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Grayscale Research | Phil Bonello | August 2020
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02 | 20
Valuing
Bitcoin
“It’s an insurance policy in case inflation comes back again as it did in the
1970s. I would say that if that’s a sensible thing to do, then, certainly to
have 1 to 2% of your assets in Bitcoin makes great sense here.” – Bill Miller1
We believe that professional investors should feel confident navigating a
conversation around Bitcoin. As this asset continues to pervade advisory
conversations and investment committee meetings, the unique qualities
Bitcoin possesses can make valuation a daunting task.
This report is intended to help investors visualize why Bitcoin may be more
important than ever; we explore Bitcoin’s value indicators, delineate
its substantial supply/demand imbalance, and extrapolate how these
factors may create a tailwind for Bitcoin’s adoption and price. This analysis
indicates that the current Bitcoin market structure parallels that of early
2016 before it began its historic bull run.
Why is Bitcoin important today?
To understand Bitcoin’s role today, it’s worth exploring the monetary history
of the last 50 years. We believe demand for a scarce monetary asset like
Bitcoin grows as global monetary inflation accelerates.
In 1971, the United States abandoned the gold standard causing asset
prices to balloon, while wages stagnated. Figure 1 illustrates this
phenomenon through the dislocation of real GDP growth and real wage
growth. This widening gap has necessitated further expansionary economic
policies – policies that are now commonplace to counter the downward
pressure on economic demand.
August 2020
1. Legendary Investor Bill Miller Makes the Case for Bitcoin (BTC) Rise to $300,000.” The Daily Hodl, July 8, 2020.
https://dailyhodl.com/2020/07/08/legendary-investor-bill-miller-makes-the-case-for-bitcoin-btc-rise-to-300000
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2. Source: Grayscale, Federal Reserve Bank of Saint Louis, Economic Policy Institute, United States Census Bureau
FIGURE 1: REAL GDP GROWTH & REAL WAGE GROWTH2
Over the last half century, loose monetary policy incented the market to
take on debt to purchase assets. In 2008, amidst the Great Recession,
some of that debt was forced to unwind. Quantitative Easing (QE) was
implemented to mitigate the debt spiral and support the economy, but
in doing so, further exacerbated the problem. Stated another way, loose
monetary policies resulted in money being funneled into financial assets
instead of the general economy or main street as intended, increasing the
disconnect between the equity market and the economy. As illustrated
in Figure 2, U.S. debt to GDP has nearly doubled since 2008, and the
velocity of M2 monetary supply, the rate at which money moves around,
declined as newly distributed money made its way into financial assets
rather than into the economy.
0%
50%
100%
150%
200%
250%
300%
350%
1948
1952
1956
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
2008
2012
2016
CumulativePercentChangeSince1948
Real	
  GDP	
  Growth	
  &	
  Real	
  WageHourly Compensation Real GDP per Capita
0%
50%
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150%
200%
250%
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350%
1948
1952
1956
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
2008
2012
2016
CumulativePercentChangeSince1948
Real	
  GDP	
  Growth	
  &	
  Real	
  WageReal Hourly Compensation
 Real GDP per Capita
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FIGURE 2: U.S. DEBT TO GDP VS M2 VELOCITY3
1965-2020
Starting in 2008, QE expanded the Federal Reserve’s balance sheet from
under $1 trillion to over $4 trillion by 2014. As the economy showed signs
of strength, the Fed planned to reverse this expansion. However, as the
Fed attempted to shrink its balance sheet in 2018, the market responded
unfavorably with the S&P 500 dropping approximately 20% in just three
months. It would appear that QE cannot be reversed without cratering the
financial markets it is intended to support.
As illustrated by Figure 3, the Federal Reserve is currently printing more
and faster than ever, dubbed "QE Infinity." While the US dollar remains
structurally strong relative to other currencies, the ongoing QE measures
have attracted the attention of investors who may be wary of monetary
inflation.
3. Source: Grayscale, Bloomberg
0
20
40
60
80
100
120
1.2
1.4
1.6
1.8
2
2.2
2.4
2.6
2.8
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
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2002
2005
2008
2011
2014
2017
Velocity
U.S. Debt to GDP vs M2 Velocity
1965-2020
M2 Velocity Federal Debt as % of GDP
%
0
20
40
60
80
100
120
1.2
1.4
1.6
1.8
2
2.2
2.4
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2.8
1966
1969
1972
1975
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1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011
2014
2017
Velocity
U.S. Debt to GDP vs M2 Velocity
1965-2020
M2 Velocity Federal Debt as % of GDP
%
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4. Source: Grayscale, Bloomberg
FIGURE 3: BALANCE SHEET EXPANSION PER WEEK ($ MILLIONS)4
August 2008 - August 2020
Amidst unprecedented monetary and fiscal stimulus, investors are
searching for ways to protect against an ever-expanding monetary supply.
Because of Bitcoin’s unique qualities – such as its verifiable scarcity and
a supply that can’t be controlled by a central authority – we believe it
can be leveraged as a store of value and as a way to escape this great
monetary inflation.
How can we think about Bitcoin’s value?
Investors may agree that a scarce, digital form of money makes sense
in the current environment, but may still struggle to assign a fair value
to Bitcoin. Since Bitcoin is not a cash generating asset, investors can’t
apply a standard discounted cash flow analysis to model its present
value. In many ways, valuing Bitcoin is similar to how some value gold.
Instead of depending on cash flows, we can use relative valuation and
supply/demand analysis to value Bitcoin as an investment. Of course,
these metrics rely on historical data, and historical performance is not
indicative of future results.
QE1
Aug 2008
- Mar 2010
QE2
Nov 2010
- Jun 2012
QE3
Sep 2012
- Jun 2014
QE Infinity
Sep 2019
- Present
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
QE1 (2008-2010) QE2 (2011-2013) QE3 QE Infinity (2016 - Present)
Balance Sheet Expansion per Week ($ millions)
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06 | 20
5. Source: “May 2020 BVI Letter - Macro Outlook.” Scribd. Scribd. May 7, 2020.
https://www.scribd.com/document/460382154/May-2020-BVI-Letter-Macro-Outlook.
RelativeValuation
Because of Bitcoin’s scarcity, a quality built into the protocol, a straightforward
way to think about its value is through its relative position to other stores of
value.
In May 2020, famed investor Paul Tudor Jones wrote a letter to investors that
included his investment case for Bitcoin.5
With concerns of monetary inflation
in mind, he and his team scored different stores of value based on purchasing
power, trustworthiness, liquidity, and portability. The analysis examined
financial assets, cash, gold, and Bitcoin.
FIGURE 4: PAUL TUDOR JONES STORE OF VALUE SCORING5
AS OF AUGUST 4, 2020
Purchasing
Power*
Trust* Liquidity* Portability*
Total
Score
Market
Capitalization
($ millions)
Financial
Assets
90 65 60 60 71 $266,917,000
Cash 5 60 90 80 54 $39,000,000
Gold 70 85 45 30 62 $11,938,404
Bitcoin 50 5 50 80 43 $207,283
*Scores were constructed from Jones’ descriptions.
Jones suggested that while Bitcoin ranked lowest among the stores of value,
its score implied a far higher market capitalization than it currently has. To
quote Jones:
What was surprising to me was not that Bitcoin came in last, but that it
scored as high as it did. Bitcoin had an overall score nearly 60% of that of
financial assets but has a market cap that is 1/1200th of that. It scores 66%
of gold as a store of value, but has a market cap that is 1/60th of gold’s
outstanding value. Something appears wrong here and my guess is it is the
price of Bitcoin.
Jones’ framing helps illustrate the sheer size of the addressable market for
Bitcoin, but there are still significant challenges for Bitcoin to reach the scale
of adoption, trust, and regulatory certainty afforded to the other assets in
this analysis.
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07 | 20
Supply and Demand
At the core of many valuation and pricing exercises is the balance between
supply and demand. While Bitcoin doesn’t have cash flows, the public
blockchain that underpins Bitcoin allows investors to analyze supply and
demand shifts on the network to estimate price accordingly. Bitcoin’s supply
is set – there will only ever be 21M Bitcoin – however, not all Bitcoin have
been mined and not all Bitcoin are actively used or traded.
The following are a number of blockchain-based metrics that can
demonstrate shifts in the market structure. Currently, these metrics indicate a
supply shortage relative to growing demand for Bitcoin. However, significant
activity occurs off-chain which may decrease the efficacy of these metrics.
Supply-Based Metrics
Active Coins
We can identify coins by age to understand the aggregate Bitcoin market
structure. In the below chart, coins that have not moved for one to three years
are labeled as belonging to a Holder. Coins that have moved in the last 90 days
are labeled as belonging to a Speculator. An increase in Holder coins signifies
accumulation (likely a bullish indicator), whereas an increase in Speculator
coins signifies distribution (likely a bearish indicator). This chart looks potentially
promising for Bitcoin, as there are a growing number of Holders relative to a
small number of Speculators in the market. Notice the similar structure to that
of early 2016.
