, 2022, 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”

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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 September 30, 2022 or December 31, 2021.

Related Parties

The Trust considers the following entities, their directors, and employees to be related parties of the Trust:

DCG, Genesis, Grayscale and CoinDesk Indices, Inc.

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 Trust considers the following entities, their directors, and certain employees to be related parties of the Trust:

DCG, Genesis, Genesis Global Holdco, LLC, Grayscale, Grayscale Securities, and CoinDesk Indices, Inc.

As of March 31, 2023 and December 31, 2022, 36,066,527 and 36,065,470 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.

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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 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.

The Trust held no Incidental Rights or IR Virtual Currency as of March 31, 2023 and December 31, 2022.

No Incidental Rights or IR Virtual Currencies have been distributed in payment of the Sponsor’s Fee during the three months ended March 31, 2023 and 2022.

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;

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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.

For the three months ended March 31, 2023 and 2022, the Trust incurred Sponsor’s Fees of $ 71,084,974 and $ 131,024,620 , respectively.

As of March 31, 2023 and December 31, 2022, 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 nine months ended September 30, 2022 and 2021 the Sponsor did no t pay any Additional Trust Expenses on behalf of the Trust.

For the three months ended March 31, 2023 and 2022 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.

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

From March 10, 2021 through June 30, 2022, DCG purchased a total of $ 771.8 million worth of Shares of the Trust under this authorization.

From July 1, 2022 through March 31, 2023, DCG did not purchase any Shares of the Trust under this authorization.

Risks and Uncertainties

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statements by senior officials at the SEC have indicated that the SEC did not consider Bitcoin or Ethereum to be securities, and does not currently consider Bitcoin to be a security.

The SEC staff also provided informal assurances to a handful of promoters that their digital assets are not securities.

The SEC staff has also provided informal assurances to a handful of promoters that their digital assets are not securities.

On the other hand, the SEC has brought enforcement actions against the issuers and promoters of several other digital assets on the basis that the digital assets in question are securities.

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The Trust relies on third party service providers to perform certain functions essential to its operations.

Any disruptions to the Trust’s or the Trust’s service providers’ business operations resulting from business restrictions, quarantines or restrictions on the ability of personnel to perform their jobs as a result of the COVID-19

pandemic could have an adverse impact on the Trust’s ability to access critical services and would be disruptive to the operation of the Trust.

Any disruptions to the Trust’s service providers’ business operations resulting from business failures, financial instability, security failures, government mandated regulation or operational problems could have an adverse impact on the Trust’s ability to access critical services and be disruptive to the operations of the Trust.

The Sponsor and the Trust may be subject to various litigation, regulatory investigations, and other legal proceedings that arise in the ordinary course of its business.

Financial Highlights Per Share Performance

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Per Share Data

Net asset value, beginning of period

Net increase (decrease) in net assets from investment

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

Net investment loss

Net realized and unrealized gain (loss)

Net increase (decrease) in net assets

resulting from operations

Net increase (decrease) in net assets resulting from operations

Net asset value, end of period

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Subsequent Events

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.

As of the close of business on May 1, 2023, the fair value of Bitcoin determined in accordance with the Trust’s accounting policy was $ 27,833.06 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