What changed in this filing

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Item 1. Financial Statements

2020-08-07 compared with 2020-05-08 · 84 added, 86 removed, 270 unchanged (39% of the section changed)

2 unchanged sentences

STATEMENTS OF ASSETS AND LIABILITIES

June 30, 2020

December 31, 2019

(Amounts in U.S.

dollars, except Share amounts)

March 31, 2020

December 31, 2019

Investment in Bitcoin, at fair value (cost $ 1,223,309,388 and $ 839,093,484 as of March 31, 2020 and December 31, 2019, respectively)

Investment in Bitcoin, at fair value (cost $ 1,972,997,225 and $ 839,093,484 as of June 30, 2020 and December 31, 2019, respectively)

3,532,364,439

10 unchanged sentences

Accumulated net investment loss

( 107,431,961

Accumulated net realized gain on investment in Bitcoin

3 unchanged sentences

3,532,364,439

1,866,217,842

Shares issued and outstanding, no par value (unlimited Shares authorized)

3 unchanged sentences

SCHEDULES OF INVESTMENT

March 31, 2020

Number of Bitcoin

June 30, 2020

Investment in Bitcoin

5 unchanged sentences

December 31, 2019

Number of Bitcoin

Investment in Bitcoin

5 unchanged sentences

STATEMENTS OF OPERATIONS

Three Months Ended March 31,

Three Months Ended

Six Months Ended

(Amounts in U.S.

3 unchanged sentences

Net investment loss

Net realized and unrealized (loss) gain from:

Net realized and unrealized gain from:

Net realized gain on investment in Bitcoin

Net change in unrealized (depreciation) appreciation on investment in Bitcoin

Net change in unrealized appreciation on investment in Bitcoin

1,593,068,169

Net realized and unrealized (loss) gain on investment

1,679,604,244

Net (decrease) increase in net assets resulting from operations

Net realized and unrealized gain on investment

1,598,779,045

1,687,159,197

Net increase in net assets resulting from operations

1,590,648,779

1,675,166,493

See accompanying notes to the unaudited financial statements

1 unchanged sentence

STATEMENT OF CHANGES IN NET ASSETS

Three Months Ended March 31,

Three Months Ended

Six Months Ended

(Amounts in U.S.

dollars, except change in Shares outstanding)

(Decrease) increase in net assets from operations:

Increase in net assets from operations:

Net investment loss

Net realized gain on investment in Bitcoin

Net change in unrealized (depreciation) appreciation on investment in Bitcoin

Net change in unrealized appreciation on investment in Bitcoin

1,593,068,169

Net (decrease) increase in net assets resulting from operations

1,679,604,244

Net increase in net assets resulting from operations

1,590,648,779

1,675,166,493

Increase in net assets from capital share transactions:

Shares issued

1,146,919,548

Net increase in net assets resulting from capital share transactions

1,146,919,548

Total increase in net assets from operations and capital share transactions

1,560,120,409

1,655,307,406

1,666,146,597

1,781,657,488

Beginning of period

1,972,244,030

1,866,217,842

End of period

3,532,364,439

2,533,279,662

3,532,364,439

2,533,279,662

Change in Shares outstanding:

16 unchanged sentences

Grayscale Investments LLC (“Grayscale” or the “Sponsor”) acts as the Sponsor of the Trust and is a wholly owned subsidiary of Digital Currency Group, Inc.

The Sponsor is responsible for the day-to-day

administration of the Trust pursuant to the provisions of the Trust Agreement.

The Sponsor is responsible for the day-to-day administration of the Trust pursuant to the provisions of the Trust Agreement.

Grayscale is responsible for preparing and providing annual and quarterly reports on behalf of the Trust to investors and is also responsible for selecting and monitoring the Trust’s service providers.

As partial consideration for the Sponsor’s services, the Trust pays Grayscale a Sponsor’s Fee as discussed in Note 6.

