Grayscale Bitcoin Trust/GBTC FAQs
These FAQ’s are qualified in all respects by the information in Grayscale Bitcoin Trust’s Annual Report, including the Risk Factors therein, which is available at OTC Markets.
The Basics: Bitcoin
What is Bitcoin?
Bitcoin is a type of digital currency that exists on the Bitcoin network.
What is the Bitcoin Network?
The Bitcoin network is a decentralized network of computers that operates on cryptographic protocols. No single entity owns or operates the Bitcoin network, the infrastructure of which is collectively maintained by a decentralized user base. The Bitcoin network allows people to exchange tokens of value, called bitcoin, which are recorded on a public transaction ledger known as a blockchain.
What is a Blockchain?
A blockchain is a public transaction ledger that records digital currency transactions (called “blocks”). The Bitcoin blockchain is the blockchain that records bitcoin transactions on the Bitcoin network.
The Basics: Gold
What is Gold?
Gold is a metal that has historically served as a store-of-value.
What is the #DropGold campaign?
Grayscale Investments launched their #DropGold campaign on Wednesday, May 1, 2019. #DropGold is our ad campaign which focuses on the emergence of Bitcoin as an alternative to investing in gold. It’s not only about building awareness around Grayscale and GBTC, but also about the emergence of digital currencies as a viable asset class. The campaign aims to shift the mindset around modern investment opportunities and portfolio allocations. For more information about our campaign, please visit www.dropgold.com.
The Basics: Grayscale
What is Grayscale?
Grayscale Investments is the largest digital currency asset manager. With approximately $2.7B AUM,* Grayscale provides opportunities for investors to gain exposure to digital currencies.
Grayscale’s investment products are available to institutional and accredited individual investors through their respective private placements. Grayscale’s single-asset investment products provide exposure to Bitcoin (BTC), Bitcoin Cash (BCH), Ethereum (ETH), Ethereum Classic (ETC), Horizen (ZEN), Litecoin (LTC), Stellar Lumens (XLM), XRP, and Zcash (ZEC). Grayscale’s diversified investment vehicle, Grayscale Digital Large Cap Fund™, provides exposure to the top digital currencies by market capitalization.
Additionally, Grayscale Bitcoin Trust™ (OTCQX: GBTC), Grayscale Ethereum Trust™ (OTCQX: ETHE), and Grayscale Ethereum Classic Trust™ (OTCQX: ETCG) are publicly-quoted and available to all individual and institutional investors.
*As of June 30, 2019
What is Grayscale Bitcoin Trust™?
Grayscale Bitcoin Trust™ was created for investors seeking exposure to bitcoin through a traditional investment vehicle. It is the largest bitcoin investment product globally, holding more than 1.2% of the outstanding bitcoin supply*. Grayscale Bitcoin Trust’s investment objective is for the value of its shares to reflect the price performance of bitcoin, less fees and expenses. Modeled on popular commodity ETFs, Grayscale Bitcoin Trust is solely and passively invested in bitcoin.
Grayscale Bitcoin Trust is not registered with the Securities and Exchange Commission and is not subject to disclosure and certain other requirements mandated by U.S. securities laws. Investors considering an investment in GBTC should carefully read Grayscale Bitcoin Trust’s Annual Report, which is available at OTC Markets. These FAQ’s are qualified in all respects by the information in Grayscale Bitcoin Trust’s Annual Report, including the Risk Factors therein.
*As of June 30, 2019
What is GBTC?
GBTC is the symbol under which shares of Grayscale Bitcoin Trust are publicly quoted on OTCQX®, the top tier marketplace operated by OTC Markets.
Why should I own shares of Grayscale Bitcoin Trust (GBTC) over purchasing bitcoin outright?
Grayscale Bitcoin Trust offers the benefits of investing in bitcoin without having to buy and store bitcoin itself and manage additional individual accounts, wallets, and private keys. Grayscale Bitcoin Trust was developed to offer investors ease of mind and an investment product that is familiar to both financial advisors and investors.
Ease and Peace of Mind
Often, individuals and institutions seeking to directly purchase or sell bitcoin must themselves transact via unfamiliar exchanges or intermediaries that in some cases may be unregulated and insecure. This often requires investors to transmit funds to jurisdictions where they might not be comfortable. In addition, storing bitcoin on one’s own can add additional headaches, as the private keys (the bitcoin equivalent of passwords) which ensure access to an investor’s bitcoin can be susceptible to loss or theft. This potentially exposes one’s bitcoin position to partial or total loss, often with limited or no recourse to regain access to the bitcoin.
In contrast, by investing in Grayscale Bitcoin Trust (GBTC) shares, investors avoid the challenges of purchasing, storing, and transferring bitcoin on their own and instead, pass these tasks to Grayscale and Grayscale Bitcoin Trust’s service providers, while maintaining their exposure to the price performance of bitcoin. Grayscale Bitcoin Trust’s assets are safeguarded by a robust security system that uses industry-leading security standards. The system’s underlying protocols are designed by experienced security, financial, legal, and technology professionals, and are overseen by a financial operations principal. Grayscale Bitcoin Trust’s financial statements are audited annually by Friedman LLP.
Titled, Transferable, and IRA Eligible
Shares of Grayscale Bitcoin Trust are titled securities, which are similar to other non-SEC registered common stocks and bonds that investors may own. Titled securities are familiar to financial and tax advisors, and easily transferred to beneficiaries under estate laws, Grayscale Bitcoin Trust shares are eligible to be held in certain IRAs, 401ks, and other brokerage and investment accounts. Consult your investment and tax advisors for additional information.
