What changed in this filing

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Item 1. Financial Statements

2021-08-06 compared with 2021-05-07 · 46 added, 46 removed, 270 unchanged (25% of the section changed)

3 unchanged sentences

( Amounts in thousands, except Share amounts)

March 31, 2021

June 30, 2021

December 31, 2020

Investment in Bitcoin, at fair value (cost $ 7,414,166 and $ 5,543,305 as of March 31, 2021 and December 31, 2020, respectively)

Investment in Bitcoin, at fair value (cost $ 7,377,287 and $ 5,543,305 as of June 30, 2021 and December 31, 2020, respectively)

Sponsor's Fee payable, related party

11 unchanged sentences

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

March 31, 2021

June 30, 2021

Investment in Bitcoin

7 unchanged sentences

( Amounts in thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Investment income:

2 unchanged sentences

Net investment loss

Net realized and unrealized gain (loss) from:

Net realized and unrealized (loss) gain from:

Net realized gain on investment in Bitcoin

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

Net realized and unrealized gain (loss) on investment

Net increase (decrease) in net assets resulting from operations

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

Net realized and unrealized (loss) gain on investment

Net (decrease) increase in net assets resulting from operations

See accompanying notes to the unaudited financial statements.

2 unchanged sentences

( Amounts in thousands, except change in Shares outstanding)

Three Months Ended March 31,

Increase (decrease) in net assets from operations:

Three Months Ended June 30,

Six Months Ended June 30,

(Decrease) increase in net assets from operations:

Net investment loss

Net realized gain on investment in Bitcoin

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

Net increase (decrease) in net assets resulting from operations

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

Net (decrease) increase in net assets resulting from operations

Increase in net assets from capital share transactions:

1 unchanged sentence

Net increase in net assets resulting from capital share transactions

Total increase in net assets from operations and capital share transactions

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

Beginning of period

13 unchanged sentences

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

The investment objective of the Trust is for the Shares to reflect the value of Bitcoin held by the Trust, less the Trust’s expenses and other liabilities.

The Trust’s investment objective is for the value of the Shares (based on Bitcoin per share) to reflect the value of Bitcoin held by the Trust, less the Trust’s expenses and other liabilities.

The Trust may also receive Incidental Rights and/or IR Virtual Currency as a result of the Trust’s investment in Bitcoin, in accordance with the terms of the Trust Agreement.

9 unchanged sentences

ETCG), Grayscale Filecoin Trust (FIL), Grayscale Horizen Trust (ZEN), Grayscale Litecoin Trust (LTC) (OTCQX:

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

LTCN), Grayscale Livepeer Trust (LPT), Grayscale Stellar Lumens Trust (XLM), Grayscale Zcash Trust (ZEC), Grayscale Decentralized Finance Fund LLC (DeFi), and Grayscale Digital Large Cap Fund LLC (OTCQX:

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

The following investment products sponsored or managed by the Sponsor are also SEC reporting companies with their shares registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”):

Grayscale Ethereum Trust (ETH).

Grayscale Ethereum Trust (ETH) and Grayscale Digital Large Cap Fund LLC (GDLC).

Authorized Participants of the Trust are the only entities who may place orders to create or, if permitted, redeem Baskets.

11 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, 2021 and December 31, 2020 and results of operations for the three months ended March 31, 2021 and 2020 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, 2021 and December 31, 2020 and results of operations for the three and six months ended June 30, 2021 and 2020 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.

4 unchanged sentences

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

The Trust is not registered under the Investment Company Act of 1940.

The Trust is not a registered investment company under the Investment Company Act of 1940.

GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes.

45 unchanged sentences

(Amounts in thousands)

March 31, 2021

June 30, 2021

Investment in Bitcoin

3 unchanged sentences

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

As of March 31, 2021, and December 31, 2020, the Trust held 654,600.12768251 and 607,039.48515191 Bitcoin, respectively.

The Trust determined the fair value per Bitcoin to be $ 58,601.27 and $ 29,185.05 on March 31, 2021 and December 31, 2020, 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, 2021, and December 31, 2020, the Trust held 651,344.12940358 and 607,039.48515191 Bitcoin, respectively.

The Trust determined the fair value per Bitcoin to be $ 34,764.81 and $ 29,185.05 on June 30, 2021 and December 31, 2020, 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:

16 unchanged sentences

Net realized gain on investment in Bitcoin

Balance at March 31, 2021

Balance at June 30, 2021

651,344.12940358

Creations and Redemptions of Shares

At March 31, 2021 and December 31, 2020, there were an unlimited number of Shares authorized by the Trust.