FIGURE 5: HOLDER VS SPECULATOR INDEX6
JANUARY 1, 2013 - AUGUST 1, 2020
6. Source: Grayscale, Coin Metrics
10%
15%
20%
25%
30%
35%
40%
45%
50%
55%
$10
$100
$1,000
$10,000
$100,000
2013 2014 2015 2016 2017 2018 2019 2020
Holder vs Speculator Index
PriceUSD Speculators Holders
15%
20%
25%
30%
35%
40%
45%
50%
55%
$100
$1,000
$10,000
$100,000
Holder vs Speculator Index
PriceUSD Speculators Holders
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It’s also worth noting that the Bitcoin blockchain reveals that there has never
been a higher level of Bitcoin owned for more than one year. This metric
indicates a strong conviction in Bitcoin by its current investor base. While this
is a supply-side metric, it also demonstrates the demand for Bitcoin’s use case
as a store of value — rather than trading, it appears investors are interested in
holding Bitcoin despite its volatility.
FIGURE 6: BITCOIN HELD FOR OVER A YEAR7
JANUARY 1, 2013 - AUGUST 1, 2020
Bitcoin Days Destroyed (BDD)
Investors may also look at Bitcoin days destroyed (BDD), a metric that
measures the aggregate age of all coins moved on a given day. For
example, if John sends Grace a Bitcoin and Grace holds that coin for 10 days
before spending it, she has destroyed 10 Bitcoin days. BDD allows analysts
to identify large shifts in the supply of old coins. A high BDD is notable
because long-term holders are signalling a bullish or bearish bias to the
market. Historically, BDD has spiked near the market tops, as investors sell
their long-term holdings or near market bottoms as investors capitulate as
the final indication of supply exhaustion. To clearly illustrate this relationship,
Figure 7 uses 15-day and 60-day moving averages of BDD.
7.. Source: Grayscale, Coin Metrics
35%
40%
45%
50%
55%
60%
65%
$10
$100
$1,000
$10,000
$100,000
2013
 2014
 2015
 2016
 2017
 2018
 2019
 2020
Bitcoin Held for Over a Year
PriceUSD
 1-Year Dormant
35%
40%
45%
50%
55%
60%
65%
$10
$100
$1,000
$10,000
$100,000
2013 2014 2015 2016 2017 2018 2019 2020
Bitcoin Held for Over a Year
PriceUSD
 1-Year Dormant
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FIGURE 7: BITCOIN DAYS DESTROYED8
JANUARY 1, 2013 - AUGUST 1, 2020
8. Source: Grayscale, Coin Metrics
9. Source: Grayscale, Coin Metrics
BDD can be further segmented into age tiers to give investors more detailed
signals on shorter timeframes. Figure 8 shows the supply from the 30-day,
90-day, and 180-day age tiers of coins that were previously dormant and
now "revived." The spike in short-term revived supply clearly signalled a
bottoming of the Bitcoin price as experienced in March 2020.
FIGURE 8: BITCOIN SHORT TERM REVIVED SUPPLY9
MARCH 1, 2020 - AUGUST 1, 2020
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
$10
$100
$1,000
$10,000
$100,000
2013
2013
2013
2014
2014
2014
2015
2015
2015
2016
2016
2016
2017
2017
2017
2018
2018
2018
2019
2019
2019
2020
2020
Bitcoin Days Destroyed
PriceUSD 15-DMA 60-DMA
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
$10
$100
$1,000
$10,000
$100,000
2013
2013
2013
2014
2014
2014
2015
2015
2015
2016
2016
2016
2017
2017
2017
2018
2018
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2019
2019
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2020
Bitcoin Days Destroyed
PriceUSD
 15-DMA
 60-DMA
2013 20202014 2015 2016 2017 2018 2019
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
01/03/20
 01/04/20
 01/05/20
 01/06/20
 01/07/20
 01/08/20
Bitcoin Short Term Revived Supply
30-Day Revived 90-Day Revived 180-Day Revived PriceUSD
03/01/2020 04/01/2020 05/01/2020 06/01/2020 07/01/2020 08/01/20200
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
01/03/20 01/04/20 01/05/20 01/06/20 01/07/20 01/08/20
Bitcoin Short Term Revived Supply
30-Day Revived
 90-Day Revived
 180-Day Revived
 PriceUSD
BitcoinDaysDestroyedRevivedBitcoin
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Realized Capitalization10
A measure of the aggregate cost basis of all Bitcoin ever moved, known as
realized capitalization, is calculated by taking the price of each Bitcoin at its
last on-chain movement. For example, in calculating realized capitalization,
coins that were last moved in 2012 will contribute far less to Bitcoin’s
aggregate market capitalization since they were less expensive than coins
that moved in 2020. This method allows analysts to de-emphasize coins that
may be lost, such as those which have become inaccessible to investors
who lost the private keys to their Bitcoin wallets. In some ways, this reading
is a more accurate representation of Bitcoin’s market capitalization because
it takes into account the last price of all traded coins rather than just the
most recently traded coins. It also has historically acted as a support zone
for Bitcoin’s market capitalization. MVRV, which is the ratio between the
market capitalization and the realized capitalization, has historically signalled
a buying opportunity when the reading is near 1.11
FIGURE 9: REALIZED CAPITALIZATION12
JANUARY 1, 2013 - AUGUST 1, 2020
10. Source: Coin Metrics. “Introducing Realized Capitalization.” Coin Metrics, December 14, 2018.
https://coinmetrics.io/realized-capitalization/.
11. Source: Puell, David. “Bitcoin Market-Value-to-Realized-Value (MVRV) Ratio.” Medium. Medium, October 1, 2018.
https://medium.com/@kenoshaking/bitcoin-market-value-to-realized-value-mvrv-ratio-3ebc914dbaee.
12. Source: Grayscale, Coin Metrics
0
1
2
3
4
5
6
7
$100M
$1B
$10B
$100B
$1000B
2013 2014 2015 2016 2017 2018 2019 2020
Realized Capitalization
Realized Cap Market Cap MVRV Ratio
0
1
2
3
4
5
6
7
$100M
$1B
$10B
$100B
$1000B
2013
 2014
 2015
 2016
 2017
 2018
 2019
 2020
Realized Capitalization
Realized Cap
 Market Cap
 MVRV Ratio
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Stock-to-Flow Model
The investment community often employs the stock-to-flow ratio as a measure
of scarcity for commodities. It is calculated by dividing the existing supply of a
commodity by that commodity’s annual production growth. Commodities with
high stock-to-flow ratios such as Bitcoin, gold, and silver have historically been
utilized as stores of value. Figure 10 shows a popular model that uses Bitcoin’s
historical relationship between price and stock-to-flow to estimate a future
price.13
While it’s true that price has followed this stock-to-flow model with high
correlation, the relationship may be spurious and does not take into account
the requisite demand for price appreciation.
FIGURE 10: STOCK-TO-FLOW MODEL14
JANUARY 1, 2013 - AUGUST 1, 2020
13. Source: PlanB. “Modeling Bitcoin Value with Scarcity.” Medium. Medium, March 22, 2019.
https://medium.com/@100trillionUSD/modeling-bitcoins-value-with-scarcity-91fa0fc03e25.
14. Source: Grayscale, Coin Metrics
Bitcoin Held on Exchanges
While some Bitcoin is traded through CME futures or OTC markets, another
way to trade Bitcoin is through a collection of digital asset exchanges.
Consequently, investors can measure the amount of Bitcoin held on these
exchanges to determine the amount of supply that may be looking for liquidity.
A large amount of exchange supply may be bearish and a low supply may be
bullish. In July, exchange balances were nearly the lowest since May 2019,
and price surged accordingly. Recently, exchange balances have increased
indicating some investors may be looking to sell.
$10
$100
$1,000
$10,000
$100,000
$1,000,000
2013 2015 2017 2019 2021 2023 2025
Stock-to-Flow Model
Model PriceUSD
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FIGURE 11: BITCOIN HELD ON EXCHANGES15
JANUARY 1, 2019 - AUGUST 1, 2020
15. Source: Grayscale, Coin Metrics. Full exchange analysis of Bitfinex, Bitmex, Binance, Bitstamp, Bittrex, Huobi, Poloniex, Gemini,
Kraken.
16. “Advancing Our Approach to Digital Currency.” Visa, July 21, 2020. https://usa.visa.com/visa-everywhere/blog/bdp/2020/07/21/
advancing-our-approach-1595302085970.html., Pollock, Darryn.; “Bitcoin Paying Off For Square’s Cash App Raking In $178 Million.”
Forbes. Forbes Magazine, February 29, 2020.https://www.forbes.com/sites/darrynpollock/2020/02/29/bitcoin-paying-off-for-squares-
cash-app-raking-in-178-million/, Allison, Ian.; “PayPal, Venmo to Roll Out Crypto Buying and Selling: Sources.” CoinDesk. CoinDesk,
June 22, 2020. https://www.coindesk.com/paypal-venmo-to-roll-out-crypto-buying-and-selling.
