What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-07 compared with 2020-11-06 · 41 added, 75 removed, 95 unchanged (55% of the section changed)

4 unchanged sentences

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

Risk Factors or in Part II, Item 1A.

Risk Factors in this Quarterly Report or in Part II, Item 1A.

Risk Factors or other sections of our Annual Report on Form 10-K for the year ended December 31, 2020.

3 unchanged sentences

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

To date, the Trust has not met its investment objective and the Shares quoted on OTCQX have not reflected the value of Bitcoins held by the Trust, less the Trust’s expenses and other liabilities, but have instead traded at a substantial premium over such value.

To date, the Trust has not met its investment objective and the Shares quoted on OTCQX have not reflected the value of Bitcoins held by the Trust, less the Trust’s expenses and other liabilities, but instead have traded at both premiums and discounts to such value, with variations that have at times been substantial.

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

35 unchanged sentences

Review of Financial Results (unaudited)

Financial Highlights for the Three and Nine Months Ended September 30, 2020 and 2019

Financial Highlights for the Three Months Ended March 31, 2021 and 2020

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended March 31,

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

Net increase (decrease) in net assets resulting from operations

Net realized and unrealized gain on investment in Bitcoin for the three months ended September 30, 2020 was $582,442 which includes a realized gain of $10,694 on the transfer of Bitcoins to pay the Sponsor’s Fee and net change in unrealized appreciation on investment in Bitcoin of $571,748.

Net realized and unrealized gain on investment in Bitcoin for the period was driven by Bitcoin price appreciation from $9,134.09 per Bitcoin as of June 30, 2020 to $10,708.57 per Bitcoin as of September 30, 2020.

Net increase in net assets resulting from operations was $560,362 for the three months ended September 30, 2020, which consisted of the net realized and unrealized gain on investment in Bitcoin, less the Sponsor’s Fee of $22,080.

Net assets increased to $4,816,619 at September 30, 2020, a 36% increase for the three-month period.

The increase in net assets resulted from the aforementioned Bitcoin price appreciation and the contribution of approximately 65,143 Bitcoin with a value of $723,892 to the Trust in connection with Share creations during the period, partially offset by the withdrawal of approximately 2,075 Bitcoin to pay the foregoing Sponsor’s Fee.

Net realized and unrealized loss on investment in Bitcoin for the three months ended September 30, 2019 was ($708,082) which includes a realized gain of $9,451 on the transfer of Bitcoins to pay the Sponsor’s Fee and net change in unrealized depreciation on investment in Bitcoin of ($717,533).

Net realized and unrealized loss on investment in Bitcoin for the period was driven by Bitcoin price depreciation from $11,237.68 per Bitcoin as of June 30, 2019 to $8,283.71 per Bitcoin as of September 30, 2019.

Net decrease in net assets resulting from operations was ($720,450) for the three months ended September 30, 2019, which consisted of the net realized and unrealized loss on investment in Bitcoin, plus the Sponsor’s Fee of $12,368.

Net assets decreased to $1,976,897 at September 30, 2019, a 22% decrease for the period.

The decrease in net assets resulted from the aforementioned Bitcoin price depreciation and the withdrawal of approximately 1,196 Bitcoin to pay the foregoing Sponsor’s Fee, partially offset by the contribution of 14,418 Bitcoin with a value of $164,068 to the Trust in connection with Share creations during the period.

Net realized and unrealized gain on investment in Bitcoin for the nine months ended September 30, 2020 was $1,128,266, which includes a realized gain of $24,275 on the transfer of Bitcoins to pay the Sponsor’s Fee and net change in unrealized appreciation on investment in Bitcoin of $1,103,991.

Net realized and unrealized gain on investment in Bitcoin for the period was driven by Bitcoin

price appreciation from $7,145.00 per Bitcoin as of December 31, 2019 to $10,708.57 per Bitcoin as of September 30, 2020 .

Net increase in net assets resulting from operations was $1,079,589 for the nine months ended September 30, 2020 , which consisted of the net realized and unrealized gain on investment in Bitcoin, less the Sponsor’s Fee of $48,677 .

Net assets increase d to $4,816,619 at September 30, 2020 , a 158% increase for the period.

The increase in net assets resulted from the aforementioned Bitcoin price appreciation and the contribution of approximately 193,802 Bitcoin with a value of $1,870,812 to the Trust in connection with Share creations during the period, partially offset by the withdrawal of approximately 5,203 Bitcoin to pay the foregoing Sponsor’s Fee.

Net realized and unrealized gain on investment in Bitcoin for the nine months ended September 30, 2019 was $979,077, which includes a realized gain of $17,006 on the transfer of Bitcoins to pay the Sponsor’s Fee and net change in unrealized appreciation on investment in Bitcoin of $962,071.

Net realized and unrealized gain on investment in Bitcoin for the period was driven by Bitcoin price appreciation from $3,679.42 per Bitcoin as of December 31, 2018 to $8,283.71 per Bitcoin as of September 30, 2019.