At June 30, 2021 and December 31, 2020, 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 and 0.0010 of one Bitcoin at March 31, 2021 and December 31, 2020, respectively.

Each Share represented approximately 0.0009 and 0.0010 of one Bitcoin at June 30, 2021 and December 31, 2020, respectively.

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

27 unchanged sentences

In that event, the Trust would be subject to entity-level U.S.

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.

federal income tax (currently at the rate of 21 %) on its net taxable income and certain distributions made by the Trust to s hareholders 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, 2021 and December 31, 2020 , the Trust did not have a liability for any unrecognized tax amounts.

As of and during the periods ended June 30, 2021 and December 31, 2020, 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, 2021 or December 31, 2020.

Related Parties

1 unchanged sentence

DCG, Genesis, Grayscale and TradeBlock, Inc.

As of March 31, 2021 and December 31, 2020, 12,009,724 and 14,512,320 Shares of the Trust were held by related parties of the Trust, respectively.

As of June 30, 2021 and December 31, 2020, 16,567,432 and 14,512,320 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 March 31, 2021 and December 31, 2020.

No Incidental Rights or IR Virtual Currencies have been distributed in payment of the Sponsor’s Fee during the three months ended March 31, 2021 and 2020.

The Trust held no Incidental Rights or IR Virtual Currency as of June 30, 2021 and December 31, 2020.

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, 2021 and 2020.

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;

12 unchanged sentences

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, 2021 and 2020, the Trust incurred Sponsor’s Fees of $ 144,299,795 and $ 11,793,388 , respectively.

As of March 31, 2021 and December 31, 2020, there were no accrued and unpaid Sponsor’s Fees.

For the three months ended June 30, 2021 and 2020, the Trust incurred Sponsor’s Fees of $ 151,473,648 and $ 14,803,403 , respectively.

For the six months ended June 30, 2021 and 2020, the Trust incurred Sponsor’s Fees of $ 295,773,443 and $ 26,596,791 , respectively.

As of June 30, 2021 and December 31, 2020, 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, 2021 and 2020, the Sponsor did not pay any Additional Trust Expenses on behalf of the Trust.

For the three and six months ended June 30, 2021 and 2020, the Sponsor did not pay any Additional Trust Expenses on behalf of the Trust.

On March 10, 2021, the Board of the Sponsor approved the purchase by DCG, the parent company of the Sponsor, of up to $ 250 million worth of Shares of the Trust.

Subsequently, DCG authorized such purchase.

On April 30, 2021, the Board approved the purchase by DCG of up to $ 750 million worth of Shares of the Trust.

This increased DCG’s prior authorization to purchase of up to $ 250 million worth of Shares by $ 500 million .

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.

6 unchanged sentences

If Digital Asset Markets continue to experience significant price fluctuations, the Trust may experience losses.

Several factors may affect the price of Bitcoin, including, but not limited to, global Bitcoin supply and demand, theft of Bitcoin from global exchanges or vaults, competition from other forms of digital currency or payment services, global or regional political, economic or financial conditions, and events and situations such as the novel coronavirus outbreak.

The Bitcoin held by the Trust are commingled and the Trust’s shareholders have no specific rights to any specific Bitcoin.

18 unchanged sentences

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 June 30,

Six Months Ended June 30,

Per Share Data:

Net asset value, beginning of period

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

Net (decrease) increase 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 realized and unrealized (loss) gain

Net (decrease) increase in net assets resulting from operations

Net asset value, end of period

10 unchanged sentences

Subsequent Events

On April 30, 2021, the Board of the Sponsor approved the purchase by DCG, the parent company of the Sponsor, of up to $ 750 million worth of Shares of the Trust.

Subsequently, DCG authorized such purchase.

This increases DCG’s prior authorization to purchase up to $ 250 million worth of Shares by $ 500 million.

Through April 30, 2021, DCG has purchased $ 193.5 million worth of Shares.

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.

As of the close of business on May 3, 2021 the fair value of Bitcoin determined in accordance with the Trust’s accounting policy was $ 57,587.67 per Bitcoin.

As of the close of business on August 2, 2021 the fair value of Bitcoin determined in accordance with the Trust’s accounting policy was $ 39,170.03 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