Demand-Based Metrics
Bitcoin is being adopted by Visa, Square, and PayPal as well as traditional
businesses in financial services.16
In addition to this empirical evidence
of growing demand for Bitcoin, investors can also observe growth of
demand directly on the Bitcoin blockchain. Popular methods include
analysis of daily active addresses, trends of wealthy addresses, and miner
profitability.
Daily Active Addresses (DAA)
Daily active addresses (DAA) is a measure of the total number of unique
addresses that participate in a Bitcoin transaction on a given day. The
daily active addresses metric doesn’t properly encompass all users, but it
nonetheless gives investors a view of network growth. Investors generally
want to see increased activity correspond with price. Figure 12 below
shows that the DAA metric is at its highest level since 2017. This spike in
activity may be indicative of increased adoption and the beginnings of a
new market cycle.
1,250,000
1,300,000
1,350,000
1,400,000
1,450,000
1,500,000
1,550,000
1,600,000
1,650,000
1,700,000
1,750,000
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
01/01/2019 01/05/2019 01/09/2019 01/01/2020 01/05/2020
Bitcoin Held on Exchanges
PriceUSD Exchange Balance
1,250,000
1,300,000
1,350,000
1,400,000
1,450,000
1,500,000
1,550,000
1,600,000
1,650,000
1,700,000
1,750,000
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
01/01/2019 01/05/2019 01/09/2019 01/01/2020 01/05/2020
Bitcoin Held on Exchanges
PriceUSD Exchange Balance
05/01/2019 05/01/2020
#ofBitcoin
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FIGURE 12: DAILY ACTIVE ADDRESSES17
JANUARY 1, 2013 - AUGUST 1, 2020
Whale Index
"Whale" Index, which counts the number of unique Bitcoin addresses with
balances over 1,000 Bitcoin (approx $11 million as of July 30, 2020), is sitting
near all-time highs as shown below in Figure 16. An address can be thought of
as an account or wallet, but we note that users can have multiple addresses;
therefore, a single individual can be the owner of multiple addresses in the
Whale Index. The figure below illustrates an increasing number of addresses
with large amounts of Bitcoin, a trend that signifies accumulation.
FIGURE 13: WHALE INDEX18
JANUARY 1, 2013 - AUGUST 1, 2020
17. Source: Grayscale, Coin Metrics
18. Source: Grayscale, Coin Metrics
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
2013 2014 2015 2016 2017 2018 2019 2020
$10
$100
$1,000
$10,000
$100,000
Daily Active Addresses
PriceUSD Active Addresses
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
2013 2014 2015 2016 2017 2018 2019 2020
$10
$100
$1,000
$10,000
$100,000
Daily Active Addresses
PriceUSD Active Addresses
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
$10
$100
$1,000
$10,000
$100,000
2013 2014 2015 2016 2017 2018 2019 2020
Whale Index
PriceUSD Addresses with 1k BTC
BTCAddresses
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Bitcoin’s Production Value
The Bitcoin network’s electricity consumption can be used to calculate the
production cost per Bitcoin. Simply put, mining is the process of converting
electricity into Bitcoin. The prices of commodities tend to oscillate around
production cost, so this measure can be extended to indicate somewhat
of a price floor for Bitcoin.19
The relationship between price and production
cost is important because it gives us clues about miner profitability, a
critical input to the Bitcoin value analysis. As the Bitcoin price increases,
profitability tends to increase, which entices miners to expend more
energy. Conversely, when profitability decreases, inefficient miners are
often forced to sell their Bitcoin and shut down their mining equipment.
This allows more efficient, well-capitalized miners to accumulate more
Bitcoin rather than assume the role of being the market’s natural seller.
Because these miners are better capitalized, they may have the flexibility to
hold Bitcoin in hopes of price appreciation.
FIGURE 14: BITCOIN’S PRODUCTION VALUE20
JANUARY 1, 2013 - AUGUST 1, 2020
Taking the ratio between Bitcoin’s price and its production cost can
provide clues to price floors in Bitcoin market cycles. Long periods of low
or negative profitability benefit the most efficient miners and improve
the market structure by flushing out unstable participants. In Figure 15,
the green coloring indicates periods of potentially unprofitable mining,
historically good buying opportunities.
19. Edwards, Charles. “Bitcoin Value-Energy Equivalence.” Medium. Capriole, December 19, 2019.
https://medium.com/capriole/bitcoin-value-energy-equivalence-6d00d1baa34a.
20. Source: Grayscale, Coin Metrics
$1
$10
$100
$1,000
$10,000
$100,000
01/01/2013
01/01/2014
01/01/2015
01/01/2016
01/01/2017
01/01/2018
01/01/2019
01/01/2020
Bitcoin's Production Value
PriceUSD Bitcoin's Production Value
2013 2014 2015 2016 2017 2018 20202019
PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS PAPER.
©2020GrayscaleInvestments,LLC
More Grayscale research
papers and investment
theses are available at:
www.grayscale.co/insights
15 | 20
FIGURE 15: MINER PROFITABILITY RATIO21
JANUARY 1, 2013 - AUGUST 1, 2020
21. Source: Grayscale, Coin Metrics
Conclusion
The current economic environment presents a compelling opportunity to
explore how Bitcoin can be part of a resilient portfolio. However, many
investors are challenged to find a reliable methodology to ascribe
Bitcoin’s value. This report outlines how investors can use relative
valuation and blockchain metrics for supply and demand to estimate fair
value. However, with more Bitcoin transactions occurring off-chain, these
metrics may become less effective.
As demand for stores of value grows during this regime of monetary
inflation, Bitcoin may be well-positioned given that it is a scarce digital
asset. The plethora of blockchain metrics covered in this report indicate
that the current market structure is reminiscent of early 2016, the period
that preceded Bitcoin’s historic bull run. Bitcoin continues to command
global investor attention, there is scant supply to meet growing demand,
and the infrastructure is now in place to satisfy that demand. With the
techniques outlined in this report, investors can now measure Bitcoin's
network growth and more confidently assess its value.
-200%
0%
200%
400%
600%
800%
1000%
$10
$100
$1,000
$10,000
$100,000
2013 2014 2015 2016 2017 2018 2019 2020
Miner Profitability Ratio
PriceUSD Profitability
PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS PAPER.
©2020GrayscaleInvestments,LLC
More Grayscale research
papers and investment
theses are available at:
www.grayscale.co/insights
16 | 20
About Grayscale Investments®
Grayscale Investments is the world’s largest digital currency asset
manager, with more than $5.8 Billion in assets under management
as of August 10, 2020. Through its family of 10 investment
products, Grayscale provides access and exposure to the digital
currency asset class in the form of a traditional security without the
challenges of buying, storing, and safekeeping digital currencies
directly. With a proven track record and unrivaled experience,
Grayscale’s products operate within existing regulatory frameworks,
creating secure and compliant exposure for investors.
For more information, please visit www.grayscale.co and follow
@Grayscale.
PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS PAPER.
©2020GrayscaleInvestments,LLC
More Grayscale research
papers and investment
theses are available at:
www.grayscale.co/insights
17 | 20
Important Disclosures & Other Information
©Grayscale Investments, LLC. All content is original and has been researched and produced
by Grayscale Investments, LLC (“Grayscale”) unless otherwise stated herein. No part of this
content may be reproduced in any form, or referred to in any other publication, without the
express consent of Grayscale.
This report is for informational purposes only and does not constitute an offer to sell or the
solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation
would be illegal. There is not enough information contained in this report to make an
investment decision and any information contained herein should not be used as a basis for
this purpose. This report does not constitute a recommendation or take into account the
particular investment objectives, financial situations, or needs of investors. Investors are not
to construe the contents of this report as legal, tax or investment advice, and should consult
their own advisors concerning an investment in digital assets. The price and value of assets
referred to in this research and the income from them may fluctuate. Past performance is
not indicative of the future performance of any assets referred to herein. Fluctuations in
exchange rates could have adverse effects on the value or price of, or income derived from,
certain investments.
Investors should be aware that Grayscale is the sponsor of Grayscale Bitcoin Trust (BTC),
Grayscale Bitcoin Cash Trust (BCH), Grayscale Ethereum Trust (ETH), Grayscale Ethereum
Classic Trust (ETC), Grayscale Litecoin Trust (LTC), Grayscale Horizen Trust (ZEN), Grayscale
Stellar Lumens Trust (XLM), Grayscale XRP Trust (XRP) and Grayscale Zcash Trust (ZEC)
(each, a “Trust”) and the manager of Grayscale Digital Large Cap Fund LLC (the “Fund”).
The Trusts and the Fund are collectively referred to herein as the “Products”. Any Product
currently offering Share creations is referred to herein as an “Offered Product”. Information
provided about an Offered Product is not intended to be, nor should it be construed or
used as investment, tax or legal advice, and prospective investors should consult their own
advisors concerning an investment in such Offered Product. This report does not constitute
an offer to sell or the solicitation of an offer to buy interests in any of the Products. Any offer
or solicitation of an investment in a Product may be made only by delivery of such Product’s
confidential offering documents (the “Offering Documents”) to qualified accredited investors
(as defined under Rule 501(a) of Regulation D of the U.S. Securities Act of 1933, as amended),
which contain material information not contained herein and which supersede the information
provided herein in its entirety.