The Sponsor also acts as the sponsor and manager of other investment products including Grayscale Bitcoin Cash Trust (BCH), Grayscale Ethereum Trust (ETH) (OTCQX:

The Sponsor also acts as the sponsor and manager of other investment products including Grayscale Bitcoin Cash Trust (BCH) (Symbol:

BCHG), Grayscale Ethereum Trust (ETH) (OTCQX:

ETHE), Grayscale Ethereum Classic Trust (ETC) (OTCQX:

ETCG), Grayscale Horizen Trust (ZEN), Grayscale Litecoin Trust (LTC), Grayscale Stellar Lumens Trust (XLM), Grayscale XRP Trust (XRP), Grayscale Zcash Trust (ZEC) and Grayscale Digital Large Cap Fund LLC (OTCQX:

ETCG), Grayscale Horizen Trust (ZEN), Grayscale Litecoin Trust (LTC) (Symbol:

LTCN), Grayscale Stellar Lumens Trust (XLM), Grayscale XRP Trust (XRP), Grayscale Zcash Trust (ZEC) and Grayscale Digital Large Cap Fund LLC (OTCQX:

GDLC), each of which is an affiliate of the Trust.

3 unchanged sentences

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

The custodian of the Trust

is Coinbase Custody Trust Company, LLC

”), a third-party service provider.

The Custodian

is responsible for safeguarding the Bitcoin, Incidental Rights, and IR Virtual Currency held by the Trust

, and holding the private key(s) that provide access to the Trust’s digital wallets and vaults.

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

The Custodian is responsible for safeguarding the Bitcoin, Incidental Rights, and IR Virtual Currency held by the Trust, and holding the private key(s) that provide access to the Trust’s digital wallets and vaults.

The Custodian Agreement is for an initial term of three years.

5 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 March 31, 2020 and December 31, 2019 and results of operations for the three months ended March 31, 2020 and 2019 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 June 30, 2020 and December 31, 2019 and results of operations for the three and six months ended June 30, 2020 and 2019 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.

2 unchanged sentences

The financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”).

The Trust qualifies as an investment company for accounting purposes pursuant to the accounting and reporting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services –

Investment Companies

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

6 unchanged sentences

Principal Market and Fair Value Determination

To determine which market is the Trust’s principal market (or in the absence of a principal market, the most advantageous market) for purposes of calculating the Trust’s net asset value (“NAV”), the Trust follows ASC 820-10,

which outlines the application of fair value accounting.

determines fair value to be the price that would be received for Bitcoin in a current sale, which assumes an orderly transaction between market participants on the measurement date.

requires the Trust to assume that Bitcoin is sold in its principal market to market participants or, in the absence of a principal market, the most advantageous market.

ASC 820-10 determines fair value to be the price that would be received for Bitcoin in a current sale, which assumes an orderly transaction between market participants on the measurement date.

ASC 820-10 requires the Trust to assume that Bitcoin is sold in its principal market to market participants or, in the absence of a principal market, the most advantageous market.

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.

1 unchanged sentence

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

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

The Authorized Participant transacts in a Brokered Market, a Dealer Market, Principal-to-Principal Markets and Exchange Markets, each as defined in the FASB 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.

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

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

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 and excludes any Digital Asset Markets that are non-accessible 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 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.

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.

Based on information reasonably available to the Trust, Exchange Markets have the greatest volume and level of activity for the asset.

The Trust therefore looks to accessible Exchange Markets as opposed to the Brokered Market, Dealer Market and Principal-to-Principal

Markets to determine its principal market.

The Trust therefore looks to accessible Exchange Markets as opposed to the Brokered Market, Dealer Market and Principal-to-Principal Markets to determine its principal market.

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

21 unchanged sentences

Fair value estimates do not necessarily represent the amounts that may be ultimately realized by the Trust.

Amount at Fair

Fair Value Measurement Using

March 31, 2020

June 30, 2020

Investment in Bitcoin

7 unchanged sentences

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

As of March 31, 2020, and December 31, 2019, the Trust held 304,631.31046282 and 261,192.14022299 Bitcoin, respectively.

The Trust determined the fair value per Bitcoin to be $ 6,474.20 and $ 7,145.00 on March 31, 2020 and December 31, 2019, 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 June 30, 2020, and December 31, 2019, the Trust held 386,723.19178964 and 261,192.14022299 Bitcoin, respectively.