Net increase in net assets resulting from operations was $954,716 for the nine months ended September 30, 2019, which consisted of the net realized and unrealized gain on investment in Bitcoin, less the Sponsor’s Fee of $24,361.

Net assets increased to $1,976,897 at September 30, 2019, a 163% increase for the period.

Net realized and unrealized gain on investment in Bitcoin for the three months ended March 31, 2021 was $18,882,994 which includes a realized gain of $109,934 on the transfer of Bitcoins to pay the Sponsor’s Fee and net change in unrealized appreciation on investment in Bitcoin of $18,773,060.

Net realized and unrealized gain on investment in Bitcoin for the period was driven by Bitcoin price appreciation from $29,185.05 per Bitcoin as of December 31, 2020 to $58,601.27 per Bitcoin as of March 31, 2021.

Net increase in net assets resulting from operations was $18,738,694 for the three months ended March 31, 2021, which consisted of the net realized and unrealized gain on investment in Bitcoin, less the Sponsor’s Fee of $144,300.

Net assets increased to $38,360,399 at March 31, 2021, a 117% increase for the period.

The increase in net assets resulted from the aforementioned Bitcoin price appreciation and the contribution of approximately 50,739 Bitcoin with a value of $1,905,227 to the Trust in connection with Share creations during the period, partially offset by the withdrawal of approximately 3,178 Bitcoin to pay the foregoing Sponsor’s Fee.

Net realized and unrealized loss on investment in Bitcoin for the three months ended March 31, 2020 was ($271,710) which includes a realized gain of $6,480 on the transfer of Bitcoins to pay the Sponsor’s Fee and net change in unrealized depreciation on investment in Bitcoin of ($278,190).

Net realized and unrealized loss on investment in Bitcoin for the period was driven by Bitcoin price depreciation from $7,145.00 per Bitcoin as of December 31, 2019 to $6,474.20 per Bitcoin as of March 31, 2020.

Net decrease in net assets resulting from operations was ($283,503) for the three months ended March 31, 2020, which consisted of the net realized and unrealized loss on investment in Bitcoin, plus the Sponsor’s Fee of $11,793.

Net assets increased to $1,972,244 at March 31, 2020, a 6% increase for the period.

The increase in net assets resulted from the contribution of approximately 44,868 Bitcoin with a value of $389,529 to the Trust in connection with Share creations during the period, partially offset by the aforementioned Bitcoin price depreciation and the withdrawal of approximately 1,429 Bitcoin to pay the foregoing Sponsor’s Fee.

Off-Balance Sheet Arrangements

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Selected Operating Data

Three Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended March 31,

Opening balance

6 unchanged sentences

Closing balance

As of September 30,

As of March 31,

Price of Bitcoin on principal market (1)

1 unchanged sentence

Digital Asset Holdings per Share (3)

The Trust performed an assessment of the principal market at September 30, 2020 and 2019 , and identified the principal market as Coinbase Pro.

As of September 30, 2020 and 2019 the NAV per Share was calculated using the fair value of Bitcoin based on the price provided by Coinbase Pro, the Digital Asset Exchange that the Trust currently considers its principal market, as of 4:00 p.m., New York time, on the valuation date.

The Trust performed an assessment of the principal market at March 31, 2021 and 2020, and identified the principal market as Coinbase Pro.

As of March 31, 2021 and 2020 the NAV per Share was calculated using the fair value of Bitcoin based on the price provided by Coinbase Pro, the Digital Asset Exchange that the Trust currently considers its principal market, as of 4:00 p.m., New York time, on the valuation date.

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

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Business—Trust Objective and Key Operating Metrics” in the Trust’s Annual Report on Form 10-K for a description of the Trust’s Digital Asset Holdings per Share.

The Digital Asset Exchanges used to calculate the Index Price as of September 30, 2020 were Coinbase Pro, LMAX Digital, Kraken and Bitstamp.

As of September 30, 2019, the Digital Asset Exchanges used to calculate the Index Price consisted of Coinbase Pro, Bittrex, Kraken, Bitstamp, and itBit.

The Digital Asset Exchanges used to calculate the Index Price as of March 31, 2021 were Coinbase Pro, Bitstamp, Kraken, and LMAX Digital.

As of March 31, 2020, the Digital Asset Exchanges used to calculate the Index Price consisted of Coinbase Pro, Bitstamp, itBit, Kraken, and LMAX Digital.

For accounting purposes, the Trust reflects creations and the Bitcoins receivable 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 is received.

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The Trust currently has no intention of seeking regulatory approval to operate an ongoing redemption program.

As of September 30, 2020, the Trust had a net closing balance with a value of $4,834,583,325, based on the Index Price (non-GAAP methodology).

As of September 30, 2020, the Trust had a total market value of $4,816,618,672, based on the principal market (Coinbase Pro).

As of September 30, 2019, the Trust had a net closing balance with a total value of $1,924,721,610, based on the Index Price (non-GAAP methodology).

As of September 30, 2019, the Trust had a total market value of $1,976,897,396, based on the principal market (Coinbase Pro).