The Products are private investment vehicles. Shares of Grayscale Bitcoin Trust (BTC) and
Grayscale Digital Large Cap Fund, which are only offered on a periodic basis, are publicly
quoted under the symbols: GBTC and GDLC, respectively. Except for Grayscale Bitcoin
Trust (BTC), the Products are not subject to the same regulatory requirements as exchange
traded funds or mutual funds, including the requirement to provide certain periodic and
standardized pricing and valuation information to investors. The Products are not registered
with the Securities and Exchange Commission (the “SEC”) (except for Grayscale Bitcoin Trust
(BTC)), any state securities laws, or the U.S. Investment Company Act of 1940, as amended.
There are substantial risks in investing in one or more Products. Any interests in each Product
described herein have not been recommended by any U.S. federal or state, or non-U.S.,
securities commission or regulatory authority, including the SEC. Furthermore, the foregoing
authorities have not confirmed the accuracy or determined the adequacy of this document.
Any representation to the contrary is a criminal offense.
Certain of the statements contained herein may be statements of future expectations and
other forward-looking statements that are based on Grayscale’s views and assumptions
and involve known and unknown risks and uncertainties that could cause actual results,
performance or events to differ materially from those expressed or implied in such
statements. In addition to statements that are forward-looking by reason of context, the
words “may, will, should, could, can, expects, plans, intends, anticipates, believes, estimates,
predicts, potential, projected, or continue” and similar expressions identify forward-looking
statements. Grayscale assumes no obligation to update any forward-looking statements
contained herein and you should not place undue reliance on such statements, which speak
PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS PAPER.
©2020GrayscaleInvestments,LLC
More Grayscale research
papers and investment
theses are available at:
www.grayscale.co/insights
18 | 20
only as of the date hereof. Although Grayscale has taken reasonable care to ensure that the
information contained herein is accurate, no representation or warranty (including liability
towards third parties), expressed or implied, is made by Grayscale as to its accuracy, reliability
or completeness. You should not make any investment decisions based on these estimates
and forward-looking statements.
Certain Risk Factors
Each Product is a private, unregistered investment vehicle and not subject to the same
regulatory requirements as exchange traded funds or mutual funds, including the
requirement to provide certain periodic and standardized pricing and valuation information
to investors. There are substantial risks in investing in a Product or in digital assets directly,
including but not limited to:
•	 PRICE VOLATILITY
Digital assets have historically experienced significant intraday and long-term price
swings. In addition, none of the Products currently operates a redemption program
and may halt creations from time to time or, in the case of Grayscale Bitcoin Trust
(BTC) and Grayscale Digital Large Cap Fund, periodically. There can be no assurance
that the value of the common units of fractional undivided beneficial interest
(“Shares”) of any Product will approximate the value of the digital assets held by such
Product and such Shares may trade at a substantial premium over or discount to the
value of the digital assets held by such Product. At this time, none of the Products is
operating a redemption program and therefore Shares are not redeemable by any
Product. Subject to receipt of regulatory approval from the SEC and approval by
Grayscale, in its sole discretion, any Product may in the future operate a redemption
program. Because none of the Products believes that the SEC would, at this time,
entertain an application for the waiver of rules needed in order to operate an ongoing
redemption program, none of the Products currently has any intention of seeking
regulatory approval from the SEC to operate an ongoing redemption program.
•	 MARKET ADOPTION
It is possible that digital assets generally or any digital asset in particular will never be
broadly adopted by either the retail or commercial marketplace, in which case, one or
more digital assets may lose most, if not all, of its value.
•	 GOVERNMENT REGULATION	
The regulatory framework of digital assets remains unclear and application of existing
regulations and/or future restrictions by federal and state authorities may have a
significant impact on the value of digital assets.
•	 SECURITY
While each Product has implemented security measures for the safe storage of its
digital assets, there have been significant incidents of digital asset theft and digital
assets remains a potential target for hackers. Digital assets that are lost or stolen
cannot be replaced, as transactions are irrevocable.
•	 TAX TREATMENT OF VIRTUAL CURRENCY
For U.S. federal income tax purposes, Digital Large Cap Fund will be a passive foreign
investment company (a “PFIC”) and, in certain circumstances, may be a controlled
foreign corporation (a “CFC”). Digital Large Cap Fund will make available a PFIC
Annual Information Statement that will include information required to permit each
eligible shareholder to make a “qualified electing fund” election (a “QEF Election”)
with respect to Digital Large Cap Fund. Each of the other Products intends to take
the position that it is a grantor trust for U.S. federal income tax purposes. Assuming
that a Product is properly treated as a grantor trust, Shareholders of that Product
generally will be treated as if they directly owned their respective pro rata shares of
the underlying assets held in the Product, directly received their respective pro rata
shares of the Product’s income and directly incurred their respective pro rata shares
of the Product ’s expenses. Most state and local tax authorities follow U.S. income tax
rules in this regard. Prospective investors should discuss the tax consequences of an
investment in a Product with their tax advisors.
PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS PAPER.
©2020GrayscaleInvestments,LLC
More Grayscale research
papers and investment
theses are available at:
www.grayscale.co/insights
19 | 20
•	 NO SHAREHOLDER CONTROL
Grayscale, as sponsor of each Trust and the manager of the Fund, has total authority
over the Trusts and the Fund and shareholders’ rights are extremely limited.
•	 LACK OF LIQUIDITY AND TRANSFER RESTRICTIONS
An investment in a Product will be illiquid and there will be significant restrictions on
transferring interests in such Product. The Products are not registered with the SEC,
any state securities laws, or the U.S. Investment Company Act of 1940, as amended,
and the Shares of each Product are being offered in a private placement pursuant
to Rule 506(c) under Regulation D of the Securities Act of 1933, as amended (the
“Securities Act”). As a result, the Shares of each Product are restricted Shares and are
subject to a one-year holding period in accordance with Rule 144 under the Securities
Act. In addition, none of the Products currently operates a redemption program.
Because of the one-year holding period and the lack of an ongoing redemption
program, Shares should not be purchased by any investor who is not willing and able
to bear the risk of investment and lack of liquidity for at least one year. No assurances
are given that after the one year holding period, there will be any market for the
resale of Shares of any Product, or, if there is such a market, as to the price at such
Shares may be sold into such a market.
•	 POTENTIAL RELIANCE ON THIRD-PARTY MANAGEMENT; CONFLICTS OF
INTEREST
Products and their sponsors or managers and advisors may rely on the trading
expertise and experience of third-party sponsors, managers or advisors, the identity
of which may not be fully disclosed to investors. The Products and their sponsors or
managers and advisors and agents may be subject to various conflicts of interest.
•	 FEES AND EXPENSES
Each Product’s fees and expenses (which may be substantial regardless of any
returns on investment) will offset each Product’s trading profits.
Additional General Disclosures
Investors must have the financial ability, sophistication/experience and willingness to bear the
risks of an investment. This document is intended for those with an in-depth understanding
of the high risk nature of investments in digital assets and these investments may not be
suitable for you. This document may not be distributed in either excerpts or in its entirety
beyond its intended audience and the Products and Grayscale will not be held responsible
if this document is used or is distributed beyond its initial recipient or if it is used for any
unintended purpose.
The Products and Grayscale do not: make recommendations to purchase or sell specific
securities; provide investment advisory services; or conduct a general retail business. None
of the Products or Grayscale, its affiliates, nor any of its directors, officers, employees or
agents shall have any liability, howsoever arising, for any error or incompleteness of fact
or opinion in it or lack of care in its preparation or publication, provided that this shall not
exclude liability to the extent that this is impermissible under applicable securities laws.
The logos, graphics, icons, trademarks, service marks and headers for each Product and
Grayscale appearing herein are service marks, trademarks (whether registered or not) and/
or trade dress of Grayscale Investments, LLC. (the “Marks”). All other trademarks, company
names, logos, service marks and/or trade dress mentioned, displayed, cited or otherwise
indicated herein (“Third Party Marks”) are the sole property of their respective owners.
The Marks or the Third Party Marks may not be copied, downloaded, displayed, used as
metatags, misused, or otherwise exploited in any manner without the prior express written
permission of the relevant Product and Grayscale or the owner of such Third Party Mark.
The above summary is not a complete list of the risks and other important disclosures
involved in investing in any Product or digital assets and is subject to the more complete
disclosures contained in each Product’s Offering Documents, which must be reviewed
carefully.