The Trust determined the fair value per Bitcoin to be $ 9,134.09 and $ 7,145.00 on June 30, 2020 and December 31, 2019, 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:

12 unchanged sentences

128,659.07651662

Bitcoin distributed for Sponsor’s Fee, related party

1,146,919,548

Net change in unrealized depreciation on investment in Bitcoin

Bitcoin distributed for Sponsor's Fee, related party

( 3,128.02494997

Net change in unrealized appreciation on investment in Bitcoin

Net realized gain on investment in Bitcoin

Balance at March 31, 2020

Balance at June 30, 2020

386,723.19178964

1 unchanged sentence

Creations and Redemptions of Shares

At March 31, 2020 and December 31, 2019, there were an unlimited number of Shares authorized by the Trust.

At June 30, 2020 and December 31, 2019, 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.

The creation and redemption of Baskets on behalf of investors are made by the Authorized Participant in exchange for the delivery of Bitcoin to the Trust or the distribution of Bitcoin by the Trust.

The number of Bitcoin required for each creation Basket or redemption Basket is determined by dividing (x) the number of Bitcoin owned by the Trust at 4:00 p.m., New York time, on such trade date of a creation or redemption order, after deducting the number of

representing the U.S.

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 0.0010 of one Bitcoin at March 31, 2020 and December 31, 2019.

Each Share represented approximately 0.0010 of one Bitcoin at June 30, 2020 and December 31, 2019.

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.

28 unchanged sentences

federal income tax (currently at a maximum rate of 21 %) on its net taxable income and certain distributions made by the Trust to Shareholders would be treated as taxable dividends to the extent of the Trust’s current and accumulated earnings and profits.

In accordance with GAAP, the Trust has defined the threshold for recognizing the benefits of tax return positions in the financial statements as “more-likely-than-not”

to be sustained by the applicable taxing authority and requires measurement of a tax position meeting the “more-likely-than-not”

threshold, based on the largest benefit that is more than 50% likely to be realized.

Tax positions not deemed to meet the “more-likely-than-not”

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

As of and during the periods ended March 31, 2020 and December 31, 2019, 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”

tax positions may be subject to review and adjustment at a later date based on factors including, but not limited to, further implementation guidance, and on-going

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 March 31, 2020 or December 31, 2019.

In accordance with GAAP, the Trust has defined the threshold for recognizing the benefits of tax return positions in the financial statements as “more-likely-than-not” to be sustained by the applicable taxing authority and requires measurement of a tax position meeting the “more-likely-than-not” threshold, based on the largest benefit that is more than 50% likely to be realized.

Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current period.

As of and during the periods ended June 30, 2020 and December 31, 2019, 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” tax positions may be subject to review and adjustment at a later date based on factors including, but not limited to, further implementation guidance, and on-going analyses of and changes to tax laws, regulations and interpretations thereof.

Related Parties

1 unchanged sentence

DCG, Genesis, and Grayscale.

As of March 31, 2020 and December 31, 2019, 11,213,392 and 12,617,869 Shares of the Trust were held by related parties of the Trust, respectively.

As of June 30, 2020 and December 31, 2019, 12,606,247 and 12,617,869 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.

17 unchanged sentences

the costs of maintaining the Trust’s website and applicable license fees (the “Sponsor-paid Expenses”), provided that any expense that qualifies as an Additional Trust Expense will be deemed to be an Additional Trust Expense and not a Sponsor-paid Expense.

The Trust may incur certain extraordinary, non-recurring

expenses that are not Sponsor-paid Expenses, including, but not limited to, taxes and governmental charges, expenses and costs of any extraordinary services performed by the Sponsor (or any other service provider) on behalf of the Trust to protect the Trust or the interests of Shareholders (including in connection with any Incidental Rights and any IR Virtual Currency), any indemnification of the Custodian or other agents, service providers or counterparties of the Trust, the fees and expenses related to the listing, quotation or trading of the Shares on any secondary market (including legal, marketing and audit fees and expenses) to the extent exceeding $ 600,000 in any given fiscal year and extraordinary legal fees and expenses, including any legal fees and expenses incurred in connection with litigation, regulatory enforcement or investigation matters (collectively “Additional Trust Expenses”).