Investing in Grayscale Products
Where can I purchase Grayscale Bitcoin Trust™/GBTC?
Grayscale Bitcoin Trust is publicly quoted on OTCQX®, the top tier operated by OTC Markets, under the symbol: GBTC. Grayscale Bitcoin Trust is also available periodically as a private placement to accredited investors only but is currently closed.
Shares of GBTC can be purchased and sold under the symbol: GBTC on most brokerage platforms, including Ally Invest, Charles Schwab, E*TRADE, Fidelity, Interactive Brokers, TD Ameritrade, TradeStation and Vanguard.
Shares of the private placement are only available to accredited investors on a periodic basis and are currently unavailable. If you are interested in our other private placement products, please email [email protected].
What is the difference between purchasing shares directly from Grayscale Bitcoin Trust as opposed to purchasing Grayscale Bitcoin Trust shares trading on OTCQX®?
Investors may transact in eligible Grayscale Bitcoin Trust shares on OTCQX® under the symbol: GBTC at the applicable market price. These securities have been deemed freely tradeable under SEC Rule 144 and are not subject to restrictions on resale or transferability once purchased. The Grayscale Bitcoin Trust private placement is also offered on a periodic basis to accredited investors* only but is currently closed.
Can I purchase Grayscale Bitcoin Trust shares in my retirement account?
It is possible that your IRA or retirement account provider may allow you to purchase shares in Grayscale Bitcoin Trust. For additional information, please inquire with the Grayscale team at [email protected].
Please note that Grayscale does not and will not provide any advice or recommendation regarding investment in Grayscale Bitcoin Trust and that you should consult your own advisers before making any decision to purchase shares in Grayscale Bitcoin Trust.
When are my private placement shares eligible to sell on OTCQX?
The Grayscale Bitcoin Trust private placement is offered on a periodic basis to accredited investors* only and is currently closed.
However, even when the private placement is closed, private placement shares continue to season and it will not affect shareholders’ ability to sell seasoned shares of the Grayscale Bitcoin Trust private placement via the public quotation (symbol: GBTC), after the statutory one-year holding period.
This is question is not applicable to GBTC public quotation shareholders.
Grayscale Product Structure
What are Grayscale Bitcoin Trust’s fees?
Similar to other investment products, Grayscale Bitcoin Trust charges an annual administration fee of 2.0%, which accrues daily in bitcoin. Since shares of Grayscale Bitcoin Trust are solely and passively invested in bitcoin, the amount of bitcoin underlying each share will decline over time by the annual fee. For further details on Grayscale Bitcoin Trust’s fees, please review Grayscale Bitcoin Trust’s Annual Report.
Investors should kindly note that their broker or investment platform may charge fees for buying or selling shares of Grayscale Bitcoin Trust.
How is Grayscale Bitcoin Trust’s Bitcoin Holdings (non-GAAP NAV) calculated?
Grayscale Bitcoin Trust’s Bitcoin Holdings is calculated and published each business day at 4 p.m., Eastern Time (New York City time). The Bitcoin Holdings calculation is based on TradeBlock’s XBX Index, taking into account a trailing 24-hour VWAP across the major bitcoin exchanges that comprise the index. For further details on how Bitcoin Holdings is calculated, please review Grayscale Bitcoin Trust’s Annual Report which is available at otcmarkets.com/stock/GBTC/disclosure.
How are the bitcoins underlying Grayscale Bitcoin Trust shares safeguarded?
Grayscale Bitcoin Trust’s assets are stored in offline or “cold” storage with Coinbase Custody Trust Company, LLC, as Custodian. The Custodian is a fiduciary under § 100 of the New York Banking Law and a qualified custodian for purposes of Rule 206(4)-2(d)(6) under the Investment Advisers Act of 1940, as amended.
What are the tax consequences of owning shares in Grayscale Bitcoin Trust?
Grayscale Bitcoin Trust intends to take the position that it is a grantor trust for U.S. federal income tax purposes. Prospective investors in Grayscale Bitcoin Trust should discuss the tax consequences of an investment in Grayscale Bitcoin Trust with their tax advisors.
What are the risks of investing in Grayscale Bitcoin Trust?
It is important for investors to understand their own risk tolerance as well as the risks associated with any potential investment.
As described more fully in Grayscale Bitcoin Trust’s Annual Report, an investment in Grayscale Bitcoin Trust is highly speculative in nature that involve high degrees of risk, including loss of invested funds. Grayscale products are not suitable for any investor that cannot afford loss of the entire investment. The trading prices of many digital assets, including those that will initially be held by Grayscale Bitcoin Trust, have experienced extreme volatility in recent periods and may continue to do so.
Go to OTC Markets or our website www.Grayscale.co for the annual report, which includes investment objectives, risks, fees and expenses, or Grayscale.co for more information on Grayscale and our other investment vehicles. Read these materials carefully before investing.
What is an accredited investor?
*An accredited investor includes:
Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; or
Any natural person whose individual net worth, or joint net worth with that person’s spouse, exceeds $1,000,000 (excluding the value of the person’s primary residence and certain indebtedness secured by such person’s primary residence).
In addition, entities such as banks, partnerships, corporations, nonprofits and trusts may be accredited investors. Of the entities that would be considered accredited investors and depending on your circumstances, the following may be relevant to you:
any trust, with total assets in excess of $5 million, not formed for the specific purpose of acquiring shares of Grayscale Bitcoin Trust, whose purchase is directed by a sophisticated person; or
any entity in which all of the equity owners are accredited investors.
For this purpose, a sophisticated person means a person who has sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of a prospective investment.