General Inquiries:
info@grayscale.co
Address: 250 Park Ave S 5th floor, New York, NY 10003
Phone: (212) 668-1427
@GrayscaleInvest

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Grayscale valuing bitcoin - Why you should own Bitcoin in your portfolio

  • 1. Grayscale Research | Phil Bonello | August 2020 grayscale.co
  • 2. PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS PAPER. ©2020GrayscaleInvestments,LLC More Grayscale research papers and investment theses are available at: www.grayscale.co/insights 02 | 20 Valuing Bitcoin “It’s an insurance policy in case inflation comes back again as it did in the 1970s. I would say that if that’s a sensible thing to do, then, certainly to have 1 to 2% of your assets in Bitcoin makes great sense here.” – Bill Miller1 We believe that professional investors should feel confident navigating a conversation around Bitcoin. As this asset continues to pervade advisory conversations and investment committee meetings, the unique qualities Bitcoin possesses can make valuation a daunting task. This report is intended to help investors visualize why Bitcoin may be more important than ever; we explore Bitcoin’s value indicators, delineate its substantial supply/demand imbalance, and extrapolate how these factors may create a tailwind for Bitcoin’s adoption and price. This analysis indicates that the current Bitcoin market structure parallels that of early 2016 before it began its historic bull run. Why is Bitcoin important today? To understand Bitcoin’s role today, it’s worth exploring the monetary history of the last 50 years. We believe demand for a scarce monetary asset like Bitcoin grows as global monetary inflation accelerates. In 1971, the United States abandoned the gold standard causing asset prices to balloon, while wages stagnated. Figure 1 illustrates this phenomenon through the dislocation of real GDP growth and real wage growth. This widening gap has necessitated further expansionary economic policies – policies that are now commonplace to counter the downward pressure on economic demand. August 2020 1. Legendary Investor Bill Miller Makes the Case for Bitcoin (BTC) Rise to $300,000.” The Daily Hodl, July 8, 2020. https://dailyhodl.com/2020/07/08/legendary-investor-bill-miller-makes-the-case-for-bitcoin-btc-rise-to-300000
  • 3. PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS PAPER. ©2020GrayscaleInvestments,LLC More Grayscale research papers and investment theses are available at: www.grayscale.co/insights 03 | 20 2. Source: Grayscale, Federal Reserve Bank of Saint Louis, Economic Policy Institute, United States Census Bureau FIGURE 1: REAL GDP GROWTH & REAL WAGE GROWTH2 Over the last half century, loose monetary policy incented the market to take on debt to purchase assets. In 2008, amidst the Great Recession, some of that debt was forced to unwind. Quantitative Easing (QE) was implemented to mitigate the debt spiral and support the economy, but in doing so, further exacerbated the problem. Stated another way, loose monetary policies resulted in money being funneled into financial assets instead of the general economy or main street as intended, increasing the disconnect between the equity market and the economy. As illustrated in Figure 2, U.S. debt to GDP has nearly doubled since 2008, and the velocity of M2 monetary supply, the rate at which money moves around, declined as newly distributed money made its way into financial assets rather than into the economy. 0% 50% 100% 150% 200% 250% 300% 350% 1948 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 CumulativePercentChangeSince1948 Real  GDP  Growth  &  Real  WageHourly Compensation Real GDP per Capita 0% 50% 100% 150% 200% 250% 300% 350% 1948 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 CumulativePercentChangeSince1948 Real  GDP  Growth  &  Real  WageReal Hourly Compensation Real GDP per Capita
  • 4. PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS PAPER. ©2020GrayscaleInvestments,LLC More Grayscale research papers and investment theses are available at: www.grayscale.co/insights 04 | 20 FIGURE 2: U.S. DEBT TO GDP VS M2 VELOCITY3 1965-2020 Starting in 2008, QE expanded the Federal Reserve’s balance sheet from under $1 trillion to over $4 trillion by 2014. As the economy showed signs of strength, the Fed planned to reverse this expansion. However, as the Fed attempted to shrink its balance sheet in 2018, the market responded unfavorably with the S&P 500 dropping approximately 20% in just three months. It would appear that QE cannot be reversed without cratering the financial markets it is intended to support. As illustrated by Figure 3, the Federal Reserve is currently printing more and faster than ever, dubbed "QE Infinity." While the US dollar remains structurally strong relative to other currencies, the ongoing QE measures have attracted the attention of investors who may be wary of monetary inflation. 3. Source: Grayscale, Bloomberg 0 20 40 60 80 100 120 1.2 1.4 1.6 1.8 2 2.2 2.4 2.6 2.8 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 Velocity U.S. Debt to GDP vs M2 Velocity 1965-2020 M2 Velocity Federal Debt as % of GDP % 0 20 40 60 80 100 120 1.2 1.4 1.6 1.8 2 2.2 2.4 2.6 2.8 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 Velocity U.S. Debt to GDP vs M2 Velocity 1965-2020 M2 Velocity Federal Debt as % of GDP %
  • 5. PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS PAPER. ©2020GrayscaleInvestments,LLC More Grayscale research papers and investment theses are available at: www.grayscale.co/insights 05 | 20 4. Source: Grayscale, Bloomberg FIGURE 3: BALANCE SHEET EXPANSION PER WEEK ($ MILLIONS)4 August 2008 - August 2020 Amidst unprecedented monetary and fiscal stimulus, investors are searching for ways to protect against an ever-expanding monetary supply. Because of Bitcoin’s unique qualities – such as its verifiable scarcity and a supply that can’t be controlled by a central authority – we believe it can be leveraged as a store of value and as a way to escape this great monetary inflation. How can we think about Bitcoin’s value? Investors may agree that a scarce, digital form of money makes sense in the current environment, but may still struggle to assign a fair value to Bitcoin. Since Bitcoin is not a cash generating asset, investors can’t apply a standard discounted cash flow analysis to model its present value. In many ways, valuing Bitcoin is similar to how some value gold. Instead of depending on cash flows, we can use relative valuation and supply/demand analysis to value Bitcoin as an investment. Of course, these metrics rely on historical data, and historical performance is not indicative of future results. QE1 Aug 2008 - Mar 2010 QE2 Nov 2010 - Jun 2012 QE3 Sep 2012 - Jun 2014 QE Infinity Sep 2019 - Present $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 QE1 (2008-2010) QE2 (2011-2013) QE3 QE Infinity (2016 - Present) Balance Sheet Expansion per Week ($ millions)
  • 6. PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS PAPER. ©2020GrayscaleInvestments,LLC More Grayscale research papers and investment theses are available at: www.grayscale.co/insights 06 | 20 5. Source: “May 2020 BVI Letter - Macro Outlook.” Scribd. Scribd. May 7, 2020. https://www.scribd.com/document/460382154/May-2020-BVI-Letter-Macro-Outlook. RelativeValuation Because of Bitcoin’s scarcity, a quality built into the protocol, a straightforward way to think about its value is through its relative position to other stores of value. In May 2020, famed investor Paul Tudor Jones wrote a letter to investors that included his investment case for Bitcoin.5 With concerns of monetary inflation in mind, he and his team scored different stores of value based on purchasing power, trustworthiness, liquidity, and portability. The analysis examined financial assets, cash, gold, and Bitcoin. FIGURE 4: PAUL TUDOR JONES STORE OF VALUE SCORING5 AS OF AUGUST 4, 2020 Purchasing Power* Trust* Liquidity* Portability* Total Score Market Capitalization ($ millions) Financial Assets 90 65 60 60 71 $266,917,000 Cash 5 60 90 80 54 $39,000,000 Gold 70 85 45 30 62 $11,938,404 Bitcoin 50 5 50 80 43 $207,283 *Scores were constructed from Jones’ descriptions. Jones suggested that while Bitcoin ranked lowest among the stores of value, its score implied a far higher market capitalization than it currently has. To quote Jones: What was surprising to me was not that Bitcoin came in last, but that it scored as high as it did. Bitcoin had an overall score nearly 60% of that of financial assets but has a market cap that is 1/1200th of that. It scores 66% of gold as a store of value, but has a market cap that is 1/60th of gold’s outstanding value. Something appears wrong here and my guess is it is the price of Bitcoin. Jones’ framing helps illustrate the sheer size of the addressable market for Bitcoin, but there are still significant challenges for Bitcoin to reach the scale of adoption, trust, and regulatory certainty afforded to the other assets in this analysis.