In such circumstances, the Sponsor or its delegate (i) will instruct the Custodian to withdraw from the Bitcoin 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.

The Trust may incur certain extraordinary, non-recurring expenses that are not Sponsor-paid Expenses, including, but not limited to, taxes and governmental charges, expenses and costs of any extraordinary services performed by the Sponsor (or any other service provider) on behalf of the Trust to protect the Trust or the interests of Shareholders (including in connection with any Incidental Rights and any IR Virtual Currency), any indemnification of the Custodian or other agents, service providers or counterparties of the Trust, the fees and expenses related to the listing, quotation or trading of the Shares on any secondary market (including legal, marketing and audit fees and expenses) to the extent exceeding $ 600,000 in any given fiscal year and extraordinary legal fees and expenses, including any legal fees and expenses incurred in connection with litigation, regulatory enforcement or investigation matters (collectively “Additional Trust Expenses”).

In such circumstances, the Sponsor or its delegate (i) will instruct the Custodian to

withdraw from the Bitcoin 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 March 31, 2020 and 2019, the Trust incurred Sponsor’s Fees of $ 11,793,388 and $ 3,862,438 , respectively.

As of March 31, 2020 and December 31, 2019, there were no accrued and unpaid Sponsor’s Fees.

For the three months ended June 30, 2020 and 2019, the Trust incurred Sponsor’s Fees of $ 14,803,403 and $ 8,130,266 , respectively.

For the six months ended June 30, 2020 and 2019, the Trust incurred Sponsor’s Fees of $ 26,596,791 and $ 11,992,704 , respectively.

As of June 30, 2020 and December 31, 2019, 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 months ended March 31, 2020 and 2019, the Sponsor did not pay any Additional Trust Expenses on behalf of the Trust.

For the three and six months ended June 30, 2020 and 2019, the Sponsor did not pay any Additional Trust Expenses on behalf of the Trust.

Risks and Uncertainties

23 unchanged sentences

To the extent a private key required to access a Bitcoin address is lost, destroyed or otherwise compromised and no backup of the private keys are accessible, the Trust may be unable to access the Bitcoin controlled by the private key and the private key will not be capable of being restored by the Bitcoin network.

The processes by which Bitcoin transactions are settled are dependent on the peer-to-peer

network, and as such, the Trust is subject to operational risk.

The processes by which Bitcoin transactions are settled are dependent on the peer-to-peer network, and as such, the Trust is subject to operational risk.

A risk also exists with respect to previously unknown technical vulnerabilities, which may adversely affect the value of Bitcoin.

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 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.

Financial Highlights Per Share Performance

Three Months Ended March 31,

Three Months Ended

Six Months Ended

Per Share Data:

Net asset value, beginning of period

Net (decrease) increase in net assets from investment operation s

Net increase in net assets from investment operations:

Net investment loss

Net realized and unrealized (loss) gain

Net (decrease) increase in net assets resulting from operations

Net realized and unrealized gain

Net increase in net assets resulting from operations

Net asset value, end of period

2 unchanged sentences

Ratios of net investment loss and expenses to average net assets have been annualized.

An individual Shareholder’s return, ratios, and per Share performance may vary from those presented above based on the timing of Share transactions.

Total return is calculated assuming an initial investment made at the net asset value at the beginning of the

and assuming redemption on the last day of the

period and has been annualized

An i nd i v i du a l Shareholde r ’ s r eturn , ratios, and per Share performance m a y va r y from those presented above b a s e d on the ti m ing of S h a re t r ansac ti ons.

Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and assuming redemption on the last day of the period and has been annualized.

Indemnifications

4 unchanged sentences

Subsequent Events

As of the close of business on May 1

, 2020 the fair value of Bitcoin determined in accordance with the Trust’s accounting policy was $ 8,731.74 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.

As of the close of business on August 4, 2020 the fair value of Bitcoin determined in accordance with the Trust’s accounting policy was $ 11,235.00 per Bitcoin.

There are no known eve nts 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