As of March 31, 2021, the Trust had a net closing balance with a value of $38,423,240,437, based on the Index Price (non-GAAP methodology).

As of March 31, 2021, the Trust had a total market value of $38,360,398,824, based on the principal market (Coinbase Pro).

As of March 31, 2020 , the Trust had a net closing balance with a total value of $1,969,892,276 , based on the Index Price (non-GAAP methodology).

As of March 31, 2020 , the Trust had a total market value of $1,972,244,030 , based on the principal market (Coinbase Pro).

Historical Digital Asset Holdings and Bitcoin Prices

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

The following chart illustrates the movement in the Trust’s Digital Asset Holdings per Share (as adjusted for the Share Split for periods prior to January 26, 2018) versus the Index Price and the Trust’s NAV per Share (as adjusted for the Share Split for periods prior to January 26, 2018) from September 25, 2013 to September 30, 2020.

The following table illustrates the movements in the Index Price from the beginning of the Trust’s operations on September 25, 2013 to September 30, 2020 .

Since the beginning of the Trust’s operations, the Index Price has ranged from $117.03 to $18,756.45 , with the straight average being $3,865.55 through September 30, 2020 .

The following table illustrates the movements in the Index Price from the beginning of the Trust’s operations on September 25, 2013 to March 31, 2021.

Since the beginning of the Trust’s operations, the Index Price has ranged from $117.03 to $60,609.43, with the straight average being $5,644.64 through March 31, 2021.

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

1 unchanged sentence

Last business day

Twelve months ended September 30, 2016

Twelve months ended September 30, 2017

Twelve months ended September 30, 2018

Twelve months ended September 30, 2019

Twelve months ended September 30, 2020

September 25, 2013 (the first Creation Basket of the Trust) to September 30, 2020

The following table illustrates the movements in the price of Bitcoin, as reported on the Trust’s principal market, from the beginning of the Trust’s operations on September 25, 2013 to September 30, 2020.

Twelve months ended March 31, 2017

Twelve months ended March 31, 2018

Twelve months ended March 31, 2019

Twelve months ended March 31, 2020

Twelve months ended March 31, 2021

September 25, 2013 (the first Creation Basket of the Trust) to March 31, 2021

Since the beginning of the Trust’s operations, the price of Bitcoin has ranged from $110.83 to $61,607.76, with the straight average being $5,670.20.

1 unchanged sentence

Last business day

Twelve months ended September 30, 2016

Twelve months ended September 30, 2017

Twelve months ended September 30, 2018

Twelve months ended September 30, 2019

Twelve months ended September 30, 2020

September 25, 2013 (the first Creation Basket of the Trust) to September 30, 2020

Twelve months ended March 31, 2017

Twelve months ended March 31, 2018

Twelve months ended March 31, 2019

Twelve months ended March 31, 2020

Twelve months ended March 31, 2021

September 25, 2013 (the first Creation Basket of the Trust) to March 31, 2021

The following chart sets out the historical closing prices for the Shares as reported by OTCQX and the Trust’s Digital Asset Holdings per Share.

GBTC Premium:

GBTC Premium/(Discount):

GBTC Share Price vs.

1 unchanged sentence

The following chart sets out the historical premium and discount for the Shares as reported by OTCQX and the Trust’s Digital Asset Holdings per Share.

GBTC Premium:

GBTC Premium/(Discount):

GBTC Share Price vs.

Digital Asset Holdings per Share (%)

Update to “Certain U.S.

Federal Income Tax Consequences” Disclosure in Form 10-K

The section entitled “Certain U.S.

Federal Income Tax Consequences” in our Annual Report on Form 10-K for the year ended December 31, 2019 is supplemented by adding at the end thereof:

As discussed above, it is unclear whether any ordinary income recognized by a non-U.S.

Holder as a result of a fork, airdrop or similar occurrence would constitute U.S.-source FDAP income.

Provisions of the Code commonly referred to as “FATCA” require withholding of 30% on payments of U.S.-source FDAP income and, subject to the discussion of proposed U.S.

Treasury regulations below, of gross proceeds of dispositions of certain types of property that produce U.S.-source FDAP income to “foreign financial institutions” (which is broadly defined for this purpose and in general includes investment vehicles) and certain other non-U.S.

entities unless various U.S.

information reporting and due diligence requirements (generally relating to ownership by U.S.

persons of interests in or accounts with those entities) have been satisfied, or an exemption applies.

An intergovernmental agreement between the United States and an applicable foreign country may modify these requirements.

In addition, regulations proposed by the U.S.

Treasury Department (the preamble to which indicates that taxpayers may rely on the regulations pending their finalization) would eliminate the requirement under FATCA of withholding on gross proceeds.

If FATCA withholding is imposed, a beneficial owner that is not a foreign financial institution generally may obtain a refund of any amounts withheld by filing a U.S.

federal income tax return (which may entail a significant administrative burden).

Shareholders should consult their tax advisers regarding the effects of FATCA on an investment in the Trust.

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