  • 7. PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS PAPER. ©2020GrayscaleInvestments,LLC More Grayscale research papers and investment theses are available at: www.grayscale.co/insights 07 | 20 Supply and Demand At the core of many valuation and pricing exercises is the balance between supply and demand. While Bitcoin doesn’t have cash flows, the public blockchain that underpins Bitcoin allows investors to analyze supply and demand shifts on the network to estimate price accordingly. Bitcoin’s supply is set – there will only ever be 21M Bitcoin – however, not all Bitcoin have been mined and not all Bitcoin are actively used or traded. The following are a number of blockchain-based metrics that can demonstrate shifts in the market structure. Currently, these metrics indicate a supply shortage relative to growing demand for Bitcoin. However, significant activity occurs off-chain which may decrease the efficacy of these metrics. Supply-Based Metrics Active Coins We can identify coins by age to understand the aggregate Bitcoin market structure. In the below chart, coins that have not moved for one to three years are labeled as belonging to a Holder. Coins that have moved in the last 90 days are labeled as belonging to a Speculator. An increase in Holder coins signifies accumulation (likely a bullish indicator), whereas an increase in Speculator coins signifies distribution (likely a bearish indicator). This chart looks potentially promising for Bitcoin, as there are a growing number of Holders relative to a small number of Speculators in the market. Notice the similar structure to that of early 2016. FIGURE 5: HOLDER VS SPECULATOR INDEX6 JANUARY 1, 2013 - AUGUST 1, 2020 6. Source: Grayscale, Coin Metrics 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% $10 $100 $1,000 $10,000 $100,000 2013 2014 2015 2016 2017 2018 2019 2020 Holder vs Speculator Index PriceUSD Speculators Holders 15% 20% 25% 30% 35% 40% 45% 50% 55% $100 $1,000 $10,000 $100,000 Holder vs Speculator Index PriceUSD Speculators Holders
  • 8. PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS PAPER. ©2020GrayscaleInvestments,LLC More Grayscale research papers and investment theses are available at: www.grayscale.co/insights 08 | 20 It’s also worth noting that the Bitcoin blockchain reveals that there has never been a higher level of Bitcoin owned for more than one year. This metric indicates a strong conviction in Bitcoin by its current investor base. While this is a supply-side metric, it also demonstrates the demand for Bitcoin’s use case as a store of value — rather than trading, it appears investors are interested in holding Bitcoin despite its volatility. FIGURE 6: BITCOIN HELD FOR OVER A YEAR7 JANUARY 1, 2013 - AUGUST 1, 2020 Bitcoin Days Destroyed (BDD) Investors may also look at Bitcoin days destroyed (BDD), a metric that measures the aggregate age of all coins moved on a given day. For example, if John sends Grace a Bitcoin and Grace holds that coin for 10 days before spending it, she has destroyed 10 Bitcoin days. BDD allows analysts to identify large shifts in the supply of old coins. A high BDD is notable because long-term holders are signalling a bullish or bearish bias to the market. Historically, BDD has spiked near the market tops, as investors sell their long-term holdings or near market bottoms as investors capitulate as the final indication of supply exhaustion. To clearly illustrate this relationship, Figure 7 uses 15-day and 60-day moving averages of BDD. 7.. Source: Grayscale, Coin Metrics 35% 40% 45% 50% 55% 60% 65% $10 $100 $1,000 $10,000 $100,000 2013 2014 2015 2016 2017 2018 2019 2020 Bitcoin Held for Over a Year PriceUSD 1-Year Dormant 35% 40% 45% 50% 55% 60% 65% $10 $100 $1,000 $10,000 $100,000 2013 2014 2015 2016 2017 2018 2019 2020 Bitcoin Held for Over a Year PriceUSD 1-Year Dormant
  • 9. PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS PAPER. ©2020GrayscaleInvestments,LLC More Grayscale research papers and investment theses are available at: www.grayscale.co/insights 09 | 20 FIGURE 7: BITCOIN DAYS DESTROYED8 JANUARY 1, 2013 - AUGUST 1, 2020 8. Source: Grayscale, Coin Metrics 9. Source: Grayscale, Coin Metrics BDD can be further segmented into age tiers to give investors more detailed signals on shorter timeframes. Figure 8 shows the supply from the 30-day, 90-day, and 180-day age tiers of coins that were previously dormant and now "revived." The spike in short-term revived supply clearly signalled a bottoming of the Bitcoin price as experienced in March 2020. FIGURE 8: BITCOIN SHORT TERM REVIVED SUPPLY9 MARCH 1, 2020 - AUGUST 1, 2020 0 10,000,000 20,000,000 30,000,000 40,000,000 50,000,000 60,000,000 70,000,000 $10 $100 $1,000 $10,000 $100,000 2013 2013 2013 2014 2014 2014 2015 2015 2015 2016 2016 2016 2017 2017 2017 2018 2018 2018 2019 2019 2019 2020 2020 Bitcoin Days Destroyed PriceUSD 15-DMA 60-DMA 0 10,000,000 20,000,000 30,000,000 40,000,000 50,000,000 60,000,000 70,000,000 $10 $100 $1,000 $10,000 $100,000 2013 2013 2013 2014 2014 2014 2015 2015 2015 2016 2016 2016 2017 2017 2017 2018 2018 2018 2019 2019 2019 2020 2020 Bitcoin Days Destroyed PriceUSD 15-DMA 60-DMA 2013 20202014 2015 2016 2017 2018 2019 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 01/03/20 01/04/20 01/05/20 01/06/20 01/07/20 01/08/20 Bitcoin Short Term Revived Supply 30-Day Revived 90-Day Revived 180-Day Revived PriceUSD 03/01/2020 04/01/2020 05/01/2020 06/01/2020 07/01/2020 08/01/20200 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 01/03/20 01/04/20 01/05/20 01/06/20 01/07/20 01/08/20 Bitcoin Short Term Revived Supply 30-Day Revived 90-Day Revived 180-Day Revived PriceUSD BitcoinDaysDestroyedRevivedBitcoin
  • 10. PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS PAPER. ©2020GrayscaleInvestments,LLC More Grayscale research papers and investment theses are available at: www.grayscale.co/insights 10 | 20 Realized Capitalization10 A measure of the aggregate cost basis of all Bitcoin ever moved, known as realized capitalization, is calculated by taking the price of each Bitcoin at its last on-chain movement. For example, in calculating realized capitalization, coins that were last moved in 2012 will contribute far less to Bitcoin’s aggregate market capitalization since they were less expensive than coins that moved in 2020. This method allows analysts to de-emphasize coins that may be lost, such as those which have become inaccessible to investors who lost the private keys to their Bitcoin wallets. In some ways, this reading is a more accurate representation of Bitcoin’s market capitalization because it takes into account the last price of all traded coins rather than just the most recently traded coins. It also has historically acted as a support zone for Bitcoin’s market capitalization. MVRV, which is the ratio between the market capitalization and the realized capitalization, has historically signalled a buying opportunity when the reading is near 1.11 FIGURE 9: REALIZED CAPITALIZATION12 JANUARY 1, 2013 - AUGUST 1, 2020 10. Source: Coin Metrics. “Introducing Realized Capitalization.” Coin Metrics, December 14, 2018. https://coinmetrics.io/realized-capitalization/. 11. Source: Puell, David. “Bitcoin Market-Value-to-Realized-Value (MVRV) Ratio.” Medium. Medium, October 1, 2018. https://medium.com/@kenoshaking/bitcoin-market-value-to-realized-value-mvrv-ratio-3ebc914dbaee. 12. Source: Grayscale, Coin Metrics 0 1 2 3 4 5 6 7 $100M $1B $10B $100B $1000B 2013 2014 2015 2016 2017 2018 2019 2020 Realized Capitalization Realized Cap Market Cap MVRV Ratio 0 1 2 3 4 5 6 7 $100M $1B $10B $100B $1000B 2013 2014 2015 2016 2017 2018 2019 2020 Realized Capitalization Realized Cap Market Cap MVRV Ratio
  • 11. PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS PAPER. ©2020GrayscaleInvestments,LLC More Grayscale research papers and investment theses are available at: www.grayscale.co/insights 11 | 20 Stock-to-Flow Model The investment community often employs the stock-to-flow ratio as a measure of scarcity for commodities. It is calculated by dividing the existing supply of a commodity by that commodity’s annual production growth. Commodities with high stock-to-flow ratios such as Bitcoin, gold, and silver have historically been utilized as stores of value. Figure 10 shows a popular model that uses Bitcoin’s historical relationship between price and stock-to-flow to estimate a future price.13 While it’s true that price has followed this stock-to-flow model with high correlation, the relationship may be spurious and does not take into account the requisite demand for price appreciation. FIGURE 10: STOCK-TO-FLOW MODEL14 JANUARY 1, 2013 - AUGUST 1, 2020 13. Source: PlanB. “Modeling Bitcoin Value with Scarcity.” Medium. Medium, March 22, 2019. https://medium.com/@100trillionUSD/modeling-bitcoins-value-with-scarcity-91fa0fc03e25. 14. Source: Grayscale, Coin Metrics Bitcoin Held on Exchanges While some Bitcoin is traded through CME futures or OTC markets, another way to trade Bitcoin is through a collection of digital asset exchanges. Consequently, investors can measure the amount of Bitcoin held on these exchanges to determine the amount of supply that may be looking for liquidity. A large amount of exchange supply may be bearish and a low supply may be bullish. In July, exchange balances were nearly the lowest since May 2019, and price surged accordingly. Recently, exchange balances have increased indicating some investors may be looking to sell. $10 $100 $1,000 $10,000 $100,000 $1,000,000 2013 2015 2017 2019 2021 2023 2025 Stock-to-Flow Model Model PriceUSD
  • 12. PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS PAPER. ©2020GrayscaleInvestments,LLC More Grayscale research papers and investment theses are available at: www.grayscale.co/insights 12 | 20 FIGURE 11: BITCOIN HELD ON EXCHANGES15 JANUARY 1, 2019 - AUGUST 1, 2020 15. Source: Grayscale, Coin Metrics. Full exchange analysis of Bitfinex, Bitmex, Binance, Bitstamp, Bittrex, Huobi, Poloniex, Gemini, Kraken. 16. “Advancing Our Approach to Digital Currency.” Visa, July 21, 2020. https://usa.visa.com/visa-everywhere/blog/bdp/2020/07/21/ advancing-our-approach-1595302085970.html., Pollock, Darryn.; “Bitcoin Paying Off For Square’s Cash App Raking In $178 Million.” Forbes. Forbes Magazine, February 29, 2020.https://www.forbes.com/sites/darrynpollock/2020/02/29/bitcoin-paying-off-for-squares- cash-app-raking-in-178-million/, Allison, Ian.; “PayPal, Venmo to Roll Out Crypto Buying and Selling: Sources.” CoinDesk. CoinDesk, June 22, 2020. https://www.coindesk.com/paypal-venmo-to-roll-out-crypto-buying-and-selling. Demand-Based Metrics Bitcoin is being adopted by Visa, Square, and PayPal as well as traditional businesses in financial services.16 In addition to this empirical evidence of growing demand for Bitcoin, investors can also observe growth of demand directly on the Bitcoin blockchain. Popular methods include analysis of daily active addresses, trends of wealthy addresses, and miner profitability. Daily Active Addresses (DAA) Daily active addresses (DAA) is a measure of the total number of unique addresses that participate in a Bitcoin transaction on a given day. The daily active addresses metric doesn’t properly encompass all users, but it nonetheless gives investors a view of network growth. Investors generally want to see increased activity correspond with price. Figure 12 below shows that the DAA metric is at its highest level since 2017. This spike in activity may be indicative of increased adoption and the beginnings of a new market cycle. 1,250,000 1,300,000 1,350,000 1,400,000 1,450,000 1,500,000 1,550,000 1,600,000 1,650,000 1,700,000 1,750,000 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 01/01/2019 01/05/2019 01/09/2019 01/01/2020 01/05/2020 Bitcoin Held on Exchanges PriceUSD Exchange Balance 1,250,000 1,300,000 1,350,000 1,400,000 1,450,000 1,500,000 1,550,000 1,600,000 1,650,000 1,700,000 1,750,000 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 01/01/2019 01/05/2019 01/09/2019 01/01/2020 01/05/2020 Bitcoin Held on Exchanges PriceUSD Exchange Balance 05/01/2019 05/01/2020 #ofBitcoin
  • 13. PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS PAPER. ©2020GrayscaleInvestments,LLC More Grayscale research papers and investment theses are available at: www.grayscale.co/insights 13 | 20 FIGURE 12: DAILY ACTIVE ADDRESSES17 JANUARY 1, 2013 - AUGUST 1, 2020 Whale Index "Whale" Index, which counts the number of unique Bitcoin addresses with balances over 1,000 Bitcoin (approx $11 million as of July 30, 2020), is sitting near all-time highs as shown below in Figure 16. An address can be thought of as an account or wallet, but we note that users can have multiple addresses; therefore, a single individual can be the owner of multiple addresses in the Whale Index. The figure below illustrates an increasing number of addresses with large amounts of Bitcoin, a trend that signifies accumulation. FIGURE 13: WHALE INDEX18 JANUARY 1, 2013 - AUGUST 1, 2020 17. Source: Grayscale, Coin Metrics 18. Source: Grayscale, Coin Metrics 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 2013 2014 2015 2016 2017 2018 2019 2020 $10 $100 $1,000 $10,000 $100,000 Daily Active Addresses PriceUSD Active Addresses 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 2013 2014 2015 2016 2017 2018 2019 2020 $10 $100 $1,000 $10,000 $100,000 Daily Active Addresses PriceUSD Active Addresses 1,000 1,200 1,400 1,600 1,800 2,000 2,200 2,400 $10 $100 $1,000 $10,000 $100,000 2013 2014 2015 2016 2017 2018 2019 2020 Whale Index PriceUSD Addresses with 1k BTC BTCAddresses
  • 14. PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS PAPER. ©2020GrayscaleInvestments,LLC More Grayscale research papers and investment theses are available at: www.grayscale.co/insights 14 | 20 Bitcoin’s Production Value The Bitcoin network’s electricity consumption can be used to calculate the production cost per Bitcoin. Simply put, mining is the process of converting electricity into Bitcoin. The prices of commodities tend to oscillate around production cost, so this measure can be extended to indicate somewhat of a price floor for Bitcoin.19 The relationship between price and production cost is important because it gives us clues about miner profitability, a critical input to the Bitcoin value analysis. As the Bitcoin price increases, profitability tends to increase, which entices miners to expend more energy. Conversely, when profitability decreases, inefficient miners are often forced to sell their Bitcoin and shut down their mining equipment. This allows more efficient, well-capitalized miners to accumulate more Bitcoin rather than assume the role of being the market’s natural seller. Because these miners are better capitalized, they may have the flexibility to hold Bitcoin in hopes of price appreciation. FIGURE 14: BITCOIN’S PRODUCTION VALUE20 JANUARY 1, 2013 - AUGUST 1, 2020 Taking the ratio between Bitcoin’s price and its production cost can provide clues to price floors in Bitcoin market cycles. Long periods of low or negative profitability benefit the most efficient miners and improve the market structure by flushing out unstable participants. In Figure 15, the green coloring indicates periods of potentially unprofitable mining, historically good buying opportunities. 19. Edwards, Charles. “Bitcoin Value-Energy Equivalence.” Medium. Capriole, December 19, 2019. https://medium.com/capriole/bitcoin-value-energy-equivalence-6d00d1baa34a. 20. Source: Grayscale, Coin Metrics $1 $10 $100 $1,000 $10,000 $100,000 01/01/2013 01/01/2014 01/01/2015 01/01/2016 01/01/2017 01/01/2018 01/01/2019 01/01/2020 Bitcoin's Production Value PriceUSD Bitcoin's Production Value 2013 2014 2015 2016 2017 2018 20202019
  • 15. PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS PAPER. ©2020GrayscaleInvestments,LLC More Grayscale research papers and investment theses are available at: www.grayscale.co/insights 15 | 20 FIGURE 15: MINER PROFITABILITY RATIO21 JANUARY 1, 2013 - AUGUST 1, 2020 21. Source: Grayscale, Coin Metrics Conclusion The current economic environment presents a compelling opportunity to explore how Bitcoin can be part of a resilient portfolio. However, many investors are challenged to find a reliable methodology to ascribe Bitcoin’s value. This report outlines how investors can use relative valuation and blockchain metrics for supply and demand to estimate fair value. However, with more Bitcoin transactions occurring off-chain, these metrics may become less effective. As demand for stores of value grows during this regime of monetary inflation, Bitcoin may be well-positioned given that it is a scarce digital asset. The plethora of blockchain metrics covered in this report indicate that the current market structure is reminiscent of early 2016, the period that preceded Bitcoin’s historic bull run. Bitcoin continues to command global investor attention, there is scant supply to meet growing demand, and the infrastructure is now in place to satisfy that demand. With the techniques outlined in this report, investors can now measure Bitcoin's network growth and more confidently assess its value. -200% 0% 200% 400% 600% 800% 1000% $10 $100 $1,000 $10,000 $100,000 2013 2014 2015 2016 2017 2018 2019 2020 Miner Profitability Ratio PriceUSD Profitability
  • 16. PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS PAPER. ©2020GrayscaleInvestments,LLC More Grayscale research papers and investment theses are available at: www.grayscale.co/insights 16 | 20 About Grayscale Investments® Grayscale Investments is the world’s largest digital currency asset manager, with more than $5.8 Billion in assets under management as of August 10, 2020. Through its family of 10 investment products, Grayscale provides access and exposure to the digital currency asset class in the form of a traditional security without the challenges of buying, storing, and safekeeping digital currencies directly. With a proven track record and unrivaled experience, Grayscale’s products operate within existing regulatory frameworks, creating secure and compliant exposure for investors. For more information, please visit www.grayscale.co and follow @Grayscale.
  • 17. PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS PAPER. ©2020GrayscaleInvestments,LLC More Grayscale research papers and investment theses are available at: www.grayscale.co/insights 17 | 20 Important Disclosures & Other Information ©Grayscale Investments, LLC. All content is original and has been researched and produced by Grayscale Investments, LLC (“Grayscale”) unless otherwise stated herein. No part of this content may be reproduced in any form, or referred to in any other publication, without the express consent of Grayscale. This report is for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. There is not enough information contained in this report to make an investment decision and any information contained herein should not be used as a basis for this purpose. This report does not constitute a recommendation or take into account the particular investment objectives, financial situations, or needs of investors. Investors are not to construe the contents of this report as legal, tax or investment advice, and should consult their own advisors concerning an investment in digital assets. The price and value of assets referred to in this research and the income from them may fluctuate. Past performance is not indicative of the future performance of any assets referred to herein. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments. Investors should be aware that Grayscale is the sponsor of Grayscale Bitcoin Trust (BTC), Grayscale Bitcoin Cash Trust (BCH), Grayscale Ethereum Trust (ETH), Grayscale Ethereum Classic Trust (ETC), Grayscale Litecoin Trust (LTC), Grayscale Horizen Trust (ZEN), Grayscale Stellar Lumens Trust (XLM), Grayscale XRP Trust (XRP) and Grayscale Zcash Trust (ZEC) (each, a “Trust”) and the manager of Grayscale Digital Large Cap Fund LLC (the “Fund”). The Trusts and the Fund are collectively referred to herein as the “Products”. Any Product currently offering Share creations is referred to herein as an “Offered Product”. Information provided about an Offered Product is not intended to be, nor should it be construed or used as investment, tax or legal advice, and prospective investors should consult their own advisors concerning an investment in such Offered Product. This report does not constitute an offer to sell or the solicitation of an offer to buy interests in any of the Products. Any offer or solicitation of an investment in a Product may be made only by delivery of such Product’s confidential offering documents (the “Offering Documents”) to qualified accredited investors (as defined under Rule 501(a) of Regulation D of the U.S. Securities Act of 1933, as amended), which contain material information not contained herein and which supersede the information provided herein in its entirety. The Products are private investment vehicles. Shares of Grayscale Bitcoin Trust (BTC) and Grayscale Digital Large Cap Fund, which are only offered on a periodic basis, are publicly quoted under the symbols: GBTC and GDLC, respectively. Except for Grayscale Bitcoin Trust (BTC), the Products are not subject to the same regulatory requirements as exchange traded funds or mutual funds, including the requirement to provide certain periodic and standardized pricing and valuation information to investors. The Products are not registered with the Securities and Exchange Commission (the “SEC”) (except for Grayscale Bitcoin Trust (BTC)), any state securities laws, or the U.S. Investment Company Act of 1940, as amended. There are substantial risks in investing in one or more Products. Any interests in each Product described herein have not been recommended by any U.S. federal or state, or non-U.S., securities commission or regulatory authority, including the SEC. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of this document. Any representation to the contrary is a criminal offense. Certain of the statements contained herein may be statements of future expectations and other forward-looking statements that are based on Grayscale’s views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. In addition to statements that are forward-looking by reason of context, the words “may, will, should, could, can, expects, plans, intends, anticipates, believes, estimates, predicts, potential, projected, or continue” and similar expressions identify forward-looking statements. Grayscale assumes no obligation to update any forward-looking statements contained herein and you should not place undue reliance on such statements, which speak
  • 18. PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS PAPER. ©2020GrayscaleInvestments,LLC More Grayscale research papers and investment theses are available at: www.grayscale.co/insights 18 | 20 only as of the date hereof. Although Grayscale has taken reasonable care to ensure that the information contained herein is accurate, no representation or warranty (including liability towards third parties), expressed or implied, is made by Grayscale as to its accuracy, reliability or completeness. You should not make any investment decisions based on these estimates and forward-looking statements. Certain Risk Factors Each Product is a private, unregistered investment vehicle and not subject to the same regulatory requirements as exchange traded funds or mutual funds, including the requirement to provide certain periodic and standardized pricing and valuation information to investors. There are substantial risks in investing in a Product or in digital assets directly, including but not limited to: • PRICE VOLATILITY Digital assets have historically experienced significant intraday and long-term price swings. In addition, none of the Products currently operates a redemption program and may halt creations from time to time or, in the case of Grayscale Bitcoin Trust (BTC) and Grayscale Digital Large Cap Fund, periodically. There can be no assurance that the value of the common units of fractional undivided beneficial interest (“Shares”) of any Product will approximate the value of the digital assets held by such Product and such Shares may trade at a substantial premium over or discount to the value of the digital assets held by such Product. At this time, none of the Products is operating a redemption program and therefore Shares are not redeemable by any Product. Subject to receipt of regulatory approval from the SEC and approval by Grayscale, in its sole discretion, any Product may in the future operate a redemption program. Because none of the Products believes that the SEC would, at this time, entertain an application for the waiver of rules needed in order to operate an ongoing redemption program, none of the Products currently has any intention of seeking regulatory approval from the SEC to operate an ongoing redemption program. • MARKET ADOPTION It is possible that digital assets generally or any digital asset in particular will never be broadly adopted by either the retail or commercial marketplace, in which case, one or more digital assets may lose most, if not all, of its value. • GOVERNMENT REGULATION The regulatory framework of digital assets remains unclear and application of existing regulations and/or future restrictions by federal and state authorities may have a significant impact on the value of digital assets. • SECURITY While each Product has implemented security measures for the safe storage of its digital assets, there have been significant incidents of digital asset theft and digital assets remains a potential target for hackers. Digital assets that are lost or stolen cannot be replaced, as transactions are irrevocable. • TAX TREATMENT OF VIRTUAL CURRENCY For U.S. federal income tax purposes, Digital Large Cap Fund will be a passive foreign investment company (a “PFIC”) and, in certain circumstances, may be a controlled foreign corporation (a “CFC”). Digital Large Cap Fund will make available a PFIC Annual Information Statement that will include information required to permit each eligible shareholder to make a “qualified electing fund” election (a “QEF Election”) with respect to Digital Large Cap Fund. Each of the other Products intends to take the position that it is a grantor trust for U.S. federal income tax purposes. Assuming that a Product is properly treated as a grantor trust, Shareholders of that Product generally will be treated as if they directly owned their respective pro rata shares of the underlying assets held in the Product, directly received their respective pro rata shares of the Product’s income and directly incurred their respective pro rata shares of the Product ’s expenses. Most state and local tax authorities follow U.S. income tax rules in this regard. Prospective investors should discuss the tax consequences of an investment in a Product with their tax advisors.
  • 19. PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS PAPER. ©2020GrayscaleInvestments,LLC More Grayscale research papers and investment theses are available at: www.grayscale.co/insights 19 | 20 • NO SHAREHOLDER CONTROL Grayscale, as sponsor of each Trust and the manager of the Fund, has total authority over the Trusts and the Fund and shareholders’ rights are extremely limited. • LACK OF LIQUIDITY AND TRANSFER RESTRICTIONS An investment in a Product will be illiquid and there will be significant restrictions on transferring interests in such Product. The Products are not registered with the SEC, any state securities laws, or the U.S. Investment Company Act of 1940, as amended, and the Shares of each Product are being offered in a private placement pursuant to Rule 506(c) under Regulation D of the Securities Act of 1933, as amended (the “Securities Act”). As a result, the Shares of each Product are restricted Shares and are subject to a one-year holding period in accordance with Rule 144 under the Securities Act. In addition, none of the Products currently operates a redemption program. Because of the one-year holding period and the lack of an ongoing redemption program, Shares should not be purchased by any investor who is not willing and able to bear the risk of investment and lack of liquidity for at least one year. No assurances are given that after the one year holding period, there will be any market for the resale of Shares of any Product, or, if there is such a market, as to the price at such Shares may be sold into such a market. • POTENTIAL RELIANCE ON THIRD-PARTY MANAGEMENT; CONFLICTS OF INTEREST Products and their sponsors or managers and advisors may rely on the trading expertise and experience of third-party sponsors, managers or advisors, the identity of which may not be fully disclosed to investors. The Products and their sponsors or managers and advisors and agents may be subject to various conflicts of interest. • FEES AND EXPENSES Each Product’s fees and expenses (which may be substantial regardless of any returns on investment) will offset each Product’s trading profits. Additional General Disclosures Investors must have the financial ability, sophistication/experience and willingness to bear the risks of an investment. This document is intended for those with an in-depth understanding of the high risk nature of investments in digital assets and these investments may not be suitable for you. This document may not be distributed in either excerpts or in its entirety beyond its intended audience and the Products and Grayscale will not be held responsible if this document is used or is distributed beyond its initial recipient or if it is used for any unintended purpose. The Products and Grayscale do not: make recommendations to purchase or sell specific securities; provide investment advisory services; or conduct a general retail business. None of the Products or Grayscale, its affiliates, nor any of its directors, officers, employees or agents shall have any liability, howsoever arising, for any error or incompleteness of fact or opinion in it or lack of care in its preparation or publication, provided that this shall not exclude liability to the extent that this is impermissible under applicable securities laws. The logos, graphics, icons, trademarks, service marks and headers for each Product and Grayscale appearing herein are service marks, trademarks (whether registered or not) and/ or trade dress of Grayscale Investments, LLC. (the “Marks”). All other trademarks, company names, logos, service marks and/or trade dress mentioned, displayed, cited or otherwise indicated herein (“Third Party Marks”) are the sole property of their respective owners. The Marks or the Third Party Marks may not be copied, downloaded, displayed, used as metatags, misused, or otherwise exploited in any manner without the prior express written permission of the relevant Product and Grayscale or the owner of such Third Party Mark. The above summary is not a complete list of the risks and other important disclosures involved in investing in any Product or digital assets and is subject to the more complete disclosures contained in each Product’s Offering Documents, which must be reviewed carefully.
  • 20. General Inquiries: info@grayscale.co Address: 250 Park Ave S 5th floor, New York, NY 10003 Phone: (212) 668-1427 @GrayscaleInvest